Mkango Resources Ltd (AIM:MKA, TSX-V:MKA, OTC:MKNGF) unveiled a definitive feasibility study (DFS) for the Songwe Hill rare earths project in Malawi that indicates a US$559mln post-tax net present value (NPV) and a 31.5% post-tax internal rate of return.
Songwe is one of the very few rare earths projects globally to have reached the DFS stage, the company said.
The DFS envisages a payback period of 2.5 years from full production (five years from start of capital expenditure) and post-tax life-of-operations nominal cash flow of US$2.1bn.
The DFS is based on a conventional open pit mining operation, feeding mills, flotation and hydrometallurgy plants on site in Malawi to produce a mixed rare earth carbonate (MREC), with an operating life of 18 years.
Mining is expected to start in February 2025, with production ramping up from July 2025 and averaging 5,954 tonnes per year total rare earth oxides (TREO) for the first five years of full production from September 2025 to August 2030.
The TREO annual production figure includes 1,953 tonnes of neodymium and praseodymium oxides, and 56 tonnes of dysprosium and terbium oxides, in a MREC grading 55% TREO, generating nominal EBITDA of US$215mln a year.
“The DFS is a major step forward for the company, uniquely positioning Mkango as a future supplier of both mined and recycled rare earths for the green transition, against a backdrop of a very strong demand and pricing outlook," said chief executive William Dawes.
Neodymium, praseodymium, dysprosium and terbium are used in permanent magnets for electric vehicles, wind turbines and many electronic devices.
Under the DFS, initial capital expenditure is estimated to be US$277mln, excluding a US$34mln contingency, to develop the mine, mill, flotation and hydrometallurgy plants, tailings storage facility, and related project infrastructure. Total capital expenditure is expected to be US$388.8mln.
Mine, Refine, Recycle
The NPV excludes any value attributable to the proposed Pulawy rare earth separation project in Poland, which is expected to process MREC from Songwe, and any value attributable to Mkango's interests in rare earth magnet recycling.
"Songwe is the cornerstone of Mkango's Mine, Refine, Recycle strategy, underpinning development of the proposed Pulawy separation plant in Poland and complementing our interests in rare earth magnet recycling in the UK and Germany via HyProMag,” said Dawes.
The results of the DFS for an integrated project, comprising Songwe and Pulawy, are expected to be announced when a mine development agreement with the Malawi government is completed for Songwe and a feasibility study is completed for Pulawy.
With the release of the Songwe DFS and in anticipation of releasing the integrated DFS, Mkango said it continues to advance ongoing talks with potential strategic investors, development and commercial banks, and off-takers.
Mkango said it will focus on lowering capital expenditure and operating costs for the project, which have both been negatively impacted by current market dislocations.
While the DFS is for 100% of Songwe on a stand-alone basis, Mkango noted that the government of Malawi is entitled to a 10% free carried interest.
The company will host an investor conference call at 3pm UK time on July 8.