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Malawi’s benefits from Kayelekera mine unpacked

May 23, 2024 / Marcel Chimwala
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Uranium mining has resumed in Namibia in light of competitive tax base

ASX-listed Lotus Resources, which is advancing preparations to resume production at the Kayelekera Uranium Mine in Karonga, says the mine will provide plenty of benefits to Malawians through employment and training, local business development, goods and services procurement and community development.

MD for Lotus Keith Bowes said in his presentation at the Malawi Investment Forum that the mine will directly employ 450 Malawians, recruit 250 local contractors and potentially indirectly employ 5,000 people through new and existing business opportunities.

“On local business development, Lotus will continue  working with local and regional businesses to build their capacity as future suppliers to the Kayelekera mine, which is in tandem with the Company’s sustainability principles,” said Bowes.

He said the Company will endeavour to maximise procurement of goods and services from the national suppliers in order to economically empower Malawians.

“Lotus expects to spend up to US$50-million per year with local business, generating significant amounts of foreign currency some of which will need to be converted into Kwacha creating significant demand for the local currency thereby supporting the local currency,” Bowes said.

Lotus has also finalised a community development agreement which it expects to sign with the qualified Kayelekera communities once the Mine Development Agreement has been finalised.

The agreement empowers the local community to receive a minimum of 0.45% of the proceeds from the mine for development projects of their choice.

Bowes also said when production resumes, the Company will scale up its corporate social responsibility programme which includes supporting the clinics and schools in the area through various initiatives including provision of water and electricity.

“When Kayelekera reopens, it will also enormously contribute to the skills development of locals as the demand for both local employees and interns from local universities will rise,” said Bowes.

Malawi current laws provide for the mining company to pay to government various taxes including royalties charged at 5% of mine gate gross revenue, corporate tax charged at 30% of net profit after tax, various import duties, withholding taxes and resource rent tax calculated at 15% of net profit after tax. 

With all of these, Lotus regards the tax base in Malawi as uncompetitive and Bowes said the Company is negotiating for a Mine Development Agreement (MDA) with the Malawi Government to create a win-win situation between the investor and the nation by reviewing these taxes which include the resource rent tax that does not exist in other mining jurisdictions such as Namibia where the previous tenement holder for Kayelekera, Paladin Energy, has resumed production in light of a competitive tax base and a favourable market dynamics for uranium.

Paladin Energy put the Kayelekera Uranium Mine on care and maintenance in February 2014 following a slump in the prices of yellow cake in the aftermath of the Fukushima Nuclear Disaster in Japan which led to closure of a number of nuclear power plants globally.

However, in its quarterly activities report ending March 31, Lotus indicated that uranium spot price peaked at over US$100/lb during the quarter, and term price, which informs long-term contracts with utilities, reached US$80/lb.

In light of the favourable market conditions, Lotus said in the report that it has initiated a Front-End Engineering Design (FEED) program to validate and update costs and timelines determined in the Restart Feasibility Study, identify critical long lead items and early works, and complete detailed design to prepare Kayelekera for restart.

While it continues negotiating for the MDA, Lotus said in the report that it has also appointed a debt advisor to facilitate debt for the Kayelekera Mine restart.

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