Mkango Resources (CVE:MKA) has moved closer to completing the feasibility study on its Songwe rare earths project in Malawi with a C$1.5mln fund raise and AIM listing plan.
The company is already listed on the Venture exchange in Canada, but a listing in London will widen the pool of capital available to the company, increase the size of its investment audience and potentially boost liquidity.
What’s more, London knows Africa and for many years has been the pre-eminent destination for financing African mining projects.
“There’s always been a historic link between the London market and Africa,” says Mkango chief executive Will Dawes.
“This builds on a natural affinity between the UK and Malawi. This is a natural extension of that.”
Not that he’s forsaking his North American investor base in any way.
“We’ve always had a very supportive shareholder base out of North America, Canada and out of the UK,” he says.
But how the company is valued on the Canadian market is another matter.
“We feel there’s a big value gap between us and our peer group,” he says.
“The pre new money valuation is around £1mln. Our peers are trading substantially higher. We want to close that value gap.”
For that to happen, London is the place to be.
While not exactly booming, it has been noteworthy that since the end of the mining boom a couple of years ago, London has remained more open to funding junior miners than either Toronto or the ASX.
While the precise nature of the new money that’s likely to come into Mkango hasn’t yet been revealed, it’d be a fair bet, now that news of the Aim listing is out, that the source is London.
Will Dawes won’t get drawn into specifics, but his tone tells a tale.
“I’m pretty confident we’ll get it done,” he says.
Partly, that’s because the valuation is low, albeit that the new money is coming in at a premium.
The company’s shares are trading on the Venture exchange at C$0.02, while the new units, consisting of a share and half a C$0.05 warrant, are priced at C$0.025.
The plan is to deploy the new money directly into the Songwe project, specifically on developing the process sheet, on technical and product marketing expenditures, on an environmental, social and health impact assessment, and on other ongoing costs in Malawi.
The work will push the company further ahead in the ongoing feasibility study that got underway following the completion of a pre-feasibility study back in November of last year.
That study showed that for a capital cost of around US$217mln the company will be able to build an operation capable of producing around 2,840 tonnes of rare earth oxides in concentrate per year.
The internal rate of return showed up as an attractive 36% after tax, while the net present value rang in at US$293mln.
“The capex is one of the lowest in the sector,” says Dawes. “Access to capital is going to become more important.”
Which brings us back to the London market.
The thinking is that while the new money will allow further progress on the full feasibility study, a further slug of cash will need to be raised to get the study completed, either at the point of listing, or some time thereafter.
Dawes is careful to emphasise that there are various options for this.
So much depends on the market itself, both here in London, back in Canada, and globally.
Rare earths aren’t exactly in favour, although Dawes does cite research that gives ground for optimism, but with capital costs so low, the hope is that appetite can be drummed up in London, the shareholder base will widen, liquidity will improve, the share price will rise, and things will really start to get moving.
It should be an interesting time.