Kayelekera, Songwe Hill Mining Agreements to be finalized by December this year

By Wahard Betha

The Ministry of Mining says it is expected to sign Mining Development Agreements (MDAs) with Australian Company Lotus Resources to resume mining at Kayelekera Uranium Mine in Karonga and UK firm Mkango Resources to start mining rare earths at Songwe Hill in Phalombe by December this year.

Second Principal Secretary for the Ministry of Mining Martin Kaluluma Phiri told a parliamentary committee meeting on Natural Resources and Climate Change (NRCC) that there have been delays to sign the agreements due to some unrealistic demands by the companies.

Phiri said the Ministry continues to hold meetings with the two companies to find a way forward on their demands and ensure that the MDAs reflect a win-win situation between the country and the companies..

He said: “On October 6, 2023, the government negotiating team led by the Honorable Minister Monica Chang’anamuno had a meeting with Lotus Resources Limited to discuss the remaining contentious issues.”

“The meeting went well because most of the issues were agreed upon including royalty at 5% at mine gate, corporate income tax was agreed at 30%, withholding tax on interest charged on loans, withholding tax on subcontractors, as the MDAs is between government and Lotus and therefore subcontractors and subsidiaries will be subject to withholding tax.”

“Import duty waiver on fuel was agreed to be provided and that also Lotus will provide list of consumables for the government to consider for a waiver on import duty.”

Phiri said remaining issues to be agreed on Lotus MDA include; loss carry forward from Paladin; waiver on interest on loans, non-resident tax and dividends; application on resource rent tax and; Lotus’s request of government shareholding to be at 10% and not at 15% as it was the case with Paladin.

He said: “The Government will hold the next meeting with Lotus during the week that runs from October 30, 2023 to conclude the remaining three issues.”

“And on production resumption, Lotus estimates that if the MDA is signed by December 2023, off-takers are identified and finances secured, then the plant refurbishment may commence in 2024 and production in 2025.”

“The Company has indicated that the price of uranium is picking up and there are many utilities who have indicated interest to purchase the commodity from Lotus and this gives hope for the resumption of the mine.”

In her presentation, Deputy Director of Revenue Policy Division in the Ministry of Finance and Economic Affairs Catherine Chilima told the committee that among others, the main issue delaying the Songwe Hill agreement is the demand by Mkango that Parliament ratifies the MDA to its advantage.

Chilima also said the negotiations are delaying because Mkango proposed the use of other laws not of Malawi and is seeking zero rated corporate income tax for 10 years from the date of commercial production.

Chilima said: “On October 6, 2023, the Government held a meeting with Mkango which agreed that the decision to take the MDA to parliament was receded and that the Government and the company will provide appropriate alternative legal provisions in the MDA.”

“We also agreed that the Government will look at all the related issues requested by Mkango Resources and select those that the law provides for an option to exempt or reduce, and that we will communicate on the final position.”

“We also agreed that all the legal matters will be assessed by the office of Solicitor General (SG) which will then provide guidance and recommendations; and once all the issues are agreed upon, the MDA will undergo final scrutiny.”

But in his remarks, NRCC Chairperson Werani Chilinga said the demands by the companies sound fishy and he suspects some are just deliberate excuses to abandon the licenses.

“From what they have given us as committee it is not giving us any hope that we are going to benefit from these two companies.”

“For Lotus Resources, it is giving us little hope but for Mkango, it is not giving us any hope at all and it looks like these companies are not yet ready to do mining in Malawi from our observation.”

“However, let us wait for these mining companies because we have agreed with the Attorney General, Mining Ministry and Ministry of Finance that they will conclude these MDAs by end of this year.”

Chilenga also disagreed with the ratification of the MDAs by parliament saying the powers of negotiating the agreements to reach a consensus are in the hands of the Mining Minister and the entire government negotiating team not parliament.  

He said: “As parliament we are the ones who make laws and are the ones who should be exemplary to ensure that we follow our laws through the radar.”

“So what Mkango is demanding is totally and completely outside the Mines and Minerals Act and, they are just trying to find excuses.”

“Powers are given to the Minister responsible for mining to deal with negotiations of MDAs.”  

In a Mining Development Agreement, the negotiations concentrate on technical, legal and fiscal matters.

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