The recent 44 percent devaluation of the Kwacha hit all sections of the society hard, evidenced by an overnight drop in purchasing power coupled with a rocket in commodity prices.
The underlying dynamics entail the country’s failure to produce goods and commodities enough for export to generate enough foreign exchange that would quench people’s insatiable appetite for imports including of strategic commodities such as fuel, fertilisers and medicines.
However, the saying ‘suffering amid plenty’ could not be far from reality in the Malawi as the country literally sits on trillion dollars’ worth mineral resources.
I would examine four prospective mining projects and their value and what they could do to the local economy if commenced.
They are Rare Earth Mining Project at Songwe Hill in Phalombe District under Mkango Resources Limited, the Kayelekera Uranium Mine in Karonga District under Lotus Resources Limited, the rutile projects at Kasiya in Lilongwe under Sovereign Metals Limited and the Kanyika Niobium mine under Globe Metals and Mining.
Kanyika niobium project
Niobium is used in the manufacture of high strength alloy steels, an element that is crucial in the construction industry that is prevalent across the globe.
Information available on Globe Metals and Mining website indicates that the mine has a life span of 23 years with an estimated average annual production of 3,250 tonnes of niobium and 140 tonnes of tantalum.
It further indicates that pre-production capital costs for the mine stands at $250 million and the mine would generate revenues up to $5.6 billion over its 23-year mine life, valued at a base price of $55 per kilogramme (kg) for niobium and $410 per kg for tantalum. The payback period is 1.5 years from first production.
Songwe hill rare earth project
Similarly, a statement published on Mkango Resources website indicates that production ramping up is expected from July 2025, averaging 5,954 tonnes per year for total rare earth oxides with a long operating life of 18 years.
The project has an internal rate of return of 31.5 percent, payback period of 30 months from full production and a post-tax life-of-operations nominal cash flow of $2.1 billion.
It further highlights hope for 1,953 tonnes per year of neodymium and praseodymium oxides, and 56 tonnes per year of dysprosium and terbium oxides, in a mixed rare earth carbonate grading 55 percent total rare earth oxides, generating nominal earnings before interest, taxes, depreciation of $215 million per year.
Kasiya rutile project
A pre-feasibility study by Sovereign Metals for the project indicates that the mine could generate $16 billion in revenue for an initial life of 25 years.
Running at 222 kilotonne per annum (kt/a) for rutile and a potential natural graphite at 244kt/the mine could be the largest in the world for such minerals.
The mine is expected to generate substantial economic returns averaging $415 million per annum.
It further says a financial model and discounted cash flow [DCF] analysis demonstrated compelling economics of the prospective project, with a Net Present Value of $1,605 million and an Internal Rate of Return of 28 percent.
Kayelekera uranium project information sourced from www.cruxinvestor.com indicates that uranium prices sustaining above $60 per pound and global demand forecast to grow, Kayelekera is well-positioned to meet rising uranium requirements when production commences in 2025.
The website reveals that Lotus has laid out a clear pathway to reach Final Investment Decision (FID) for Kayelekera by the end of 2023 pending conclusion of a Mine Development Agreement (MDA) with the Malawi government.
It has been indicated that to re-open the mine a $88 million capital expenditure is expected according to estimates from the 2021 feasibility study.
The 52.8 million pounds uranium already defined at Kayelekera represents $3.2 billion earnings from the mine at a constant price of $60 per pound.
The opportunity cost
Delaying the selected projects under review and investing in other sectors of the economy, the country has forfeited huge sums of foreign exchange untapped.
For example, for the three projects that are Songwe Rare Earth, Kanyika Niobium and Kayelekera Uranium Mine to set operations in motion, the initial capital injection would amount to $588 million (Songwe $250 million, Kanyika $250 million and Kayelekera $88 million).
Furthermore, if all the four projects were in motion Malawi could be getting $901 million annually ($415 million from Kasiya, $243 million from Kanyika, $127 million from Kayelekera and $116 million from Songwe Hill).
Persisting challenges
Persisting low energy supply coupled with delayed paperwork processing in government remain challenges and a huge stumbling block to developing the mining industry in Malawi.
In an earlier interview, one of the directors at Lotus Resources Limited, Grain Malunga indicated that Kayelekera Uranium Mine could have been re-opened in 2022, if the mine was supplied with electricity from the national grid.
“High operation costs perpetuated by the running of diesel generators coupled with low prices of uranium on the market did not allow for re-opening of the mine so until prices rise to profitable levels, it will be challenging to re-open the mine,” Malunga said.
His sentiments were echoed by MKango Resources Limited Country Manager Burton Kachinjika, who indicated that, in the run up to operationalising a mine in Phalombe District, the firm plans to put up a 30 megawatts solar power plant to support the mine.
Presenting the revised budget in Parliament on Monday, Minister of Finance Simplex Chithyola Banda said the Ministry of Mining has embarked on establishing the value of the mineral wealth in the country.
He said the Kawuniwuni exercise, which was conducted under the World Bank financed Project called ‘Mining Governance Growth Support project’, produced a report that only indicated locations with mineral deposits and inferred values.