Canada-listed Mkango Resources is preparing to embark on a definitive feasibility study into its Songwe Hill rare earths project, in Malawi’s southern district of Phalombe, following the conclusion of a prefeasibility study.

CEO Will Dawes says the prefeasibility study declared a maiden probable mineral reserve estimate of 8.5-million tonnes grading 1.6% total rare-earth ore, based on an openpit operation with an 18-year life-of-mine. The mine could potentially come on stream in 2017.

“There is potential to significantly expand production or the mine life and for a lower strip ratio, given the large additional inferred resource and potential to expand the mineral resource,” says Dawes.

He says the first phase of development envisages production of a high-grade 2 840 t/y of concentrate for toll treatment or sale.

The prefeasibility study pegs the after-tax net value of the deposit at $293-million, using a 10% nominal discount rate and a 36% after-tax internal rate of return.

The prefeasibility study estimates the project's capital expenditure at $217-million, including a contingency of $20-million, which Dawes describes as among the lowest in the rare earths sector.

Assuming an additional cost of $10/kg to account for the cost or discount associated with toll separation or the sale of a mixed chemical concentrate, the prefeasibility study outlines cash operating costs of $13.4/kg for the first five years of production, increasing to $17/kg for the remainder of the mine life.

Mkango president Alexander Lemon says: “The results are a major milestone for the company and position Mkango and Malawi as one of the few rare earths companies or countries globally with a prefeasibility study announced.”

The rare earths to be mined at Songwe Hill as major revenue drivers include neodymium, dysprosium, praseodymium and europium.

Mkango is also undertaking exploration at its second licence area, known as Thambani, in the district of Mwanza, in south-western Malawi, where it has identified a number of areas with potential for uranium, zircon, corundum and niobium.

“The corporation’s strategy is to further develop the Songwe Hill rare earths deposit and secure additional rare-earth elements and other mineral opportunities in Malawi and elsewhere in Africa,” says Lemon.

Mkango Resources is listed on Canada’s TSX Venture Exchange and runs its operations in Malawi through Lancaster Exploration, which has its head office in Blantyre.