Aim- and TSX-V-listed Mkango Resources and two of its subsidiaries have signed a mining development agreement (MDA) with the Mawali government for the Songwe Hill rare earths project.

The signing of the MDA marks a significant occasion in the history of Malawi’s mining sector, says Malawi Mining Minister Monica Chang’anamuno, adding that the agreement paves the way for the companies to start mining rare earths at the project.

The subsidiaries related to the agreement are British Virgin Islands-based Lancaster Exploration Limited, as well as Lancaster Exploration Limited in Malawi.

The MDA is a culmination of two years’ work and symbolises a new partnership. Mkango comments that the conclusion of the MDA is a testament to what can be achieved when stakeholders work together with a common purpose.

“It will ensure that the benefits of our mineral wealth are shared equitably and that our environmental and social responsibilities are upheld,” the company adds.

According to the MDA, the government will provide the requisite infrastructure to support mining activities at Songwe Hill and the country in general, enabling future mining operations in Phalombe to have far-reaching impacts on the economy.

Additionally, the MDA confirms the fiscal terms applicable to the project and enhances the options to create value for shareholders in the context of the ongoing strategic review and engagement with potential strategic investors, development and commercial banks and offtakers.

Particular components of the MDA include a 5% royalty of gross revenue, a 30% corporate tax rate, a 10% non-diluting equity interest in the project to the Malawi government, exemption from customs and excise duties and a provision that community development expenditure is an allowable tax deduction.

“When developed, my hope is that Songwe Hill will catalyse a new industrial revolution in Malawi, creating employment opportunities, producing high value-added exports, as well as further unlocking Malawi's mineral potential and new infrastructure developments,” notes Mkango president Alexander Lemon.

Songwe Hill is poised to produce neodymium, praseodymium, dysprosium and terbium, which are all critical for the green transition and are essential to permanent magnets for electric vehicles, wind turbines and many electronic devices.