Mkango Resources Ltd. (AIM/TSX-V: MKA) (the
“
Company” or “
Mkango”) is pleased
to announce the results of the definitive feasibility study
(“
DFS”) for the Songwe Hill Rare Earths Project
(“Songwe” or the “Project”) in Malawi.
Highlights
- US$559.0
million post-tax net present value (“NPV”), using a 10% nominal
discount rate, with an internal rate of return (“IRR”) of 31.5%,
payback period of 2.5 years from full production (5 years from
start of capital expenditure) and post-tax life-of-operations
nominal cash flow of $2.1 billion.
- DFS is
for 100% of Songwe on a stand-alone basis. Under the Mines and
Minerals Act of Malawi, the Government of Malawi is entitled to a
10% free carried interest in Songwe.
- Songwe
is now confirmed as one of the very few rare earths projects
globally to have reached the DFS stage, with a full Environmental,
Social, Health Impact Assessment (“ESHIA”) completed in compliance
with IFC Performance Standards and The Global
Industry Standard for Tailings Management (2020) (“GISTM”)
adopted for design and management of the tailings storage
facility.
- Long
operating life of 18 years, with mining assumed to commence in
February 2025, production ramping up from July 2025 and averaging
5,954 tonnes per year total rare earth oxides
(“TREO”) for the first five years of full production (September
2025 – August 2030), including 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
(“MREC”) grading 55% TREO, generating nominal
EBITDA of US$215 million per year.
-
Neodymium, praseodymium, dysprosium and terbium
are critical for the green transition, used in permanent
magnets for electric vehicles, wind turbines and many electronic
devices.
- Initial
capital expenditure (“capex”) of US$277 million (excluding a US$34
million contingency) for development of mine, mill, flotation and
hydrometallurgy plants, tailings storage facility, and related
project infrastructure in Malawi.
- The NPV
excludes any value attributable to the proposed Pulawy Rare Earth
Separation Project (“Pulawy”) in Poland, which is expected to
process MREC from Songwe, enabling Mkango to capture additional
value via growing its integrated downstream business with a captive
source of primary raw material feed from Songwe. The NPV also
excludes any value attributable to Mkango’s interests in rare earth
magnet recycling.
- The
results of the DFS for an integrated project, comprising both
Songwe and Pulawy, are expected to be announced when both the Mine
Development Agreement (“MDA”) with the Malawi Government is
completed for Songwe and the feasibility study is completed for
Pulawy.
- In
parallel, a major focus for the Company will be further
optimisation of the Project with the objective of lowering capex
and operating costs (“opex”), both of which have been negatively
impacted by current market dislocations, creating the potential to
reduce costs as markets stabilise.
The Company will host an investor conference
call at 3pm UK time / 10am Eastern Time on Friday 8th July 2022.
Please join the call at least 5 minutes before the booked start
time to allow the operator to transfer you into the call by the
scheduled start time: Canada toll free: 1 866 378 3566; UK toll
free: 0808 109 0700; USA toll free: 1 866 966 5335; Password:
Mkango DFS Results.
The DFS indicates a US$559.0 million post-tax
NPV, using a 10% nominal discount rate, and 31.5% post-tax IRR for
100% of Songwe. The DFS is based on Songwe as a stand-alone project
selling MREC as opposed to separated rare earth oxides and excludes
Pulawy, which has potential to add significant downstream value.
The financial analysis doesn’t reflect any changes to the fiscal
regime that may be contained in the MDA that is currently being
negotiated with the Government of Malawi. The Company plans to
announce the results of the feasibility study for an integrated
project comprising both Songwe and Pulawy (the “Integrated DFS”)
when both the MDA is completed for Songwe and the feasibility study
is completed for Pulawy.
With the release of the Songwe DFS and in
anticipation of releasing the Integrated DFS, Mkango continues to
advance ongoing discussions with potential strategic investors,
development and commercial banks, and off-takers, working closely
with its brokers, its project finance advisors, Terrafranca Capital
Partners Ltd (www.terrafranca.co.uk), its United States strategic
advisors, Jones Group International
(www.jonesgroupinternational.com) and EIT RawMaterials
(www.eitrawmaterials.eu) within the framework of the European Raw
Materials Alliance.
During the week of 27th June 2022, the Company
hosted site visits to Songwe for a number of major commercial and
development banks.
Derek Linfield, Chairman of Mkango,
stated: “This is a major milestone which few rare earth
companies have been able to reach. It reflects the perseverance and
outstanding work completed by our executive and management team
since Project inception in 2010, as well as by our excellent team
of international consultants, advisors and academic partners, in
addition to the longstanding support of our local stakeholders and
the Government of Malawi. We look forward to developing this
exciting Project for the benefit of Malawi and our
shareholders.”
William Dawes, Chief Executive of
Mkango, stated: “Songwe is the cornerstone of Mkango’s
Mine, Refine, Recycle strategy, underpinning development of the
proposed Pulawy separation plant in Poland and complementing our
interests in rare earth magnet recycling in the UK and Germany via
HyProMag. The DFS is a major step forward for the Company, uniquely
positioning Mkango as a future supplier of both mined and recycled
rare earths for the green transition, against a backdrop of a very
strong demand and pricing outlook.”
Alexander Lemon, President of Mkango,
stated: “Mkango is pleased to announce this major
milestone for the Company, and looks forward to finalising the
Mining Development Agreement with the Government of Malawi. This
Project is transformational for Malawi, and Mkango welcomes the
very strong support it is receiving from all stakeholders. Songwe
will catalyse a new industrial revolution in Malawi, creating
employment opportunities and producing high value-added exports, as
well as further unlocking Malawi’s mineral potential and new
infrastructure developments.”
Summary of Selected Financial Inputs and Corresponding
Results – Post-Tax Valuation
Item |
Unit |
Value |
Life of operations post-tax nominal cash flow |
US$ million |
2,083.3 |
Payback period from project start1 |
Years |
5.0 |
Payback period from start of full production1 |
Years |
2.5 |
Post-tax NPV at 10% (nominal) discount rate |
US$ million |
559.0 |
Post-tax IRR (nominal) |
% |
31.5 |
1 Assumes project start ie start capital expenditure March 2023
and start of full production September 2025
Project Overview
Mkango appointed SENET, a DRA Global company, as
the principal consultant to complete the DFS. SENET is a leading
engineering, procurement and construction management (EPCM)
minerals processing and project delivery firm located in Africa.
Other primary consultants for the DFS included the following:
- Geology, Mineral Resource, and Geotechnical Investigation: The
MSA Group (Pty) Ltd (“MSA”)
- Mining: Bara Consulting (Pty) Ltd (“Bara”)
- Comminution: Grinding Solutions Limited (“Grinding Solutions”),
Keramos
- Process Plant including On-Site and Off-Site Infrastructure:
SENET, a DRA Global Company (“SENET”)
- Hydrometallurgy: Australian Nuclear Science and Technology
Organisation (“ANSTO”)
- Flotation: KYSPY Investments (Pty) Ltd ("KYSPYmet”), ALS
Metallurgy (Pty) Ltd (“ALS Metallurgy”)
- Tailings Storage Facility (TSF): Epoch Resources (Pty) Ltd
(“Epoch”)
- Environmental, Social and Health Impact Assessment (ESHIA):
Digby Wells and Associates (Pty) Ltd (“Digby Wells Environmental”),
Kongiwe Environmental (Pty) Ltd
- Geochemistry: SGS Australia (Pty) Ltd
- Geotechnical testwork: Western Geotechnical and Laboratory
Services
- Logistics: C. Steinweg Bridge (Pty) Ltd
The DFS is based on a conventional open pit
contract mining operation, feeding mills, flotation and
hydrometallurgy plants on site in Malawi to produce a MREC, with an
operating life (mining and processing) of 18 years with mining
expected to commence in February 2025, processing expected to ramp
up from July 2025 and full production expected from September 2025.
The Company believes there is potential to increase the mine life
given the additional Inferred Resource, the potential to expand the
Mineral Resource, and the exploration potential from the nearby
Nkalonje project. The DFS supports the declaration of a Proven and
Probable Mineral Reserve Estimate of 18.1 million tonnes grading
1.16% TREO.
Energy supply for the Project comprises a 24 MW
solar facility supplemented with grid power, which in Malawi is
largely from hydroelectric sources. The Company is also evaluating
wind power to further enhance and diversify the renewable power
mix.
Songwe features broad zones of outcropping rare
earth mineralisation on the northern slopes of a steep sided hill.
The annual processing capacity is assumed to be approximately 1.0
million tonnes per year of ore with a view to producing an average
of 5,954 tonnes of TREO in MREC per year for the first five years
and 4,081 tonnes of TREO in MREC per year in years 6 to 18. The
MREC will be cerium depleted. Because cerium is currently
considered to have challenging market fundamentals, there is a
strong economic rationale to remove as much cerium as possible and,
as a result, a large proportion of the cerium will be removed from
the MREC during the hydrometallurgical process. Confirmation of the
flotation and hydrometallurgical processing flow sheets was
underpinned by seven piloting campaigns at ALS Metallurgy and
ANSTO.
The final stage of hydrometallurgical piloting
at ANSTO produced MREC grading 55% TREO equivalent, enriched in
neodymium and praseodymium (“Nd/Pr”) oxides, which together made up
31% of the rare earth oxide content in the carbonate product (i.e.
Nd/Pr oxides / TREO = 31%).
The MREC produced from Songwe is expected to be
a high value product (averaging US$32,816 per tonne (real 2022 US
dollars)) for the first full five years of production based on
pricing estimates from Adamas Intelligence and will be exported via
largely existing infrastructure. The Project is connected by road
to Blantyre, the largest commercial centre in Malawi, located
approximately 70 km away, which has a rail head and international
airport.
There have been significant improvements to
local infrastructure in recent months. The Malawi Roads Authority
has upgraded an existing government road from nearby Migowi to the
Songwe Hill project site. To date, 12 km of an existing 15 km
government dirt track has been upgraded and widened to an
all-weather gravelled road with new reinforced concrete culverts,
embankments and bridges installed.
The MREC is expected to be shipped to the
proposed Pulawy project in Poland for separation. The DFS is based
on selling the MREC rather than separated products. As a result, a
27% discount was applied to the forecasted value of rare earths
contained in the MREC (discount equivalent to approximately
US$22.07 per kilogram (real 2022 US dollars) of TREO in MREC for
first full five years of production to reflect the discount that
would be applied for MREC product versus the value of the
underlying separated rare earth oxides (“REO”). A significant
proportion of this discount is expected to be captured in the
Pulawy separation plant. It is envisaged that the Pulawy plant will
sell separated neodymium, praseodymium and / or didymium (NdPr)
oxides as well as a heavy rare earth enriched carbonate and a
lanthanum cerium carbonate, thereby capturing more of the value of
the underlying REOs. Subject to the results of the Pulawy
feasibility study, Mkango is targeting a separation cost of less
than US$3 per kilogram of TREO in MREC (based on the rare earth
distribution below) to produce this product suite at Pulawy, with a
capex for the separation plant targeted at approximately US$120
million.
A summary of the key outputs of the DFS is presented in the
tables below:
Summary of Mining and Processing Inputs and Results –
Average over First Full Five Years1
Item |
Unit |
Value |
Mining |
|
|
Average yearly ore mined |
kt |
2,186 |
Average TREO grade mined |
% |
1.19 |
Average yearly waste mined |
kt |
3,667 |
Average strip ratio (waste:ore) |
|
1.68 |
Processing |
|
|
Average yearly flotation plant feed |
kt |
1,000.8 |
Average plant feed TREO grade |
% |
1.50 |
Flotation TREO concentrate grade |
% |
15.05 |
Average TREO recovery to concentrate |
% |
74.10 |
Average yearly flotation concentrate feed to hydrometallurgical
plant |
kt |
74.06 |
Average NdPr oxide hydrometallurgical recovery to carbonate |
% |
85.3 |
Average Ce oxide hydrometallurgical recovery to carbonate |
% |
20.9 |
Average yearly TREOs in carbonate product |
t |
5,954 |
Average carbonate TREO grade |
% |
55 |
Average yearly carbonate production (dry basis) |
t |
10,826 |
1 First 5 years refers to the 60 months from start of processing
in September 2025. Mining excludes first 5 months of mined and
stockpiled ore prior to start of processing (819,437 tonnes at
1.00% TREO)
Summary of Mining and Processing Inputs and Results –
Life of Operations (averages)
Item |
Unit |
Value |
Life of operations (mining and processing) |
Years |
18 |
Mining (February 2025 – April 2037) |
|
|
Average yearly ore mined |
kt |
1,481 |
Average TREO grade mined |
% |
1.16 |
Average yearly waste mined |
kt |
3,311 |
Average strip ratio (waste:ore) |
|
2.2 |
Processing (September 2025 – August
2043)1 |
|
|
Average yearly flotation plant feed |
kt |
1,000.8 |
Average plant feed TREO grade |
% |
1.16 |
Flotation TREO concentrate grade |
% |
11.64 |
Average TREO recovery to concentrate |
% |
74.10 |
Average yearly flotation concentrate feed tohydrometallurgical
plant |
kt |
74.06 |
Average NdPr oxide hydrometallurgical recovery to carbonate |
% |
85.3 |
Average Ce oxide hydrometallurgical recovery to carbonate |
% |
20.9 |
Average yearly TREOs in carbonate product |
t |
4,634 |
Average carbonate TREO grade |
% |
55.00 |
Average yearly carbonate production (dry basis) |
t |
8,425 |
1 Excludes final month of partial operations
Summary of Mining and Processing Inputs and Results –
Life of Operations (totals)
Item |
Unit |
Value |
Mining |
|
|
Total ore mined |
kt |
18,147.8 |
Total waste mined |
kt |
40,553.9 |
Strip ratio (waste: ore) |
|
2.2 |
Processing |
|
|
Total flotation concentrate feed to hydrometallurgical plant |
kt |
1,341.4 |
Total contained TREO in carbonate product |
kt |
83.4 |
Total carbonate production (dry basis) |
t |
151,644 |
Market and Financial
Analysis
A detailed financial model was constructed based
on input parameters set out in the DFS. Free cash flows were
modelled in both real and nominal terms for a range of discount
rates and on a debt free basis.
MREC price forecasts and underlying REO price
forecasts were based on the following market analysis by Adamas
Intelligence from their report dated April 2022 entitled Rare Earth
Magnet Market Outlook to 2035:
- From 2022
through 2035:
- Global demand
for NdFeB magnets is expected to increase at a compound annual
growth rate (“CAGR”) of 8.6 %, bolstered by double-digit
growth from the electric vehicle and wind power sectors,
translating into comparable demand growth for the rare earth
elements (“REEs”) (i.e., neodymium, praseodymium, dysprosium and
terbium) that these magnets contain.
- Global
production of neodymium, praseodymium, dysprosium and terbium are
forecast to collectively increase at a slower CAGR of 5.4 % as
the supply side of the market increasingly struggles to keep up
with rapidly growing demand.
- From 2023
through 2035, the global rare earth industry is expected to
consistently underproduce neodymium, praseodymium, dysprosium and
terbium oxides (or oxide equivalents), resulting in the depletion
of historically accumulated inventories and, ultimately, shortages
of these critical magnet materials if supply is not increased
beyond the levels currently anticipated.
Songwe offers strong economic exposure to the
rare earth permanent magnet sector, which is the fastest-growing
end-use category for rare earths and the one most in need of
additional rare earth supplies. From a marketing, logistics and
economic standpoint, the high proportion of valuable magnet-related
REEs in the Songwe Hill project’s prospective TREO production means
that a future mine (with separation) could generate approximately
95% of its rare earth revenues from just 34% of its production
volume.
Going forward, Adamas Intelligence believes that
the current strong pricing environment for rare earth materials is
here to stay, notwithstanding the market’s usual ebbs and flows on
the back of seasonality and other transient factors.
Adamas Intelligence forecasts the following for
the basket value (real 2022 US dollars) of Songwe Hill’s TREO
production:
- Base case:
US$64.81/kg in 2022 increasing to US$102.77/kg in 2035
- Upside scenario:
US$70.59/kg in 2022 increasing to US$114.59/kg in 2035
- Downside
scenario: US$59.02/kg in 2022 increasing to US$91.07/kg in
2035
Adamas Intelligence forecasts the following for
the value of MREC (real 2022 US dollars) produced at the Songwe
Hill project based on a MREC grade of 55% and applying a 27%
discount to the forecast MREC value (discount equivalent to
US$17.50 per kilogram of TREO in MREC in 2022 and US$27.75 per
kilogram of TREO in MREC in 2035) to reflect the estimated discount
that would be applied for MREC product versus the value of the
underlying separated rare earth oxides (“REO”):
- Base case:
US$26.02/kg in 2022 increasing to US$41.26/kg in 2035
- Upside scenario:
US$28.34/kg in 2022 increasing to US$46.01/kg in 2035
- Downside
scenario: US$23.70/kg in 2022 increasing to US$36.57/kg in
2035.
The Adamas Intelligence base case scenario was
applied in the DFS which is an equivalent to a total rare earth
basket value in real 2022 US Dollars for Songwe of US$64.81/kg of
TREO in 2022, increasing to US$83.62/kg in 2025 and US$102.77/kg in
2035.
The key revenue drivers for Songwe are neodymium
and praseodymium. The base case basket value and MREC price
forecasts reflect underlying neodymium oxide (Nd oxide) and
praseodymium oxide (Pr oxide) price forecasts of US$165.0/kg and
US$156.8/kg in 2022 increasing to US$215.5/kg and US$204.7/kg in
2025 and US$266.0/kg and US$252.7/kg in 2035.
From a marketing, logistics and economic
standpoint, the high proportion of valuable magnet-related REEs in
the Project’s expected TREO production means that Songwe (with
separation at Pulawy) could generate approximately 95% of its rare
earth revenues from just 34% of its production volume.
The relative contributions of the REOs to the
production split and basket value, based on the first full five
years of production, are illustrated below:
Rare earth oxide |
|
REO Price Assumption |
REO in MREC |
REO in MREC |
REO in MREC |
REO in MREC |
|
|
US$/kg |
tonnes per years |
% Split (tonnes) |
(US$/kg) |
% split (value) |
Lanthanum |
La2O3 |
1.40 |
2,326 |
39.07% |
0.55 |
0.7% |
Cerium |
CeO2 |
1.45 |
1,094 |
18.38% |
0.27 |
0.3% |
Praseodymium |
Pr6O11 |
199.82 |
458 |
7.70% |
15.38 |
18.8% |
Neodymium |
Nd2O3 |
210.33 |
1,495 |
25.10% |
52.80 |
64.6% |
Samarium |
Sm2O3 |
5.09 |
197 |
3.31% |
0.17 |
0.2% |
Europium |
Eu2O3 |
36.37 |
51 |
0.85% |
0.31 |
0.4% |
Gadolinium |
Gd2O3 |
108.41 |
110 |
1.86% |
2.01 |
2.5% |
Terbium |
Tb4O7 |
2482.94 |
12 |
0.20% |
5.01 |
6.1% |
Dysprosium |
Dy2O3 |
584.22 |
44 |
0.74% |
4.30 |
5.3% |
Yttrium |
Y2O3 |
16.90 |
143 |
2.40% |
0.41 |
0.5% |
Holmium |
Ho2O3 |
286.84 |
6 |
0.10% |
0.27 |
0.3% |
Erbium |
Er2O3 |
62.92 |
10 |
0.17% |
0.11 |
0.1% |
Thulium |
Tm2O3 |
200.00 |
1 |
0.02% |
0.04 |
0.0% |
Ytterbium |
Yb2O3 |
19.59 |
6 |
0.10% |
0.02 |
0.0% |
Lutetium |
Lu2O3 |
949.83 |
1 |
0.01% |
0.10 |
0.1% |
|
|
|
Average REO in MREC: 5,954 tonnes |
Total: 100%Nd/Pr/Dy/Tb oxides:
34% |
Average basket value: US$81.73/kg |
Total: 100%Nd/Pr/Dy/Tb oxides:
95% |
Based on the preceding assumptions, the discounted cash flow
valuation analysis for the base case provided the following
results:
- NPV at 10%
(nominal) (7.3% real) of US$559.0 million as at 1 July 2022
- IRR of 31.5%
(nominal) (28.3% real)
NPVs of Songwe Hill
Project1
Financial Evaluation |
Nominal
DiscountRate(%) |
RealDiscountRate(%) |
Adamas IntelligenceBase
CasePost-tax NPV
(US$million) |
Adamas IntelligenceUpside
CasePost-tax NPV
(US$million) |
Adamas IntelligenceDownside
CasePost-tax NPV
(US$million) |
|
8.0 |
5.37 |
719.3 |
1,007.2 |
431.6 |
Base Case |
10.0 |
7.32 |
559.0 |
801.4 |
316.5 |
|
12.0 |
9.27 |
435.0 |
641.1 |
228.5 |
|
|
|
|
|
|
|
|
|
|
Nominal Internal Rate of Return |
31.47% |
39.20% |
22.70% |
Real Internal Rate of Return |
28.26% |
35.80% |
19.71% |
1 As at July 1, 2022 |
Operating Costs
Cash operating costs include the costs of
contract mining, milling, flotation, leaching, purification and
precipitation to produce a MREC in addition to other costs
associated with the operation. The operating costs do not include
the cost of separation, which is reflected in the 27% discount
applied to the basket value of the REOs in MREC. The estimate of
opex, and the associated general and administration (“G&A”)
costs, were calculated to an accuracy of +15% to −10% and were
utilised in the economic analysis of the Project.
Reagents and consumables account for 56% of
estimated opex, with power accounting for an additional 18%.
Operating costs have been negatively impacted by the increased
costs of reagents and the freight costs of shipping these reagents
and these costs may reduce within the timeline for Songwe
development as reagent supply chains and shipping costs return to
more normal market conditions. This will be investigated further in
parallel with front end engineering and design (“FEED”) for
Songwe.
In addition, the Company and SENET, together
with the Company’s other consultants, have identified a number of
other areas with potential for optimisation, which will focus on
reducing reagent and power consumption.
Operating Costs – Average over First Full Five
Years
Item |
Unit |
Value |
Mining |
US$/kg TREO |
4.8 |
Beneficiation – Milling and Flotation |
US$/kg TREO |
7.9 |
Hydrometallurgical Plant |
US$/kg TREO |
10.8 |
G&A and Other |
US$/kg TREO |
1.8 |
Total Operating Costs |
US$/kg TREO |
25.3 |
Operating Costs – Average over Life of
Operations
Item |
Unit |
Value |
Mining |
US$/kg TREO |
3.9 |
Beneficiation – Milling and Flotation |
US$/kg TREO |
10.2 |
Hydrometallurgical Plant |
US$/kg TREO |
13.8 |
G&A and Other |
US$/kg TREO |
2.2 |
Total Operating Costs |
US$/kg TREO |
30.1 |
Capital Expenditure
The estimate of initial capital expenditure
costs was calculated to an accuracy of +15% to −10% and was
utilised in the economic analysis of the Project. The capital costs
were priced as of Q3 and Q4 of 2021. These costs were increased by
7.5% to account for the increase in prices between last year and
the date of the DFS as, due to anomalous market conditions, the
increase was higher than expected. Capex estimates were reviewed by
Professional Cost Consultants (PCC), which confirmed the estimates
were realistic.
The largest capex component is an integrated
processing plant comprising a mill, flotation plant,
hydrometallurgical plant, and a sulphuric acid plant with power
co-generation capacity. The capex estimate for the integrated
processing plant was completed by SENET and covers the design,
engineering, procurement, supply/manufacture, construction and
pre-commissioning of the proposed new processing facility and
associated plant complex infrastructure including a 24.3MW solar
facility. Other major capex items include the cost of a lined
tailings storage facility provided by Epoch.
Total initial capital expenditure is US$277.4
million, not including a contingency of US$33.8 million.
Capital Cost Summary
Item |
Unit |
Value |
Total Development Capital |
US$ million |
277.4 |
Contingency |
US$ million |
33.8 |
Total Development Capital Including
Contingency |
US$ million |
311.2 |
Sustaining capital and reclamation |
US$ million |
77.6 |
Total Capital Expenditure |
US$ million |
388.8 |
Capital Cost Breakdown
Description |
CAPEX |
Contingency |
Total CAPEX |
US$ |
US$ |
US$ |
General & Plantwide |
124,924,955 |
17,288,526 |
142,213,481 |
Comminution/flotation |
28,223,755 |
2,856,945 |
31,080,700 |
Hydromet |
27,206,985 |
2,775,705 |
29,982,690 |
Spares |
4,896,744 |
734,512 |
5,631,256 |
Mobile Plant & Equipment |
4,087,295 |
613,094 |
4,700,389 |
Generator Plant |
5,469,482 |
820,422 |
6,289,904 |
PV Solar Plant |
21,327,663 |
3,031,646 |
24,359,308 |
Construction Camp |
3,567,379 |
535,107 |
4,102,486 |
TSF Phase 1 and RWD |
31,225,050 |
2,420,546 |
33,645,596 |
Mining Pre-Production |
13,972,675 |
2,095,901 |
16,068,576 |
Other |
12,460,340 |
623,017 |
13,083,357 |
TOTAL INITIAL COST |
277,362,322 |
33,795,421 |
311,157,744 |
Capital Cost Breakdown
Description |
CAPEX (US$) |
Contingency (US$) |
Total CAPEX (US$) |
Earthworks |
7,470,560 |
1,120,584 |
8,591,144 |
Civil Works – Plant |
17,336,477 |
2,600,471 |
19,936,948 |
Civil Works – Infrastructure |
1,717,576 |
257,636 |
1,975,212 |
Infrastructure |
2,993,326 |
299,333 |
3,292,658 |
Structural Steel |
6,239,267 |
748,712 |
6,987,979 |
Plate Work |
2,699,408 |
323,929 |
3,023,337 |
Tankage |
4,509,659 |
541,159 |
5,050,818 |
Machinery and Equipment |
51,550,103 |
5,155,010 |
56,705,113 |
Piping |
5,776,188 |
866,428 |
6,642,616 |
Valves |
1,763,011 |
264,452 |
2,027,463 |
Electricals |
10,505,600 |
1,050,560 |
11,556,160 |
Instrumentation |
5,178,489 |
776,773 |
5,955,263 |
Transport |
4,389,373 |
658,406 |
5,047,778 |
E&I Installation |
6,715,672 |
1,007,351 |
7,723,023 |
SMPP Installation |
21,862,300 |
3,279,345 |
25,141,645 |
TOTAL DIRECT FIELD COSTS |
150,707,010 |
18,950,150 |
169,657,160 |
Commissioning Spares |
243,050 |
36,458 |
279,508 |
2-Year Operational Spares |
2,633,275 |
394,991 |
3,028,266 |
Insurance and Critical Spares |
2,020,419 |
303,063 |
2,323,482 |
Vendor Services |
2,596,685 |
389,503 |
2,986,188 |
First Fills |
558,554 |
83,783 |
642,337 |
TOTAL INDIRECT FIELD COSTS |
8,051,983 |
1,207,798 |
9,259,781 |
TOTAL FIELD COST |
158,758,993 |
20,157,947 |
178,916,941 |
|
|
|
|
Project Management (EPCM) |
23,318,266 |
3,497,740 |
26,816,006 |
Insurances and Guarantees |
3,175,180 |
0 |
3,175,180 |
TOTAL HOME OFFICE COSTS |
26,493,446 |
3,497,740 |
29,991,186 |
TOTAL PROJECT COST |
185,252,439 |
23,655,687 |
208,908,127 |
|
|
|
|
Mobile Plant and Equipment |
4,087,295 |
613,094 |
4,700,389 |
Generator Plant |
5,469,482 |
820,422 |
6,289,904 |
PV Solar Plant |
21,327,663 |
3,031,646 |
24,359,308 |
Construction Camp |
3,567,379 |
535,107 |
4,102,486 |
TSF Phase 1 and RWD |
31,225,050 |
2,420,546 |
33,645,596 |
Mining Pre-Production |
13,972,675 |
2,095,901 |
16,068,576 |
Other |
12,460,340 |
623,017 |
13,083,357 |
TOTAL OTHER COST |
92,109,883 |
10,139,734 |
102,249,617 |
|
|
|
|
TOTAL INITIAL COST |
277,362,322 |
33,795,421 |
311,157,744 |
|
|
|
|
TSF Sustaining Capital – Phases 2 to 5 |
49,551,380 |
3,841,192 |
53,392,572 |
Mining Sustaining Capital |
896,618 |
134,493 |
1,031,111 |
Closure Cost |
15,616,797 |
961,460 |
16,578,257 |
Owners Cost |
6,028,280 |
602,828 |
6,631,108 |
TOTAL SUSTAINING COST |
72,093,075 |
5,539,973 |
77,633,048 |
TOTAL COST |
349,455,397 |
39,335,394 |
388,790,792 |
Mineral Resource and Mineral Reserve
Estimates
The DFS is based on the NI 43-101 Mineral
Resource Estimate prepared by MSA entitled “NI 43-101 Technical
Report – January 23, 2019 Mineral Resource Estimate” which was
filed on SEDAR on February 3, 2020. The Mineral Resources are
reported within a conceptual pitshell at a selected cut-off, taking
into consideration processing and mining assumptions, as part of an
assessment of reasonable prospects for eventual economic extraction
(“RPEEE”). The Mineral Resource Estimates for Songwe Hill are
reported at a cut-off grade of 1.0% TREO and classified into the
Measured, Indicated and Inferred categories as summarised
below.
Category |
Tonnage (Mt) |
TREO % |
TREO (‘000 Tonnes) |
Measured |
8.81 |
1.50 |
131.9 |
Indicated |
12.22 |
1.35 |
165.5 |
Measured & Indicated |
21.03 |
1.41 |
297.4 |
Inferred |
27.54 |
1.33 |
366.2 |
Note: TREO = La2O3, CeO2, Pr6O11, Nd2O3, Sm2O3,
Eu2O3, Gd2O3, Tb4O7, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3, Lu2O3, and
Y2O3 In situ – no geological losses applied
The sensitivity of the Mineral Resource at a variety of cut-off
grades for the combined Measured and Indicated categories is
presented in the following table.
Cut-offTREO % |
Tonnage (Mt) |
TREO % |
TREO (‘000 Tonnes) |
0.50 |
37.64 |
1.13 |
425.7 |
0.75 |
30.45 |
1.25 |
379.9 |
1.00 |
21.03 |
1.41 |
297.4 |
1.25 |
12.44 |
1.62 |
201.2 |
1.50 |
6.80 |
1.83 |
124.1 |
2.00 |
1.12 |
2.35 |
26.32 |
The Inferred Mineral Resources are presented at a variety of
cut-off grades in the table below.
Cut-offTREO % |
Tonnage (Mt) |
TREO % |
TREO (‘000 Tonnes) |
0.50 |
59.65 |
1.02 |
608.2 |
0.75 |
43.74 |
1.16 |
507.1 |
1.00 |
27.54 |
1.33 |
366.2 |
1.25 |
14.35 |
1.52 |
218.4 |
1.50 |
5.92 |
1.75 |
103.4 |
2.00 |
0.92 |
2.21 |
20.3 |
The DFS supports the declaration of a Mineral
Reserve Estimate for the Project. The results of the DFS have shown
that the mining inventory included in the study, which is derived
from only Measured and Indicated Mineral Resources, can be viably
mined based on the techno-economic assumptions in the DFS. Mineral
Reserves resulting from Measured Mineral Resources have been
considered as Proven Mineral Reserves while those generated from
Indicated Mineral Resources are categorised as Probable Mineral
Reserves. The table below shows a summary of the total Mineral
Reserves.
Mineral Reserve Estimate
Category |
Tonnage (Mt) |
TREO % |
TREO (t) |
Proven Mineral Reserves |
8.160 |
1.28 |
104,183 |
Probable Mineral Reserves |
9.988 |
1.07 |
106,801 |
Total Ore Reserves |
18.147 |
1.16 |
210,984 |
NOTE: Totals might not add due to rounding. |
NOTES:
- Ore has been classified as Type 1 ore and Type 2 material. The
Mineral Reserve Estimate only includes Type 1 ore categorised on
the basis of metallurgical performance. Type 2 material, which is
mineralised material with a grade above the cut-off grade but not
optimised for metallurgical processing, will be stockpiled on site
for possible future processing. This material is excluded from both
the run of mine (ROM) ore inventory and any Mineral Reserve
estimate.
- Inferred Resources are not considered as ore in the mine plan
and as such are treated as waste and not included in the ROM ore
inventory.The following modifying factors were used to convert the
Mineral Resource Estimate to the Mineral Reserve Estimate: Mining
recovery – 95%; mining dilution – 9%; TREO recovery – 39.6%;
product price – US$68.2/kg TREO; operating cost – US$30.2/kg TREO
recovered.
- The financial valuation is based on the mining of the ROM Type
1 ore (high grade and medium grade).
Mining Summary
The mine design was completed by Bara and
assumed the use of a contract miner. The mine plan incorporates the
use of stockpiles to manage the grade profile and maximise returns.
As part of the DFS, contract mining companies were integrally
involved in the estimation process.
The mining method at Songwe will be conventional
open-pit mining, making use of relatively small-scale trucks and
diesel-hydraulic excavators, selected to match the mining
conditions and required production rates. The procedure followed in
arriving at the mine design was as follows:
- A geotechnical evaluation was completed including logging of
core on site. The geotechnical data was collated in a database and
used to inform a geotechnical design of the pit slope design
parameters.
- Using the slope design parameters, mining costs obtained from
mining contractors, modifying factors derived during the
pre-feasibility mining study, and product price data provided by
Mkango from Adamas Intelligence, a pit optimisation was completed.
The results of the pit optimisation were analysed, and a pit shell
was selected on which to base the DFS pit design.
- Various scenarios of production rate, cut-off grade
application, and stockpiling strategy were tested during the pit
optimisation, which ultimately led to the selection of an option
developed in more detail for the DFS pit design.
- Mine design criteria were developed for the pit design. A
practical pit design was completed which included the design of
haul roads and safety berms. The overall pit was split into two
phases or cutbacks.
- A production schedule was developed, addressing all the
material types produced from the pit over the life of mine (LOM).
These material types included waste, Type 1 ore (included in
Mineral Reserves Estimate, mine plan and financial forecasts) and
Type 2 material (stockpiled and not included in Mineral Reserves
Estimate, mine plan and financial forecasts).
Processing and Metallurgical
Summary
Test work started on the Songwe Hill project in
2010 and has since included comprehensive test work over several
campaigns, ensuring that the orebody and optimal processing routes
are well understood. Surface grab samples, drill core samples from
drilling campaigns and bulk samples have been collected in the
decade since 2010 and were used to determine the optimal
beneficiation and recovery processes for the Songwe ore.
Mineralogical analyses indicates that synchysite is the main rare
earth bearing mineral. The understanding of the ore has been of
fundamental importance in developing flowsheets for the
beneficiation and recovery of rare earths.
The development of the processing flow sheet is
underpinned by mineralogy, comminution, flotation and
hydrometallurgical test work undertaken at laboratories in
Australia (KYSPYmet, ALS Metallurgy, ANSTO, Keramos, SGS, Bureau
Veritas, Nagrom), South Africa (Mintek), Canada (SGS, XPS) and the
United Kingdom (Grinding Solutions, Camborne School of Mines,
Natural History Museum, Aberystwyth University) as well as three
PhD research projects undertaken at Camborne School of Mines. Not
only has this international effort delivered a processing flow
sheet for Songwe, but it has led to a greater understanding of the
mineralogy, geo-metallurgy and beneficiation processes for primary
carbonatite hosted rare earth deposits.
Numerous bench-scale flotation tests were
completed at KYSPYmet to develop the flotation regime for the DFS.
This culminated in flotation piloting carried out at ALS Metallurgy
which was completed over a seven-day period. The first three days
were operated on a day shift only, with results collected during
the day’s shift to be analysed and assessed overnight in order to
optimize conditions and make any adjustments for the next day of
operation. The pilot plant was operated continuously for the last
four days with relatively stable conditions.
Several different sets of data were collected
during flotation piloting, which were used for the assessment of
concentrate grade and recovery:
- Control Samples:
Grab samples typically taken every three to four hours during the
trial on major streams. These results were used to control the
circuit and make necessary changes to optimise the circuit
performance.
- Shift
Composites: Multiple samples taken of major streams composited
together over each nominal 12-hour shift.
- Surveys:
Multiple samples taken of every stream in the plant over a
one-to-two-hour period of stable operation. This data typically
represents optimised results and allows a full circuit mass balance
to be conducted.
- Timed final
concentrate: The final concentrate was collected into 200 litre
drums at timed intervals, nominally every three hours, and
separated, filtered, sampled and assayed. This enables a recovery
to be calculated by dividing the concentrate REO units by the feed
REO units over the same time period.
ANSTO has conducted test work on Songwe
flotation concentrate since mid-2019 in order to develop the
hydrometallurgical flow sheet for the DFS. Numerous tests were
completed over a two-year span, optimising conditions for each unit
operation in the hydrometallurgical plant. Bench-scale test work
was conducted to establish the optimal process parameters, focusing
on the optimal extraction of rare earths and effective rejection of
impurities that might impact rare earth recovery. After the
bench-scale test work, step-through tests were conducted on
consecutive processing operations using material from the previous
test in the next, which further refined the conditions and target
reagent consumptions, rare earth extractions, and impurity levels.
Following the step-through tests, the pilot plant design criteria
were generated to upscale the process to continuous piloting. In
many cases, bench-scale test work, step-through test work and
piloting overlapped, as various unit operations were tested in
parallel. Six campaigns of hydrometallurgical piloting were
completed resulting in a hydrometallurgical flow sheet comprising
the following steps:
- Gangue leach
(hydrochloric acid) and acid regeneration using sulphuric acid
- Caustic
conversion of gangue leach residue and cerium oxidation to reject
cerium
- Caustic
evaporation and regeneration
- Rare earth leach
of caustic conversion residue
- Purification and
rare earth carbonate precipitation
As noted above, the final stage of
hydrometallurgical piloting at ANSTO produced MREC grading 55% TREO
equivalent, enriched in neodymium and praseodymium (Nd/Pr) oxides,
which together made up 31% of the rare earth oxide content in the
carbonate product (i.e., Nd/Pr oxides / TREO = 31%).
Environmental, Social and Health Impact
Studies
Digby Wells Environmental undertook the ESHIA
process and Kongiwe Environmental (Pty) Ltd provided
further input throughout. The ESHIA was undertaken in terms of the
Malawian Environmental Management Act, No. 19 of 2017 (the EMA Act)
promulgated in 2019 and in accordance with the International
Finance Corporation (IFC) Performance Standards (PS) and the GISTM
(2020). During the ESHIA process, Digby Wells worked with local
Malawian experts, EnviroConsult, which ensured that there was a
two-way knowledge transfer during the ESHIA in terms of
international good practice and local expertise and compliance. The
ESHIA is a culmination of over nine years of baseline studies and
is currently being submitted to the Malawi Environmental Protection
Authority (MEPA) for review and approval.
Extensive stakeholder engagement has been
undertaken in line with IFC requirements with local communities and
the Malawi government. This, in conjunction with extensive
corporate social responsibility projects throughout the exploration
stage, has resulted in a project enabling environment. Mkango’s
strategy of “Mine, Refine and Recycle” is aligned to our
Environmental, Social, and Governance (ESG) goals which include
providing maximum shareholder value while implementing sincere,
meaningful and successful social responsibility programmes. The
Project is expected to contribute to the development of Malawi by
providing the country with an exportable product which is reliable,
sought after and profitable, all while ensuring that minimal
negative impacts occur to their surrounding environment and social
fabric.
Qualified Persons
An NI 43-101 Technical Report supporting the DFS
is being prepared by SENET under the guidance of Mr. Nick Dempers,
who is a “Qualified Person” in accordance with National Instrument
43-101 – Standards of Disclosure for Mineral Projects. Although the
Qualified Person was not responsible for the completion of the
Geology, Mineral Resource, Reserve, TSF and ESHIA sections of the
DFS, the Qualified Person at SENET has relied on the Qualified
Persons listed below who are the specialists in these fields for
completion of their respective portions of the DFS. The Qualified
Person at SENET has reviewed the sections completed by others and
has found no reason not to accept their work.
Scientific and technical information contained
in this release relating to the Geology and Mineral Resource
Estimate has been approved and verified by Mr. Jeremy Witley Pr.
Sci Nat of The MSA Group Pty Ltd, who is a "Qualified Person" in
accordance with National Instrument 43-101 - Standards of
Disclosure for Mineral Projects.
Scientific and technical information contained
in this release relating to sampling, analytical, and test data
underlying the Mineral Resource Estimate has been approved and
verified by Dr. Scott Swinden PGeo of Swinden Geoscience
Consultants Ltd who is a "Qualified Person" in accordance with
National Instrument 43-101 - Standards of Disclosure for Mineral
Projects.
The Mineral Reserve calculation was completed by
Bara under the supervision of Mr. Clive Brown, who is a “Qualified
Person” in accordance with National Instrument 43-101 – Standards
of Disclosure for Mineral Projects.
The tailings storage facility (TSF) study was
completed by Epoch Resources under the supervision of Mr. Guy Wiid,
who is a “Qualified Person” in accordance with National Instrument
43-101 – Standards of Disclosure for Mineral Projects.
The ESHIA study was completed by Digby Wells
under the supervision of Mr. Graham Trusler, who is a “Qualified
Person” in accordance with National Instrument 43-101 – Standards
of Disclosure for Mineral Projects.
The process design and cost estimation as well
as the design and cost estimation for the infrastructure associated
with the integrated processing plant for the Study was completed by
SENET under the supervision of Mr. Nick Dempers who is a “Qualified
Person” in accordance with National Instrument 43-101 – Standards
of Disclosure for Mineral Projects.
Scientific and technical information contained
in this release in relation to metallurgical test work has been
approved and verified by Mr. Nick Dempers, who is a “Qualified
Person” in accordance with National Instrument 43-101 – Standards
of Disclosure for Mineral Projects.
The NI 43-101 compliant Technical Report in
respect of the results of the Study described herein will be filed
on SEDAR within the next 45 days.
Independence of Qualified
Persons
All of the Qualified Persons referred to in this
Press Release are independent of Mkango.
Market Abuse Regulation (MAR)
Disclosure
The information contained within this
announcement is deemed by the Company to
constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ('MAR') which
has been incorporated into UK law by the European Union
(Withdrawal) Act 2018. Upon the
publication of this announcement via
Regulatory Information Service, this inside information is now
considered to be in the public domain.
About Mkango
Resources Limited
Mkango's corporate strategy is to develop new
sustainable primary and secondary sources of neodymium,
praseodymium, dysprosium and terbium to supply accelerating demand
from electric vehicles, wind turbines and other clean technologies.
This integrated Mine, Refine, Recycle strategy differentiates
Mkango from its peers, uniquely positioning the Company in the rare
earths sector.
Mkango is developing the Songwe Hill rare earths
project in Malawi. Malawi is known as "The Warm Heart of Africa", a
stable democracy with existing road, rail and power infrastructure,
and new infrastructure developments underway.
In parallel, Mkango and Grupa Azoty PULAWY,
Poland's leading chemical company and the second
largest manufacturer of nitrogen and compound fertilizers in
the European Union, have agreed to work together towards
development of a rare earth Separation Plant at Pulawy in Poland
(the “Pulawy Separation Plant”). The Pulawy Separation Plant will
process the purified mixed rare earth carbonate produced at Songwe
Hill.
Through its ownership of Maginito
(www.maginito.com), Mkango is also developing green technology
opportunities in the rare earths supply chain, encompassing
neodymium (NdFeB) magnet recycling as well as innovative rare earth
alloy, magnet, and separation technologies. Maginito holds a 42%
interest in UK rare earth (NdFeB) magnet recycler, HyProMag
(www.hypromag.com), with an option to increase its interest to 49%.
Mkango holds 100% of rare earth recycler Mkango Rare Earths UK
Limited.
Mkango also has an extensive exploration
portfolio in Malawi, including the Mchinji rutile exploration
project, the Thambani uranium-tantalum-niobium-zircon project and
Chimimbe nickel-cobalt project.
For more information, please
visit www.mkango.ca
Cautionary Note Regarding
Forward-Looking Statements
This news release contains forward-looking
statements (within the meaning of that term under applicable
securities laws) with respect to Mkango, its business, HyProMag,
Mkango Rare Earths UK Limited, the Pulawy Separation Plant, and
Songwe and respective feasibility studies. Generally, forward
looking statements can be identified by the use of words such as
“plans”, “expects” or “is expected to”, “scheduled”, “estimates”
“intends”, “anticipates”, “believes”, or variations of such words
and phrases, or statements that certain actions, events or results
“can”, “may”, “could”, “would”, “should”, “might” or “will”, occur
or be achieved, or the negative connotations thereof. Readers are
cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties, both general and
specific, that contribute to the possibility that the predictions,
forecasts, projections and other forward-looking statements will
not occur, which may cause actual performance and results in future
periods to differ materially from any estimates or projections of
future performance or results expressed or implied by such
forward-looking statements. Such factors and risks include, without
limiting the foregoing, governmental action relating to COVID-19,
the fact that actual results may differ significantly from those
projected in the DFS, resource and reserve calculations result in
estimates only, market effects on global demand and pricing for the
metals and associated downstream products for which Mkango is
exploring, researching and developing, factors relating to the
development of Songwe and the Pulawy Separation Plant including the
inexact nature of capex and opex estimates and management’s ability
to reduce these estimates in the current environment, the outcome
and timing of the completion of the Integrated DFS, cost overruns,
complexities in building and operating Songwe and the Pulawy
Separation Plant, changes in economics and government regulation,
the positive results of a feasibility study on the Pulawy
Separation Plant and delays in obtaining financing or governmental
approvals for, and the impact of environmental and other
regulations relating to, Songwe and the Pulawy Separation Plant.
The forward-looking statements contained in this news release are
made as of the date of this news release. Except as required by
law, the Company disclaims any intention and assume no obligation
to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
required by applicable law. Additionally, the Company undertakes no
obligation to comment on the expectations of, or statements made
by, third parties in respect of the matters discussed above.
For further information on Mkango,
please contact:
Mkango Resources Ltd |
William
Dawes |
Alexander
Lemon |
Chief Executive Officer |
President |
will@mkango.ca |
alex@mkango.ca |
Canada: +1 403 444 5979 |
|
www.mkango.ca |
|
@MkangoResources |
|
|
|
BlytheRay |
|
Financial Public Relations |
|
Tim Blythe |
|
UK: +44 207 138 3204 |
|
|
|
SP Angel Corporate Finance LLP |
|
Nominated Adviser and Joint Broker |
|
Jeff Keating, Caroline Rowe |
|
UK: +44 20 3470 0470 |
|
|
|
Alternative Resource Capital |
|
Joint Broker |
|
Alex Wood, Keith Dowsing |
|
UK: +44 20 7186 9004/5 |
|
The TSX Venture Exchange has neither
approved nor disapproved the contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This press release does not constitute an offer
to sell or a solicitation of an offer to buy any equity or other
securities of the Company in the United States. The securities of
the Company will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act") and
may not be offered or sold within the United States to, or for the
account or benefit of, U.S. persons except in certain transactions
exempt from the registration requirements of the U.S. Securities
Act.
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