JOHANNESBURG (miningweekly.com) – The share price of Mkango Resources on the LSE surged by up to 135% on Thursday afternoon after the company reported securing a £12-million direct investment that will enable the funding of a bankable feasibility study (BFS) for its Songwe Hill rare-earth project, in Malawi.

The company’s shares peaked at 10.88p on Thursday afternoon, compared with the 3.88p at closing on Wednesday.

This followed the agreement by Noble Group subsidiary Talaxis to invest directly in the project – in three tranches – in exchange for a 49% interest in Mkango subsidiary Lancaster Exploration, which holds the licence for the project.

“This transaction is transformational for Mkango and for Malawi, and is a further endorsement of the company's strategy and potential,” said Mkango CEO William Dawes.

The Aim- and TSX-V-listed Mkango will receive the first £2-million tranche on receipt of TSX-V regulatory approval, leaving Talaxis with an 8% interest.

A further £3-million for an additional 12% interest is due 45 days after the approval, with the final tranche of £7-million subject to the completion of a definitive joint venture (JV) agreement for Songwe and on Mkango publishing an updated National Instrument 43-101-compliant resource.

The use of proceeds will fund the first phase of the BFS, including infill, geotechnical and exploration drilling, bulk sampling, processing flow sheet optimisation, work in relation to the environmental, social and health impact assessment and other expenditures.

Talaxis will also be granted the option to bring its interest up to 75% through the further acquisition of a 26% interest in Lancaster by arranging the estimated $216-million funding for the project development programme.

If the option is exercised, Mkango will hold a 25% interest in Lancaster, free-carried until the project starts production.

SP Angel said Talaxis’ investment was an endorsement for the project, with the investment implying a value of £24.5-million for Songwe Hill.

It also secures the completion of the BFS and provides a pathway for funding and developing the project through to production.

“This important endorsement of Mkango provides Talaxis with up to 75% of the project and access to the future production, as well as building for a wider partnership in the developing global rare earths industry,” the company said in a note to investors.

Meanwhile, Talaxis also plans to invest in Mkango’s 85:15 research and development (R&D) JV with Metalysis.

The JV is undertaking a programme to jointly research, develop and commercialise neodymium iron boron alloy powders for use in permanent magnets. Mkango is also considering the development of three-dimensional printed magnets.

Talaxis plans to acquire up to a 49% interest, for £2-million paid out in two equal tranches, in a new venture (Newco) to be established by Mkango to further develop, commercialise and market the production of new rare-earth alloy powders, magnet and other technologies.

Upon completion of the investments, Mkango will hold a 51% interest in Newco.

The first tranche, providing Talaxis a 24.5% stake, will be due within 45 days of TSX-V approval and the second tranche on completion of a definitive investment agreement for Newco and the successful completion of the Phase 2 R&D programme.

The first-tranche proceeds will fund the Phase 2 R&D programme with Metalysis.

Under the terms of the agreement, Talaxis will be Mkango's preferred partner for all rare-earths projects globally and for all activities in Malawi.

The definitive agreements are expected to be completed by January 31, 2018, subject to the receipt of all necessary regulatory approvals.