Malawi urged to offer 'attractive deals' to woo mining investors

22nd November 2013 By: Marcel Chimwala - Creamer Media Correspondent

Africa-focused ASX-listed miner Globe Metals & Mining has urged the Malawi government to offer mining investors attractive deals if it is to transform the minerals sector into a thriving industry that will contribute significantly to the country’s economy.

Globe Metals & Mining CEO Alistair Stephens says Malawi’s projections that mining, which currently accounts for 12% of the country's gross domestic product (GDP), will contribute up to 30% of GDP by 2015 will not materialise if government does not "dangle exciting deals to mining investors".

Globe Metals & Mining is currently negotiating for a licence to mine niobium at its Kanyika prospect, in northern Malawi.

The company initially intended to start mine construction at Kanyika in the first quarter of 2013, but negotiations with government have dragged on primarily because the Malawi government feels a draft development agreement concluded by the two parties, which was reportedly modelled on one that the Malawi government signed with Paladin Energy in 2009 for the mining of uranium at Kayelekera, is not fair to government.

Under the Kayelekera agreement, Paladin pays 3% in royalties to the government, which also has a 15% shareholding in the mine.

The Malawi government says it wants to sign an agreement that ensures that Malawians benefit more from mining projects and is reportedly pushing for a 5% royalty and a 30% shareholding in the Kanyika mine.

Globe, however, argues that government has to consider the substantial expanses that companies incur and the serious risks they face when they undertake exploration projects.

Says Stephens: “Exploration is a high-risk venture that requires courage, talent, persistence and financial backing, which, in turn, demands a reward.

“The deposit must first be discovered, and this is usually the result of time-consuming and expensive geological prospecting, using state-of-the-art technology and highly skilled and experienced people. Exploration companies work on the assumption they will recover their expenses when they develop a profitable mine once they have found a viable deposit. But there are no guarantees in the exploration business, and the entire investment effort will be wasted if they find nothing."