Wrangle over Niobium deal

Wrangles over the Development Agreement (DA) between Malawi Government and Globe Metals and Mining Limited—the firm gunning to mine niobium at Kanyika in Mzimba—has sent negotiations into disarray, The Nation has learnt.

The two parties started discussing the agreement last year, but Malawians still have to wait until about July this year before they can fully know the future of the niobium mining project already embroiled in environmental scuffles with locals there.

Our investigations so far show that Capital Hill, smarting from the Kayelekera Development Agreement saga, is pushing hard for a better deal for the country than the one with Paladin Africa, the other Australian company currently extracting uranium in Karonga.

Among others, Malawians have voiced out against a 1.5 to three percent royalty Paladin pays to Capital Hill against the five percent mark set by the Mining Act of 1981.

Paladin allowed only 15 percent local stake in the mining project at Kayelekera, which critics consider to be on the lower side.

In an interview this week, Globe Metals country director Neville Huxhum confirmed that the agreement has taken long to complete “of course, obviously the Kayelekera issue has some impact on our negotiations.”

Writing in the first edition of Mining Review, a newsletter sponsored by the Malawi Government, Paladin, Surestream, Globe Metals and Intra Energy, Huxhum realises that niobium is one of the world’s rare and unique metals.

“Malawi stands poised to become the world’s third largest producer of niobium,” writes Huxhum.

According to Ministry of Finance sources, Malawi is negotiating for a better cut in the niobium project, “much higher than the raw deal we got in the Kayelekera project.”

The source said instead of Globe Metals paying up to three percent in royalties, Malawi Government is negotiating for five percent as stipulated by law.

Malawi also wants up to 30 percent local stake in the project to ensure maximum benefits for the country.

The government is also demanding that Globe Metals should only export a semi-finished product for Treasury to maximise on tax revenue.

On this, Huxhum said: “These are obvious sensitivities about details involved in the negotiation of development agreements. There are a lot of details required where injection of millions of US dollars is concerned because on the part of Globe, these details are commercial considerations.”

He added that, among other worries, learning from the Kayelekera situation: “We expect that when such agreements are signed, they must remain in force regardless of whichever [political] party is ruling.”

This was in direct reference to a push for government to renegotiate the DA signed with Paladin where Malawians feel they were short-changed.

“That is not a good thing in the security of future negotiations, but it is Globe’s intention that after the development agreement is signed, documents should be made public for all to know,” said Huxhum.

He is nonetheless concerned that delays in signing the agreement will hinder Malawians from seeing the fruits of niobium mining.

In a separate interview, Kalindekafe, who is principal secretary in the Ministry of Mining, refused to discuss any figures, saying “it is too early to be talking of such details in the media.”

He defended the delays in finalising the agreement, arguing that “the slow pace is to avoid the same concerns raised by Globe.”

In a separate e-mail response, Globe Metals and Mining acting chief executive officer Fergus Jockel also declined to outline the sticking points for Globe to resolve with government.

“In all negotiations, there are commercial elements and other specific aspects related to the project that must be considered by both parties before agreement can be reached. It would be highly inappropriate for Globe to mention any of these aspects while they are still under discussion,” he said.

Jockel noted that the future of the Kanyika project is dependent on the satisfactory conclusion of discussions with the Government of Malawi concerning the DA.

He, however, was quick to point out that the negotiations are continuing and that the next round of meetings is scheduled to take place in Lilongwe in late June this year.

Kanyika mining capacity

According to Huxhum, Globe is scheduled to invest up to $300 million (about K126 billion) in the project expected to produce up to 3 000 tons of niobium oxide a year.

Alongside niobium, the company also expects to mine 150 tonnes of tantalum—another rare earth metal—annually.

This will make Malawi third largest niobium producer after Brazil and Canada.

Global niobium production is currently around 63 000 tons a year, with 92 percent coming from Brazil’s Araxa and Goias mines and seven percent coming from the Niobec Mine in Quebec, Canada.

Niobium Uniqueness

Niobium is a unique rare earth metal used in many distinctive manufacturing industries.

For example, the Apollo Lunar programme, which carried teams of American astronauts to the moon, used niobium in the thruster nozzles for main rocket engines.

Niobium’s main use today is in the manufacturing of special steels for gas pipeline construction.

It is also used in welding of stainless steel, in the nuclear industry and in coin production.

According to various websites, global demand for niobium grew at a compound annual growth rate of 10 percent from 2000 to 2010.

Two key factors have driven this growth: Robust demand for steel, particularly among the Bric (Brazil, Russia, India and China) countries and growth in the amount of niobium being used to produce an increasingly higher grade of steel.

Globe writes on its website www.globemetalsandmining.com.au, that “demand for niobium is expected to return to a long-term growth trend (8-10 percent per annum) as market segments where niobium is well established and often has no substitute, will continue to expand and new niches for niobium continue to be developed.”

Stakeholder expectations

In a recent report into the extractive industry, the Catholic Commission for Justice and Peace (CCJP) called for the Malawi Government to establish a Mining Authority as proposed in the Mining Act of 1981.

“One apparent challenge that has been created by the booming extractive sector is police and legislative inconsistencies among existing legislation and policies,” notes the CCJP.

The inconsistent happenings in the extractive industry, have led to Malawi Government allowing mining in protected areas such as National Parks and Game Reserves, thereby infringing other existing laws.

CCJP has also questioned why government keeps under wraps proceeds from companies such as Paladin Africa which is mining uranium at Kayelekera in Karonga.

The report urges government to adopt and introduce the principles of the Extractive Industries Transparency Initiative (EITI).

The EITI tool was developed to assist resource-rich countries to publicise what revenue companies pay to government and what receipts government get from mining companies.

It is believed that mining companies are ripping Malawi of much-needed income amid several tax holidays while declaring losses year in, year out.

“I cannot believe that a company like Paladin has been making losses all these years,” said activist Mavuto Bamusi at the launch of CCJP report.

Lawyer Kamuzu Chibambo argued that much of the contents of the DA between Paladin and Malawi were illegal.

Legislator David Luka who chairs the Parliamentary Committee of Environment blamed problems in ensuring a workable environment in the extractive industry on what he called excessive Executive powers.

When she met leaders of opposition last year, President Joyce Banda promised that her government would first consult stakeholders before licensing more players in the mining industry.

However, in late 2012, government went ahead licensing some 60 companies before a single consultative session was organised.

Currently, there are about 172 companies in various small, medium and large-scale mining works across the country.

According to the 2009 Malawi Mineral Sector Review, the mineral sector has now made its first significant contribution to the country’s gross domestic product (GDP) as a result of the start of uranium mining at Keyelekera in April 2009.

“Paladin Resources rapidly transformed what had been a non-commercial prospect into a producing mine able to contribute some $150 million [K63 billion] annually to exports,” reads the report in part.

But stakeholders think while there is a drop of hope from the Kayelekera mining, Paladin has not done enough to uplift lives of people surrounding the mining area.

This, the CCJP report says, could be a result of mining companies being left alone to decide whatever they wish to do in their corporate social responsibility roles.