A member of the Share Talk team caught up with William Dawes, Chief Executive Officer and co-founder of Mkango Resources LTD in London recently. We ask if the company would be happy to answer shareholder questions?
Share talk has covered AIM:MKA since the IPO listing on the London Alternative Investment Market, 15 Jun 2016. Mkango is a company that is gaining a lot of interest with the private – retail investing community.
Mkango is a listed mineral exploration and development company rare earth element (REE) company based in Malawi which is a proven area in the resources market, the area has good working relationships with other countries and has good political and local amenities for the mining sector such as transport and energy needs and requirements. Mkango is also listed on the TSX Canadian Stock Exchange.
Standing from left to right: Derek Linfield (Non-Executive Chairman) Alex Lemon (Co- founder -President) William Dawes (Co – founder -CEO) speak to Share Talk
1/ What are the intentions of HiTech AlkCarb and SoS Rare during their recent visits to Mkango’s Songwe Hill?
We are very excited to be in Malawi at the moment for the HiTech AlkCarb programme. Over the next week, we will be visiting the advanced stage Songwe Hill rare earths project, the Nkalonje prospect, and the Mantrap / Knoll heavy rare earth prospects, all of which are in Mkango’s Phalombe licence area, as well as other rare earths deposits in Malawi.
To be the only exploration company involved in this project is a unique honour for the company. Other partners in the project include the Camborne School of Mines (University of Exeter), British Geological Survey, GeoAfrica Prospecting Services, Terratec Geophysical Services, Eberhard Karls University of Tubingen, Mendel University in Brno, University of St Andrews, Natural History Museum, A Speiser Environmental Consultants, Geological Survey of Denmark and Greenland and Gabriele d’Annunzio University of Chieti-Pescara.
We will be joined by 33 leading international scientists, experts in the fields of rare earths, carbonatites, geophysics and exploration, as well as leading Malawian geologists, senior members of the Geological Survey of Malawi, the Ministry of Mines and the Government of Malawi.
The HiTech AlkCarb project has been funded by a Euro 5.4m grant under the European Union Horizon 2020 research and innovation programme. The goals of the project are to:
Ø Develop new geological models to explore for ‘hi-tech’ raw materials (such as rare earth elements, scandium, niobium, tantalum, zirconium, hafnium and fluorspar) associated with alkaline rocks and carbonatites.
Ø Improve and develop interpretation of geophysical and downhole data in order to understand alkaline rock and carbonatite systems down to depths of approximately one kilometre.
Ø Build exploration expertise in hi-tech raw materials, and to ensure knowledge exchange between Europe and Africa.
Ø Assess environmental and socio-economic impacts of mining for these raw materials, and develop best practice
The HiTech AlkCarb programme in Malawi includes the review by these leading experts of the geological and geophysical database, alteration patterns (fenite) and other data from Songwe and other prospects with a view to developing new ideas on geological interpretation and exploration for rare earths.
The SoS RARE project is a separate project (with some overlap with the groups involved in each, including Mkango) which aims to understand the mobility and concentration of neodymium and heavy rare earths in natural systems, and to investigate new processes that will lower the environmental impact of rare earth extraction and recovery. It brings together an interdisciplinary team of researchers to look at aspects of rare earth geology, chemistry and metallurgy, and will study both conventional rare earths deposits and ion adsorption clays. In relation to Mkango, the research is focused on flotation which is a key part of our processing flow sheet.
We are very fortunate to have these fantastic opportunities to engage with leading experts in the sector and develop a greater understanding of the potential of our assets. The information generated from these two research projects will help us immensely in preparation for a bankable feasibility study for Songwe and for future rare earths exploration
2/ Is the future intention for Mkango to add further value to the project by doing a drilling program to change the inferred resource to indicated? And show a further reduction in the capital expenditure needed to start production? If so what are initial thoughts for costings?
The current Indicated resource at Songwe is enough for 18 years’ mine life but there is significant potential to expand this. This would encompass infill drilling the inferred resource, with the objective of upgrading the in-pit Inferred resource. The In-pit Inferred Resource is currently treated as waste in the mine plan despite being mineralised – only the Indicated resource was included in the mine plan for the pre-feasibility study. If the inferred resource is upgraded and included in the mine plan, this would extend the mine life, lower the strip ratio and operating costs, and potentially add significant value. This would affect the operating costs rather than the capital expenditure. The capital expenditure is mainly driven by the scale of operation and processing flow sheet. Drilling would be carried out in conjunction with completion of the bankable feasibility study. The Company intends to bring in a joint venture, financial or strategic partner to fund the next stages of development for Songwe
3/ What are the plans for the next quarter to further add value to your projects and thus add further value to Mkango?
We are focused on optimisation of Songwe with a view to maximising efficiency and reducing costs, thereby providing an enhanced platform for entering into partnerships, marketing and off take arrangements. This encompasses work in conjunction with HiTech AlkCarb and SoS Rare, focused on geological, geophysical modelling and flotation.
4/ Have further studies or programs have been planned in relation to Nkalonje and Namangale? What are future intentions with these new potential assets?
These prospects are relevant from the perspective of the long term exploration and production potential of the broader licence area. They are lower priority targets compared to Songwe and Thambani, but there will be a field visit to Nkalonje as part of HiTech AlkCarb which we believe has greatest potential of the two prospects.
5/ With the main market looking towards the longer term viewpoint to electric and hybrid vehicles, many are concentrating on lithium plays which can be expensive to extract chemically and not in short supply, how would you compare your resources to the market within that sector?
The rare earths and uranium sectors are at bottom cycle valuations in contrast to lithium, but all three are geared to growth in the low carbon economy, so in Mkango there is an opportunity to participate in that growth off, what we believe, is a low base. In terms of rare earths, there are very few advanced stage projects outside China so we are very well positioned. The uranium project needs further exploration but results to date have been encouraging.
6/ With lithiums high cost extraction methods and based against the facts in the PFS, what are the rates of extraction and costs to a partner likely to be to process the ree?
Lithium and rare earths are similar in that they are small specialist markets geared to the same global clean energy trend. The key criteria for success in either market is being able to compete on cost and product with other developers in the sector, as well as incumbent producers, hence our focus on costs. I am confident that Mkango has the potential to be a future low capex, lowest cost quartile sustainable producer of rare earths.
7/ In relation to funding for the foreseeable work plans for Mkango’s Rare Earth Elements, what is your current financial situation? What funding is available from external agencies to help with these work plans?
The upcoming site visits and programme in Malawi are part of HiTech AlkCarb funded by the European Union as discussed above. The SoS RARE project is a consortium project including funding from NERC and EPSRC under the Security of Supply of Mineral Resources science programme, running from 2015 to 2019. In relation to Mkango, SoS Rare is focused on f lotation.
As discussed in the last quarterlies, at the time of its AIM listing net proceeds of the fund raising were sufficient to fund the working capital requirements of the Company for 18 months from listing. We have no plans to complete a fund raising in the near term, however we have an opportunistic strategy and if in the future we see an opportunity to create value for shareholders via a transaction which requires additional funding outside the 18 months working capital budget then we would obviously consider it. The current strategy for existing assets, Thambani and Songwe, are to bring in partners to fund the next stage of development.
8/ During previous media accounts you have said that you have planned to accelerate the project through partnerships, can you tell us more about these partnerships?
There is nothing further I can add at the moment apart from that it is a major focus and priority for the Board, and that we are exploring a number of opportunities.
9/ What is your preferred strategy going forwards to extract maximum value of the Thambani asset?
Our preferred strategy would be to bring in a partner who would commit to fund an exploration work programme on the property to earn an interest in the project so that shareholders in Mkango would participate in the upside without dilution in the top company. However, we are opportunistic as a company and would look at all potential scenarios to create value for shareholders.
10/ What is the expected news flow in relation to Thambani in the next 3 months?
Subject to funding from a partner or otherwise, we envisage an initial circa 2-3-month period of mapping, sampling, trenching, potentially geophysics, with a view to identifying targets for exploration drilling.
11/ Are MKA seeking a JV partner as mentioned in last RNS
Yes, this is a major focus
12/ How important is MKA uranium play to your company growth – future
Thambani provides additional exploration potential for commodities, uranium, tantalum and niobium, which are complementary to the Songwe rare earths project. Thambani is a known area of uranium potential and one of the key uranium projects in Malawi.
13/ How does the visit from SOS RARE fit in with the pursuit of partners for REE
In relation to Mkango, S oS Rare is focused on flotation which is a key step in our processing flow sheet and a major opportunity for optimisation. As part of a dedicated PhD research project supported by leading experts in the field of rare earths flotation, the programme is targeting a better understanding of the flotation characteristics of rare earths minerals, coupled with improving recoveries and the flotation regime for Songwe ore. This will, we believe, allow us to reduce operating costs for the project.
14/ Do you see any opportunity to do what KENV did and forge an off take agreement to purchase the rare earth from an industry giant from tech sector
Yes this is something we are definitely focused on in parallel with our strategy to bring in a partner on the project.
Thank you to the Mkango management team for taking the time to answer all our share holders questions today. Both Alex Lemon and William Dawes are in Malawi this week and we appreciate the time restrictions on the company.
On a closing note, Mkango Resources LTD management team will be attending an Investor show, 17th November 2016, London, UK. Share talk will be involved and we will update soon on the site.