The rare metals anxiety

There is a new battle raging over rare metals. Apparently China produces 95 percent of these metals. Recently China decided to ban export of these metalsThis has stimulated interest in alternative sources of such minerals. An article headlined “Interest in rare earths stimulated by concerns over possible Chinese export curbs” READ MORE..  mentions Malawi as one of the major sources of such metals.


Some years ago Lynas Corporation Ltd acquired rare earths deposit (Kangankunde Carbonatite Complex) located in Balaka. It made some investments but its activities came to a standstill because of legal problems READ MORE. . Now it turns out that China wants to buy Lynas International so as to further corner the rare metals market. The Western countries are not amused. And this is how small countries can easily be pawns in big powers’ games. For Malawi, the point is that we must think strategically if we are not to be simple pawns.

Hold on to your mining rights

If you have any mining rights anywhere in Malawi hold on to them!  You could be sitting on a fortune. No one seems to know exactly what they are prospecting for. You may recall that the Australian company Global Uranium was prospecting for uranium when it hit on “world class” reserves of not uranium but even more significantly niobium and tantalum. The company was so overwhelmed by its discovery that it changed its name to Global Metals. Now an Italian company Block & Rock Italia from Carrara (Tuscany), which specializes in granite is wrestling with a Malawi partner and trying to take over the company Ilomba Granite Co. Ltd (Malawi). Reason? It turns out that the granite contains niobium! This is in Karonga, by the way.

 

First Modern Mine

And so finally Malawi has its first modern mine – the Kayelekera Uranium Mining http://www.google.com/hostednews/afp/article/ALeqM5iYW-oAsY10hHQQwmPtgVvevUGxaw.   

Bingu is  reported to have said: "We have entered a new era of economic development and transformation" . The mine will contribute to the country’s forex earnings, government tax revenue and  direct employment in the Karonga district. As such this entry by Malawi into the world of mining. It will also increase the domestic market for other producers. There are signs that other major mining projects are in the pipeline.

 It is said one reason that Malawi has taken so long before embarking on  serious mining wasDr. Banda’s aversion to mining. Apparently Dr. Banda had noticed that Ivory Coast with no mining was economically  doing better than Ghana with its legendary  gold mining. From this he drew the conclusion that Malawi would focus on agriculture. 

 Mining a is a double edged sword and this blessing can easily turn into a curse. In the worst case it  can negatively affect other export sectors through strengthening of the Kwacha. This has been called as the “Dutch Disease” after the negative effects on other export activities  of the discovery by the Netherlands of natural gas[1]. However this “disease” can be overcome by using the earnings to enhance the productivity of other sectors by, for example funding the formation of human capital (education, health etc) and the building of infrastructure and enhancing the productivety of our agriculture.  If, on the other hand, the “easy” revenue accruing to the state goes to pharaonic projects and wasteful consumption or simply fuels corruption  then the Dutch disease will hit us hard . There are also other political economy effects to consider – the distribution of the revenue along class and geographical lines.  Generally mining economies in Africa have the worst income distribution. This will be the subject of another blog. Watch this hole!

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[1] For a layman’s explanation of the Disease see http://en.wikipedia.org/wiki/Dutch_disease