"Coat of arms of Malawi" by Sodacan. Own work, in accordance with the blazon (heraldic description) above. Licensed under CC BY-SA 3.0 via Wikimedia Commons.
After a quiet summer, Mkango Resources (TSXV:MKA) is back with the results of a prefeasibility study for its Malawi-based Songwe Hill rare earth element (REE) project. According to CEO William Dawes, the report is a "major milestone," largely because it means the company holds one of just three REE projects in Africa with a prefeasibility or feasibility study. He added, "[w]e are very encouraged by the Project's strong returns and relatively low capex." By the numbers It's not hard to see why. The prefeasibility study pegs initial capex for Songwe Hill at US$217 million, including a contingency of $20 million, and according to the company that "is among the lowest in the rare earth sector." Mkango will be spending the most on an integrated processing plant made up of a mill, flotation plant, hydrometallurgical plant and sulfuric acid plant with power co-generation capacity. The project is expected to have a 36-percent internal rate of return and an after-tax net present value of $293 million using a 10-percent nominal discount rate. Those numbers are based on rare earth oxide (REO) prices equivalent to a total rare earth basket price of $55 per kilogram; the company notes that the price "reflects the selective removal of a large proportion of the cerium." Finally, cash operating costs are expected to average $13.4 per kilogram of REO for the first five years of production and $17 per kilogram for the mine's 18-year life. Production should start in 2017, and Songwe Hill will ultimately be a conventional open-pit operation.