Malawi to substantially benefit from Kayelekera Uranium Mine

By Donata Mpochela

The Malawi Government says with the new Mines and Minerals Act in place, the country stands to substantially benefit from resumption of uranium production at Kayelekera Mine in Karonga.

Minister of Mining Honourable Dr Albert Mbawala said when he visited the Mine that Malawi is positioned to get ample benefits from the mine through revenues accrued from the five percent royalties, and other taxes including 30% corporate tax, pay as you earn, resource rent fees and dividends on shares through the free equity arrangement stipulated in the new Act.

The Mines and Minerals Act of 2019 stipulates that Government is free to acquire 10% free equity in a large scale mine.

The new Act also provides for mining companies to sign a Community Development Agreement (CDA) with local communities and besides executing projects communities propose through CDA, mining companies also carry out Corporate Social Responsibility (CSR) projects.

Mbawala said: “Right now, we are negotiating a new Mining Development Agreement (MDA) with the current investor, Australian firm Lotus Resources, since the existing MDA was signed with the previous investor, Paladin Africa.”

“Our negotiations are being guided by the new Act and based on the calculations by experts, Malawi is getting up to 65% of revenue from the mine. Lotus are trying to negotiate with us so that at least they should get 60% and we get 40% since they have to recover their investment in exploration and refurbishment of the mine.”

“With this new Law in place, Malawians should not get worried that we will not adequately benefit from the mine. We are having an upper hand in the negotiations and we are in control.”

He explained that the negotiations for the MDA are taking long because the Malawi Government wants to come up with a deal that provides enormous benefits for the country.

But Mbawala said besides ensuring that it signs a win-win deal that satisfies both parties, the Malawi Government wants to see the mine reopened as soon as possible.

He said: “We want to see the mine resuming production because since the mine is not operational, as Government we are not making money in form of dividends as a shareholder, royalties and taxes.

“People are now retrenched. We only have 17 Malawian employees out of 800 employees who would be employed when the mine is operational.”

Lotus acquired 85% shareholding in Kayelekera Uranium Mine from Paladin Africa while 15% shares in the mine are held by the Malawi Government.

The project hosts a current resource of 46.3Mlbs U308 and historically produced over 11Mlbs of uranium between 2009 and 2014 when Paladin put the mine on care and maintenance due to a slump in prices of the yellow cake on the world market in the wake of the Fukushima Nuclear disaster in Japan which led to the closure of many nuclear plants in Asia.

In his presentation when the Minister toured the mine, General Manager for Lotus Theo Kyter said Lotus completed a positive Re-Start study for the mine in October 2020 that confirmed the viability of the project based on a US$65/lb uranium price.

“The Re-Start Study completed confirms that Kayelekera can be among the first uranium projects to recommence production in the future,” he said.

The current price of uranium hovers at around US$50/lb but there are expectations among industry captains that the price will further increase as major energy consuming countries such as China and India are building new nuclear plants as they seek to adopt clean energy to replace utilisation of fossil fuels.

Kyter said Kayelekera will be kept in Care and Maintenance until the Company completes studies and the uranium price has recovered to required levels for it to restart mining.

He said: “We will need to work with our shareholders and financiers to raise the capital amount required to restart the mine (minimum US$50M to be raised).”

“We will need to sign uranium sales agreements with our customers to provide confidence that we can sell our product when we restart.”

“Once the above points have been met we can make the decision to restart the mine.”

It is expected that it will take over 15 months to refurbish and restart the mine with an early start date for production being the first quarter of 2024.

Kyter explained that the mine will operate for over 10 years based on the current resources at Kayelekera but exploration success will allow the Company to extend the life of the operation.

Studies conducted by Lotus have proposed changes for the project, compared to the previous operation, which include improved options around power supply thus connecting to the national grid and using alternative sources to diesel such as Solar/battery options and acid plant energy recovery; ore sorting (or similar) technology; acid recovery and leach optimization and tailings dam improvements.

Kyter said:  “A feasibility study to improve on the accuracy and incorporate the new ideas is in progress and will be completed by mid – 2022.”

“The study will target a project producing 2.5 to 3Mlbs U308 per annum for more than 10 years.”

Since it took over Kayelekera, Lotus has been conducting exploration work including drilling at Kayelekera, which has seen the Mineral Resource Estimate (MRE) increase by 23%, compared to the previous MRE, to 46.3Mlbs at 500 ppm U3O8.

The Company has also completed initial exploration drilling works at Livingstonia and Chilumba exploration sites

Government assistance required

Kyter said Lotus is seeking assistance from the Malawi Government to connect Kayelekera Mine to the national grid in order to reduce power costs, a development that will also generate significant revenue for the Electricity Supply Corporation of Malawi (Escom).

He also urged the Minister to ensure that mineral exploration licenses are granted in time to enable the Company extend the life-of-mine through exploration success.

“The focus for Lotus is on operating Kayelekera for longer than 10 years,” he said.

Kyter also asked the Minister to assist in ensuring that permits and licences for re-construction and operations are provided in good time to avoid any delays in restarting the project

He also expressed the Company’s wish for a Development Agreement that sets a suitable business environment that benefits both Kayelekera and Malawi Government and provides stability and confidence moving forward

“We urge for assistance with providing confidence to our potential investors, regulators and customers that Malawi is supportive of the project restarting,” he said.

Continued benefits from Kayelekera

The Kayelekera Mine has paid the Malawi Governmnet K42 billion in taxes, K10 billion in royalties and spent K18-billion on community development projects since work started in 2008 to 2021.

The mine continues to make significant contributions to the Malawi economy even now when it is on care and maintenance as it has 17 employees and 41 contractors on site for care and maintenance work.

Lotus Resources continues to conduct a number of corporate social responsibility projects in the area such as maintenance of access roads, supporting university students with internship, assisting Kayelekera Health Centre during emergencies, donating container and boom gate to police checkpoint at Chiwondo, and giving laboratory materials to Kayuni Secondary School.

The Company is also working on finalising a CDA in which members of the community have proposed development projects it will carry out in the area as per the requirement of the Mines and Minerals Act.

Livingstonia inaugural MRE

Meanwhile, Lotus Resources has announced the inaugural MRE for the Livingstonia Uranium deposit of 6.9mt at 320 ppm U3 O8 which increases the total global MRE for the Company in Malawi to 51.1Mlbs U3O8.

Keith Bowes, Managing Director of Lotus, commented: “The acquisition of the Livingstonia prospect last year consolidated the Company’s ownership of our southern project area, a known uranium mineralised district that has had very limited exploration work completed over the years. Following the small-scale drill program last year, it is pleasing to now produce a JORC (2012) compliant Mineral Resource Estimate, which is broadly in line with our expectations.”

“As we have previously commented, Livingstonia is not part of the current production strategy at the Kayelekera project nor our Definitive Feasibility Study work, however it has the potential to become a satellite operation in the future, once the Kayelekera resource has been depleted. The results show that there are additional feed materials available for the Kayelekera processing plant and that the life of the mine is not limited by what currently exists on the mining tenement.”

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