Rare earth elements (REEs) mineral exploration and development company Mkango Resources has completed a definitive feasibility study (DFS) for its Songwe Hill rare earths project, in Malawi, which estimates that the company will have to invest $277-million in the project’s development.
The TSX-V- and Aim-listed company notes that the project is among only a few advanced-stage REE projects in the world at a time when a major supply/demand gap is developing.
Further, the project is only the first portion of a larger strategy by Mkango to participate in all stages of the rare earths supply chain.
“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,” says Mkango CE William Dawes.
“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,” he adds.
The DFS sets out an 18-year operating life for the Songwe Hill mine, which has a proven and probable mineral reserve estimate of 18.1-million tonnes, grading 1.16% total rare earth oxides (TREO).
Mkango believes there is further potential to increase the mine life of Songwe Hill, given the additional inferred resource, the potential to expand the mineral resource and the exploration potential from the nearby Nkalonje project.
Songwe Hill is planned to be a conventional openpit contract mining operation, feeding mills, flotation and hydrometallurgy plants on site, in Malawi, to produce a mixed rare earth carbonate, with mining expected to start in February 2025, processing expected to ramp up from July 2025 and full production expected from September 2025.
The DFS sets out average production of about 5 954 t/y of TREO for the first five years of full production, including 1 953 t/y of neodymium and praseodymium oxides and 56 t/y of dysprosium and terbium oxides, in a mixed rare earth carbonate grading 55% TREO.
This is expected to generate nominal earnings before interest, taxes, depreciation and amortisation of $215-million a year.
From years 6 to 18, the mine is expected to produce 4 081 t/y of TREO in mixed rare earth carbonate.
The mixed rare earth carbonate produced from Songwe is expected to be a high-value product, averaging $32 816/t for the first full five years of production, based on pricing estimates from Adamas Intelligence.
Additionally, the mixed rare earth carbonate will be cerium depleted. Because cerium is currently considered to have challenging market fundamentals, there is a strong economic rationale to remove as much cerium as possible and, as a result, a large proportion of the cerium will be removed from the mixed rare earth carbonate during the hydrometallurgical process, Mkango says.
Energy supply for the project comprises a 24 MW solar facility supplemented with grid power, which, in Malawi, is largely from hydroelectric sources. Mkango is also evaluating wind power to further enhance and diversify the renewable power mix.
The project has an initial capital expenditure (capex) estimate of $277-million, excluding a $34-million contingency, for development of mine, mill, flotation and hydrometallurgy plants, tailings storage facility and related project infrastructure.
A major focus for the company will be further optimisation of the project with the objective of lowering capex and operating costs.
Further, the DFS estimates a post-tax net present value (NPV) of $559-million, using a 10% nominal discount rate, with an internal rate of return of 31.5%, a payback period of two-and-a-half years from full production, which is five years from start of capex, and estimated post-tax life-of-operations nominal cash flow of $2.1-billion.
The project's NPV excludes any value attributable to Mkango’s proposed Pulawy rare earth separation project, in Poland, which is expected to process mixed rare earth carbonate from Songwe Hill, enabling the company to capture additional value from growing its integrated downstream business with a captive source of primary raw material feed.
The NPV also excludes any value attributable to Mkango’s interests in rare earth magnet recycling.
Mkango intends to publish a DFS for an integrated operation, comprising its mining and rare earth separation activities, in due course.
It is in discussions with the Malawi government about a mine development agreement for Songwe Hill, with Dawes saying the process is progressing well.
A feasibility study on the Pulawy separation plant is also under way.