Sovereign Metals Limited, an Australian Stock Exchange (ASX)-listed mining firm conducting a feasibility study for graphite at Malingunde in Lilongwe, has posted pre-tax loss of $5.2 million (about K3.8 billion) largely due to exploration expenditure.
This is on top of another loss of $3.6 million (K2.6 billion) posted the year before, according to the company’s 2018 annual report.
But mining expert Grain Malunga, who is also former minister of Natural Resources, Energy and Mining, in an interview, argued that under normal circumstances, the firm was not supposed to post losses as mining has not yet started.
He said the miner is only in research stage.
Sovereign Metals started exploration works in 2015 after its geological team discovered graphite using hand auger drilling techniques.
The report shows that expenses for the company have grown following exploration expenditure totalling $4.1 million (about K3 billion) compared to $2.3 million (about K1.6 billion) in 2017 in relation to the pre-feasibility study at the Malingunde project.
The report, signed by its managing director Julian Stephens, shows that the pre-feasibility study is at an advanced stage and has so far progressed in engineering works, mining, processing environmental and social activities.
The company, which has just shipped 44 tonnes of graphite samples to Canada, says to date, it has not started production of any minerals.
But as part of its strategy, the company plans to complete a pre-feasibility study followed by a definitive feasibility study on the project and conduct further field work to follow up the large number of saprolite targets identified on the company’s tenements.
It also plans to examine other new business development opportunities in the resources sector locally and overseas.
“All of these activities are inherently risky and the board is unable to provide certainty that any or all of these developments will be able to be achieved,” reads the report in part.
Among other risks, the report says its exploration properties may never be brought into production.
To mitigate this risk, the company will undertake systematic and staged exploration and testing programmes on its mineral properties and, subject to the results of these exploration programmes, the company will then progressively undertake a number of technical and economic studies.