Ngualla Rare Earth Mining License Imminent
As part of President John Magufuli’s mining reforms aimed at cleaning up the industry and increasing domestic revenues, the Tanzanian government is finally establishing its new Mining Commission responsible for licensing and enforcement. The new body, which should exist by mid to late March, will follow up on new rules that require miners and their contractors to source local workers and services, giving first consideration to qualified Tanzanians.
While this is all good news for Tanzanians, it has created a colossal backlog of licensing applications during the formative period of the new legislation and accompanying commission. One of these applications belongs to Peak Resources Ltd. (ASX: PEK) (“Peak”), which currently has a Special Mining Licence (SML) in waiting for the Ngualla Rare Earth mine and multi-stage processing plant in Tanzania that was filed back in August 2017 and has hung in the air ever since. However, Peak has maintained contact with, and received assurances from, many officials throughout the process, suggesting that its application will be dealt with very shortly.
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The Deputy Minister Hon. Nyongo confirmed back in December that the more strategic SML applications will be given priority over standard Mining Licence Applications. SMLs are for projects with a capex of more than $100 million. There are only three pending SML applications currently, of which Ngualla’s is one. Peak has to conduct a technical workshop with the Ministry of Minerals and other government stakeholders in Dodoma in early April at the request of another Deputy Minister aimed at expediting the process, but we are led to believe that Ngualla remains a top priority for the new commission.
It does seem as if the SML will be granted, and possibly sooner rather than later. The Ngualla project, being the leading undeveloped rare earths site in the world, is likely too big an economic benefit to dismiss. Ngualla has unusually good ore grades, and the integrated mine to market solution proposed by Peak allows the company the ability to trade in more refined rare earth products at much higher margins. The potential mine has an ore Reserve of 18.5 million tonnes at 4.8% REO, a Capex of US$200 million, an Opex of US$51 million and a 26 year life of mine, over which it will churn out 32,700 tpa of 45% rare earth concentrate.
With the recent receipt of the Environmental Certificate and impending processing of the Mining Licence application, Peak intends to further engage with the Government of Tanzania to rapidly advance Ngualla through the final permitting processes and seek total clarity on the recent legislative changes. We already know that the government wants to enhance the competitiveness of local mining and financial institutions by setting minimum employment levels and in-country spend for foreign firms, and follow up on it.
The company can then expedite discussions with potential offtake partners with a special focus on magnet manufacturers and continue to work on opportunities to further improve the economics of Ngualla. Peak is very well positioned with the rising market for NdPr driven by e-mobility and other low carbon technologies. Tesla altered its motor recipe to heavily feature NdPr permanent magnets in the Model 3. Simply put, Peak has a project with potential for lowest quartile Capex and Opex, which, in this sector, makes them a top choice.
Lara Smith has spent over a decade covering commodity markets. She started her career as a buyside analyst in South Africa where she covered soft ... <Read more about Lara Smith>