Mining & Trade News

I came across this post on LinkedIn by Mr Asimwe Kabunga; a Tanzanian born Entrepreneur who is the Founder and largest shareholder in Australian-listed Lindian Resources, which is preparing to open the Kangankunde Mine poised to become one of the largest and most significant rare earth mines in the World located in Balaka District.

Kemerton’s Cautionary Tale: Why African Downstream Ambitions Need a Reality Check

I am just leaving Investing in African Mining Indaba in Cape Town, and the message from some African governments was clear: "No rawer exports.We want downstream precessing."

It sounds great in a speech. It wins votes. But this week, the world’s largest lithium producer, Albemarle, gave us a $2 billion reality check.

Albemarle just idled the final production line at its Kemerton refinery in Western Australia (the state I have called home for almost 30 years now). This was supposed to be the "gold standard" of Western refining. Despite a lithium price rebound, the company realized it is cheaper to mine ore in Australia and ship it to China for processing than to refine it locally.

If a Tier-1 jurisdiction like Australia, with $17B in incentives, world-class power, and a skilled workforce, cannot make the "refining math" work, African nations must ask: Are we setting ourselves up for a "Refining Trap"?

Here are three hard truths for the "Downstream or Bust" agenda:

1. Mining and Refining are NOT the same business

Mining is about geology and volume. Refining is about chemical engineering, low energy costs, and massive scale. You can be a great miner and a terrible refiner. Forcing them together often kills the profitability of both.

2. "Dig and Ship a badge of honor, not a failure

Australia is a mining leader not because it makes batteries, but because it perfected the "METS" (Mining Equipment, Technology, and Services) sector. Australia exports software, safety systems, and drilling tech. This is higher-margin value-add than a chemical plant and does not require billions in subsidized electricity.

3. Policy should be a Magnet, not a Mandate.

Banning raw exports, like we have seen in Zimbabwe or Namibia, does not automatically create a refinery. Often, it creates "stranded assets" and kills investment. Capital is cowardly. It goes where it is welcome and stays where it is well-treated.

The African Approach should be:

• Infrastructure first: Do not mandate a refinery if the power grid cannot handle a toaster.

• Focus on Beneficiation: Primary crushing and sorting (getting to 6% concentrate) is a win. It reduces shipping costs and creates jobs without the $2B price tag.

• Build the METS ecosystem: Use the mines to build local engineering and logistics firms. That is the Australian Model" that actually works.

If we want downstream to grow in Africa, it must grow because it is competitive, not because it is compulsory.

My reaction

After finishing reading the article, I remembered the speech by State President His Excellency Professor Arthur Peter Mutharika before announcing the national ban on export of raw minerals. Mutharika hailed the potential of the Kangankunde deposit in helping transforming the economy of Malawi currently in deep waters. Before announcing the ban, he emphasized the importance of value addition for Malawi to scale up benefits from mines for critical minerals such as Kangankunde.

When the ban was announced, I was among those people alert on what reaction would come from Lindian. In this newspaper, we had also published an editorial persuading Lindian to consider setting up a processing plant that will produce the high value rare earth minerals in Malawi in order to scale up benefits from Kangankunde. In the editorial, we gave an example of Mkango Resources pursuing the Songwe Hill Rare Earth Minerals, who are planning to construct a processing plant to produce high value minerals from the rare earths within Malawi.

But Lindian posted a statement on the Australian stock exchange soon after the announcement of the ban  that its plans to export rare earth concentrate from Kangankunde would not be impacted because it would conduct some processing within Malawi to concentrate stage,  it claimed was the highest level possible in Malawi due to lack of required facilities.

This was despite cries over the ban from local Artisanal and Small-scale Miners (ASMs) whose activities were impacted by the ban due to lack of access to beneficiation facilities within Malawi. I questioned myself; was Mutharika only targeting ASMs by issuing the Executive Order? But why did he take time talking about Kangankunde before announcing the ban?

Mr Kabunga’s post, therefore, has opened my eyes that Mkulukutamoyo (as Mutharika is fondly called in political circles)  did not execute the ban to just impact the local poor ASMs, rather some investors want to find ways to escape the trap.

As the President stated in his speech before announcing the ban, the success of Kangankunde will certainly contribute significantly to the economy of Malawi understanding that the deposit has over 100 years mining life with Lindian having pegged the initial life span at 45 years.

The economic changes due to the contributions of mines such as Kangankunde will help sustain the political popularity of the President and his ruling Democratic Progressive Party. Mutharika can indeed not dare risk his popularity just to meet Mr Kabunga’s aspirations though factual and coherent.

Certainly, he clearly remembers that Malawians talked a lot about inadequate benefits from the Kayelekera Uranium Mine in Karonga when during his tenure as President his late brother Bingu sanctioned the opening of the Mine in 2009 by Australia’s Paladin Resources. I do not think he would dare ride in a similar boat though it might look investor friendly.

The best Mr Kabunga and the Kangankunde Project management team can do is to mobilise investors to consider partnering the Malawi Government in developing the refinery to produce the high value rare earths within Malawi. Neither Mutharika nor any Malawian of good would dare lose Kangankunde for a song.

As the President said when announcing the ban, it is imperative for Malawi to realise maximum benefits from its mineral resources, and local value addition is the way.

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