Mkango Resources Ltd (LON:MKA) said it has a “clearly defined pathway to production” after it kicked off a major diamond drilling programme at the Songwe Hill rare earths project in Malawi earlier this year.
The drilling programme is for 10,000 metres and is focused on infill, step-out and geotechnical drilling.
More than 50 drill pads have been constructed along with new access roads and enlarged camp infrastructure.
Mkango is targeting completion of an updated mineral resource estimate by the end of 2018.
The drilling programme is a key component for the feasibility study for Songwe, which is being fully funded by Noble Group Ltd subsidiary Talaxis.
Development deal with Talaxis
At the end of January, Talaxis invested an initial £5mln into Lancaster Exploration Limited - the subsidiary which holds the licence for Songwe Hill - in return for a 20% interest in the business.
Talaxis also invested £1mln into a new Mkango subsidiary, Maginito Limited, in return for a 24.5% interest in Maginito.
Once the updated resource estimate has been delivered, Talaxis can increase its stake in Lancaster to 49% through investing a further £7mln with an option to go up to 75% once the feasibility study is complete.
The feasibility study is expected to be completed by end 2019.
If Talaxis exercises its option, Mkango will retain a 25% interest, free carried to production.
Maginito will also receive a further £1mln once a second phase of R&D work is completed, which will take Talaxis’ stake to 49%.
Largest drill programme to date at Songwe
Among the most recent intercepts were 147.2 metres at 1.6% total rare earth oxides (TREO) and 91 metres at 1.5% TREO.
The latest results go to support the company's vision of a bulk tonnage operation, although we'll have to wait for the feasibility study to see how the numbers play out
“Mkango is fully funded to completion of a feasibility study with a clearly defined pathway to production,” said Dawes.
“We look forward to keeping the market updated as we progress through the drilling programme and other major milestones."