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Mkango Resources sets itself for rare earths upswing as EVs take off

Snapshot

An investment at the project level from major commodities trader Talaxis is helping it along

Electric vehicles

Quick facts: Mkango Resources Ltd

Price: 4.43 GBX

LSE:MKA
Market: LSE
Market Cap: £5.89 m
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  • Mkango is a rare earths (and other metals) explorer with three licences in Malawi

  • Songwe Hill (Phalombe) is the flagship project and is being developed in collaboration with Noble Group division Talaxis

  • Rare earths come overwhelmingly from China at present

  • New sources are required as demand elsewhere is predicted to soar as new application using super magnets grow

 

 

What it does

Mkango Resources Ltd’s (LON:MKA) Songwe Hill rare earth operation in Malawi is moving rapidly towards a production decision.

A significant investment at the project level from major commodities trader Talaxis is helping it along.

So far, Talaxis has committed £12mln at the project level, but with a feasiblity study well underway the presence of a major player in the world of commodities is providing investors with some food for thought when it comes to thinking about future funding. 

The Talaxis investment as it stands will net out at a 49% interest for Talaxis once the project is taken through the bankable feasibility stage.

Once that study is published, Talaxis can take its stake up to 75% by arranging the finance to take Songwe Hill through to production and an arrangement that gives Mkango a 25% free carried interest.

A 60 tonne bulk sample was taken and shipped to Australia for analysis and arrived in August. Tests are ongoing. Meanwhile, the company has also appointed Senet as lead engineer. 

The mineral resource for Songwe stands at 8mln tonnes grading 1.50% TREO (rare earth metals) measured, 12.2 Mt grading 1.35% indicated and 27.5 Mt grading 1.33% inferred.

Metallurgy 

Talaxis also made an investment totalling £2m in Mkango’s downstream arm Maginito, which has a collaboration in place with powder alloy pioneer Metalysis into permanent magnet manufacturing.

Permanent magnets are critical materials for most electric vehicles, direct drive wind turbines and many other high growth applications.

Thambani

At Thambani, also in Malawi, Mkango has an agreement with MetalNRG for it to spend US$2mln on exploration for a 75% interest.

Uranium indications at Thambani were confirmed by a World Bank funded nationwide airborne geophysical programme.

Grab samples have also returned high-grade uranium, tantalum and niobium values, and Mkango continues to carry out detailed exploration work on the project.

 

How it is doing

Operations for the next 12 months are currently being funded with US$16mln provided by Talaxis, of which the third tranche was received last year.

In the three months to March 31, net loss grew to US$1mln from US$697,000 in the same period last year. The period ended with US$7mln in cash, down from US$9mln as at December 31.

In May it announced the launch of the Innovate UK grant-funded project, "Rare-Earth Recycling for E-Machines" (RaRE). 

The project will establish a supply chain to incorporate recycled rare earth magnets into electric vehicles, whereby recycled magnets will be built into an ancillary electric motor to ultimately support the development of a commercial ancillary motor suite.

 

What the boss says: William Dawes, chief executive

"We are very excited about this innovative project and the opportunity to scale up and commercialise the HPMS technology. We envisage that recycling of rare earth magnets will play a key role in the development of robust supply chains to catalyse and support growth in the electric vehicle sector and in other clean technologies."

"Further building on our platform within the circular economy and downstream markets is a key component of our strategy, underpinned by the sustainable development of the Songwe Hill rare earths project in Malawi."

 

Video

 

Inflexion points

  • Metallurgical optimisation is underway for ore at Songwe Hill focused on flotation, hydrometallurgy and acid regeneration
  • Feasibility study at Songwe Hill expected in 2020, triggering production decision by Talaxis
  • Results from exploration at Thambani 

 

 

Blue Sky

The funds invested in Maginito by Talaxis will be used to advance complementary downstream opportunities in the rare earths supply chain, in particular new rare earth alloy, magnet and other technologies geared to accelerating growth in the electric vehicle market, including the Metalysis Joint Venture, says SP Angel.

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