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Extremely common outlook in many African nations. Looks like this one might be the same.
Very little commercial acumen. High levels of corruption, greed and short-term thinking.
Which may, or may not, apply in this case.
But I did suggest quite a while ago now that in a game of brinkmanship we were unlikely to win.
The question I posed then, and which annoyingly remains unanswered, is what is our Plan B, in the event we do not cede to their demands?
Another presentation, which addresses this scenario, would indeed be welcome.
Especially as the last raise was fundamentally to get the MDA over the line and the BOD needs to make this happen.
Even if it requires agreeing to a smaller profit than we might reasonably expect to obtain in an advanced country.
And I would like to see some of the other Directors buy a decent chunk of shares on the open market at the earliest opportunity too.
Hard to know what to make of that article. Garbled mix of issues. Past present or future? That's a very strange suggestion about MKA being middlemen. Why and for whom! The context there seems to be negotiation of a tax holiday, pretty normal stuff. Defensive a.r.se covering by that committee as MDA nears maybe.
May I respectfully suggest that The Malawian government officers look at the tax breaks that a country like Morocco offer mining companies, in order to encourage them.
ATB. DH
"We needed to sit down and reach an agreement with the companies before signing the agreements. Otherwise it could be unwise to regret after the MDAs have already been signed,” Nyirenda said."
After a reread, the quote above is past tense, and followed by a reference to the AG pausing in May. 5 months of talks have followed. I suspect the MDA is still close but could do with an MKA update to be honest. We must be due another presentation.
Doesn't make any sense to delay it - the pay back is with jobs, infrastructure (if the gov isn't going to provide it) and so on. I guess any agreement is always something where both sides are unhappy - so I also wonder how much leeway in negotiations we are giving ourselves as well. Still, both sides are working towards a solution so hopefully just a matter of time/movement in positions!
I think there is a level of naivety unfortunately as they just see the headlines re rare earths and governments want more of the pie without the commitment and investment.
Malawi should back these horses with infrastructure investment and support otherwise they will be left behind.
Burundi have done the same with Rainbow and rainbow are moving on the different projects.
Putting unreasonable demands on hard Rock miners is a bad call imho.
What I find strange is that mkango have been working on this rare earths project in malawi for about 12 years now. is it normal to spend all that time and money developing a project without some understanding in place that in the end the project will be allowed to go ahead? it does not make any sense. I know governments come and go but after all this time working in the country and the investment WE have made developing this project, I did not see this delay in granting the mda coming. we have been there working on this for 12 years ffs
Yeah bit strange there - will be large when it happens but at least managed to find something on it - 9 months I thought was standard but yeah looks to be delayed. hence good to have recycling up and running soon
Middlemen to who I wonder? Makes no sense. I find it interesting that these countries want all of the risk to be on the company. Malawi should invest and part fund in order to reap additional reward.
I dont think mka are in a rush now to finance and build a mine. Recycling will be earning revenue long before mda
Spotted this:
https://www.africannewsagency.com/times-group-malawi/committee-warns-government-on-mining-companies-fc6c57e5-2492-5121-b1fe-4748a26164e1/
so that's why we have a delay
What'd be great is if this bill is law by first US production :)
'Rare earth magnets are challenging to make and are not readily available in large quantities. Low-cost, high-quality magnets from China have squeezed the profitability of United States producers, and while industry sources estimate the global rare earth magnet market will nearly double by 2027, China could dominate the market because of low production costs.
The bipartisan bill creates a $20 per kilogram production tax credit for magnets that are manufactured in the United States, or $30 per kilogram for magnets that are both manufactured in the United States and for which all component rare earth material is produced and recycled or reclaimed wholly within the United States. To be eligible, the rare earth magnets may not include any component rare earth magnet material produced in non-allied foreign nations such as China, Iran, North Korea, and Russia.
The bill is endorsed by MP Materials, USA Rare Earths, National Mining Association, and Zero Emission Transportation Association.'
Also, I noticed the US is open to its current Inflation Act tax bill to be utilised by none US freindly nations.
Hi Both, 100% agree - I think flundra and GLR that your statements much better approximate what I was trying to say (i.e. how the back end comes together when all said and done), that maybe on paper it looks 40:60 but the end result is currently unknown and could skew either way due to those external factors. Thanks also for the Cotec presentation!
I think we can all agree on is that this is definitely a good step forward.
The RNSs says the US JV is called Hypromag US and is a 50:50 JV between Maginito Ltd and Cotec. Cotec now owns 20.6% of Maginito. MKA owns the other 79.4%. So Hypromag US is owned 60.3% Cotec and 39.7% MKA, so approx 60:40.
The Hypromag tech is being sublicensed to the US JV.
That's the basic set up. Presumably the various accountants and lawyers have advised this is the best way to structure it. Sure there'll be tax etc at JV and partner and interested party levels, and this and net returns will differ for each party.
Any Cotec shareholder loan would doubtless be on terms, with interest payable, plus conversion rights perhaps.
Sorry - read your second post again
'The JV is stated as 50:50 not 40:60, and whilst I see that it can be construed as 40:60 due to the 80:20 of the UK company'
Yes you are spot on, if/when we commence production, who knows who will end up with what. This is one of my concerns as I hope we manage to keep a large percentage of the US operation (I cannot see us obtaining more unless we structure a deal with Cotec to give them a larger percentage of the UK and EU) but the risk is should we need further funding due to the delays with the MDA (and any other costs before we become profitable, we may end up giving away more of the 'technology asset' - I hope not and costs do appear to be minimal at the moment.
Hi MyIPA
Cotec have a 60.3% interest in the newly established US subsidiary 'HyPromag US'
'60.3% based on the 50-50 JV right (CoTec-Maginito) for US roll-out, and 20.6% equity ownership of Maginito, leading to an effective interest of 60.3% in the USA'
It says this on the Cotec Presentation slide also
https://www.cotec.ca/_resources/presentations/corporate-presentation.pdf?v=0.193?v=0.049
I think it's best to keep it separate as the companies are in different countries. I dont see an RNS where the HyprMag US is 40:60, just what is being inferred here. The JV is stated as 50:50 not 40:60, and whilst I see that it can be construed as 40:60 due to the 80:20 of the UK company, the eventual split due to funding, taxes, costs, working environment etc are different and would be reported by each co separately in different parts of the balance sheets (also to account for $/£/CAD$ FX and so on if converting) and would not, in the end, be 40:60.
For example the taxes on this in the US could be set to 0%, but the taxes in the UK could still be corporation tax at 20% (for example) - and the mixing of all this won't make 40:60 so I think that's too simplistic. Could go either way - could be higher taxes in the UK but more research rebates in the UK mean the skew moves to MKA, or vice versa it skews more to COTEC.
Just want to make sure it's understood that the final split after tax and profits etc it isn't as straight forward as suggested that's all.
HyProMag US, the JV set up to proceed in the USA, and get access to funding (via CoTec) is 40% MKA and 60% CoTec.
Ah I see what you have done. You've confused the US JV to be equatable to the UK and GmbH arms of the business which it isn't, and thrown in coupons and whatever else into the mix.
The only funding stated here is responsible by COTEC, for the US JV, and imo most of that will be US government funding which can only be obtained by a company that has filed US tax returns in the previous 12-24 months which MKA has not - so COTEC is the natural owner of the US side of the funding especially the critical US government funding (also as alluded to by Crumbs a couple of days ago RE Undersecretary of State for the Environment going to the MKA/COTEC(20%) sponsered event in London. Any further funding from shareholder loans would come from COTEC (and their shareholders), and perhaps a shift in the 50:50 of the JV over time, matched by MKA in which case stays 50:50, or as you say some form of interest paid by the JV as a whole. none of that was clarified however.
Still. Nice to see this - and potential US government funding on the horizon!
Sorry not sure I get that ESDUK - your numbers seem very odd plus what's this about a coupon - nothing stated about that at all. I assume any funding COTEC provides is raised from their shareholders to be a part of the JV (be it CLN, dilution, US government funding, etc etc which makes sense as to get US funding you need to be a US company which MKA is not - so they bring that to the table). If funding is raised by MKA then why would it state thata COTEC is responsible for finding all the funding?
Also, not sure how you get 40% to MKA and 60% to COTEC when the JV is 50:50 and MKA own 80-90% of the UK and GmbH entities respectively:
HyProMag Ltd ("HyProMag") is a wholly owned subsidiary of Maginito Ltd ("Maginito"), which is 79.4% owned by Mkango and 20.6% owned by CoTec.
Maginito holds a 100 per cent interest in HyProMag and a 90 per cent direct and indirect interest (assuming conversion of Maginito's convertible loan) in HyProMag GmbH [...]and a 100 per cent interest in Mkango Rare Earths UK Ltd ("Mkango UK") [...].
The 50:50 US JV is thus as it says. 50:50 of the US arm. UK ownership is still 80/20 to MKA/COTEC, and GmbH profits are what 72%/18% (with remaining 10% indirect interest (assuming conversion of Maginito's convertible loan) MKA/COTEC.
So, what's this about 40% MKA and 60% COTEC?
Aren’t Cotec responsible for fully funding the development costs including building the four new facilities (3 recycling vessels and one magnet manufacturing plant)? So financing shouldn’t need to be arranged.
Yes the US JV will likely/hopefully receive some grant funding from US government, but Cotec are responsible for any remaining funding requirement and Mkango get a free ride for chipping in the tech. Mkango effectively own 40% of the US JV given we now own 80% of Hypromag, so we get a free ride to 40% of the JV profit.
The JV RNS says Cotec will fund the development/construction costs through shareholder loans, which will have a coupon payment (I assume), so alongside their 60% share of profits Cotec will also get a return on the funding they provide for development/construction.
Good RNS
We finally get visibility on the economics
35% EBITDA or thereabouts vs $10m revs per plant per annum
CAPEX at least $30m (lets say $45m) however for the financer, it could be half of this as it may be backed partially or in full by government grants, so very attractive
$30m capex
govt funds 50% (hopefully)
EBITDA of 35%
$10.5m EBITDA per annum
Payback without funding = just under 3 years
Payback with govt funding = just under 1.5 years (now that's fast!)
What I liked about this RNS is the figures are realistic, we all know the songwe DFS is very much out of date in terms of pricing and economics, this is much more realistic and almost negative in some ways. Ofc should RE prices drop I suspect a lot of our material costs / input costs will drop too as it will likely be an overall market impact vs just one product. There are also proposed tax breaks etc unsure if these have been taken into account
I like the update but IMHO they haven't really said anything new.
Good to see Neodymium prices rising again though. Great to malawi mine numbers as well as recycling profitability.
Yup 2023 for first production in the UK.
What I like about MKA is that whilst waiting for the mining development agreement (and even since the DFS) is that they haven't sat on their hands drinking tea, they've got up and built this new segment of the company so we have a complete lifecycle for rare earths. good stuff
Get a grip. This board is not aggressive. Positively civilised compared to many out there.