The “Lion” of Malawi

Last week I had the good fortune to meet up with the CEO and the President of Mkango Resources Limited in London, an early stage REE prospecting company operating in Malawi. If you’re ever visiting and hear the locals yelling Mkango, pay attention, they are not paying deference to the folks at Mkango Resources, Mkango means lion in one of the local languages, and there is a high possibility you are marked down for lunch.  MRL hold a 100% prospecting licence in a carbonatite REE property called Songwe Hill, located about 40 miles from the main commercial city of Blantyre. The company I find interesting on several levels.

The first is that the company is brand new, meaning few have heard of the stock therefore it isn’t carrying an outrageous premium or outrageous hyped expectations. The stock trades in Toronto for about 55 cents (TSX.V: MKA.) Next it’s located in Malawi, hardly the epicentre of REE global interest, yet Malawi has vast other resources which are just in the process of coming into play. Paladin Energy is developing Africa’s second largest uranium mine in Malawi, but the one that’s more important is Malawi’s coal reserves. Brazil mining giant Vale, among others, is developing Malawi’s vast coal deposits, with shipment largely intended for the Indian market. To that end Malawi, Vale and Mozambique in April signed a deal to improve railway access to new coal export ports being built at at Beira and at Nacala in Mozambique. Malawi is just coming into mainstream play. Better yet, Malawi is a rule of law country,  with British style rule of law applying.

Good for Malawi, now what about Mkango. Well below from Mkango in their own words:

Significant exploration work was completed at Songwe between 1986 and 1988 by the Japan International Cooperation Agency (JICA) and the Metal Mining Agency of Japan (MMAJ) under an agreement with the Government of Malawi. The work comprised geochemical sampling, trenching, thin section, polished section, XRF and EPMA analysis, and 19 drill holes to 50m. The logs of the drill holes indicate broad intersections of carbonatite in a number of holes, including 46m grading 1.3% REO, 50m grading 1.5% REO and 50m grading 3.1% REO. Assays were only completed for lanthanum, cerium, neodymium, samarium, europium, terbium, yttrium, strontium, niobium and phosphate. Praseodymium, dysprosium and other heavy rare earths were not analysed in the drill intersections.
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Back in the 1980s, Japan shallow drilled the prospect to 50 metres, and only performed limited assays.  In September the results of new deeper drilling, some down to 260 metres will become available and complete assays are also being conducted. I think it quite likely that the modern results will greatly improve on the results obtained back in the mid 80s. Drilling will continue on until the rainy season arrives. I think that the stock is a reasonable punt ahead of the coming results. I think given the change coming to Malawi, and the prospect that some of Malawi’s coal will in future be used in local power projects, together with the rail improvements to Africa’s east coast, I think that long term Mkango has a very good chance of going on to become a mine. Disclosure: I have no position in Mkango Resources though I might very well go on to acquire one.

As always, before making any investment it’s important to do your own due diligence on a company, and to reflect on whether it meets your own individual risk compatibility. No one has more at risk in any investment made than you do yourself, once you decide to invest. We don’t invest to provide a living for others.

It was a confusion of ideas between him and one of the lions he was hunting in Kenya that had caused A. B. Spottsworth to make the obituary column. He thought the lion was dead, and the lion thought it wasn’t.

P. G. Wodehouse.