South African company Gondo Resources says it is to launch a feasibility study into a bauxite project in the Mulanje area of southern Malawi early this year.
This follows reports that the Malawi government has asked the firm to conduct a feasibility study within 24 months or risk losing its exclusive prospecting licence over the Mulanje deposit, which boasts probable and indicated reserves of bauxite amounting to 25,6-million tons.
Gondo was granted an exclusive prospecting licence for Mulanje bauxite in 2005, but this expired last year, before a feasibility study and an environmental-impact assessment (EIA) were undertaken.
A representative of Gondo in Malawi, Essa Arab, says the company has successfully requested the Malawi government to extend its licence by two years, from September 3, 2008, with an option for a review.
The licence covers an area of 29,25 km2.
Arab says that, over the initial three-year licence period, Gondo undertook preparatory work for the feasibility study, including finding ways of disposing of the red clay that will come out during mining, studying the deposit, monitoring international marketing trends for aluminium, recruiting partners, and studying the effects that the mining of bauxite will have on the quality of tea produced in Mulanje, Malawi's main tea-growing district.
"Our studies have revealed that the project will not impact negatively on the quality of the tea because there will be no dust emissions.
"We have also resolved to turn the 15-million tons of red clay from the project into tiles instead of throwing it away," says Arab.
A feasibility study carried out in 1993 by Canadian company Met-Chem with funding from the African Development Bank pegged the capital cost for the project at $820-million.
Met-Chem indicates that the project will be capable of mining 580 000 t of bauxite yearly to produce 200 000 t alumina, which, in turn, will be processed into 100 000 t of aluminium through the Bayer process in Alcan P-180 cells.
Using all assumptions for the base case, the project will generate an internal rate of return in constant dollar terms of 6,2% before tax for the smelter and 7,4% for the alumina plant alone, with corresponding payback periods of 17 and 15 years respectively.
A profile of the project compiled by geologist Grain Malunga indicates that Malawi produces enough electricity to supply the alumina plant but more electricity will have to be sourced elsewhere for the aluminium smelter. A possible source is the Cahora Bassa hydropower scheme, in Mozambique.
Malunga calculates that an additional $50-million will have to be invested to cater for the construction of a rail extension to the project site, a power line and a dry port.
Gondo is the second mining firm to show interest in developing the Mulanje bauxite project ever since the Met-Chem study in 1993.
Resources group BHP Billiton in 2001 expressed an interest in developing the Mulanje deposit, with the aim of exporting the resource in the form of alumina to its Mozal smelter, in Mozambique, but later pulled out following reports that it had secured a better deal from its Australian supplier of alumina.
Malawi also boosts of unexploited bauxite deposits in the Nyika Mountain area, in the country's northern region, and in the Zomba Highlands, in the southern region.