MININGREVIEWISSUE NO 24 April 2015 The Voice of Mineral Sector in Malawi Order price MK200

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Prospects appear bright for Malawi to join the bandwagonof countries with large scale mining operations for goldand other high value minerals as Portuguese firmMota-Engil, which dominates exploration licences forthese minerals in the country, has reported encouragingresults in its exploration work.

CEO for Mota-Engil Africa Gilberto Rodrigues, said in hispresentation at this year’s Mining Indaba in Cape Town, South Africathat Malawi, whose President His Excellency Professor Arthur PeterMutharika has an open door policy for investors, is among thecountries in which the company has strategic interest as far asexploration work for high value minerals is concerned.

Strategic EnvironmentalAssessment in Mining

ExportDevelopment Fundready to financemineral

sectorprojects

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By Mining Reporter

Malawians engageexperts in mining andhuman rights round

table discussion

Buoyant gold miningprospects for Malawi

Mota-Engil advances in exploration work

TO PAGE 3

President Prof. PeterMutharika has an open-door policy for investors Rodrigues: Gold exploration producing encouraging results

ADVERTISEMENT April 20152

April 2015 NEWS AND ANALYSIS 3He informed the audience that

Mota-Engil Minerals & Mining’s exploration divisioncurrently controls three exclusive prospecting licences(EPLs) in Malawi with a combined total area of 7681km2and with potential for gold, base metals and graphite,among others.

The company is also involved in two joint venture (JV)projects in Malawi namely the Tundulu Phosphate and theLake Chilwa Heavy Mineral Sands Projects.

“Mota-Engil Minerals & Mining puts value on newresources and is investing in exploration projects, miningcontracts and building partnerships with other miningcompanies in Malawi,” said Rodrigues.

Tundulu has the potential for a phosphate and rare earthelement (REE) resource grading 20% p2o5 and 2.5%TREO respectively and results for a 6000m drillingprogramme completed in 2014 are pending.

The Lake Chilwa Heavy Mineral Sands Project has thepotential for a 300mt resource at 3.5% ilmenite and a

scoping study is currently underway.“The Chilwa Project is further favoured by the

upgrading of the Nacala Corridor railway which will offerlow-cost transport to the port of Nacala and for whichMalawi has been allocated 5mt per annum,” saidRodrigues.

He also gave brief details of seven Malawianexploration projects that the Portuguese multinational is

working on which are Dwangwa, Kasungu, Malingunde,Lisungwe, Lake Chilwa, Tundulu and Mwanza Faulttarget.

He said the company’s exploration work with its jointventure partner for the Dwangwa project, UK firm SouthEast African Mining (SEAM), shows potential for alluvialplacer deposit.

Mota-Engil and its joint venture partner are targetinghistorical gold occurrences in Dwangwa, and the JV isworking to establish the quality and quantity of theresource.

In Kasungu, Rodrigues reported that the company hasidentified three target areas where it has completed a 1540mdrilling exercise unearthing gold with a peak value of1.6g/tonne.

In Malingunde in the District of Lilongwe, Mota-Engilis working on a 5km x 30km target zone and a geophysicalsurvey is underway at the site.

The firm already completed a ground electromagneticsurvey and 2200m drillingwhile a 4000m drillingprogramme is planned forMay 2015.

In Lisungwe, Rodriguessaid Mota-Engil is targetinggold, copper, nickel,graphite, among otherminerals, in its explorationwork in its licence areaswhich include Likudzi (Ni),Phalula (Au and Cu) andMateme (Gr).

The firm has conductedgeophysical surveys at the

site including a magnetic survey and a 3595m drilling pro-gramme.

“More regional exploration programmes are planned for2015,” said Rodrigues.

Mota-Engil is also the mining contractor forAustralia’sPaladin Energy’s Kayelekera Uranium Mine, which isMalawi’s largest investment in the mining sector.

Besides, the group is currently contracted to managefour Lake Malawi ports for a period of 35 years and wasalso contracted by Brazilian mining giant, Vale, to constructthe railway line that cuts through Malawi from Vale’sMoatize Coalfield to Nacala Port in Mozambique.

Mota-Engil has also operations in other SouthernAfricaDevelopment Community (Sadc) countries includingAngola, Mozambique, Zambia, South Africa andZimbabwe.

President Mutharika’s administration is promoting theexploration and exploitation of minerals in Malawi toensure economic diversification for the country whichheavily relies on agriculture with tobacco as the engine forgrowth.

At the Cape Town Mining Indaba, the MalawiGovernment delegation was led by Commissioner for

Mines, Mr. Charles Kaphwiyo, who presented details ofMalawi’s mineral potential to visitors at the Malawi stand.

Canada-listed Mkango Resources, which is conductinga definitive feasibility study for rare earth mining at itsSongwe Hill licence area in Phalombe also made apresentation at this year’s indaba in which it highlighted theprogress that the project is making.

...FROM PAGE 1

Malawi map showing sites of Mota-Engil mining licenses and JV projects Mota-Engil was one of a few companies active in Malawi that exihibited at theCape Town International Mining Indaba

Commissioner ofMinesMr. Kaphwiyo led theMalawidelegation to CapeTown InternationalMining Indaba

MINING AND HUMAN RIGHTS April 20154

MMaallaawwiiaannss eennggaaggee eexxppeerrts in mining andhhuummaann rriigghhttss rroouunndd ttaabble discussion...as panellists clear misconception over mineral sample exports

Across section of the Malawi communityhad a rare opportunity to engage miningexperts on topical issues rocking the grow-ing minerals sector during a live publicdiscussion on Zodiak Broadcast-ing Station that was held on March 20,

2015 at Crossroads Hotel in Lilongwe. The event was organised by non-governmental

organisations that included ActionAid Malawi, Citizens forJustice (CFJ) and Centre for Environmental Policy andAdvocacy with funding from Tilitonse Fund.

The panellists included a member of the civil society(Mr. Emmanuel Mlaka from LandNet), a governmentofficial (Mr. Jaff Salima from Geological SurveyDepartment), traditional leaders (Inkosi Mabulabo fromMzimba and Group Village Headwoman Namalima ofPhalombe) and an independent mineral sector consultant(Mr. James Chatupa).

In the live programme, the panellists answeredquestions from members of the audience and also listenersof the popular radio station who sent the questions to themoderator of the discussions, Veteran Broadcaster OwenLupesya through text messages.

Hot on the issues was the export of mineral samples byexploration firms as members of the general publicquestioned how secure is the process of exporting mineralsamples for processing outside the country doubting thatsome unscrupulous mineral explorers can take advantageof the process to smuggle the country’s precious minerals.

The questions at the public discussion held atCrossroads Hotel in Lilongwe, therefore, focused much onthe quantity of mineral samples that are legally acceptablefor analysis as well as the experiences and expectations ofthe general public relating to mineral exploration activities.

The experts who included representatives of theMinistry of Natural Resources, Energy and Mining,nonetheless, cleared misconceptions surrounding howmineral samples are collected and exported for analysis.

Explaining to the audience, Commissioner for MinesMr. Charles Kaphwiyo said that it would be difficult forgovernment to come up with a quantified tonnage ofsamples that an investor should take for analysis, because

“different minerals require different uptake of samples.”“For instance, coal is found in one large rock and

requires a small amount of sample for analysis while in thecase of niobium, huge amount of samples are requiredbecause from, for example, 40 tons of sampled soil, only0.05 percentage could turn out to be valuable,” saidMr. Kaphwiyo.

Kaphwiyo took time to enlighten the audience on therigorous checking that government make on samples thatan exploration firm takes outside the country for analysis.

He explained that samples have to go through vettingby three government institutions which include GeologicalSurvey and Mines Department as well as Malawi RevenueAuthority (MRA).

Director of Geological Survey Department Jalf Salimacommented that firms take samples outside the country foranalysis as part of their exploration work because Malawi

does not have a certified laboratory where analysis formineral samples can be done.

“As you might be aware, mining in Malawi is at aninfancy stage hence we lack capacity to do the analysis righthere, as a result investors have to do the sampling outsidethe country,” said Mr. Salima.

Furthermore, the Geological Survey Departmentdirector explained that the investors’ purpose of doing theanalysis is to determine whether their investment can berecovered.

“When it comes to the samples that are taken foranalysis outside this country, their value is not monetary,the value only remains in the data obtained as it helps indesigning the pending mining process and determining theviability of the investment,” Mr. Salima said.

Also joining the discussion was Former Minister ofNatural Resources, Energy and Environment, Honourable

By Chiku Jere

Panellists from left: Mr. Salima, Mr. Chatupa, Inkosi Mabulabo, GVH Namalima and Mr. Mlaka

Part of the audience that attended the round table discussion Elvin Nkhonjera Chawinga of ActionAid joining the discussion An expert in mining, Hon. Malunga with the microphone clarifying issues

April 2015 MINING AND HUMAN RIGHTS 5

Grain Malunga, who is an expert in mining andenvironmental management. He explained that mineralsampling can even take seven to ten years before actualmining is commenced and the members of public need notto be suspicious of any underhand dealing on the part ofinvestors.

“This is because it is through such a process where thepotential of that particular mineral is determined toguarantee the profitability of the investment,” Hon.Malunga said.

The two traditional leaders present, Inkosi Mabulaboand GVH Namalima also aired their concerns, amongwhich, was lack of proper information from government asregards the mining activities that are taking place in theirrespective jurisdiction.

The other issue raised at the meeting was the allegedtendency by some mining investors of disregarding properprocedures when entering into areas to commence mineralexploration.

“We are really baffled with the breach of our traditionalprocedures of acquiring land. We need to be consulted priorto the commencement of any work by these investors sothat we should inform our subjects about the issue to avoidthe misconception and the air of suspicious that comeswhen people in the area, let alone us, us leaders, are notmade aware of the impending mining process,” said theemotionally charged Mabulabo, with Namalima, who satnext to him nodding in total agreement.

Noting the chief’s concerns, Executive Director forLandNet, Mr. Mlaka, an expert in land issuesacknowledged the existence of the problem, but was quickto blame it on the delay to the tabling and passing of theamended land bill, which he said could helped address allthese issues, since it clearly stipulates appropriateprocedures if an investor wants to use traditional land.

The event attracted a multitude of questions whichcould be an indication that more and more people aregetting interested in mining issues in this traditionallyagricultural country.

This could auger well with the objective of the of theevent, which was to discuss the governance elements andpractices that needs to be strengthened, revised or adoptedinto the current governance system in order to enhanceresponsiveness, inclusiveness, transparency, accountabilityand respect for human rights in the mining sector.

Malawians engage experrttss iinn mmiinniinngg aannddhuman rights round tabbllee ddiissccuussssiioonn...as panellists clear misconception over mineral sample exports

On 18 March 2015, Malawi’s Extractive IndustriesTransparency Initiative (EITI) Multi-Stakeholder Groupmet for the first time. This is a “very important milestone”as the Chief Economist in the Ministry of Finance andEconomic Planning and Development, George Harawa,announced while chairing the first meeting. TheGovernment’s commitment to EITI reflects the move tomore informed public debate on the way the nation’sresources and associated revenues are used.

Representatives from government, the mining industryand civil society, selected over the last few months byeach constituency, sat around a table to discuss the EITIimplementation. The Ministry of Finance and EconomicPlanning and Development, the Ministry of NaturalResources, Energy and Mining, the Reserve Bank ofMalawi, the National Audit Office, Bwanje Cement,Globe Metals & Mining, Paladin, ActionAid Malawi, theCatholic Commission for Justice and Peace, Citizens forJustice, and the Foundation for Community SupportServices were all present. Only Mkango Resources senttheir apologies.

Through this initiative, the government will publish whatit receives in taxes and other payments from the industryand companies will publish what they pay government.This should stimulate discussion on how commoditywealth is being translated into socio-economicdevelopment for the country. The annual report will alsoinclude contextual information, a description of the legalframework and fiscal regime that govern the extractiveindustries, an overview of exploration activities,production data and a register of licences.

It is yet to be seen if Malawi will also apply the EITIStandard’s voluntary provisions on beneficial ownershipand contract transparency. A register of beneficialownership will reveal more about who owns extractivecompanies and who will ultimately benefit from acompany’s activities. According to EITI, the identity of“real” or beneficial owners is “often hidden behind achain of corporate entities. This opacity can contribute tocorruption, money laundering and tax evasion in theextractive sector”.

Disclosure of contracts and licences that include terms isalso recommended by EITI. Publically accessiblecontracts can provide stability for companies and ensurethat a country’s “wealth is maximised and invested intoprojects that yield development”, remarked TanzaniaMember of Parliament Hon. Zitto Kabwe during EITIconsultations on contract transparency.

Malawi plans to submit its application to the EITI duringthe next quarter. The Multi-Stakeholder Group will guidethis process and is responsible for developing a fullycosted work plan and its own terms of reference whichare prerequisites for signing-up. The financial resourcesand time invested must reflect the current size of Malawi’smining sector, which the Government hopes will grow tobecome a significant contributor to the country’seconomy.

Examining Malawi’s journeytowards EITI compliance

Malawi’s Multi-Stakeholder Group

Meets for theFirst Time

Part of the audience that attended the round table discussion Elvin Nkhonjera Chawinga of ActionAid joining the discussion An expert in mining, Hon. Malunga with the microphone clarifying issues

Mr. Salima represented government’s GeologicalSurvey Department

Mr. Chatupa is an independent consultant whogave his views as an academia

Mr. Mlaka represented the Civil Society as an expertas regards land issues

ANALYSIS April 20156

ABSTRACTStrategic Environmental Assessment (SEA) aims at bringing sustainable development and promotingsmart partnership with communities around mining areas. It is a process that tries to be all inclusive inissues of sustainable development for the benefit of all stakeholders. The emergence of Civil SocietyOrganisations (CSOs), as representative of the local communities, has brought challenges where “goldseekers” and fake activists pry a trade of “give me and I will be silent” undermining the very essence oftheir existence. This group can be disruptive and therefore needs to be included in the whole SEA processfrom scoping to monitoring and evaluation during project implementation.

1. INTRODUCTIONSEA in mining is a process of assessing wider environmental, social and economic impacts of alternativeproposals at the beginning of a mining project. The process starts with policy review, scoping, planningand program implementation.It is also called Strategic Impact assessment (SIA). This process is nowwidely preferred as compared with Environmental Impact Assessment (EIA) because it covers social,economic and environmental impact assessment of projects. EIA only covers specific environmentalimpacts at project level. SEA involves participation of all stakeholders.

2. THE PROCESS OF UNDERTAKING SEA

POLICY REVIEWPolicy review or screening is a time when policies, laws and regulations affecting the mineral sector arereviewed. Other laws and policies governing administration of environment such as air, water and landare included in the review.

SCOPINGScoping is the process ofidentifying significant strate-gic issues, stakeholders in theproject area and understandingthe current state of theenvironment. Stakeholdersinclude local communities andtheir leaders, civil societiesoperating in the area and localgovernment representatives. The Malawi scenario can beequated with initial consulta-tions at Village DevelopmentCommittee (VDC), AreaDevelopment Committee(ADC) and groups or societiesrelated with natural resourcemanagement. Coordinationproblems associated withdifferent agencies andstakeholders need to be sortedat this stage.

IMPACT ASSESSMENTThis stage helps to identify all inputs into the SEA including constraints, project impacts, social economicopportunities and trends, develop objectives, criteria and indicators.In terms of mining, focus is put on the impacts of release of three major contaminants which areradionuclides, rare earth elements, dust and metal. Each of these contaminants escapes the mines indifferent ways and their potential effects on the environment are documented and possible mitigationmeasures documented.Refining or processing of mined products involves release of metal by products into the environment. Itis very easy for metals to enter the air, ground, or water making it nearly impossible to remove them.Contaminated water in tailing dams can easily be treated but contaminated water that gets in river systemsthrough sedimentation, acid drainage, and metals deposition becomes difficult to treat to its originalquality. It is important at this stage that all stakeholders understand mitigation measures and be honestabout their fears without sensationalising or misleading each other for the sake of maintaining theirunholy alliance or networks.

Potential Social economic opportunities are also assessed and agreed at this stage and become part ofCorporate Social Responsibilities (CSR). Tax and non-tax revenues are documented and social amenitiesestablished within the mine area may also benefit local communities. Indicators for positive socialeconomic transformation in the local community are defined at this stage. Temptations to force miningcompanies to undertake government development responsibilities are identified at this stage and put intoperspective. Voluntary Corporate Social Responsibility is a moral and good way of doing business, butshould not be legalised as this can be an expenditure line that can kill profitability of a project. CSRshould be viewed as a process through which a company can manage its business to produce an overallpositive impact on the local communities. Possibility of transforming royalties to address CSR demandscan be viewed at this stage.

Various impacts so far identified, will lead to development of parameters, principles or guidelines foraddressing environmental or socio-economic impacts.

ENVIRONMENTAL MANAGEMENT PLANS (EMP)After identifying social, economic and direct project impacts; there is need to come up with an EMP thatdefines decision-making processes with clearly defined assigned responsibilities and accountabilities. SIAprocess is checked, final decision documented. This plan is important during monitoring and review of theproject.

PUBLIC HEARINGIn order to build local or national consensus, the SEA document is deposited and displayed in DistrictCouncils, National Libraries and other convenient public places for information and comments. Variousmeetings are held to build consensus and make the necessary amendments after which the document issubmitted to the Department of Environmental Affairs for review by the Technical Committee on theEnvironment (TCE) and later approved by the National Committee on the Environment (NCE). These twocommittees are highly technical and are drawn from competent technical institutions and academia.

REFLECTION ON THE ROLE OF INTEREST GROUPSThe process of developing a SEA document is all inclusive and does not entertain late comers to disruptunnecessarily the operations of a mining project in the name of inclusiveness. The process of monitoringand evaluation be left to local communities and local supportgroups. If this stage is not properly managed,a lot of opportunists in the name of concerned citizens come in through dubious sponsorship fromexternal disruptive groups who are active internationally and take advantage of poverty and irresponsiblejournalism. Mining companies should take an interest in developing smart partnership with localcommunities and support groups. Representative groups can be formed and quarterly meetings held toupdate these interest group on mine operations and other activities as stipulated in the SEA document.Civil Society Organisations (CSOs) can be good partners if they take a positive approach in dealing withnatural resource management through formation of a smart partnership with mining companies,government and local communities. Government needs to take a positive approach in being transparent andaccountable to its people by making public documents or reports that are submitted by mining companies. The aggressive approach being pursued by some CSOs will defeat the whole purpose of promoting themineral sector to transform the economy of this country.

Project Profile by Grain Wyson Phillip Malunga FIMMMMining and Environmental Management Expert

Figure 1: Scoping during Njereza Cement Project SEA inMangochi

Figure 2:A product of CSR in which children of mine employees learn togetherwith local community children at Njereza in Mangochi

STRATEGIC ENVIRONMENTALASSESSMENT IN MINING

April 2015 ADVERTISEMENT 7

Issue No. 24 April 2015

Published by Mining Review Publications P.O. Box 31973 Blantyre 3, Cell +(0) 888 356 536, 0993 252 656Email: marcsmediamw@gmail.com

VOICE OF THE MINERAL SECTOR IN MALAWI

EDF ready to finance mineral sector projects• EDF offers development financial solutions aimed at boosting the country’s forex generation

Export Development Fund (EDF) says it isready to finance viable projects in thecountry’s mineral sector in order to promoteexports of mining products and enhance im-port substitution.

EDF’s Chief Executive Officer Mr. Efford Goneka saysbeing a development financial institution; EDF’s primaryobjective is to create and develop export enterprises inMalawi and position them as critical agents of foreignexchange generation through the provision of affordablefinancial services

The financing facilities offered by EDF are in bothUnited States Dollar and Malawi Kwacha currencies.

“Our services are aimed at boosting the productivecapacity of export businesses either through workingcapital or project financing.”

According to Goneka, EDF uses its investments andother resources to support the set up, expansion,diversification and modernization of projects in theeconomy.

“Preference is given to projects that promote exportearnings, exports diversification, import substitution andtechnological transfer,” says Goneka.

Goneka explains that EDF, in support of the MalawiNational Export Strategy (NES), aims at financing andpromoting different economic sectors in Malawi in-orderto encourage diversification from traditional exports. Inaddition to the services being offered, EDF is encouragingand supporting value addition projects in a bid to reducethe tendency of exporting commodities in a raw form.

“Although Malawi’s economy has always depended ona narrow productive export base which is largelycomprised of unprocessed agricultural products, EDFbelieves there is potential for value addition and promot-

ing the diversification of export clusters such as miningand mineral processing, tourism, agro-processing andmanufacturing ” explains Goneka.

The Fund also provides advisory services as it realizesthat export development, promotion and growth requiremore than just finance.

“There is evidence that management and advisoryservices assume a critical role in the success ofdevelopmental projects and helping businesses expand andcreate jobs. To help the export enterprises, EDF has a teamof qualified and dedicated staff that will offer businessadvice and intermediary services relevant to exports,” saysGoneka.

Export Development Fund is a development financialinstitution established by the Malawi Government and theReserve Bank of Malawi in response to the country’sexport/import imbalance due to the economy’s highdependence on tobacco as the major foreign exchangeearner.

In view of this, the Government through EDF hasprioritised diversification of exports by focusing on oilseeds products, sugarcane products, tourism, mining andmanufacturing products as set out in the National ExportStrategy.

As a catalyst for export promotion, diversification andgrowth, EDF’s goals include ensuring that Malawi’s vastexport business opportunities are exploited; and promotingprojects that have potential for exports, wealth creation andjob creation.

Malawi’s exports have grown at a slower pace thanimports over the past 10 years creating an unsustainablestructural deficit that leaves the country vulnerable toforeign exchange shocks.

“It is in this regard that EDF was created as a specialpurpose vehicle to extend financial assistance to export

businesses in Malawi with much emphasis on theircreation, expansion, diversification and modernization. Weurge stakeholders in the mining sector including large andregistered small-scale mining cooperatives to takeadvantage of the existence of EDF’s services,” he says.

Goneka says in order to access the export financefacilities from EDF, companies are required to submit tothe Fund their profiles supported by documents includingcertificate of incorporation, business registrationcertificate, articles and memorandum of association,evidence of suppliers of raw materials and the exportmarket for the product, financial history and projectionsof the business and a detailed financial plan, and risks andsafeguards of the business.

EDF has dangled financing for mining, mineral processing and haulage

EDF’s CEO Mr. Goneka