“This is a major milestone,” says Will Dawes of Mkango Resources Ltd (CVE:MKA, LON:MKA).
This morning the company added an Aim listing to its existing Venture Exchange listing, with the shares steady in early trade at 3.62p.
In the process Mkango also raised £1 mln.
After years of tough mining equity markets a combined capital raising and new listing have become comparatively rare.
Even Tharisa, which listed on the main board in London a week or so ago, didn’t raise any money.
But Mkango has got several unique selling points that it can put in front of new and existing investors in the UK.
It is the only focussed rare earths company listed on Aim. And it’s the only Aim-listed exploration company focused on Malawi.
Specialised it may be, but the potential payoffs could be significant.
“We started off with an early stage exploration target,” says Dawes. “Over the last five years we’ve taken that project all the way through drilling and resource definition to the point where it is now beyond the pre-feasibility stage.”
Indeed, an updated pre-feasibility study put out by the company at the end of last year showed Songwe Hill to have an after-tax net present value of US$345 mln
The study put the internal rate of return at 37% and estimated total production as likely to come in at 2,841 tonnes of rare earths oxide over an 18 year mine life.
What’s more, the rare earths in question are likely to be much in demand over the coming years, as over 80% of the company’s production value contains rare earths used in high growth permanent magnet applications.
So, while the company’s low cost structure insulates it on the downside, there is nonetheless plenty of upside on offer too.
It’s this value proposition that London investors will now be offered.
So far, they’ve taken to it pretty well. The £1 mln raise was all done in London, and the aim now is to widen the investor base further.
“Listing in London gives us a great platform as the project progresses to a more advanced stage,” says Dawes.
“A further objective is to improve liquidity and to close the value gap in relation to peers. There is a strong affinity between the UK and Malawi, and a good understanding of Africa in the London market. Coupled with our listing in Canada, we are well positioned moving forward”
The company’s management is already largely based either in the UK or in Malawi, so there are certain operational synergies.
The plan now will be to undertake further work on Songwe Hill with a view to lowering capital expenditure and operating costs still further.
The current studies show that it will take US$216 mln to build, already amongst the lowest in the sector for rare earths projects. Ongoing work might well cause that number to be tweaked a bit before full-blown feasibility work can begin.
“The pre-feasibility study identified opportunities to reduce operating costs” says Dawes. “I’m confident we can be a lowest cost quartile producer.”
If he can deliver on that aspiration, then getting the funding to build at Songwe Hill could become a compelling proposition.