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Mineral Resource Revenue Management and Distribution from Mining
January 22, 2020 / Ignatius Kamwanje

Mineral resource revenues are special because they are finite, volatile and if they are large enough, they can easily impact other industries and paralyse them. They also generate large economic rents and are location-specific, which can lead to conflicts over their control in other areas. As a result, they may need to be managed and distributed differently from other types of government revenue.  There are various techniques that governments can employ to respond to the special challenges of natural resource revenues in a country like Malawi. These among others include;

  • state-owned enterprises.
  •  subnational jurisdictions.
  • distributing revenues to natural resource funds.
  • the national budget, or directly to citizens in the form of cash. Each of these institutions requires a unique management strategy.

Natural Resource Revenue

Many countries do not see their expected returns of social and economic development when they discover mineral resources. This challenge is in part linked to how the countries manage the natural resource revenues, or the money received by the government because of the extraction or sale of natural resources. The reader must understand that mineral resources are unique and to understand the uniqueness there are characteristics that make them to be in such a state and belong to a special way  as compared to other natural resources for a country. Below are some of the selected few  properties that make mineral resources uniquely identified;

  1. Mineral Resources are volatile.

 Prices of natural resources like minerals, fluctuate with respect to market forces. When government revenues are tied to natural resources, their revenues will fluctuate accordingly. In this case,volatility is amplified by  production cycles of mining and unexpected stoppages. This makes the mine planning or the countrys development planning difficult and may lead to company’s/countries go into debt when revenues decline in order to maintain the same standard of living as before the downturn. Volatility can create problems because it means public expenditure becomes less effective than it was before so countries must try to put in place mechanisms that can minimise this kind of risk because the end result to this  is poor investment decisions and higher probability of debt crises.

2. Mineral Resources are Non Renewable ( Finite).

Each mining project cycle has a life span called the Life of Mine(LOM) upon reaching the Goodbye Cut. This is usually so many years but mostly less than 50 . While new technology or exploration generates new discoveries, ultimately mineral resources are finite because they cannot be renewed once and for all. Some countries have experienced large economic booms during their peak production phase of the mineral resources both in areas of operation and the country as a whole but ultimately, only to fall into poverty as soon as the resources are fully exhausted. An example in Malawi is the mining town of Karonga from Kayelekera Uranium Mine  in the north where there was an economic boom but later phased out slowly due to its temporary closure (under Care and Maintenance) and also the phosphate exploited and entirely depleted in the tiny Island of Nauru in Oceania.

3. Mineral Resources can damage other industries.

When mineral resources are discovered, they can represent a large percentage of the country’s GDP and government revenues. If the economy does not have the absorptive capacity to make efficient use of these revenues, the result can be inflation or exchange rate appreciation. This increases the cost of domestically produced goods in foreign markets, especially manufactured goods, harming exporters. Also, the large revenues in the private sector often attract skilled workers to extractive industries like mining. When the number of skilled workers in a country is small, this can make it more difficult for other sectors to find expertise. Together these trends can make it more difficult for other industries to successfully operate and can make a country more dependant on natural resources like minerals. Together, these effects are often referred to as Dutch disease. In other words, Dutch disease leads to accumulation of wealth from resources like minerals and the consumption that comes from that wealth leads to a demand for a lot of non-traded goods and this pulls resources away from other internationally traded goods that would be competitive.

Politically a Dutch Disease is a highly valued resource that acts as a natural rent which is just as income that is free. It’s a massive wealth that can sometimes lead to internal conflicts of a country.

4. Mineral resources can be large and geographically concentrated.

Mining revenues can be enormous relative to the size of an economy, yet, as a capital-intensive rather than labour-intensive industry, they tend to employ only a very small portion of the population. This is often misaligned with the expectations of the communities that surround the extraction point. Furthermore, the profits can be captured by a selected few or be exported to foreign investors. This can cause frustration and unnecessary expectations among locals, leading to conflict, especially in the region where the mines are located. The large amount of profits from a single source is vulnerable to state capture or government mismanagement unless oversight mechanisms are in place.

Some selected institution for management and distribution of revenue in mineral resources

Revenue distribution refers to the manner in which a government allocates, or distributes, natural resource revenues to different levels of government, institutions, or directly to citizens. Some of the decisions of where to allocate revenues are fundamentally political. Economic efficiency criteria consider questions of the absorptive capacity of different levels of government, whether individual citizens have access to the ability to save transfers, and how costs differ over different locations or sectors. Combining the economics with the political analysis can be challenging, particularly when trying to respond to the special qualities of natural resource revenues realised from extractive sector like mining. For instance, allocating an appropriate percentage of revenues, determined by an economic formula, to a long-term savings fund can help mitigate Dutch disease and improve national spending efficiency, though it can also starve the government of much-needed development financing. Allocating some revenues to subnational governments may also improve local service delivery. However in allocating resource revenues directly to citizens, it may reduce poverty and improve natural resource revenue accountability. Therefore governments, with input from citizens, must decide how to manage risks and opportunities in the sector. Allocation of revenues is only part of a bigger picture and mining related/natural resource revenue institutions should have established procedures or principles to plan, organize staff and control their operations. These activities are referred to as revenue management, as opposed to revenue distribution, which simply refers to the allocation of revenues. Some key institutions that manage resource revenues are:

(a) Natural resource funds.

Governments can establish special extra budgetary funds—outside the regular budget process—to manage natural resource revenues such as from mining of a mineral resource. When these funds are used to invest at least partly in foreign assets, they are referred to as sovereign wealth funds or natural resource funds. Ideally, the government dictates how much to deposit and withdraw from these funds by fiscal rules. Sometimes governments that are dictatorial ones, manage these natural resource funds willy nilly without clear rules or objectives.

How successful are natural resource funds

  • When they  are established with clear objectives
  •  Strong fiscal and investment rules
  •  Division of responsibilities between actors.
  •  Sufficient disclosure for proper oversight.

(b) State-owned enterprises

 State-owned enterprises are companies that are more than 50 percent owned and operated by the government. In mining, state owned enterprises can play an important role in revenue management, as natural resource revenues often pass through them on their way to the budget, or there are large budget allocations of mineral revenue to these. Countries often find them attractive, as  national mining companies can generate revenues for the state and serve other functions, such as training domestic workers and improving sector control e.g. Botswana. However, there is a risk that State Owned Enterprises can act as a drain on government finances or become a financial risk and thus they can divert scarce government revenues away from public investments in other sectors. They are also responsible for non-fiscal expenditures that can be an inefficient use of public resources, such as Corporate Social Responsibility (CSR) projects. If a government clearly establishes the fiscal relationship between these state owned enterprises  and the budget, it can work better to avoid  problems.

Mining
800MW required to power minerals sector
January 22, 2020 / Wahard Betha

The Ministry of Natural Resources, Energy and Mining says a minimum of 800 MW of energy is required to power the mining sector.

The Ministry said this during a stakeholder’s workshop on the identification and prioritization of advocacy in the implementation of the National Energy Policy which was held at Sunbird Capital Hotel in Lilongwe.   

The Electricity Generation Company (EGENCO) produces an average of 363.75 MW against a demand of over 450 MW which is expected to grow to over 1000 MW by 2020 this year.

In a report presented at the workshop dubbed ‘Status of energy sector in Malawi,’ the Ministry explains that the Government has embarked on various initiatives to attract private investors in the power generation industry.

It leads: “Some of Government’s interventions to allow private sector participation in the power industry include: Amendment of Electricity Act; development of the Independent Power Producer (IPP) Framework; conduction of Cost of Service Study; conduction of feasibility study; development of an Integrated Resource Plan (IRP) and; construction and rehabilitation of transmission and distribution lines and substations for evacuation of power.”

The report indicates that the country has a huge potential to increase hydropower generation capacity to 1, 300 MW.

There is also potential for coal-fired power generation and renewable energy including solar energy, wind, geothermal and mini/micro hydro.

It says despite such potential, 99% of the nation’s electricity is generated from hydropower stations cascaded on the Shire River.

Meanwhile, the Ministry has signed a Power Purchase Agreement (PPA) with an investor to develop a wind energy project at Lunjika in Mzimba and conducted resource mapping across the country for development of solar power, geothermal and mini hydro power stations.

“The country receives 2, 640 sunlight hours in a year with annual average insolation levels in the range of 5.21 to 5.79metres kWh/m2/year.”

“There is also potential for wind energy with measured annual average wind speeds of 3.8 to 4.0 m/s at 10m heights; 12m/s in Chikangawa and at 70metres in Bolero, Rumphi,” reads the report.  

Besides the mining sector, other sectors that are yearning for increased power supply include: Tourism, education, banks, ICT, hospitals and offices, all requiring a minimum of 500MW.

The Green Belt Irrigation Initiative requires a minimum of 130MW; manufacturing and processing industry demands not less than 700MW while domestic demand is pegged at a minimum of 700MW.

Malawi’s access rate to electricity stands at 11.4 percent overall with only about two percent in rural areas and blackouts are the order of the day in the country owing to inadequate generation capacity; ageing transmission and distribution networks; non-cost reflective tariffs; slow rate of connection to the grid; and environmental degradation.

Power projects underway in the county include the 19 MW Tedzani IV to be completed by 2021; the 70MW grid connected solar project; the 350MW Mpatamanga hydropower plant whose construction will start this year 2020 or 2021; the 200MW Kholombidzo hydropower plant; the 261MW Fufu hydropower and the 190MW Songwe hydropower plant.

The National Energy Policy (NEP) of 2018 is based on a goal of increasing access to affordable, reliable, sustainable, efficient and modern energy for every person in the country.  

Mineral exploration is advancing in a number of mining projects which will require a substantial amount of power including Makanjira Heavy Sands in Mangochi, Songwe Hill Rare Earths in Phalombe, and Kanyika Niobium in Mzimba.

The Kayelekera Uranium Mine in Karonga, which is currently on care and maintenance, uses diesel generators.

Mining
Kayelekera workers panic over buyout deal
January 22, 2020 / Wahard Betha

The impending sale of the Kayelekera Uranium Mine in Karonga has triggered panic among the workers of the mine who are not certain of their future when the new owners take over the mothballed mine.

The Ministry of Natural Resources, Energy and Mining has given consent to Australia’s Paladin Energy to sell its 85% majority shareholding in Kayelekera to Lotus Resources Limited Pty Limited, a subsidiary of Hylea Metals Limited (ASX: HCO).

In an exclusive interview with Mining and Trade Review during a recent visit to the mine, Kayelekera employees said they want Paladin to retrench and pay them their terminal benefits before they sign fresh contracts with the new owner of the mine.

“We were told that our contracts will be intact regardless of the ownership changes but we are in panic because we do not know what the new Company will offer. Many of us have been working here for over 10 years and it will be fair for Paladin to give us our dues before they leave,” said one of the employees who pleaded for anonymity.

He explained that the employees wrote a letter to Paladin management, which was signed by about 50% of the members of the workforce, but the Company is dilly-dallying to give them feedback.

The Kayelekera employees, therefore, urged “the Government to come to their rescue on the issue as they have proven powerless to demand their labour rights from Paladin.”

But Paladin General Operations Manager Mike Hoey parried down the demands from the workers saying since Lotus Resources are purchasing Paladin Africa as a going concern, all existing entitlements will be transferred to the new owner.

Hoey said: “We will follow the country’s labour law that mandates the transferring of the employees to the new owner when you are selling an entity. Both Paladin and Lotus will continue to comply with all relevant Acts and Legislation of the Republic of Malawi.”

Meanwhile, Paladin has quashed allegations by some members of the community that it is polluting the nearby Sere River.

Speaking during a media tour to the site organized by Ministry of Natural Resources, Energy and Mining, Kayelekera Senior Environmental and Compliance Officer John Msachi explained that the Company follows all the procedures as spelt out in the country’s regulations and internationally set standards in handling uranium.

Msachi said: “We do not just dispose uranium into the environment.  We even take that water that we think is contaminated with uranium back into the processing plant for extraction of uranium deposits. Before disposing the water used for processing of uranium into the river, we make sure that the value of uranium is not beyond the standard which is 0.30.”

He also explained that the company undertakes regular environmental monitoring activities and produces regular reports that are submitted to the Government through Environmental Affairs Department.

The reports include: Annual environmental; Quarterly data reports; quarterly license compliance reports and; monthly data reporting – from joint Paladin/Government of Malawi monitoring programs.

Paladin has three water treatment ponds at Kayelekera and also planted grass and trees at the site.

“We use native grass and trees from the area and also monitor the rehabilitated areas for sustainable and self development post mine closure and water post closure for about five years as the area consolidates,” he said.

Spokesperson for the Ministry, Sangwani Phiri commended Paladin for proper management of the environment at Kayelekera.

 “As we have seen after touring the area, no any poor disposal is being made here,” he said.

In the Kayelekera buyout deal, the Malawi Government will retain its 15% stake in the uranium mine.

Lotus MD Simon Andrew said in the statement that following consent granted by the Ministry of Natural Resources, Energy and Mining, completion of the sale remains subject to customary terms and conditions, including Reserve Bank of Malawi (RBM) approval, which is expected to follow.

Kayelekera hosts a high-grade uranium resource with an existing open pit mine but Paladin suspended mining at Kayelekera in 2014 following a slump in global uranium prices.

The mine has since remained on care and maintenance as directors anticipated a pickup in global uranium prices.

The stake in KUM, according to Paladin will be sold for US$5 million (about K3.7 billion), comprising $200 000 (about K148 million) in cash and $4.8 million (about K3.5 billion) in Hylea shares which will be issued to Paladin.

Mining
Tension over Chitipa’s Illomba Granite Mine
January 22, 2020 / Tawonga Nyirenda Mayuni

There is uncertainty over the reopening of Ilomba granite sodalite mine in Mbilima, Chitipa as the people of the area through a civil society group dubbed the Concerned Citizens of Chitipa (CCC) have put their foot down that the mine will not reopen until the investor honors Corporate Social Responsibility (CSR) obligations.

Production at Ilomba was suspended in November 2019 following protests by the Concerned Citizens who were demanding that government closes the mine for failing to honor corporate social responsibility obligations.

The protests turned violent as the protesters burnt shelters of mine workers and even seized a vehicle which was supposed to carry the product for export.

In response, Ilomba Granite Mine Company sued leaders of the Concerned Citizens in December 2019, and applied for an interlocutory injunction restraining the people of Mbilima from interfering with the operations of the company through protests or whatsoever.

But during a court hearing at Mzuzu High court on January 6, Ilomba withdrew the case “in the interests of peace, and to avoid further conflicts and ease tension.”

Chairperson of Natural Resources Justice Network (NRJN), Kossam Munthali, who was one of the defendants said he was delighted that the case was dismissed with no costs attached to it.

However, the Concerned Citizens have stood their ground that the mine be temporarily closed “until some sticky issues are sorted out regarding the Chinese miners.”  

“Our demand still remain that the mine be temporarily closed until some sticky issues are sorted out, the communities need to be told who the Chinese miners are because the license holder is a Malawian of Asian origin Faisal Hassen, furthermore the new Chinese owners did not carry out  any community sensitization,” said Chairperson of the Civil Society Network Sydney Simwaka.

Hassen, however, dismissed the CCC’s assertions saying his Chinese partners met up with the traditional leaders of the area before commissioning mining operations.

Hasssen said on Mining Review readers Whatsapp group: “The truth is that we have done nothing wrong as a Company. When my Chinese partners moved to the site and met up with the chiefs, they were overwhelmed by the welcome they received hence they pledged to assist the community. Among others, they pledged a borehole, the building of a classroom and a clinic. The borehole has already been completed and the other projects are on their way.”

But commenting on Hassen’s remarks, Munthali described them as an insult to the community of Mbilima explaining that constructing a borehole alone is not enough considering the 24 years that the company has been in operation in the area.

Munthali also lashed out at Ilomba Mining Company for being secretive in its dealings.

He said:“What even shocked the community when we met was the size of their mining area which is 3.4 square kilometers, implying all the villages in Mbilima area are within the mining area.”

 This information was not even known to the community, so hiding the information for 24 years is not fair.

 “The people do not even know who the Chinese people are, they were just surprised.”

Mining
Quarry mining wrangle exposes gap in community engagement
December 13, 2019 / Charles Pensulo

Manesi Kapeni Village in the area of Senior Chief Kapeni in the south-western part of Blantyre is located almost 5-minutes’ drive off the M1 road. There is almost an air of tranquility as one passes through trees which form part of the surrounding and the chirping sounds of birds and insects. The sight of many people working in the farms clearly demonstrates that it is a predominantly agricultural area.

But this area, in September, experienced acts of violence. The community members blocked a Chinese company which is constructing a bypass road in Blantyre from mining quarry stones in the area. What followed later were a series of meetings between government officials, the community and local leaders. No resolution has been reached so far.

Village head Manesi Kapeni said the initiative to start mining quarry in his area came as a surprise. So do his subjects who were shocked to see the Chinese coming into the area to start testing the rock quarry for construction of Blantyre By-Pass Road. Most of the information the village head had about the project then was through grapevine.

“They just came with their machines and this surprised my subjects. Consequently,  some of them started rioting,” he told Mining and Trade Review in an interview, adding; “I told them [contractors] to go back as some of my subjects accused me that I had sold part of the village where the rock was.”

But later, the contractors came and took samples of the rock and assessed the surrounding area to determine how much land will be affected. Those within the vicinity of the affected area were to be compensated.

“When the officers from the District Council visited the area there was riot. People insisted they would not relocate since some of their relatives were buried there. I sat down with Traditional Authority Kapeni and the District Council officials after engaging the community but up to now there is no resolution to the wrangle. The Chinese came again and did some testing, I am told, but we do not know what will happen next.”

Not isolated incident

What happened in Manase Kapeni Village is growing into a familiar phenomenon in Malawi’s minerals sector as recently a vehicle belonging to a Chinese firm carrying gemstones was detained in Mzimba following a row which erupted between community members and the firm with the latter being accused of smuggling gemstones out of the area.

Senior Chief Pherembe of Mzimba said in an interview: “We have noticed that there is an influx of these Chinese operators in the district that are conducting mining activities without proper procedures.”

“They are doing that on customary land which belongs to us and therefore we have to be informed of their presence.”

 The chiefs threatened to shut down the gemstone mines.

Members of parliament and councilors in Dowa district also called for suspension of all mining activities in their areas until the Ministry of Natural Resources, Energy and Mining gives an explanation on how it is dealing with illegal mining in the district.

Unanswered questions

According to Consulting Geologist, john Nkhoma, there is need for proper community sensitisation before the inception of any mining project in the country.

“The company should inform the community through the District Council and Mines department of what their activities are and if there is any compensation, people must know who will do the property evaluation and modes of payment,” said Nkhoma, a veteran Geologist, who is Managing Director of Chiwandama GeoConsultants.

He said in the case of the quarry mining wrangle in Blantyre, there should have been consultation for the company to be awarded an Environmental and Social Impact Assessment (ESIA) certificate.

The question is; “Did the company do that. When they were mobilising did they inform all the relevant stakeholders?”

Reacting to the events, Deputy Director for Mines Department in the Ministry of Natural Resources, Energy and Mining Peter Chilumanga said in order to deal away with wrangles between mining company’s and members of the community in mining areas, government has proposed that all artisanal and small scale miners (ASMs) using equipment should get medium scale mining licenses.

 “In that way, issues of CSR as complained by communities will be a thing of the past as all medium scale miners are mandated to execute CSR activities signed by all interested and affected parties,” Chilumanga said.

 Surely, if the government and the quarry mining contractor in Manesa Kapeni Village had followed such well knitted arrangements as unveiled by Chilumanga, things could not reached such a boiling point in this beautiful village.

Mining
Mchenga mine to increase coal production
December 13, 2019 / Wahard Betha

Mchenga Coal Mines Limited (MCM), which is one of the oldest mines in the country, has unveiled plans to extend and open new mining sites in its license area to increase its annual coal production from the current 12000 tonnes to 48000 by 2021.

MCM Mining Manager Munashe Dicha disclosed the plans in an interview with Mining & Trade Review during a media tour of the mine organised by the Ministry of Natural Resources, Energy and Mining.

Dicha said the planned increase in production is aimed at meeting the demand of coal from its local customers.

He said: “It has been a long time since our customers started complaining that we, the local coal producers, are failing to meet their demands. We have located new sites that we plan to open as soon as possible to up production,”

“The sites include Phoka Mine, office block thus near our offices, and we also we want to extend the existing Mwandira mine.”

Dicha said the office block prospect has a huge reserve to support development of three mines.

He said the planned production increase will reduce the importation of coal from neighboring countries including Zimbabwe and Mozambique.

Mchenga customers are spread across Malawi and include Limbe Leaf Tobacco Company, Cement Products, Kanengo Tobacco Processors, Central Poultry Feeds Group, East Metals, and Malawi Iron and Steel Corporation (Miscor).

Regional Mining Engineer for the Northern Region George Maneya commended Mchenga for its plans to increase production.

Maneya said: “Mchenga lies within the Livingstonia Coalfield where coal is of highest quality compared to the Sub Sahara coal.”

“So the idea for the company to increase production implies Malawi will produce more quality coal to meet the demands of the local market.”

He said if local companies increase their production to meet the domestic demand, the government will map out ways to reduce importation of coal from other countries, which is creating unfair competition with the local industry hence threatening the survival of local investments.

Mchenga also updated the journalists on its plans to kick-start construction works for the 100 MW Rukuru Power Plant by 2021.

“We already conducted a feasibility study which proved the viability of the project. We are currently working out agreements with other stakeholders to solicit funds for the project,” Dicha said.

Dicha said the plant will be connected to the national grid and the company will only tap 5MW for its operations.

Meanwhile, Mchenga is executing a corporate social responsibility programme in the area which   includes provision of free health facilities and drugs to surrounding communities; provision of free portable water and; construction of school blocks and teachers’ houses; chief’s houses; playing fields; and renovation of roads.

MCM has also employed a bulk of its 236 employees from the surrounding community and has provided the employees and their families social amenities including a clinic, a primary school, kindergarten, a subsidized shop, sporting facilities, electricity, a club with pay television (DSTV), a maize mill and portable water.

Dicha said the company is also providing internship opportunities to students from Polytechnic University and technical colleges, and in-house training in Mining Engineering.

Mchenga has also embarked on an environmental rehabilitation exercise where by it is planting trees in worked out areas.

The company approximately planted 12000 tree seedlings in eroded areas and estimates that within 2-years, it will be able to start harvesting mine support timbers from its own rehabilitation plantations.

Coal at Mchenga Mine is extracted using Room and Pillar method, which involves the application of underground working variation of Board and Pillar configurations, a competitive method in ground control measures for stability and safety.

Coal Mining at Mchenga started in 1987 and a state owned mining company, the defunct Mining Investment and Development Corporation (MIDCOR), operated the Mine to May 1995 when it was privatised.

Mining
New mines law does not provide adequate benefits to MW – NRJN
March 01, 2019 / Gloria Mbwana

The Natural Resources Justice Network (NRJN) says the new Mines and Minerals Act, which has a provision for the Malawi government to decide to have at least 10% shareholding in large scale mining ventures, is far from meeting the expectations of Malawians as the rightful beneficiaries of mining projects.

Chairperson of NRJN KossamMunthali told Mining & Trade Review in an interview that it is unfortunate that parliament passed the Mines and Minerals Bill with such a provision for free government equity when the civil society made it clear that this is on the lower side.

Munthali said: “We already made it clear to government that this is a non-starter and have been wondering what are the basis like and from which model are we trying to borrow.”

“We feel the government is failing to be sincere to Malawians by dangling almost all the proceeds of mining projects to companies at the expense of the nation including impoverished communities in mining areas. In crafting this law, we would have used models of countries in the region which are reaping substantial benefits from the mining sector such as Botswana.”

In Botswana, the Mines and Minerals Act gives government an option to own 15% shares in new mines but the Act calls for negotiations with regard to shares in diamond mining companies.

Consequently, the government has a 50% stake in Debswana with a private company, De Beers, holding the rest, and the Botswana government fully owns other diamond investments including the Okavango Diamond Company and Morupule Colliery.

Munthali explains that though Community Development Agreements (CDA) have been included in the law as advocated by the civil society groups, the law is far from maximizing community benefits from mining projects citing that despite civil society groups advocating for 3 to 4% of mine revenue to be channeled to community projects, the law is only talking of about 0.45% of the annual growth sales revenue.

“Government should not forget that mining is not agriculture because you do not grow uranium like trees. You mine for now or you extract for now, and then it is gone for good.”

He also urges the government to amend the law on community development agreements to take on board medium scale mines which are many in the country as compared to large scale mines.

Munthali also laments the omission of the issue of “free, prior and informed consent” in the Act saying the absence of such a provision is denying the community the right to access information about mining projects taking place in their areas.

“Government enacted the Access to Information law and joined the Extractive Industry Transparency Initiative (EITI) to ensure that information on   mining issues is available to the country’s citizens including communities affected by mining activities. It would have, therefore, been another progressive step on the issue of transparency and accountability on mining activities to include the issue of ‘free, prior and informed consent’ in the new law,” he says.

He explains that in absence of such a provision, mining companies will not be obliged to sensitise communities on the projects taking place in their respective areas.

Malawi government holds 15% shareholding in Kayelekera Mine in Karonga, the country’s largest mining investment, with the rest of the shares owned by Australia’s Paladin Africa.

Despite collecting royalties and taxes from the mine, the Malawi government has not been successful in earning dividends from its shares as Kayelekera, now on care and maintenance, has remained a loss making entity due to low uranium prices on the world market.

Mining
Exploration Drilling in Mineral exploration (Geology) and Mining
February 01, 2019 / Ignatius Kamwanje

An Exploration Drilling is a process of mineral exploration in the mining industry through extraction of rock quantity to probe the contents of known ore deposits and potential sites by withdrawing a small diameter core or chip of rock from the orebody so that geologists can analyse the core/chip by chemical assaying and conduct petrologic, structural and mineralogical studies of the rock. Mineral exploration companies are often broken down into two categories namely; greenfield and brownfield.

Greenfield Exploration refers to unexplored areas, where mineral deposits are not already known to exist which can also be subdivided into grassroot and advanced projects while Brownfield Exploration, also known as near-mine exploration, refers to areas where mineral deposits were previously discovered. Exploration companies search globally for mineral deposits that can be economically mined and processed and mineral exploration is made up of a variety of different activities and techniques of which drilling is one of them, that are used to find a potential discovery which eventually may one day become an operating mine.

The goal of Mineral Exploration Techniques

Many different types of exploration techniques are used in conjunction in order to get enough information to accurately define a mineral deposit. Once enough high-quality geological data has been gathered from exploration activities, a project can be analyzed for economic feasibility.

Management will use this data to make a decision on whether to continue exploration, establish or update a mineral resource estimate, proceed with mine feasibility studies in order to reach production, or pursue other strategic initiatives with the property. The data obtained and used must pass through QAQC (Quality Assurance Quality Control) and thereafter highly validated to give well reliable and informed output for successful mining. Going from a previously unexplored piece of land (“greenfield exploration”) to a well-defined mineral deposit can take years and years of work and huge sums of money can be pumped in though in the first instance the chances of success are very slim such that an exploration company can attempt to withdraw. An example of our own KanyikaNiobium Project and Mkango Resources Songwe Hill Rare Earth Project are living testimonies of how long they carried out their exploration activities. However, the Kayelekera Uranium Project did not take that much years to commence mining since there was already exploration data that existed from the 1980s and was done previously by CEGB (Central Electricity Generating Board) of UK before Balmain Resources took over and was granted an EPL in 1997/98 and later entered into agreement with Paladin Resources to have 90% interest and the remaining 10% equity stake in the project was granted in 2005.

There are many techniques that may be utilized during mineral exploration programs, depending on the mineral deposit type and stage of exploration that is being pursued – as well as the location and budget of the program of which among them is Drilling.

Drilling Techniques

Drilling is the most expensive method of exploration and typically occurs in the later stages of exploration after other methods have already identified a potential deposit     (anomaly). As drilling is an expensive undertaking, detailed study of the area must be made before starting the project. Core logging forms an important aspect of an exploration geologist job and an important stage in the follow up work to an exploration target. There are many different types of drilling methods and all have their place in the universe. Drilling programs are used to collect rock samples at greater depths than surface methods allow. Among others, this page will highlight some of the drilling methods used.

(a) Diamond Drilling (DD)

This method produces a continuous core of rock (in theory) and allows a solid piece of rock core to be collected in such a way that an interval of core allows for much more data to be accurately interpreted.  It consists basically of a hammer unit which is driven by compressed air. This hammer unit imparts a series of short, rapid, blows to the drill steel or rods and at the same time slowly rotates them and sometimes known as down-the-hole hammer and as the name implies, the hammer unit is lowered down the hole at the end of the rods and the diamond drill bit on the end of the hammer unit consists of a large number of chisel ends. Drilled samples are then assayed, and the results will help build a model of the entire deposit. This type of drilling can eventually lead to the entire resource being defined within the boundaries of a chosen cut-off grade but based on the recovery percentage of the core.

(b) Reverse Circulation (RC)

 Reverse circulation drilling produces rock chips which can be sampled under the assumption that they come to the surface in the order in which they were produced and this method returns rock samples in the form of chips that allows sampling but at greater depths. Air is blown down the outside of the drill steel (between it and the wall of rock) and the air and rock chips are carried to the surface on the inside of the drill steel. As the air exits the drill with great blows of dust the rock chips are captured and put in bags for subsequent assaying. In this instance a very large truck is loaded with a tower, drill head, compressor and motor is used. The drill bit is usually of a tri-cone construction (3 cone shaped bits) and a bunch of air blown into the hole to capture the rock chips. This type of drilling is usually a fraction of the cost of diamond drilling but there is controversy surrounding the validity of the samples that are obtained and the method limits the amount of information that can be derived from the sample. Unfortunately, there is no way of knowing what the recovery of chips is and usually it is must be over 100% because the wall of the drill hole caves back a bit and extra rock chips are created and prone to contamination.

(c) Auger Drilling

This method uses an auger as a drilling device. It usually includes a rotating screw   helical blade called a “flighting” to act as a conveyor so as to remove the drilled-out material. The rotation of the blade causes the material to move out of the hole being drilled. Auger drills are used for semi-consolidated soils and produce a core (hollow core) or loose samples (solid core)

(d) Churn drilling

A drill whose cutting action is achieved by raising and dropping a chisel bit. Under this operation, drilling is performed by a heavy string of tools tipped with a blunt-edge chisel bit suspended from a flexible cable, to which a reciprocating motion is imparted by its suspension from an oscillating beam thereby causing the bit to be raised and dropped. It is used to sample gravels by pounding a steel pipe into the ground and then pulling out the material trapped inside the pipe. In churn (cable tool drilling)- heavy chisel like steel is repeatedly jerked up and down by a cable wire.

(e) Sonic Drilling

Cutting or shaping materials with an abrasive slurry driven by a reciprocating tool attached to an audio-frequency electromechanical transducer and vibrating at sonic frequency. This method uses sound waves to consolidate wet deposits like tailings ponds and capture the soils in a tube.

So far, the most common methods which are used in modern day exploration drilling are diamond and reverse circulation drilling methods. The other types of drilling are for fairly specialized cases and because a solid sample is obtained directly can be quite accurate. Of course, it often happens that the sample won’t come out of the pipe sometimes wholly as anticipated by the geologist. The mining industry lives and dies on the accuracy of the samples taken. And the most important samples are taken by drilling so it is important to understand the drilling process ensuring that good questions can be asked. As with anything in life, it is best to find out a bit about the company doing the drilling to       decide as to the validity of the sampling results.  Now that there is a lot of data collected and some interesting mineralization has been discovered, it is time to try and represent the data accurately in space. So the concept of a geological model is produced.

Mining
Malawi needs loan fund to support small scale mining operations
May 06, 0224 / Marcel Chimwala

As reported in our article on Page 12, the Malawi Government says it is working on establishing a loan fund to finance operations of artisanal and small-scale miners (ASMs).

Director of Mines in the Ministry of Mining Samuel Sakhuta is quoted in the article as saying that his Ministry is working with the Ministry of Finance to come up with a revolving fund for procuring equipment for ASMs.

We strongly support this initiative by the Malawi Government and would like to urge the authorities to expediate its implementation.

As MD for Maleta Gems and Jewels which is a key player in the ASM subsector Percy Maleta is quoted in the article, the revolving fund is the major way to alleviate the financial challenges faced by small scale miners in Malawi. 

We have reported in plenty of articles in previous editions of some ASMs involved in mining of industrial minerals such as limestone, quarry and gypsum who have potential to develop their businesses but they are failing to do so because they are forced to use primitive equipment due to lack of funding to buy mechanized equipment.

We have reported previously about ASMs including women in mining who are being forced to sell rough gemstones because they are failing to process the stones into finished products hence are being robbed by the buyers including foreigners who buy the stones for a song.

We have reported about small-scale gold miners causing serious environmental damage in their hotspots across the country because they mine on trial and error basis due to lack of gold detectors.

We feel the solution to all these problems is the loan fund for ASMs, whose trade is attracting multitudes across Malawi including members of the rural population.

As Maleta is quoted in the article, the mining sector is one of the key enablers in Malawi 2063 just like agriculture and tourism.

Therefore, government needs to invest in mining just like it is doing in these other sectors to propel economic growth.

Malawi’s mining sector cannot grow through facilitating foreign direct investment in large scale mining only, small scale miners also needs to be supported so that they are able to graduate into medium scale mechanized miners.