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Tuesday, 23 April 2013
Mkango Resources has "very strong" project in Songwe, reckons Dawes
Mkango Resources' (CVE:MKA) recent oversubscribed C$2.3 million financing in what is a difficult climate supports the company's view that its Songwe rare earths project is "very strong".
The cash will go towards taking the project in Malawi to the next level and through to pre-feasibility - for which work is already swiftly advancing, chief executive Will Dawes tells Proactive Investors.
Indeed, Dawes took part in the fundraise, as JP Morgan 1998 Employee Trust, of which he is a beneficiary, subscribed for 285,715 units. This is in addition to further shares acquired in the market recently.
"It [the fundraise] supports our feeling that this is a very strong project and that we are working in the right jurisdiction, therefore being well positioned to fast-track the project and to become one of Africa’s leading rare earth producers," he says.
Songwe is the company's main focus where a NI 43-101 resource was announced last October - importantly showing a substantial resource in the indicated category.
Using a cut-off of 1%, there are 13.2 million tonnes in the indicated category at a grade of 1.62% total rare earth oxides (TREO). The inferred resource stands at 18.6 million tonnes at 1.38% TREO.
Notably, Dawes explains that even after this impressive maiden resource, upside still exists to expand the resource at Songwe.
The firm is currently targeting an operation at Songwe that will process around 500,000 tonnes of ore per year to produce mixed rare earths in concentrate.
"We could scope a much larger operation but we feel it’s the right strategy to start with something more modest, which has expansion possibilities," he tells Proactive.
The upside potential he's referring to exists because Mkango has so far only drilled around 50% of the exposed carbonatite and only one fifth of the whole Songwe system, which measures around 1km by 1km, he explains.
But, for now, the company is focused on moving the project through the pre-feasibility (PFS) stage based on the indicated resource.
Importantly, the already large indicated resource means no further drilling is needed at this stage, further reducing the cost of the PFS.
Dawes says the company is targeting completion of the PFS by the end of this year.
Work is already underway on the ground at Songwe for the environmental component with consultant Digby Wells - Africa's largest environment consultancy - and the firm is also already working on a mine plan and flow sheet, all of which are going well, says the chief executive.
Dawes says the next few weeks and months will see significant news flow from Mkango beginning with a detailed proof of concept flow sheet.
The mine plan and metallurgical test work will then feed into the cost estimates leading to a pre-feasibility study.
Dawes says he is hoping to get the pre-feasibility study complete for under C$1 million by managing as much as possible of the work involved in-house.
The rest of the cash from the fundraise will be used on corporate costs and the firm's regional exploration programme, which is running in parallel with the Songwe pre-feasibility, he explains.
"As we advance the project beyond the prefeasibility stage, we'll look to do more infill drilling and look to convert some of the inferred to indicated, and indicated to measured," he said.
Songwe lies on the Phalombe licence and lies 70km south east of the city of Zomba from where it is accessible. It lies 90km from the city of Blantyre.
Rare earth mineralisation is untested to the northeast and southwest of the current drilling.
"We have got a regional exploration programme ongoing, which is focused on rare earths hosted in ion adsorption clays plus we've got potential for other commodities as well on our other licence, which is at Tambani (also Malawi)," revealed Dawes.
In layman’s terms, rare earth minerals hosted in such so-called ion adsorption clays are easier and quicker to recover, making them more economical.
At Tambani, there is also the potential for uranium and zircon, the firm has said.
Rare earths comprise 17 metals used increasingly in high-tech products such as electric car batteries, smartphones and wind turbines and there is a huge demand for them.
It is the heavy rare earth elements that are the most sought after and command a premium in the market.
The Songwe resource contains what Dawes has called a "significant" proportion of such heavy rare earths - equating to around 40% of the gross in-situ value at current prices.
And a further 40% or so of the gross in-situ value is accounted for by the rare earths neodymium and praseodymium, which, although classed as light rare earths, are much in demand for use in high strength magnets.
So, there is much for investors to look forward to from Mkango over forthcoming months as it develops its potential discovery in the rare earths space.