The start of pilot processing is a major milestone for Mkango. Developing a viable process flowsheet is arguably the key hurdle to overcome for prospective new REE market entrants , and we are therefore greatly enthused by the reported progress on optimising flotation recovery, concentrate grades and hydrometallurgical treatment steps beyond the already robust metrics envisaged in Songwe’s 2015 prefeasibility study.
We thus believe Songwe is well placed to transition to the development phase on completion of the full feasibility study later this year.
- Pilot-scale processing underway: The 2015 prefeasibility study (PFS) of Songwe envisaged a two-stage upstream processing flowsheet, the first part involving flotation concentration of milled ore to separate the rare earth minerals from gangue material, and the second part involving hydrometallurgical treatment of the resultant mineral concentrate to produce a rare-earth enriched chemical concentrate. Subsequent flotation test work aimed at increasing the grade and recoveries from those envisaged in the PFS has resulted in the development of a new, optimised flotation regime, and pilot-scale flotation processing is now underway at facilities in Australia using feed material derived from the 60t bulk sample of representative Songwe ore previously shipped from Malawi. Feasibility study work to date has also optimised the hydrometallurgical part of the flowsheet relative to the metrics envisaged in the PFS, and pilot-scale hydrometallurgical processing will commence following completion of the flotation piloting to further verify these optimised parameters.
- Major milestone in feasibility study: Developing a viable process flowsheet is a crucial step in unlocking value from a REE project, and piloting of the now optimised flotation and hydrometallurgical processes is thus a major milestone. Plant design and engineering studies by lead engineer SENET are continuing in parallel with the piloting, with the full project feasibility study due in Q4 of this year. Mkango has meanwhile completed scoping studies of the potential for developing downstream rare earth separation capabilities, and strategic options for moving forward with potential sites in the EU and UK are being evaluated. We believe this has the potential to add further value to Songwe, if progressed.
- Investment case: The positive process flowsheet progress keeps Songwe on course to emerge as a new and significant source of REE supply over the coming years. Trade tensions between the US (a key REE market) and China (the world’s dominant producer) has heightened concerns over long-term security of supply, which together with rising demand for NdPr permanent magnets from EV and wind-power end users has seen certain rare earth prices appreciate strongly. This amplifies the strategic value of developing sustainable supply chains outside China, and we believe Songwe is amongst the most advanced of the economically viable projects globally. Mkango’s share price has risen in tandem with recovering REE prices recently, and is at last trading above the 12p of attributable value ascribed by the £13m of investment to date in Songwe and the downstream Maginito venture by Mkango’s strategic partner Talaxis (a subsidiary of Noble). We believe the market is slowly beginning to recognise the longer-term value proposition – our NPV estimate of the Songwe PFS scenario, adjusted for our own assumptions on potential upside from reserve and process flow-sheet optimisation, is cUS$280m assuming a US$45/kg ‘basket’ REE price (which is below the US$60/kg used in the PFS, but which incorporates Nd and Pr prices broadly in-line with current levels). Mkango’s current 51% stake in this would equate to c75p per share. Talaxis has an option to increase its stake in Songwe to 75% (diluting Mkango to 25%) by fully project-financing the build.
*Mkango Resources is a broking client of Alternative Resource Capital, a trading name of Shard Capital Partners LLP which is authorised and regulated by the Financial Conduct Authority (FRN: 538762). This is a marketing communication, intended for qualified and professional investors only, and has not been prepared in accordance with legal requirements to promote the independence of investment research. Please read important disclaimers at the end of the attached document.
About Mkango
Mkango’s corporate strategy is to develop new sustainable primary and secondary sources of neodymium and praseodymium to supply accelerating demand from electric vehicles, wind turbines and other clean technologies.
Mkango is developing the 51% owned Songwe Hill rare earths project in Malawi with the ongoing Feasibility Study funded through a £12 million investment by strategic partner Talaxis Limited. Malawi is known as “The Warm Heart of Africa”, a stable jurisdiction with existing road, rail and power infrastructure, and new infrastructure developments underway. Following completion of the Feasibility Study, Talaxis has an option to acquire a further 26% interest in Songwe by arranging financing for project development including funding the equity component thereof.
In parallel, through its 75.5% interest in Maginito Limited ( www.maginito.com ), Mkango is 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, and recently invested in UK rare earth (NdFeB) magnet recycler, HyProMag Limited ( www.hypromag.com ).
Maginito’s strategy is underpinned by offtake rights for sustainably sourced primary and secondary raw materials from Songwe and HyProMag, respectively, and is geared to accelerating growth in the electric vehicle sector, wind power generation and other industries driven by decarbonization of the economy.
Mkango also has an extensive exploration portfolio in Malawi, including the recently announced Mchinji rutile discovery, for which assay results are pending, in addition to the Thambani uranium-tantalum-niobium-zircon project and Chimimbe nickel-cobalt project.
For more information, please visit www.mkango.ca.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement may have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
