Aim- and TSX-V-listed Mkango Resources has announced that its indirect wholly owned subsidiary, Lancaster Exploration – to be renamed Mkango Rare Earths (MKAR) – has entered into a project development funding agreement with the US International Development Finance Corporation (DFC), the US government's development finance institution, to secure $4.6-million in reimbursable funding as part of the DFC's project development strategy for the Songwe Hill rare earth project, in Malawi.

Mkango explains that receipt of the project development funding is subject to satisfaction of certain conditions set out in the agreement.

The funds are expected to support project development activities in the form of front-end engineering design (FEED) and value engineering studies. 

Project development funding is to be equally matched by MKAR contributions over the next 18 months.

The company says the funds will need to be repaid to the DFC only if, within ten years of the signing of the agreement, MKAR obtains financing sufficient to initiate construction, operations or other material implementation of the project.

Further, for a period until five years after the termination of the agreement, the DFC will have the right – but not the obligation – to directly provide and/or arrange for financing or investment for the project on commercial terms substantially comparable to or better than the terms of other financing options available to finance the project when considered in conjunction with the other benefits brought by DFC to the project in connection with the project development.

Mkango explains that the DFC's project development product is part of the US Better Utilization of Investments Leading to Development Act and provides support for high-impact companies to overcome operational, financial and developmental challenges, thereby enhancing project viability and readiness for future investment.

Project development funding is tailored for projects with the potential to receive later DFC financing.

Mkango says further funding for MKAR or the project is at the discretion of the DFC and will be contingent on the successful completion of associated FEED and value engineering studies.

"I am delighted to announce the participation of the DFC to assist MKAR to fast-track the development of the Songwe Hill rare earth mining project.

“The DFC recognises the game-changing development potential of the project and this initial project development funding provides a path for MKAR to secure the longer-term development funding needed to develop Songwe Hill and position the Mkango group as one of the few key players in the global rare earth supply chain,” says Mkango president and founding director Alexander Lemon.