Mkango Resources (LSE:MKA) was trading up 1.3pc to 9.5p on Monday afternoon after announcing a significant jump in the prospectivity of its flagship rare earths project.

The firm revealed that total measured and indicated resources at its Songwe Hill project in Malawi have increased by 60pc to 21MMt grading 1.41pc total rare earth oxide. The updated figure has seen the majority of the previously delineated near-surface inferred resource at the site be upgraded to either the measured or indicated categories.

Approximately 95pc of the measured and indicated mineral resource blocks are fewer than 160m below the surface of the hill at Songwe. According to Mkango, this suggests that the majority of the resource will be accessible through open-pit mining.

The new figure will underpin an ongoing feasibility study at Songwe. This, in turn, is aimed at helping Mkango towards its goal of becoming a long-term, sustainable producer of rare earth metals like neodymium, praseodymium, dysprosium and terbium.

Rare earths are used in permanent magnet motors for wind turbines and other clean technology. Most importantly, however, they are used in electric vehicle motors. As a result, they are expected to be a beneficiary of the forecast boom in EV usage in much the same way as battery metals like nickel, lithium, and copper.

The firm will now get to work on publishing a NI 43-101 technical report in relation to the resource update. This will trigger the next £7m milestone investment from Talaxis. Under the terms of an agreement, Talaxis will fully fund the Songwe feasibility study by investing £12m for a 49pc interest in the project. Talaxis will also have the option to acquire a further 26pc interest by arranging the funding of project development. If the business chooses to exercise this option, Mkango will retain a 25pc stake and will be free carried to production.

To-date, Talaxis has invested £5m, which has funded the initial phases of the Feasibility Study, for a 20pc interest in the project. Mkango holds the remaining 80pc.

William Dawes, chief executive of Mkango, said: ‘All the objectives for the 2018 drill programme have been achieved and we are very pleased to announce this increased resource at Songwe. This provides a solid platform for completion of a revised mine plan to be incorporated into the feasibility study. Based on the larger Measured and Indicated Resource, the feasibility study will evaluate opportunities to include more tonnes into the mine plan, expand operations, extend the mine life, reduce the strip ratio and therefore reduce mining costs.’

Author: Daniel Flynn

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