Malawi Limestone Project Summary

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					Malawi Limestone Project                                Summary
Mining and Lime Manufacturing
Feasibility Study                       G.W.P.MALUNGA     page i


                         FEASIBILITY STUDY

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Malawi Limestone Project                                                       Summary
Mining and Lime Manufacturing
Feasibility Study                                                                 Page 1



1.1    Presentation of the Study

       The present summary covers MET-CHEM's assessment recommendations of the
       technical, financial, environmental and economic viability of establishing a
       limestone mining and limeworks at Bwanje Valley,Ntcheu district, Malawi.

1.2    Limestone Resources of Malawi and Production Figures

       Limestone is currently the most valuable mineral commodity extracted in Malawi.
       It is mainly used in the production of cement. Limestone is also the raw material
       for lime used in the construction and agricultural industries.

       Several types of limestone occurrences have been documented, of which the
       most important are marble bands in the basement complex gneisses. Large
       occurrences exist also in carbonates and sedimentary rocks (Table 1.2).

       The marble bands are mainly dolomitic and pure calcitic have been observed only
       at Changalumi, Chikowa - Liivwezi and Bwanje Valley (near Golomoti). The
       Changalumi marble is the only source of limestone for cement production in
       Malawi. Cement production is around 130,000 tonnes per year. For quality
       reasons, some limestone has been extracted from Chenkumbe to blend with that
       from Changalumi. About 20,000 tonnes per year of cement are officially imported
       into Malawi. Unofficial figures, however, are estimated to be closer to 50,000 tpy.

       Chikowa - Livwezi calcite marbles occur to the Northeast of Kasungu Boma.
       Shayona Cement Company have Mining Rights there but seem to have financial
       and technical problems which are delaying the development of a cement factory.

       The main lime producing areas in Malawi are concentrated in the Middle Shire
       area within Chenkumbi - Ulongwe and Lirangwe - Kholombidzo areas. On
       average, it is reported that 3,000 tonnes of lime are produced annually. A general
       decline in lime production has been noted over the last ten years, attributed to the
       scarcity of fuelwood from these lime-producing areas.

       Dolomite production in this area is heavily dependent on demand in the
       construction industry. An average production of 2,000 tonnes has been noted.

       Table 1.3. gives picture of limestone production figures between 1989 and 1993.

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Malawi Limestone Project                                                      Summary
Mining and Lime Manufacturing
Feasibility Study                                          Page 2

1.3    General Overview of the Mineral Resources of Malawi

       Mineral exploration in Malawi started with industrial minerals. Among these
       industrial minerals are vermiculite, kaolin, iron sulphides, graphite, kyanite,
       apatite, coal and limestone. Most of these minerals require more quantification to
       justify the heavy capital investment (Table 1.1) required for exploitation.

1.4    Institutional Framework of the Mining Sector

       The institutional framework for mineral development in Malawi comprises: Ministry
       of Energy and Mining; Department of Geological Survey; Department of Mines;
       Malawi Development Corporation and the Malawi Promotion Agency.

       Mining Investment and Development Corporation Limited is charged with the task
       of spearheading mining in Malawi. Its role includes the initiation of techno-
       financial feasibility studies of selected mining opportunities and to promote,
       mediate and initiate mining investment.

       Malawi Development Corporation has, as part of its mission, the mandate to
       develop the mineral resources of Malawi through joint ventures with both local and
       foreign investors.

       The Corporation is currently producing Portland Cement through its subsidiary the
       Portland cement Company of Malawi. It has also formed a Consortium with INDE
       Bank, which is operating Mchenga Coal Mines Ltd. located in Northern Malawi.

       Malawi Investment Promoting Agency undertakes investment promotion from both
       within and outside Malawi and is also charged with facilitating mining investment
       by local and foreign investors.

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  Malawi Limestone Project                                                           Summary
  Mining and Lime Manufacturing
  Feasibility Study                                          Page 3

                (Source: Ministry of Forestry & Natural Resources Brochure & Malunga,1992)

                                                  RESERVE    RESERVES      RESERVES
Bauxite           Mulanje       AI 203-43.9%      28.8 Mt.                 60Mt.              Md
                  Mountain      Free
Ceramic clays     Linthipe      AI 203-33.8%                 14.1Mt                           Fs
Coal              Mchenga       Ash-14%                      1.4Mt         5Mt                Ps
                                Ash - 40%
                  Mwabvi        4100                         2.2Mt         150Mt.             Ps
                                CV-Kcal 4799
                  Ngana                           15.5 Mt.                 70Mt.              Ps
Graphite          Katengeza     C-4.2PSD                     .03Mt.                           Fs
                  Tuinchi       -63.2                                                         Ep
                                PSD (>.25mm)
                  Chimutu       75%                                                           Ep
Heavy sands       Tengani       Rutile - 3.%      .3Mt.                                       Ps
                                Iimenite - 3.0%   2.5Mt.
                  Salima                                                   67Mt.
Kyanite           Kapiridima    15%               30,000t    314,000T      >1 Mt.             Fs
Limestone         Chikowa/      51.0 CaO          10.0 Mt                                     Fs
                  Livwezi       0.7 Mgo
                  Chenkumbi     46.1%CaO          10.0Mt     300Mt.                           Fs
                                6.3% MgO
                  Malowa        53.6%CaO          0.5Mt.     3.0Mt.                           Fs
Niobium           Chilwa Is.    0.95 Nb2O3                   375,000 t                        Ps
                  Iilomba       0.30% Nb2O3                  104,000 t
                  Nanthache     0.37% Nb2O3                  9000,000 t
Phos[phate        Nanthache     15 - P2O5         0.9 Mt.    1.25 Mt.                         Fs
                  Chingale      3.7% - P2O5       8.75 Mt.                 2.4 Mt.            Fs
                  Mlindi        7.8% - P2O5                                                   Ep
                  Chilwa Is     2.5% - P2O5                                                   Ep
                  kangankunde   2.8% - P2O                                                    Ep

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      Malawi Limestone Project                                                                  Summary
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      Feasibility Study

MINERAL             LOCATION         ANALYSES            PROVEN          PROBABLE   POSSIBLE      REMARKS
                                                         RESERVES        RESERVES   RESERVES
Pyrite/Pyrrohitie   Chisepo                                              32.0 Mt                  Ps
                    Malingunde       8.4 S10.7% S                        10.0Mt.                  Ps
                    Nkhanyu          8.0% S              34.0 Mt.                                 Fs
                    Kadamasana       10.0% S                                        4.5 Mt.       Ep
Rare earths         Kangankunde                                                                   Fs
                    Nanthache        10.0 REO            0.3 Mt.                                  Fs
                    Songwe           7.0 % REO           0.6Mt.                                   Fs
                                     1.7% REO            1.4 Mt.                                  Fs

Strontianite        Kangankunde      17.9%               58,078t                                  Fs
Talc                Muso                                                            4,000 t       Ep
                    Joshua                                                          2,000 t
Uranium             IIombo           511g/t eU3O8        53,000 t                                 Ps
                    Kayerekera       0.17%U              10,000 t                                 Md

Vermiculite         Feremu area                                                                   Fs
                                     5.0 120 Kg/m
                    Mlindi           DBD                                 1.5 Mt.
                                     125 Kg/m                                       450,000 t     Ps

                                                        Table 1.2

                             Main Limestone Occurrences in Malawi

      GROUP                       LOCATION                  ESTIMATED QUANTITY      REMARKS
      Basement Complex            Changalumi                100 million             MgO<1%
      Sovite Carbonatite          Chilwa Island             Very large              MgO<1%
      +Karroo                     Mwesia                    Large quantity          MgO <2%
                                                                                    Total Carbonate
                                                                                    43 - 55%
                                  Nigana                    Very large              variable MgO content
                                                                                    Total Carbonate 72 - 82%

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                                         Table 1.3

       Limestone Production Figures (tonnes) in Malawi, 1989 - 1993

YEAR           1989            1990           1991         1992      1993
Dolomite       1,003           2,483          3.06         1,747     2,789
Cement         122,545         138,630        173,103      179,404   120,000
Lime           3,456           4,096          5,329        3,280     2,468

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Feasibility Study                                           Page 6


2.1   Project Description

      The Feasibility study presented by MET-CHEM consists of a comprehensive
      technico-economic evaluation of an operation of limestone mining and lime
      manufacturing based on the Bwanje valley limestone deposit. The drilling and
      chemical; analyses were executed by Malawi Geological Survey based on the
      programme established by MET-CHEM geologists. Metallurgical tests were
      performed by several laboratories in North America and Europe in order to select
      the most suitable calcination technology.

      The study presents the optimal capacity of the limeworks operation to produce the
      products with specifications based on the findings of the market survey. The
      overall aim of the study is to determine the followings:

      a,     the optional production of the operation which includes pulverised lime
             requirements as well as hydrated lime and other specific products.

      b,     The products and specifications which can be produced using the Bwanje
             Valley limestone.

      c,     The technical and financial viability of different possible scenarios.

      d,     the benefit which could accrue to Malawi from this limestone operation.

      The study covers all aspects of the projects such as the market, transportation of
      the product, limeworks location, ore reserves evaluation and mining, limeworks
      process and economic profitability, personnel requirements, operating agency and
      construction schedule, concluding with the overall project justification and

2.2   Project Location

      Bwanje Valley marble deposit lies to the South -western arm of Lake Malawi. The
      nearest Trading Centre to the deposit is Golomoti and is about 7 kilometres to the

      The deposit lies around the intersection between Longitude 34o 40' and latitude
      14o 25' South (FIG. 2.1).

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Mining and Lime Manufacturing                                                            Page 7
Feasibility Study

        Bwanje Valley marbles rise from an altitude of about 480 metres to an altitude of
        520 metres. The Valley is a continuation of the southwestern arm of Lake Malawi
        and extends between Bilila Fault Scarp in the West and the Nothern Chiripa
        Plateau in the East.

        A Lake shore road (M17) and rail line are about six (6) kilometres from the marble
        deposit. The road starts from the Blantyre - Lilongwe road, near Balaka, and joins
        to the Northern Corridor road at Mzuzu. The rail line goes as far as Lilongwe and
        Mchinji near the Zambian Border and provides access to the port of Nacala in

        The distance between Zomba and Bwanje Valley Marble is 173 Kilometres while
        from Lilongwe it is 209 Kilometres.

        Access to Bwanje limestone deposit (Malowa hill) is very difficult during the rainy
        season because the area around becomes water logged or marshy.

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                                        Figure 2.1.

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Malawi Limestone Project                                                      Summary
Mining and Lime Manufacturing                                                    Page 9
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       The marble deposit occur in the Bwanje Valley, about 7-9 Kms east of Golomoti in
       Ntcheu district, in an area near the main Lilongwe-Blantyre highway and the
       railway line which links Balaka and Salima. The deposit consist of four hills, the
       most important ones being Malowa and Khungule Hills. The hills are found in the
       centre of a dambo, which consists mainly of a flat lying area of clay and silt size
       material which are cracked during the dry season and waterlogged in the rainy
       season. The mining concession is of irregular shape and covers an area of 2.8

3.1    1995-1996 Exploration Program

       The 1995-1996 exploration program resulted in a 2,500 metre drilling campaign
       on the Malowa and BAB hills with core description and sampling, followed by
       physical and chemical analyses. In the addition to the drilling and analyses,
       geological mapping has been undertaken so as to better understand the geology.

3.2    Drilling Program

       The drilling program was designed based on core drilling using NX size core, was
       undertaken by the Geological Survey of Malawi using two boring machines. A
       total of 79 holes have been drilled between October 1995 and December 1996
       representing a meterage of 2483 meters. On the main of Malowa Hill (particularly
       in the North part between L1 and L10) drill holes have been more or less drilled
       according to a 60m x 30m pattern in calcitic zones and in BAB Hill area, the
       spacing was increased as the drilling was only done for indication purposes.

       A total of 663 samples totalling 1351 metres have been analysed for CaO, MgO,
       SiO2, Fe2O3, SO3, P2O5, K2O, Na2O, insoluble, and L.O.I. In addition, core
       recovery percentage, as well as Rock Quality Design (RQD) index, have been
       evaluated for each rock unit segment.

3.3    Carbonate Rocks Resources for Malowa

       Based on the geology interpreted from the surface mapping and the drill holes, a
       3-D block model have been built which had served to evaluate the area resources.

       The overall undiluted carbonate rocks resources for the Malowa main , L1 to
       L14, have been evaluated at 14.85 millions tons @ 46.83% CaO, 1.36% MgO
       inside the calcitic rocks bands (Lcode =2) and 17.53 millions tons @ 36.61% CaO,
       7.14% MgO inside the dolomitic and impure rock bands (Lcode =3). This includes
       all resources, regardless of the category, without any external dilution; but a

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       deduction of 23% have been applied to account for the cavities. The density used
       is 2.66 t/m3.

       Summary of the resources as well as categories are presented in the table 3.1.

3.4    Resources Categories per Market Class

       In addition to its classification according to lithology, (inside the identified rock
       bands) the resources of Malowa Main have been classified according to the
       following table, which takes the market requirements into consideration. The
       classes are based on the chemical composition variation of calcite, dolomite and
       non-carbonate materials. The codes (ORE) used here under correspond to the
       seven (7) rocks codes (market types) identified in the 3-D blocks model.

               Chemical Composition                 Name                           Code

       A.      CaCO3 >80%

               a.     CaCO3 >93%                    Ultra High Calcium Rock        1

               b.     90% < CaCO3 <93%              High Calcium Rock              2

               c.     80% <CaCO3 <90%               Medium Calcium Rock            3

       B.      MgCO3 >20%                           Dolomitic Calcium Rock         4

       C.      All other carbonate rocks            Impure marble                  5

       D.      Carbonates <50%                      Non-carbonate Rock             6

       E.      Not codified                                                        7

       Based on this classification, the Malowa Main area contains 12.29 million of
       calcitic rocks (ORE 1,2,3) and 3.69 million of dolomitic rocks (ORE 4). Figure 3.2
       is a summary of the results.

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  Mining and Lime Manufacturing                                                                           Page 11
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                                                         Figure 3.1

                                     Carbonate Rocks Resources by Lithology
                                                a. Carbon >50%

                  Calcitic Rocks (Lcode =2)                      Dolomitic Rocks (Lcode =3

              Tonnage x 000's CaO       MgO         SiO2         Tonnage x 000's   CaO        MgO           SiO2

  Measured      3,806       48.70%     1.50%       6.65%         1,265             36,65%     9.14%      12.25%
  Indicated     5,844       47.46%     1.43%       8.19%         6,415             38.70%     6.49%      12.91%
  Inferred      5,194       44.74%     1.18%       1932%         9,981             35.26%     7.32%      14.98%

  Total         14,844      46.83%     1.36%       11.69%        17,661            36.61%     7.15%      14.03%

                                              Carbonate Rocks Resources
                                                   a. Carbon >80%

                Dolomitic Rocks (Lcode =3)                                  Dolomitic Rocks (Lcode =3)
            Tonnage x 000's CaO     MgO           SiO2         Tonnage x 000's  CaO        MgO           SiO2

Measured      3,303       50.33%      1.49%       5.92%        746             39.99%       9.91%        9.31%
Indicated     4,893       49.00%      1.45%       6.58%        4,136           41.69%       7.24%        10.22%
Inferred      3,363       47.71%      1.22%       16.55%       4,887           38.45        7.76%        11.14%

Total         11.559      49.01%      1.39%       9.29%        9,770           39.94%       7.70%        10.61%

Note: Carbon = 1.79*CaO + 2.1* MgO

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                                      Total Resources

Ore Class   Tonnes x 000's   CaO      MgO      SiO2        LOI      AI2O3   Fe2O3

    1            2,396       52.72%   52.72    5.24%       41.34%   0.64%   0.34%
    2            2,445       51.23%   0.93%    5.97%       40.44%   1.72%   4.37%
    3            7,447       47.57%   1.67%    9.75%       39.04%   4.18%   0.66%

Sub-total       12,288       49.30%   1.38%    8.12%       39.77%   3.00%   1.34%

    4            3,686       35.54%   12.18%   9.68%       40.66%   2.54%   0.63%

                                   Measured and Resources

Ore Class   Tonnes x 000's   CaO      MgO      SiO2        LOI      AI2O3   Fe2O3

1           2,004            52.77%   1.05%    4.70%       41.35%   0.58%   0.33%
2           2,074            51.27%   0.93%    5.72%       40.40%   1.39%   0.44%
3           5,248            47.65%   1.77%    8.38%       39.29%   3.58%   0.64%

Sub-total   9,325            49.37%   1.46%    7.13%       39.91%   2.56%   0.54%

4           2,157            36.21%   12.99%   8.60%       41.35%   1.55%   0.65%

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4.0    Market Study

4.1    Introduction

       The Malawi Government has been showing concern over the supply of limestone
       and lime products to various consumers within in the country. Demand has been
       steadily increasing and there has been no indication of any new, local producer of
       lime which could meet this demand. Indeed, there is a continued increase in lime
       imports. The existing small-scale lime burning operations have been besieged by
       costly increases inn energy and their output is on the decline. Most of these local
       operations are at Balaka in Machinga district and Lirangwe in Blantyre district.

       In an effort to increase the quantity and improve the quality of local production, the
       government sought assistance through (Intermediate Technology Development
       Group), ITDG, to test and build appropriate technology kilns.

       Two such kilns were originally constructed - one at Uliwa in Karonga district and
       the other in Balaka.

       Although these kilns demonstrated improved technologies, they have not had any
       impact on local production. The one in Karonga has been inoperative for the past
       three years and the other in Balaka has performed dismally, both due to
       management problems.        A second kiln was built at Balaka, based on the
       experiences of the other two. Although this kiln was fully equipped to produce up
       to 3 TPD of high-grade lime, the venture was unsuccessful and the local private
       company folded up in 1992. The kiln and the related infrastructure have since
       been sold for other purposes.

       As part of this Feasibility Study, the current drilling programme has shown an
       increase in the reserves suitable for a limeworks. See Volume 1, Section 3. The
       proposed limeworks should satisfy the local demand and have export potential,
       thus allaying the concerns of the Malawi Government.


       There are many uses of crushed or pulverised limestones and they must meet
       certain physical and/or chemical properties. The following is the list of the
       applications for limestone products that are relevant to the Malawi and regional

       Agriculture, cement manufacturing, chemical and metallurgical industries,
       aggregate, coal mining and dimension stones.

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4.3    Lime Uses

       Lime is used in a wide range of applications. The tradition building and agriculture
       applications have greatly been overtaken by its uses in the chemical and
       metallurgical industries. Listed below are some of the more important uses of

       Iron and steel, non-ferrous metallurgy, environment control, manufacture of
       chemicals, bleach power, sugar industry, agriculture, water treatment, sewage
       treatment, building and construction, glass industry, etc.

       In sugar lime is used in beet sugar and cane sugar refining. Lime removes the
       phosphatic and organic acid compounds from the sugar containing juice. The
       compounds are then removed by filtration. From purifying beet sugar 0.25 tonnes
       of lime are required for 1 tonnes of sugar. Similarly 0.002 to 0.004 tonnes of lime
       are required for 1 tonnes of sugar. Similarly 0.002 to 0.004 tonnes of lime are
       required for 1 tonne of cane sugar.

       Most of the agricultural liming utilises ground limestone. Some farmers or farming
       institutions still use lime - quicklime or hydrated. Lime is more expensive than
       limestone but reacts faster, neutralising soil acidity rapidly. This added cost is
       persistent magnesium deficiencies.

       Lime is also used as detergent in whitewashing dairy barns, for composting,
       chicken litters, etc.

       High grade lime is used in the treatment of municipal potable water and industrial
       process water. Lime is used to remove temporary bicarbonate hardness from the
       water. When there are both temporary and permanent (sulphate) hardness, lime
       is used along with soda ash.

       The high pH of 11.5 from lime in water acts as sterilising agent since retention for
       3 to 10 hours at this pH will destroy 99 + % of the bacteria and most viruses. The
       pH is lowered to accepted levels by introduction of CO2, precipitation lime solution
       as a carbonate sludge.

4.4    Total Lime Supply

       Total lime supply from both local and imports over the last five years is shown in
       the table below.

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                       TABLE - TOTAL LIME SUPPLY 1990 - 1994
        YEAR            1990      1991      1992        1993                       1994
        LIME           7,522      7,981     8,150       3,491                     10,521

       A part from the anomaly in 1993, the figures confirm the Government (Ministry of
       Commerce) projections that lime supply should grow by an average ten(10)
       percent per annum. Assuming this trend is correct then the following projections
       can be made:

                           TOTAL LIME SUPPLY 1995 - 2000
        YEAR         1995    1996     1997     1998       1999                     2000
        LIME        11,573  12,730   14,000   15,400     16,944                   18,640


4.5.1 Limestone products

       The demand for limestone is reflected by the various different users. These
       industries include agriculture, cement manufacture, chemical industries and paint
       manufacture. Table below summarises the demand for limestone.

        INDUSTRY          COMPANY               CONSUMPTION
        CEMENT                   Portland            28,000
                                Grain Mill             540
                             Rab Processors            110
                            Veterinary Services        300
                                Optichem              1,200
                                   Press               100
        CHEMICALS             Lever Brothers          1,650
        PAINT                      Dulux               300
                                 Rainbow               100
                                 Valmore               300
        MINING                   Mchenga               120
        TOTAL                                        32,820

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       New Opportunities

       1.      Agriculture is and will remain the mainstay of the Malawi economy.
               Limestone will play a significant role in this economy. Liming of the soils is
               needed due to excessive use of ammonium sulphate fertilisers which
               identify the soil.    Optichem, the company that supplies pulverised
               limestone for liming, estimates that an annual consumption of 40 000
               tonnes is optimum if the sector is adequately sensitised.

       2.      Government is conscious of the prices of fertiliser being imported for the
               crucial agriculture sector of the economy. The country's requirements of
               fertilisers are 200 000 TPA, of which 40% is limestone. If the plant comes
               on stream this would call for 80 000 TPA of pulverised limestone.

       Export Potential

       It is not expected that there will be any export potential for limestone or dolomite
       due to its low value.

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4.5.2         Lime

              Existing Demand

              The current demand pattern for lime products is as follows:

            INDUSTRY              COMPANY                 CONSUMPTION (TPA)
                                  DWANGWA                              1,500
                                  SUCOMA                               2,000
                                  PRESS                                 100
                                  SABLE                                 820
                                  SOBO                                      7
                                  BATA                                  104
                                  LIWONDE TANNERY                           12
                                  MIN. OF WORKS                         40
                                  MANDALA BUILDING                     1,500
                                  HARDWARE & GD                         350
                                  CHIPIKU                               600
                                                         TOTAL          7033

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      New Opportunities

      1.     A new sugar works is on the drawing board by Candlex Limited in joint
             venture with a Malaysian Company. Negotiations are complete. The
             factory will be in Salima, which is much closer to Bwanje than the other
             two sugar plants. If this comes to fruition, the demand for lime for this new
             factory is estimated at 2500 TPA. The total demand and requirement for
             lime in the sugar industry is expected to remain fairly constant at 6000
             TPA. Production is planned to start in 1998.

      2.     The water supply in district centres other than Blantyre and Lilongwe use
             soda ash with a consumption of 100 TPA. This would also be the
             consumption of lime should the Ministry revert to lime in the face of
             escalating prices of imported soda ash. If good quality lime was available
             the district water treatment centres would switch to lime. Of course this
             consumption is insignificant but in the long term there are planned to be
             more surface water sources, for instance dams, hence the need for
             treatment. As population grows with a commensurate urban growth,
             demand for treated water will increase. But water treatment by lime faces
             competition from polymers as shown by the two water boards of Blantyre
             and Lilongwe. This market for polymers may not survive for long
             especially if it is supported by an abundant supply of foreign exchange for
             imports as opposed to locally, available, affordable, good quality lime.

      3.     Plans are already at an advanced stage to put up a bottling plant by the
             Southern Bottlers Company inn Mzuzu in 1996. Consumption of lime is
             expected to increase only marginally depending upon increasing demand
             of products.

      4.     A pulp and paper factory has been on the drawing board for many years
             and the project has been modified several times. There strong indications
             that this project will eventually be realised. Should this come to fruition it
             will call for an estimated extra 2 000 TPA of high grade lime.

      Export Opportunities

      1.     A limited amount of work has been done on opportunities existing in the
             neighbouring countries.

      2.     There are fair amounts of imports from Zambia. The country has been
             Malawi's traditional supplier of lime. It produces sufficient quantities for its
             chemical industry. Zambia would not be a natural target for Bwanje lime.
             Zambia's export opportunities give a good indication as to where market
             opportunities lie.

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Malawi Limestone Project                                                        Summary
Mining and Lime Manufacturing                                                      Page 19
Feasibility Study

       3.      Mozambique has just come out of internal instability and civil war. There is
               a lot of scope for reconstruction and a subsequent demand for raw
               materials. During the civil war all limeworks ceased operations. They
               have not yet been restarted. With peace, opportunities will abound for
               their rehabilitation. Activities in the mineral sector have also risen
               generally. It is a market that should be looked at in detail in the short to
               medium term, particularly around the towns of Tete province which include
               the Moatize coal mines.

       4.      Tanzanian lime production has been declining steadily from 3000 tonnes in
               1988 to 870 tonnes in 1992 showing increasing imports to sustain
               consuming industries. Figures are not available for the past two years.
               The impression at SADC MINING COODINATING UNIT (MCU) is that the
               lime industry is in the decline. This is market worth investigating in greater
               detail, particularly the Southern part close to Malawi.

       5.      Lime in Zimbabwe is being produced by a number of companies both
               small and large. There also exist a large number of identified limestone
               deposits which are untapped. Unfortunately, they have high impurities of
               silica, iron and phosphorous.

       A number of industries in Zimbabwe need high grade lime which is not available
       locally and is imported from South Africa and Zambia. The main users of imported
       lime are ZIMALLOY, water treatment plants, and sugar industry.


       On a year to year basis, lime production, imports and consumption have
       increased only marginally in unison with the economy over the last four years.

       The manufacturing sector averaged 13.3% of GDP over the years 1990 to 1994.
       The growth in this sector is mainly from agro-processing industries, particularly
       sugar and tobacco, fertiliser and chemical manufacture. In the medium term
       manufacturing is expected to grow at 3.8%. In the past ten years, the agriculture
       sector has averaged 34% of real GDP. Any fluctuations in GDP are due to
       agriculture fluctuations. This sector is expected in the medium term, to grow,
       ahead of population growth, by an average 10.7% per annum. Limestone,
       dolomite and lime products are associated with the agricultural sector and hence
       have a similar potential for growth.     In general the economy is expected to
       perform positively with growth rates between 4.3 and 4.5% in the medium term.

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Malawi Limestone Project                                                        Summary
Mining and Lime Manufacturing                                                     Page 20
Feasibility Study

       The current imports will remain until a local supply source is developed. There
       does not seem to be any improvement in sight from the current local small
       producers to meet the high grade technical requirements. Unfortunately the small
       producers are also hindered by energy and technology problems which will
       eventually squeeze them out of the industry creating shortages of low grade
       products as well. In addition, there are new projects, particularly the new sugar
       factory and the paper and pulp project, both of which will consume significant
       quantities of lime.

       It is vital for Malawi to be outward looking and participate in external markets. The
       Bwanje project provides a great opportunity for export development and it must be
       developed with a major aim to export lime and any other products that would
       attract external markets. The lime plant would be designed so that it can easily
       increase its capacity as market evolve from the initial 15 000TPA. The national
       economy may be able to absorb this level of production in the short to medium
       term in the absence of a fixed export market.

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Malawi Limestone project                                                           Summary
Mining and Lime Manufacturing                                                        Page 21
Feasibility Study


5.1     Introduction

        The purpose of this financial evaluation is to measure the financial results and
        profitability of MIDCOR's proposed mine manufacturing facility for Bwanje
        limestone and lime products, under the present conditions in Malawi and based on
        the technical data and costs elements developed during this feasibility study.

        The financial analysis has been performed using the model COMFAR III of
        UNIDO the financial modelling and economic evaluation of capital investment
        project. The model projects the statements of profit and loss and sources and
        applications of fund. In addition, the criteria of the project are evaluated, including
        the internal rate of return (IRR) and the return on equity. Sensitivity analyses are
        also generated on the key variables of the project such as the total revenues, the
        operating costs and the investment costs.

        Cash flow tables, net income statement and the balance sheet with some
        pertinent performance ratios are also generated by the model.

5.2     Bases of the Analyses

5.2.1   Annual Production

        The proposed manufacturing facility will produce at a rated capacity of 33,750
        tonnes per year with a product mix indicated as follows:

        -      Hydrated lime:                  18,750 tonnes;

        -      Agricultural limestone          9,000 tonnes;

        -      Pulverised limestone:           6,000 tonnes.

        Maximum capacity will be attained in operating year 1.

5.2.2   Period of the Analyses

        The project is analysed over a period of 17 years starting from year one, with the
        first two years corresponding to the construction period by 15 years of operation.

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Malawi Limestone Project                                                      Summary
Mining and Lime Manufacturing                                                   Page 22
Feasibility Study

5.2.3   Investment Costs

        The estimates of the investment costs are presented in section 2.0 of volume II of
        the feasibility study.   The model includes all capital costs estimates as
        summarised as follows:

        -      Mine equipment:               $US 678,029;

        -      Crushing/screening plant:     $US 1,173,358;

        -      Calcination plant:            $US 5,075,746;

        -      Hydration/Bagging plant:      $US 1,374,900;

        -      Indirect expenditures:        $US 3,541,927.

        Initial Capital Expenditures Disbursement schedule is assumed over the
        construction period as follows:

        -      Year 1:        40% of total project cost;

        -      Year 2:        60% of total project cost.

5.2.4   Capital Structure

        The analyses assumes that 70% of the investments costs shall be financed
        through long term debt while the remaining 30% shall be contributed by equity

        The debt financing cost is assumed to be an average of 9%, based on a mix of
        favourable financing through development institutions such as the African Bank
        and commercial supplier credits. The interest is capitalised during the 2 year
        construction period and fully amortised over 10 years as for the rest of long-term
        debt with a 5 year grace period. The repayment method is based on an annual
        constant payment of interest and principal.

5.2.5   Regulatory and Tax Issues

        -      Import duty:   All foreign sourced machinery and equipment are duty-

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Malawi Limestone Project                                                       Summary
Mining and Lime Manufacturing                                                  Page 23
Feasibility Study

        -      Corporate tax calculation: A constant tax rate of 30% on taxable
               income has been assumed with a tax exemption for the first five (5) years
               after production start-up.

5.2.6   Revenue Assumptions

        The revenues are projected on the basis of an annual sales of the total quantities
        produced of 18,750 tonnes of hydrated lime and 15,000 tonnes of limestone
        products. Sales of finished products are assumed to be for local consumption at
        the following equivalent prices:

        -      Hydrated lime:                       $US 150 / tonne;

        -      Agricultural limestone:              $US 50 / tonne;

        -      Pulverised limestone:                $US 50 / tonne.

5.2.7   Depreciation and Amortisation

        Depreciation of plant and machinery and amortisation of pre-operating expenses
        and capitalised interests during construction have been calculated on the Straight
        Line Method (SLM) based on the life indicated below. There is no consideration
        for equipment replacement of the period of the analysis.

        -      Plant and machinery:                 15 years;

        -      Mining equipment:                    10 years;

        -      Pre-production expenditures:         10 years;

        -      Capitalised interest:                10 years.

5.2.8   Projections of Operating Costs

        The basis for estimating the operating costs is presented in section 3.0 of volume
        II and the average costs are summarised below;

        -      Hydrated lime:                       $US 39.61 / tonne;

        -      Agriculture limestone:               $US 17.10 / tonne;

        -      Pulverised limestone:                $US 17.10 / tonne.

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Malawi Limestone Project                                                         Summary
Mining and Lime Manufacturing                                                      Page 24
Feasibility Study

5.2.9   Discount Factor

        The discounted cash flow has been calculated using a discounting rate of 10%.
        This rate is higher than the interest cost and will give a conservative Net Present
        Value for the project for the purpose of decision making on the investment and
        project implementation.

5.2.10 Initial Working Capital

        The working capital is the amount of cash which must be available to cover
        accounts payable, accounts receivable, and maintain a constant inventory of
        supplies and spare parts, raw material either in the production facility, being
        processed or finished products in storage, and other cash requirements, including

        The COMFAR MODEL assumes that when possible, the working capital
        requirements will be funded by internal cash flow. When the capital requirements
        are not met, a revolving short-term domestic loan facility is used. This type of loan
        is paid back immediately as surplus cash becomes available.

        The criteria used for the calculation of the working capital requirements is as

        -      Inventory

                       Raw materials:         10 days

                       Factory supplies:      15 days

                       Work in progress:      5 days

                       Finished products:     5 days

        -      Accounts receivable            5 days

        -      Cash-in-hand                   2 days

        -      Accounts payable:              10 days

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Malawi Limestone Project                                                           Summary
Mining and Lime Manufacturing                                                        Page 25
Feasibility Study

5.2.11 Inflation and Escalation

       A 0% inflation rate and escalation rate have been assumed throughout the years
       of the financial evaluation. The analyses are done based on constant money

5.3    Interpretation of Results

       The financial projections were performed only in constant dollar terms based on
       the assumptions presented above. On the basis of this projections, the internal
       rate of return on the investment is established at about 17.0% on an after tax
       basis assuming 100% of equity financing. This rate represents the absolute
       profitability of the project and with such a level is high enough to justify the project
       implementation in view of normal international standards for this type of industrial
       project, provided that the Malawi business environment does not present any
       abnormal investment risk.

       With the assumption of debt financing accounting for 70% of the total investment
       the internal rate of return on equity is established at about 28.0% after tax and
       financial charges. This value should be sufficiently high enough to attract private
       investment from the Malawi and foreign business community to the project.

       The net present value with a discount interest rate of 10% is established at $US
       4,476,690 dollars. This positive net present value confirms the profitability of this
       Bwanje limestone project.

       The payback period, which represents the required time for the project cumulative
       generated cash flows to be positive, is established at 7 years from the
       construction start up. The payback from the production start-up is only 4 years.

       The sensitivity analysis of the project IRR to changes in the major elements of the
       cash flow, (capital expenditures, operating costs and production sales prices)
       have been examined. The results of this analysis are included graphically after
       the summary sheets at the end of section 4 of volume II. This makes it possible to
       estimate the effect on the IRR produced by variation of any one or any
       combination of the key project variables. The project seems to be more sensitive
       to variations in revenues and moderately sensitive to the operating and capita

       Under the conditions of these financial projections the Bwanje Valley Limestone
       feasibility study confirmed the viability of the project based on an positive IRR and
       the ability of the project to generate sufficient cash to cover operating and
       expenses and debt repayments.

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