ISSUE NO. 46 February 2017 Mining & Business News that Matter Order Price: - MK1000

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Research onMalawiRare Earthsmakes

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Coal industry in ruins

25 extractivescompanies in initialEITI reporting exercise

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Trumpushershope onKayelekera

Uranium market improvingwith US pro-nuclear policy

Paladin continues with explorationnear mothballed mine

The recent election of Republican Donald Trump as the 45thPresident of the United States of America has given hopeto the uranium market that the price of the yellow cake mayclimb up which would necessitate the opening of themothballed Kayelekera Uranium Mine, which is so far

Malawi’s largest mining investment.Dual listed Paladin Energy, which holds mineral rights for the

Kayelekera area, put the mine on care and maintenance in 2014 followingthe slump in the price of the yellow cake in the aftermath of theFukushima Nuclear Disaster in Japan, which resulted

By Marcel Chimwala

cont. on page 2

ADVERTISEMENT February 20172

Areport reviewing the second Malawi Growthand Development Strategy implementedbetween 2011 and 2016 has unearthedgross weaknesses in the governance of thecountry’s minerals sector.

The report says that though it holds a lot of unrealizedpromise, Malawi’s mining sector is beset by issues oftechnical capacity, and governance citing the issue of therecent suspension of oil exploration licences.

“Within the past four years, Malawi issued explorationlicenses for all six blocks of oil and gas only to suspendthem and subject them to review. While sensible andnationalistic, this runs the risk of adding uncertainty to themining governance regime and raises political risk ratingand may affect the future cost of raising funds for miningventures in Malawi,” says the MGDS Review report.

It says although the law specifies the royalty and taxespayable, the general fiscal regime in mining in Malawiremains negotiable, leading to delays in finalizing miningdevelopment agreements and opening of opportunities forrent seeking behaviour.

The report says mining in Malawi is constrainedfurther by lack of up to date geological information so therecently launched results from the countrywide airbornegeophysical survey hold so much promise.

It says Malawi needs to invest in facilitating realitychecks on the ground, including production of a detailedgeological map.

The report says: “Malawi ought to establish a national

mining investment company to hold interest on behalfof the people of Malawi and also incubate specializedexpertise in modeling and mining agreement negotiation;develop a model Mining Development Agreement andProduction Sharing Agreement and introduce efficiency innegotiations of mine development agreement by makingthe fiscal regimes in mining predictable, non-negotiable andbinding. Ensuring the existence and implementation ofstrong policy and legal frameworks for the participation ofboth women and men in local content is key.”

The Kayerekera Uranium Mine, commissionedin 2009, remains the largest investment in the country’smining sector and temporari ly demonstrated thetransformative potential that mining can bring as between2009 and 2014, mining and quarrying output grew fromMK7-billion to MK 59-billion (of which MK47.75 billionwas from Kayelekera mine) and the share of mining in GDProse from 0.8 percent to 5.3 percent in 2014.

However, since dual listed Paladin mothballed the minedue to low prices of uranium on the world market, thecontribution of mining to Malawi’s GDP has fallen sharply.

Malawi’s economic report for 2016 released byMinistry of Finance, Economic Planning and Developmentforecasts that the sector will modestly grow by 1.6% in2017.

“The country has mineral potential as demonstrated bythe airborne geophysical survey carried out in 2015 andthere has been talk of oil exploration in Lake Malawi.However, it will take some time for potential explorationto take place and bear fruit. In addition, resumption inproduction of uranium at the Kayelekera Uranium Mine is

not expected to takeplace in the course of2017 as internationaluranium prices remainlow,” says the report.

Malawi, which ismining gemstonesi n c l u d i n g t h eexpansive rubiesand sapphires whichout-price diamondson the World Marketwhen well processed,h a s a n om a l i e sf o r high v a l u eminerals includinggold, gemstones andplatinum group metals.

The country also boostsof world class deposits of rare earths,h e a vy m i n e r a lsands, coal andgraphite, among others.

However, the low commodityprices prevailing on the world markethas restrained tenement holders fromadequately investing in exploration andexploitation of the minerals.

By Staff Reporter

Report reveals weaknesses in governanceof Malawi minerals sector

in the closure of several nuclear plantsin Asia.

But Paladin says in its Quarterly Activities Reportending December 2016 that uranium spot prices improvedin December in the aftermath of the US election that sawthe pro-nuclear Trump attaining leadership of the world’ssuper power.

Says CEO for theASX and TSX listed group,AlexanderMolyneux in the report: “Uranium spot prices increased inlate December 2016, and following KazAtomProm’sannouncement of a 10% cut in planned 2017 uraniumproduction, improved further in early January 2017. Spotmaterial traded as high as 25.50/lb on the day of theKazAtomProm announcement and despite falling back alittle, the spot price currently stands at 22.50/lb.”

“The election of Donald Trump to the US presidency isanticipated to be positive for nuclear power and theapproval of the Future Energy Jobs Bill in Illinois inDecember 2016 will allow Exelon’s Clinton and QuadCities Nuclear Power Plants to continue operating.”

He says in Europe there is also good market news onthe nuclear front as in the UK, January saw the award offurther contracts for the construction of the Hinkley PointC Nuclear Power Plant and French contractor BuoyguuesSA will work with UK builder Laing o’Rourke on aUS$1.8-bllion contract to construct the building that willhouse the two reactors.

“In France, EdF anticipates French nuclear availabilityto return to normal levels in early 2017 as 11 out of12 reactors offline for safety evaluation are expected toreturn to service,” says Molyneux.

In Japan, where pessimism was reportedly vey highagainst nuclear energy after the Fukushima Disaster,there is also encouraging news for the industry as Kyshu’sSendai 1 was returned to service in December 2016 aftercompleting i ts f i rs t per iodic inspect ion since restartin August 2015. Sendai 2 was taken out of service for

periodic inspectionin December and isexpected to be backo n l i n e i n l a t eFebruary 2017.

Japan’s NuclearRegulation Authorityc l e a r e d Ky s hu ’sGenk a i 1 a n d 2reactors and approveda life extension forKansai’s Mihama 3in late 2016.

“ T h e G e n k a ireactors are targetedto return to serviceduring 2017,” he says.

M e a n w h i l e ,Paladin is continuingw i t h u r a n i u mexploration work inits licence area closeto i ts KayelekeraUranium mine in Karonga, while keeping the mine on careand maintenance in expectation of the rise in the price ofthe energy mineral which would propel the firm to restartproduction.

TheASX and TSX listed miner says that it is continuingwith in-house processing of regional geophysical data(radiometrics, magnetic and gravity) which it obtained fromthe Government of Malawi in order to identify additionalexploration targets within the current tenement package.

Malawi’s Geological Survey Department obtained theupdated data from the airborne geophysical data which itexecuted with funding from the World Bank and EuropeanUnion through the Mining Governance and GrowthSupport Project.

Paladin says while awaiting confirmation of the likelyexpenditure commitment on the two most recently grantedtenements, the company is continuing to undertakelocalized ground surveys and confirmation checks ontargets analysed during prospectivity analysis.

“To date, no significant mineralization has beenidentified,” says Molyneux.

Following the Fukushima Disaster, the spot price of theyellow cake dropped from US$72 to US$35 per pound.

Market analysts say Kayelekera needs a break-evenprice of US$58 per pound to reopen.

Kayelekera begun production in 2009 and in 2013,revenues from the mine contributed 2.6% to grossdomestic product

Map showing sixblocks of Oil and Gas

...from front page

Kayelekera

Malawi’s coal industry, which used to beone of the largest employers, is in ruinsas imported coal from Mozambique haschoked the market for local producers re-sulting in closure of over three quarters

of the mines.The mines that have closed operations include

Mwaulambo, Nkhachira, Jalawe, Lisikwa, Njati and DDYTrading in the Northern Region and their officials say theyhave closed shop because of market constraints as a resultof the development of coal mines in Mozambique’s Moat-ize coalfield which is closer to the commercial city Blan-tyre, host to many of Malawi’s coal consumers.

The northern coal miners explain that the situation hasworsened because they are also not able to export to nearbyTanzania following import restrictions that have beenadopted by the East African country.

“We suspended production at Nkhachira Coal Minebecause of low sales as most of Malawian buyers opt toimport cheaper coal from Mozambique,” says ChairmanforASX-listed Intra Energy Corporation which used to runthe closed Nkhachira Coal Mine in Karonga through itssubsidiary Malcoal Mining.

Mozambique coal is sold at an average price of US$165per metric tonne while Malawi coal sells at around US$190per tonne.

Asked if the government has taken any step to protectthe local coal industry since the miners started complainingof coal dumping a couple of years ago, Acting Director forMines DepartmentAtileniWona says though his departmentwould love to have a thriving coal industry, such trade issuesfall within the Ministry of Industry, Trade and Tourism.

The Ministry’s Spokesperson Wiskes Mkombezi ,however, refuses to comment on the issue referringMining & Trade Review to either Malawi RevenueAuthority (MRA) or Ministry of Finance

But he earlier said, in response to our questionnaire, thatthe imported product is cheaper only when the importersevade taxes.

“There is need to understand what makes theseproducts cheap. What is problematic is smuggled productson the markets. Smugglers endanger clean competition byavoiding taxes and in so doing they undercut law-abidingbusinesses. This threatens industrial growth. As suchsmuggling is a threat to economic growth and the lawmakes smuggling an offence,” he said.

Industrialists, however say Mozambique coal isflooding Malawi because it is exempted from import dutydue to Southern Africa Development Community (Sadc)trade protocols that remove trade barriers between membercountries.

FormerMinistry of Natural Resources, Energy andMin-ing, who also served as Principal Secretary forMinistry of In-dustry and Trade GrainMalunga, however, says despite suchtrade protocols it is still possible to protect the local in-dustry by putting in place appropriate regulations.

“It is possible for Malawi government to protect its coalindustry by regulating it as Tanzania is doing because inallowing coal to come into the country duty free, we arekilling the industry that is a huge employer,” says Malunga.

Malunga also proposes that the government shouldwork with the industry in a public-private partnership to

establish a 20MW coal-fired powerstation that will utilize coal from thenorthern coalfields, whose reserves areestimated at over 245-million tonnes.

He said construction of the 20 MWpower plant would cost about $40.0million but the plant will be able togenerate $10.0 million per year henceable to pay back the capital cost in sixyears thus assuming that price of coalwill be between $50 and $60 per tonneand the economic value of the unit pricefor electricity will be around 25 to 35cents per kw hr.

He says: “Construction of a coal firedpower plant in Karonga can promotecoal mining in the northern region.This can create employment and boostenergy availability for the developmentof agriculture (agro-processing andirrigation farming) and mining sector.”

Despite boosting of coalfields in the North and theLower Shire area, Malawi is struggling with electricitysupply constraints attributed to environmental problemsthat affect the Shire River where the country generates upto 98% of its electricity.

Malunga says with such challenges it is high timeMalawi seriously adopted coal as an alternative source ofenergy saying coal fired power plants are more reli-able, affordable and have proven technologies that are safeand efficient.

“Coal is abundant and easy to mine. This makes itcheaper than any other sources of energy.Most industrialisedcountries use coal as a source of energy and formsover 50% of their energy mix. United States of Americagenerates about 45% of its electricity through coal whileAustralia generates about 75%,” he says.

When he toured Mchenga Coal Mine in July last year,Minister of Natural Resources, Energy and Mining BrightMsaka promised to engage the Ministry of Industry, Trade

and Tourism on ways to protect the local coal industry fromunfair competition posed by dumped coal imports.

Minister of Industry, Trade and Tourism JosephMwanamveka promised to engage experts in his Ministryto scrutinise the issue and come up with a remedy toregulate the industry in line with the rules of the WorldTrade Organisation.

However, as government officials confirm this month,there is no action on the issue and the coal industrycurrently on death bed is taking its last breath in the watchof a government which claims to promote consumption oflocally made products through its “Buy Malawi Strategy.”

Ironically, the Malawi Government is also in the processof obtaining a loan from the Export and Import Bank of thePeople’s Republic of China to construct a coal fired powerplant at Kammwamba in Neno to generate 300MW ofelectricity using Mozambique coal to be ferried through thenewly constructed Nacala Railway, which Brazilianresources giant Vale has constructed

February 2017 NEWS & ANALYSIS 3

BByy JJaammeess KKaazzeemmbbee

Cartoon

The abandoned mine is now all gulliesfilled with health hazard stagnant water

Coal industry in ruins ...Mines forced to close as imports choke market

...Industry expert proposes power station in the northBy Marcel Chimwala

NEWS & ANALYSIS February 20174

cont. on page 9

Rare earth elements (REEs) may not be asscarce as the name suggests, but China hasthe monopoly on their supply. Now pivotalresearch undertaken in Malawi and led bythe Camborne School of Mines, UK, could

help to make REEs a viable prospect worldwide, as theirdemand in applications as diverse as consumer electronics,power generation and anti-fraud technologies continues togrow.

While relatively abundant, REEs are typicallydistributed in low concentrations, making them difficult toextract cost-effectively. In recent years, China has becomethe dominant force in the supply of REEs, with typicalestimates ranging between 90–95% of the global marketshare (see Materials World, February 2015, page 50). TheUSA, once the global leader in REE supply and capable offulfilling all its domestic needs, now imports 87% of itsREEs from China, owing to unmatchable low costs.

As part of global efforts to resolve this supply problem,a new study led by Dr Sam Broom-Fendley at Camborneexamines the conditions under which REEs – in particular,the scarcer heavy rare earths (HREEs) – are concentrated incarbonatite rock formations at the Songwe Hill Rare EarthProject in Malawi. HREEs such as dysprosium, europiumand terbium are increasingly being used in lighting,anti-fraud and safety technologies.

Research on MalawiRare Earthsmakes headway

Testing Rare Earth samples

The imposing view of Songwe Hill whereRare Earth Project is in progress

February 2017 OPINION & ANALYSIS 5

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EEDDIITTOORRIIAALL

The EITI Standard is in its fifth version since the EITI Principles were agreed in 2003. ThePrinciples, on which the EITI is still based, state that the wealth from a country’s naturalresources should benefit all its citizens and that this requires high standards of transparencyand accountability. This Standard seeks to deepen the link between those Principles and theworking of the EITI. There are relatively few changes in this version from the previous

ones. Most are minor refinements and revisions that clarify ambiguities and address inconsistencies.Revenue transparency remains a fundamental aspect of the EITI. The requirements have been

reordered to better reflect the importance of bringing transparency to other aspects of resourcegovernance, such as licensing, production and revenue management. The Requirements now follow theextractive value chain order and cover: first oversight by the multi-stakeholder group, then legal andinstitutional frameworks, exploration and production, revenue collection, revenue allocation, and finallysocial and economic spending and outcomes.

This 2016 version of the Standard encourages countries to make use of existing reporting systems forEITI data collection and make the results transparent at source, rather than duplicating this exercisethrough EITI reporting. I am confident that this will make EITI data more timely, reliable and useful, andthe EITI process more cost effective and efficient.

Publishing reports is not a goal in itself. EITI Reports increasingly contain importantrecommendations aimed at improving tax collection systems, auditing procedures and other legal andadministrative reforms. This is where the potential impact of the EITI is often greatest. The Standard hasbeen revised to ensure that reports are transparent about which recommendations the government choosesto take on and why, and lay out the plans for doing so.

The 2016 Standard introduces new aspects and breaks new ground in that the identity of the realowners – the ‘beneficial owners’ – of the companies that have obtained rights to extract oil, gas andminerals will have to be disclosed from 2020. In many resource rich countries, ownership secrecycontributes to corruption, money laundering and tax evasion. In the last three years, the fight againstsecret company ownership has gained extraordinary momentum. Yet, to date, there is relatively littlebeneficial ownership information available to the public. Although many EITI countries have begun toaddress beneficial ownership, the EITI still has a long way to go to make sure the information iscomplete, reliable and comprehensible.

Finally, there have been changes to the Validation system, which assesses whether countries haveimplemented the EITI in accordance with the requirements. While the previous Validation system hasserved the EITI relatively well, many were concerned that it did not adequately consider the diversity ofimplementing countries or take into account progress over time. After extensive consultation includingfive pilot Validations in 2015, this Standard introduces a new Validation system which aims to betterrecognise efforts to exceed the EITI Requirements and sets out fairer consequences for countries thathave not yet achieved compliance.

We are grateful for the extensive feedback provided by all the stakeholders in implementingcountries throughout the long and difficult process of revising the Standard. I am confident that it willmake the EITI a better platform for progress and incentivise improvements in implementation.

As with so many major global challenges, there is no quick and easy solution. As Chair, it has beena privilege to lead the multiple efforts to develop the EITI Standard and to see first-hand the innovativeways in which this has been used by implementing countries. Now is a time for consolidation of therequirements and more focus on making it work– making EITI less bureaucratic and more integratedwith strengthened government systems; turning the recommendations into reforms; and improving thequality of the information and public debate.

The EITI has achieved a lot in recent years. However, given that our aim is to improve the managementof these resources for the benefit of the people of resource rich countries, much remains to be done

The local coal industry is on the deathbed. Coal minesin the North which is the hub of the sector have eitherclosed shop or have downsized their production andworkforce because they cannot withstand competitionon the coal market which has become saturated withimports from Mozambique.

Tanzania, which previously presented an alternativemarket for Malawi coal has introduced importrestrictions.

Yet Capital Hill is just watching the local situation while day to dayMalawians are losing their jobs in this high employing sector.

What captains of the mining industry are saying is that since the issue involvestrade, it is under the Ministry of Industry, Trade and Tourism.

The Ministry of Industry, Trade and Tourism says it has to carefully lookat the situation in line with the rules of the World Trade Organisation beforethe issue of imposing restrictions on coal imports comes into play.

We feel this is an unfortunate situation because the government has toconsider the welfare of the masses before thinking of honouring rules ofinternational trade organizations.

Even with these international trade protocols in place, we believe thegovernment still could have had a way of dealing with this issue even beforea single coal mine closed.

The current situation, therefore, implies that what top government offi-cials prioritize are travel allowances to meetings of international bodies suchas the World Trade Organisation other than the welfare of Malawians em-ployed by the industry.

It is also sad to note that as reported in our last edition, it is not only thecoal industry which is feeling the pinch of dumped imports as the cementindustry is experiencing the same with companies such as Shayona Cement,La Farge Holcim and Cement Products exposed to unfair competition by thedumped products.

It is, therefore, unfortunate that amidst this mess, the Government hadthe audacity to create pomp to launch what it calls “Buy Malawi Campaign”encouraging consumption of local products.

The question is where is the “Buy Malawi Campaign” when the governmentis encouraging coal imports from Moatize by facilitating the establishment of acoal fired power station at Kammwamba to utilize coal from Mozambiquewhile we have stockpiles of coal in the North that can feed a hydropowerplant?

Where is the “Buy Malawi strategy” when the government is encouragingcement imports by offering licences to importers in so doing putting pressureon local cement investments?

We, therefore, urge the government which has always assured investorsof protection to ensure that it reduces the gap between rhetoric and action.

If economic super powers such as the People’s Republic of China andUnited States of America are pursuing policies to protect their countries ofimport dumping, what more with a poor country like Malawi.

We have to remember that in the textile industry, companies such asDavid Whitehead and Sons used to be mass employers but they downsizedwhen the industry opened up to imports.

So at this pace the country is opening up to imports, one day we will workup to find out that all companies have closed down while the governmentcontinues sleeping.

We, therefore, urge the government to immediately do something to savethe dying coal industry

GGoovveerrnnmmeenntt mmuusstt iinntteerrvveenneettoo ssaavvee ccooaall iinndduussttrryy

BY MARCEL CHIMWALA, PUBLISHING EDITOR

EITI Board Clair Short’s EITI Standard 2016 foreword

Clare Short (C) with MWEITI MSG members Chikondi Mcheka and Kossam Munthali (to the left);Rachel Etter Phoya and George Harrawa (to the right)

NEWS AND ANALYSIS February 20176

Malawi Extractives Industry TransparencyInitiative (MWEITI) has short-listed 25extractives industry companies to beincluded in the production of firstever Extractives Industry Transparency

Initiative Standard (EITI) Report scheduled for submissionto EITI International Secretariat by April 22, 2017.

This was disclosed during the EITI ReportingWorkshop for Mining Companies held at Simama Hotel inthe Capital City Lilongwe on January 10, 2017, as thecountry intensifies its efforts to attain ‘compliant’ statusfor EITI, a global standard for governance of oil, gasand mineral resources that promotes transparency andaccountability in the extractive sector.

As per requirement, MWEITI Multi-Stakeholder Group(MSG) contracted Moore Stephens International, aLondon-based global accountancy and consultingnetwork as an ‘Independent Administrator’, to assist in theproduction of the Report, documenting company paymentsas well as government receipts, covering July 1, 2014 toJune 30, 2015 period.

With the help of MSG and MWEITI Secretariat, theIndependent Administrator uses a robust yet flexiblemethodology for monitoring and reconciling companypayments and government revenues from the extractiveindustries to compile the EITI Report which disclosesinformation on tax, royalties, rents, licences, contracts, andproduction, among other key elements around resourceextraction.

It is through these reports, supposed to be submittedannually, that the ‘candidate’ country, which Malawi is, isassessed on whether it is meeting the EITI Standard.

Addressing participants during the workshop, MooreStephens’ Head of Office, Ben Toorabally, said experience

drawn from numerous countries shows that participation inEITI process has many advantages to companies as itfacilitates the creation of an open-society-like environmentof doing business.

This, he explained, helps expel the aura of mistrustamong stakeholders in mining industry, as informationabout transactions between companies and government isaccessible to the public.

“As a result, companies involved do not face difficultiesin earning public social licences for their operations giventhe trust earned through open dealing. In the same way,bickering between interest groups such as civil society

organisations (CSOs) and communities, is dealt with, sincethe public is able to appreciate contribution companies aremaking to the economy,” he said.

Toorabally also said the open-society environment ofdoing business attract investments as it removes fears fromprospective investors of having to indulge in corruptionwhen seeking business permits.

“And more advantageous to companies and countriesthat embrace and participate in EITI process is the factthat their credit rating is improved as they are deemedtrustworthy, a scenario that draws interest of internationallending institutions that provide loans,” he said.

By Chiku Jere

25 extractives companies in initial EITI reporting exercise

Chamber of Mines and Energy President, Lungu (standing), delivering his speech

Moore Stephens’ Maales (in front) narrating the reconcilliation process to extractive companies officials

February 2017 NEWS & ANALYSIS 7

During the workshop Toorabally’s colleague, RachedMaales, Moore Stephens’ Assistant Manager, tookparticipants through a presentation that tackled EITIreporting process.

He also presented a prescribed form referred to as“Reporting Template” on which the selected companieswill enter the required information.

The eight-sheet form includes: Identification sheet,Summary Reporting Template, payment flow details (byreceipt number), social payment details, production details,export details, beneficial ownership and public interest.

Moore Stephens International started work last yearand has been collecting relevant information from variousgovernment entities such as Malawi Revenue Authority(MRA), Ministry of Natural Resources, Energy and Mining(MNREM) and Public-Private Partnership Commission(PPPC).

This led to the selection of 25 companies, out of theregistered 900 that have licences in the country’s mineralresources industry.

The selected firms, 21 dealing in mining and four in oiland gas exploration, were picked after they were deemed tohave reached the set threshold of material contribution togovernment entities - MRA and the Department of Mines- between July 1, 2014 and June 30, 2015.

The materiality threshold for the section of thesecompanies for 2014/15 Financial Year (FY) reconciliationscope is pegged at MK5million contribution for mining andMK0 for Oil and Gas.

Government entities are supposed to prepare a separatereporting template for each extractive company and send anil reporting template for companies that did not make anypayment in the stated period.

Each template must be signed off by board level orsenior level manager of both extractive company as wellas the Government Entity and certified by a registeredIndependent Auditor for companies and The AuditorGeneral for Government Entity, all applying agreed-uponprocedures based on international standards.

The list of mining companies included are Mota-EngilLtd, Mota-Engil Minerals & Mining, Paladin Africa Ltd,Shayona Cement Corporat ion, Lafarge CementCorporation, Cement Product (MW) Ltd, Terrastone Ltd,Cilcom Ltd, Mchenga Coal Mines Ltd, Optichem Malawi(2000)Ltd, PSM Investments, Kaziwiziwi Coal Mine Ltd,Kaziwiziwi Mining Company, Globe Metals & Mining Ltd,Mc Court Mining Ltd, Malcoal Mining Ltd, ZunguziwaQuarry Ltd, Lancaster Explorations Ltd, Intra EnergyTrading Limited, Premier Construction Equipments Ltdand Nyala Mines Ltd.

Oil and Gas companies include Hamra Oil in JointOperating Agreement with Surestream Petroleum, PacificOil Limited, RAKGAS MB45 and SacOil Holdings Limited.

The administrator’s analysis of extractive revenuescollected during the 2014/15FY shows that the miningsector contributed 79.89% to the total government revenuesfrom the extractive sectors and approximately 90% of thisrevenue collection was done by MRA.

The 100% revenue that was made through extractivecompanies payments to the s ta te coffers wasMWK7,077,734,640, wi th mining contr ibut ingMWK5,654,669,080, which is 79.89% of the chunk, Oil &Gas contributed MWK136,282,560 translating to 1.98%,whi le the remain ing 18 .18%, an equiva lent ofMWK1,286,783,000 came from forestry.

The administrator failed to gather information aboutMalawi’s artisanal activities as the artisanal sector is notorganised to allow the availability of reliable revenueinformation.

Chamber of Mines and Energy President, Dean Lungu,who represented the private sector, but also officiallyopened the workshop on behalf of the excused Guest ofHonour, Director in the Ministry of Finance and MWEITIMSG chairperson, Crispin Kulemeka, acknowledged therole the private sector has in the EITI implementationprocess in Malawi.

He said for Malawi to attain an EITI ‘compliant status’,companies are expected to play their part of disclosingquality information of payments they make to Government.

Lungu noted that the quality and impact of the EITI

Report depends on the quality of paymentand receipts data that is submitted to theIndependent Administrator and he assuredthat the Chamber will ensure that companiescooperate fully in supplying the requiredinformation.

“This reconciliation process dependslargely on the quality of the payment andreceipts data submitted by GovernmentDepartments and Agencies and naturalresource companies, therefore, it is expectedthat this workshop will impart the necessaryskills that will ensure quality of reporting bythe relevant entities,” he said.

Without mincing words, Lungu describedMalawi as a ‘very corrupt country’: “Noneof us here can dispute that. But as Chamber,we have made it one of our objectives to helprid our beloved country of this embarrassingvice by embracing and promoting initiativeslike EITI, which promotes transparency andaccountability.”

He quoted his counterpart, President ofthe Philippines Chamber of Mines BenjaminPhilip Romualdez as having once brandedmining as the most misunderstood industryin the world, an assertion which Lungu saidhe agrees with.

He said this is so because investors,CSOs, communities and government, all,have different interests and objectives asregards mining, which result in bickeringand conflicts.

But he said EITI provides companieswith a tool that addresses the situation.

“It brings coordination between playersof different interests in the mining industry,which eventually leads to common under-standing of the mining industry big-picturegoal – to improve the economy,” he said.

Lungu said enhanced transparency andaccountability derived from the country’sadherence to EITI will reduce corruption andin so doing improving business environment,a situation which will attract investorsinto Malawi, and eventually shoring up theeconomy of the country.

He pledged that the Chamber will ensurethat companies operate in a credible andtransparent manner in their submissions ofpayments, which he said the Chamberbelieves will positively contribute to theGross Domestic Product (GDP) of thecountry and also brighten the climate ofinvestment in the sector.

He urged the companies to avoid shoddydealings saying the Chamber will notshield any company that will indulge inmalpractices.

Then Lungu said he was pleased thatsome mineral rights holders were beingcommended for not only participating butalso actively pushing for a meaningfulEITI process in Malawi and urged them tomaintain that path.

EITI is based on the principles agreed in2003, which state that the wealth from acountry’s natural resources should benefitall its citizens and that this requires highstandards of transparency and accountability.

The Genesis of EITI in Malawi isthe Open Government Partnership (OGP)initiative, which the Malawi Governmentjoined in 2013 as part of its reform agenda.

Malawi joined other 70 countries inmaking a high-level Open GovernmentDeclaration to promote transparency, empowercitizens, fight corruption, and harness newtechnologies to strengthen governance andEITI became commitment five of the OGP

25 extractives companies in initial EITI reporting exercise

Toorabally and Maales with Rakgas’ Country Manager Chimwemwe Chikusa

Representatives from extractive companies listening to a presentation

The turnout was diverse and impressive

Some of the participants lending an attentive ear to the proceedings

ADVERTISEMENT February 20178

February 2017 NEWS & ANALYSIS 9‘Our focus is on developing a new

sustainable source of light and heavy rare earths outsideChina,’ said William Dawes, CEO of Mkango ResourcesLtd, Canada, which owns the project. Canada has lofty

ambitions in the rare earth market, its Governmentannouncing in 2014 a target of securing 20% of globalsupply by 2018. Songwe Hill, which hosts an unusuallyhigh concentration of HREEs, is one of several projects indevelopment worldwide that could begin to address thegeopolitical imbalance of their supply.

Luminescent clues‘The work involved two field seasons

in Malawi, where we investigated coredrilled by our industrial collaborator,Mkango Resources Ltd, and looked atthe relations of different rock unitsin the field,’ Broom-Fendley toldMaterials World. ‘We took representativesamples of the different rock units andlooked at thin sections of these samplesusing a petrographic microscope, aswell as electron beam techniques suchas cathodoluminescence and scanningelectron microscopy.’

The mineral apatite, they found,is key to the high HREE content ofthe Songwe Hill deposit comparedto similar carbonatite host rockelsewhere. Broom-Fendley explainedthat the luminescence of apatite ishighly susceptible to change when there are smallvariations in its structure, making cathodoluminescencea particularly useful tool for identifying apatite andrecognising variations in mineral composition that couldindicate richness in HREEs.

Hydrothermal activityIn the study REE Minerals at the Songwe Hill

Carbonatite, Malawi: HREE-Enrichment in Late-StageApatite, published inOre Geology Reviews,Broom-Fendley andhis co-authors explainthat few examples ofH R E E - e n r i c h e dcarbonatite are known,and even these are

‘typically minor occurrences forming in late-stagefluid-rich environments’.

The Songwe deposit, however, has the highest HREEconcentration of any known carbonatite apatite, and theresearchers believe they have determined a likely cause –the presence of hot fluids. ‘At Songwe, there is distinct

evidence for hydrothermal activity in the shape andchemistry of apatite and clear textural evidence for thelater formation of the light rare earth element mineralsynchysite-(cerium),’ Broom-Fendley explained.

This rare combination of both light and heavy REEscreates a well-balanced deposit that could be particularlyuseful as a supply for the growing magnetics industry.

‘Combining the “paragenetic history” [the order ofcrystallisation] with our observations at other intrusions,and through comparison with experimental work in otherinstitutes, we concluded that a hydrothermal model best fitsthe evidence available,’ he said.

HREE-enriched apatite was also found to befine-grained and elongated in a “stringer-like” shape.Identifying these characteristics would mean that miningcompanies could quickly and inexpensively evaluate theHREE potential of a carbonatite REE deposit usingmicroscopy. If found to meet these criteria, the companycould then move on to cathodoluminescence and, ifHREE-enriched apatite is still evidenced, the moreexpensive laser ablation to assess the chemistry of theapatite. This would prevent time and money being wastedin pursuit of HREEs, as the most expensive methods wouldonly be employed once a high likelihood of their presencehas been established.

An unknown fluidWhile the study points towards a hydrothermal model

for HREE enrichment, the composition of the fluidresponsible remains unknown. ‘Based on the mineralogy,fluid-inclusion composition and recent work, we suggest achloride complex is responsible for transporting REE,’ saidBroom-Fendley. ‘However, there is still a great deal ofscope for other complexing agents, including fluoride. Bothchloride and fluoride are capable of fractionating the REE,owing to the different stabilities of light and heavy rareearth element complexes. We also suggest carbonate as apotential transporting agent, although experimental data forcarbonate complexation are still limited.’

Broom-Fendley is now looking into both thecomposition of the fluid and temperature of the process,and building a more general model for carbonatite REEenrichment, while colleagues are working on theprocessing of carbonatite deposits for efficient extractionof both light and heavy REEs. Work continues, butrecognising the common accessory mineral apatite as alikely indicator of HREE enrichment may be a significantmilestone in the pursuit of technologically importantmaterialsReport by Simon Frost for Materials World Magazine

...from page 10

Heavy rare earth element-rich apatite(purple) viewed undercathodoluminescence.Calcite is shown in orange and feldspar in brown-purple.

Hydrothermal activity

Team of geo-scientists visiting one HREEs prospect spots

Geo-scientists at Songwe Hill

NEWS & ANALYSIS February 201710

AbstractCommodity price volatility has mainly been associated with the effect of economic growthin China. Industrialisation, infrastructure development, monetary policy and the rapideconomic growth of emerging markets will influence the growth of commodity prices.

The world needs to look beyond China in order to create advancement intechnological development and creation of new markets.

IntroductionCountries that rely on natural resource exploitation have recently seen their economic

growth slowing due to weak demand and strengthening of the US dollar. China’seconomic growth has adjusted to normal growth and shale-energy boom in the UnitedStates has affected the global demand and supply side of commodities. The FukushimaDaiichi nuclear power plant accident has caused a prolonged price slide in uraniumnuclear fuel prices.

Commodity Price Overview

Precious MetalsThe past five years have seen a general shrinkage in prices of precious metals. Precious

metals prices, especially silver and gold, will be affected by US monetary policy and theperformance of the US dollar. U.S. monetary policy tightening and a stronger dollar mayreduce the prices of these metals. The removal of 500 and 1,000 Indian notes as legaltender will affect physical demand for silver and gold as the informal holding of moneyhas been affected. Platinum prices are projected to decline due to continued large stockoverhang and low production of motor vehicles. All in all, the prices of precious metalswill be influenced by rising inflation, macro-economic concerns, adverse geopoliticalevents, and stronger physical demand.

Precious Metals Historical Price Data

(Source: http://www.focus-economics.com)

Base metalsThe strength of the US dollar and rise in interest rates have put pressure on base metal

prices.

AluminiumAluminium prices have had a period of price fluctuation with a downward trend. The

metal price is influenced by infrastructure spending and vehicle manufacturing. The new

US administration’s pledge to increase infrastructure spending and boost localautomobile manufacturing will improve aluminium prices. The US and China have seenan increase in car sales through an 11 year high in December and all-time high inNovember respectively.

CopperCopper prices decreased due to slow economic growth in China. China is the world’s

main copper consumer and signs of Chinese economic growth recovery has seenrecovery of copper prices in recent months. The American Trump effect throughdevelopment of local infrastructure will boost copper demand and price increase too.

LeadThere was gradual recovery of lead prices towards end of 2016. This was equally

influenced by increase in U.S. car sales and strong industrial production figures in China,Europe and North America.

NickelIndonesia’s relax on ban of export of low-grade ore will increase global supply of

nickel and this may further influence price drop.

by Grain Wyson Phillip Malunga FIMMMMining and Environmental Management Expert

The Volatility of Commodity Prices

...cont. page 11

2012 2013 2014 2015 2016

GOLD 1668.69 1410.71 1265.83 1159.8 1248.54

SILVER 31.14 23.82 19.07 15.71 17.15

PALLADIUM 643.47 725 803.44 690.55 614.03

PLATINUM 1549.48 1485.41 1383.61 1051.85 987.37

STATIONOCT 2016

DEC 2015

DEC 2014

DEC 2013

DEC 2012

Aluminium, $/t 1,701 1,503 1,832 1,710 2,043

Copper, $/t 4,786 4,936 6,659 7,026 7,871

Lead, $/t 2,048 1,667 1,853 2,051 2,310

Nickel, $/t 10,335 9,020 14,935 13,410 17,225

Tin, $/t 20,850 14,840 19,500 22,525 23,325

Zinc, $/t 2,374 1,528 2,167 1,858 2,061

Irone ore (62% Fe), $/t 63.10 $39.4 $71.2 134.0 139.5

February 2017 NKHANI M’CHICHEWA 11

Rare EarthsChina produces more than 85% of the global supply of rare earths and the country is

also the largest consumer. Rare earths prices have been affected by structural demandchanges, low growth in high-tech goods and lower investment in renewable energy. Aglobal annual demand of 6-7% has been envisaged up to 2020. Neodymium andpraseodymium demand will be significant due to manufacture of NdfeB magnets for usein electric generators and motors. Cerium and lanthanum demand for use of catalyticmaterials to control transportation emissions and in cracking materials may increase theirdemand.

NiobiumThe biggest demand for niobium comes from China, North America and Europe. China

is home to the world’s fastest-growing market for niobium, accounting for 25% of totalconsumption in 2010. This is reflected in the size of its steel industry and the rapid rate of

expansion in output in the recent years.

Niobium price was stable from 1991 to 2005 when it rose from 12.5 US$/kg to42US$/kg in 2015. Increasing demand for niobium-steel alloy in emerging nations isexpected to drive the niobium market. Demand for special steel in large constructions andgas pipelines will drive the price of niobium upwards.

Iron OreIron ore prices in 2016 started going up through a steady demand from China and

supply cutbacks from high cost producers. Anti-dumping duties on China by the US andEurope; and increase in iron ore production by major players such as Rio Tinto and Valemay affect increase in iron ore prices in 2017.

Energy MineralsThe price of coal has been influenced by increasing production in China and Australia

compounded by slowing demand in China. It is expected that, in 2017, prices may notimprove due to supply additions and weak demand may continue to reduce prices.

Energy Minerals Price History Data

(Source: http://www.focus-economics.com)

UraniumThe slump in the uranium market was a result of closure of nuclear power plants and

anti-nuclear lobby after the Fukushima Daiichi nuclear power plant melt down. This iscontinuing due to weak demand from the US and plentiful uranium supplies in China forits emerging nuclear power plants. The price of uranium has gone down from USD 136.0in 2007 to USD18.0 2016. The traditional main consumers of nuclear energy have beenUnited States, France and Japan. China and India are switching to the same energy source.

The recommissioning of about 50 Japanese nuclear plants and future commissioningof Chinese, Indian and British nuclear power plants will improve the demand side andimprovement in uranium prices in the next two years.This is in line with the thinking thaturanium demand will be experienced in highly populated economies whose energypolicies are embracing nuclear power to promote low carbon emitting energy sources forclimate change mitigation and pollution control.

Oil and GasThe US shale cracking and ease of sanctions in Iran led to oversupply of oil and gas

leading to low oil and gas prices. US crude oil production jumped from 5.4m barrels a dayin April 2010 to 9.7m b/d in April 2015. Excess supply, high stocks, and weak globaldemand continued to weaken oil and gas prices.

Oil demand is being weakened by weak European and developing countries’economies. The production of energy efficient vehicles is reducing fuel demand too. Thisis somehow compensated by increase in car sales in the USA and China.

GraphiteThe consumption of graphite is facing slowdown in conventional applications due

to downturn in steel and iron industry. However, adoption of graphite is increasing inemerging applications such as heat exchangers, lithium-ion batteries, aerospace, andnuclear reactors, among others. The compounded annual growth rate of graphite between2015 and 2020 is estimated at 4%. Natural graphite prices are heading for an average ofUS$840/t.

Forward LookingPrices of commodities such as copper, coal and iron ore have gained this year.Precious metals will continue to depend on physical demand and monetary policies

and inflation will shape the price of these metals. India’s withdrawal of INR 500 and 1,000may affect the physical demand for silver and gold in the short to medium period.

Base metal prices will be influenced by the rise in industrial projects in China, Indiaand the US.

Resource Capital Fund will go to financing industrial minerals projects that areexposed to high-tech mineral markets such as graphite, lithium and rare earths.

Uranium prices will be influenced by slow in production and closure or puttinginto care and maintenance of non-profitable mines in anticipation of recommissioning ofJapanese nuclear power plants and commissioning of new nuclear power plants in China,India and the UK. The demand may rise around 2019.

Niobium usage may increase in large infrastructure projects requiring steel. America’sswitch to local infrastructure development and growth of infrastructure in emerging mar-kets brings hope for increase in use of niobium.

The usage of graphite is increasing thanks to lithium-ion batteries, which can be usedin laptops, electronic devices and electric cars among many other things.

Oil and gas demand will be influenced by increase in car sales and revival of weakeconomies and growth in emerging markets. Geopolitical events and shale cracking maycontinue to influence periodic price fluctuations.

In 2017, metals prices are projected to increase by 4 percent as most markets continueto rebalance.

Referenceshttp://www.arultd.com/rare-earths/supply-demand.htmlhttps://www.biv.com/article/2016/1/current-commodity-price-mining-downturn-unpreceden/http://www.businessinsider.com.au/https://www.ft.com/content/7126ec00-e149-11e5-9217-6ae3733a2cd1http://pubdocs.worldbank.org/en/143081476804664222/CMO-October-2016-Full-Report.pdfhttps://en.wikipedia.org/wiki/Commodity_price_shockshttp://www.lme.com/

Themal Coal (US$/t) 31.14 23.82 19.07 15.71 17.15

Uranium (US$/lb) 643.47 725 803.44 690.55 614.03

2012 2013 2014 2015 2016

Coking Coal (US$/t) 1668.69 1410.71 1265.83 1159.8 1248.54

...from page 10

Issue No. 46 February 2017

Published by Mining Review Publications P.O. Box 206 Lilongwe, Tel: +265 (0) 111 744 071. Cell: +265 (0) 888 356 536, (0) 993 252 656Email: marcsmediamw@gmail.com

MINING & BUSINESS NEWS THAT MATTER

The World Bank says new areas showingpotential of mineral deposits have beendiscovered in Malawi, boosting opportunitiesto develop the country’s mining industry,attract investors and diversify the country’s

agricultural-based economy. In a report posted on its website, the Bretton Woods

Institution says potential mineral deposit discovery inMalawi comes in the aftermath of a year-long geophysicalsurvey co-financed by the World Bank and the EuropeanUnion through Mining Governance and Growth SupportProject (2011-2017).

The World Bank quotes Director of Geological SurveyDepartment Jalf Salima as saying: “The survey hasproduced high-resolution data that provides insight into thecountry’s mineral potential which will continue to beexplored. “The data shows there is more below the surfacewhich demands follow-up work.

Salima cites several formations in Malawi that aresimilar to those of resource-rich neighboring countries,which could signal mining opportunities for Malawiincluding the Kasungu Dyke which has similar qualities tothose of the Great Dyke Zimbabwe, which has a number of

important metals. “Southern Malawi’s Lower Shire Basin has coal

deposits, which could be linked to Moatize, a coal-miningarea in Mozambique,” he says.

The Malawi government will interpret all of the surveydata, while the private sector will interpret data in theirareas of interest to help focus their exploration efforts.

Some areas of focus will include regional relationshipssuch as the terrane boundaries within the basementcomplex of Malawi and their relation to known orsuspected boundaries in Mozambique, Zambia andTanzania, as well as dykes and their relationship to knownor new dyke swarms in the region, and potential sites ofkimberlite intrusions and their relation to known diamondoccurrences in the region.

Within Malawi, data will be explored for potential sitesfor gold and base metals mineralization, hydrocarbons,neo-tectonics, rifting structures and the existence of basinsof any age that may have potential for oil and/or gas. Theanalysis will also identify the relationships betweengeophysical signatures and known mineral occurrences andstructures across the whole spectrum of potential mineralresources in the country. The survey data will also be usedto update the national geological map of 1996.

“The completion of this survey is a key achievement

for Malawi, especially if the detailed interpretation bringsabout positive results critical for the mining sector to helpboost the economic growth that this country needs,” saysLaura Kullenberg, World Bank country manager forMalawi, cautioning stakeholders that the time fromexploration to the development of a mine could take asmany as 10-15 years.

Further, Kullenberg says that the development ofresource wealth could be a curse if the country does nothave strong institutions and legislation regarding how toinvest and share the wealth generated from new discoveries.

“Countries that do not get this right from the outset candescend into conflict,” she says. “Please do not let thishappen to Malawi.”

Bright Msaka, Malawi’s Minister of Natural Resources,Energy and Mining, says the ministry will work to ensureMalawians are the principal beneficiaries of the country’smineral wealth.

“If this data is properly utilized, it will help realize amodern mining sector and Malawians will no longer bepoor,” he says.

The Malawi Government is, currently, a candidatecountry for the Extractive Industries TransparencyInitiative (EITI) to ensure transparency and accountabilityin managing mineral revenue

By Staff Reporter

World Bankupbeat onMalawi’smining sector...Lower Shire basin could belinked to Moatize coal deposit

Kullenberg: Survey a key achievement Salima: Survey provides mining potential insight