African-focused resources company Global Metals & Mining (ASX: GBE) commenced 2024 by announcing the results from an ‘optimisation study’ gauging the merits of bringing its Kanyika niobium project in Malawi to production. It did not disappoint.
The company’s efforts to secure funding for what could become the first globally significant niobium mine in half a century are now in full swing.
Strong project economics
Globe’s economic evaluation for the development-ready Kanyika outlined a robust set of numbers showcased by a pre-tax net present value (NPV) of about US$878 million and an internal rate of return (IRR) of 34.5 per cent.
The project is characterised by a large resource base consisting of 68.3 million tonnes at 2,830 parts per million niobium pentoxide, along with some tantalum credits. Importantly, it also contains 34 million tonnes of JORC-compliant ore reserves grading more than 3,000 parts per million niobium pentoxide.
In turn, Globe has charted a lengthy 27-year operation for this vast mineral system. Throughout its life, the proposed mine at Kanyika is projected to generate revenue of nearly US$5 billion and free cash flow of about US$3.2 billion.
The company believes Kanyika represents bottom quartile cost project distinguished by shallow, open-cast mining which could generate a sturdy cash margin of more than 65 per cent.
The payback period to recover the capital outlay for building the mine is estimated at 6.6 years.
Development ready project
Notably, Kanyika is fully permitted. It already has in place a mining licence, a mine development agreement, and all environmental and land approvals required to bring the project to life.
Crucial infrastructure including power supply for the first phase of the project’s development is locked in, with water resources also available. Additionally, Kanyika already boasts road access with Globe planning to upgrade this key piece of the operation and move it to mine-ready status.
Derisked development plan
The company has put together a two-stage development plan for Kanyika which it believes derisks the project.
More specifically, ‘Phase 1’ of the proposed mine represents a ‘pilot’ stage where Kanyika is expected to operate at 10 per cent of full production and churn out 313 tonnes of niobium pentoxide and 14 tonnes of tantalum pentoxide per annum.
A modest capital cost of US$46 million has been estimated for Phase 1 of the development.
Under the broadened ‘Phase 2’ operation, Kanyika is forecast to dish out more than 3,100 tonnes per annum of niobium pentoxide and 142 tonnes of tantalum pentoxide.
Here, Globe is targeting development at an estimated capital cost of US$250 million. Full production under Phase 2 is projected for 2028.
Niobium: a vital metal for the new-age world
Niobium is considered a modern-day metal typified by rapid growing demand around the world for high-purity niobium oxide used in cutting-edge battery technologies, alloys, superconductors, and electro-ceramics for the aerospace and defence industries.
The metal has many key traits needed for today’s global economy, including heat and corrosion resistance, strength, weldability, superior electronic characteristics, and weight advantages.
In turn, it boasts economic importance for the Western world which remains burdened by a significant dependency on imports. As a result, niobium has made its way to the top of the critical metals list in the European Union, the US, Japan, India, at home in Australia, and most recently in the UK.
Kanyika could become just the second vertically integrated niobium oxide producer in the world and offer mitigation against potential supply risk. About 92 per cent of existing global production of the metal is sourced from only two mines.
For such reasons, niobium has been enjoying strong market dynamics with a robust pricing environment which could continue into the future according to some industry forecasts.
For instance, research organisation Mordor Intelligence projects the global niobium market to grow at a compound annual growth rate of nearly 10 per cent from this year through to the end of the decade.
Superior product from Kanyika
Globe could be set for an instrumental role in the new-age world with niobium oxide from Kanyika suitable for an array of high-tech industries including electronics, optics, and aeronautics.
More specifically, management believes the niobium oxide from Kanyika is a superior product to the ferro-niobium typically produced at numerous other mines.
In a nutshell, high-purity niobium oxide has 99.95 per cent purity compared to ferro-niobium with 60 per cent. Accordingly, the high-purity niobium oxide from Kanyika could be sold at premium prices into specialty metal markets.
Funding gathers momentum
Globe is now marching forward with efforts to secure funding and offtake agreement for the development of Kanyika, as it seeks to capitalise on the project’s strategic importance.
In September, Globe signed a letter of intent with leading European supplier of master alloys Affilips NV as it looks to finalise a binding offtake agreement for up to 32 per cent of Phase 1 niobium production at Kanyika.
Furthermore, the company recently entered a non-binding pre-development funding term sheet with The Industrial Development Corporation of South Africa for a US$10 million convertible loan arrangement.
The proposed funds are intended to support Kanyika’s updated bankable feasibility study due for release in the coming weeks, its detailed front-end engineering and design, as well as specific early works essential for its advancement.
According to management, this agreement enhances Kanyika’s credibility and promotes cross-border collaboration in Malawi, whilst also helping to attract strategic investors for the project’s development.
Most recently, Globe sealed a second offtake agreement for Kanyika’s Phase 1 production through a memorandum of understanding (MOU) with Myst Trading – a Singapore-based company specialising in the global trading of physical metals and concentrates.
The initial three-year term of this agreement is tabled to commence from first production of the Phase 1 operation at Kanyika.
Overall, Globe has now entered non-binding offtake agreements for 57 per cent of Kanyika’s Phase 1 production of niobium pentoxide and 100 per cent of tantalum pentoxide.