Unexpected finds in southern Malawi

Chilwa Minerals Limited (ASX:CHW) Managing Director Cadell Buss discusses surprising drilling results and outlines future exploration plans.

Paul Sanger: I am Paul Sanger for the Finance News Network, and today I'm talking with Chilwa Minerals (ASX:CHW). They have market cap of around $9m. Chilwa was incorporated in '22 and listed on the ASX in July this year. They are focused on mining explorations, specifically targeting mineral sands and rare earths at the Lake Chilwa precinct in southern Malawi. The company's primary exploration targets are critical mineral deposits, specifically heavy mineral sands, such as ilmenite and zircon. The area is also highly perspective for rare earth elements such as monazite and xenotime, with the existing geology workings and discoveries on adjacent tenements indicating its potential. We welcome Chilwa founder and Managing Director Cadell Buss. Welcome, Cadell.

Cadell Buss: Hi, Paul. Good to be here.

Paul Sanger: That was a mouthful, getting some of those names out. Cadell, to kick things off, can you tell us a little bit more about Chilwa's asset? As I understand, one of the key features is the amount of exploration drilling that has historically been done on this asset?

Cadell Buss: Yes, it has, Paul. It currently does have an inferred resource. So, drilling was done back in 2015, and an inferred resource has been put on the asset by the Mota-Engil Group, which was the company that had the asset prior and was part of the vendor deal. It's a significant size area, sort of expanding over about 400 square kilometres. And during our process of listing, we've actually got an extension to that area in the south. So, we've actually now got about an 800 square kilometre area. The resources currently has got ten deposits, ranging over the initial 400. So yes, we do have a large area and a fair bit of work to do in front of us.

Paul Sanger: So, back in October, you announced to the market that drilling had commenced at Mposa. What can you tell us about these early holes?

Cadell Buss: So, Mposa represents approximately 33 per cent of the current resource of 62 million tonnes. And so what we decided to do was to commence at Mposa. And what happened previously was that in the drilling that was conducted in 2015, Mota-Engil at the time used air core drilling, so they weren't able to really reach the bedrock. So, we engaged a sonic drilling technique. So, the sonic drilling is much more, I suppose, user-friendly in relation to areas near water. And what we've uncovered in our announcement was that we've actually got to a much greater depth than we anticipated. So, we've sort of got to 50 metres. We actually ran out of drilling casings. So, it's certainly surprised us a little bit. And what we've uncovered is that we believe there's different sedimentary packages. So, we now sort of… As I said, it's gone a lot deeper, so that's encouraging for us. And to be clear, just because it's deeper, it doesn't necessarily mean there's more mineralisation, but certainly it's a pleasant surprise for us.

Paul Sanger: And what did the results reveal? More than I expected, I understand?

Cadell Buss: Yeah. So, look, we've just made an announcement last week as well in relation to we'll now be getting a second rig in. So, we're actually getting a diamond rig. So, the reason for the diamond rig is that we can actually go much deeper to explore some clays that are underneath that sedimentary package. And again, caveat on the statement, we need to understand what that is for us, but we definitely have as a board made a decision that we'll be starting to explore and test some of those different sedimentary packages, being the clay. So, I suppose that's what exploration's all about. We were originally just looking for mineral sands, and now we've found these different levels. It's definitely gone a lot deeper, and that's why we're going to be, as I said, engaging a second rig, which will be diamond, which can go a bit deeper for us.

Paul Sanger: And, look, given the results thus far, how much potential remains for extending the deposit? How big could it be?

Cadell Buss: Look, that's the million-dollar question, right? And I suppose one thing, as I said, we do have a very large area, and I suppose what we need to do is to really sort of get a bit more of an understanding. I think one of the key attributes we have is that we can do more testing, is particularly in the lab. In our prospectus, in our independent geological report, we know that there were some errors in the lab in 2015, so we'll correct those errors so that the slimes were overstated. Now, slimes doesn't necessarily mean higher grade, but what it can mean potentially is more heavy mineral sand. So, look, Paul, it's a good question and one I get asked a lot, but one thing for sure, we are doing a 17,000 metre sonic drilling program, so we've got the capacity to do a fair amount of work. So, how big is big? It's hard to say, but one thing is for sure, we've been encouraged, is probably a word I would say, and cautiously optimistic that the resource could be bigger.

Paul Sanger: And now, Cadell, let's talk a bit more about Malawi. Africa has a chequered past when it comes to mineral exploration and some investors are still a little wary of investing in African assets. What risks do you see in terms of country risks, transportation risks?

Cadell Buss: And I do get that question asked me a bit, but Malawi fundamentally… I mean, Africa is a very big place, right? But Malawi is seen… In fact, Malawi is referred to as the warm heart of Africa. I've been there a number of times. I found it very safe. Interestingly enough, there's a couple of companies that operate on the ASX, operating in Malawi already. Predominantly it's an agricultural country, and the government's very proactive now in looking as a mining jurisdiction to develop mining. Rio Tinto recently just put a $40m placement into another ASX-listed company. So, I think it's a pretty good place to do business. I think also, from my perspective, having my major shareholder, Luso Global Mining, which is part of a subsidiary of Mota-Engil, they've been operating in Malawi for 30-odd years. So, that certainly helps me from a jurisdictional risk and being able to operate a bit more effectively.

Paul Sanger: So, let's talk a bit more about Mota-Engil and what benefits your relationship with them has for your exploration activities in Malawi.

Cadell Buss: Yeah, look, it's really interesting, and I suppose, as I said, as I just mentioned, that they have been operating in Malawi for 30 years. I mean, Mota-Engil are very large construction and mining and engineering company, do a lot of work. One of the largest engineering and procurement construction companies in Africa. Founded in 1976, so they had been around a while through Europe and Africa, as I said. So, having them is incredibly beneficial just for logistics. And then we have a service agreement, which was in our prospectus. We'll definitely look to use their knowledge, their presence, and I suppose all the things that we need to do in these early stages of exploration, be that people, four-wheel drives or things that we need on a day-to-day basis. And, look, certainly without their help, it sort of slingshot us to be able to progress a lot quicker than if it was just, you know, a one-man band if you like, operating in Western Australia.

Paul Sanger: And, Cadell, tell us a bit more about your background and also your board and the board's experience.

Cadell Buss: So, my background is in corporate finance, stockbroking. I was CEO of a company called DJ Carmichaels for just under five years. And then prior to Covid, I was actually approached by the Mota-Engil Group and by my current chairman, Alexander Shaw. And he was approached by Manuel Mota to set up this subsidiary of the Mota-Engil Group, being Luso Global Mining, our biggest shareholder. And that's actually where I came across the project. We were looking at a number of projects, but this one was within the Luso Global Mining stable. And I fell in love with the project. It had a scoping study been done on it, which we were not allowed to reference anything because it was previous people's work. But, from that point, I just decided, I thought it was a really good asset. And that's a year and a half with Luso, and then decided to take the plunge and put it on the ASX. And I think I had a bit more hair then, Paul, but it was a stressful time. But, nevertheless, it's been a good outcome.

So, on our board, Dr Alexander Shaw, who has a PhD in geology and has worked in Africa for 20 years, so Alex is a great sounding board for me. Manuel Mota is the grandson of the founder of the Mota-Engil Group. So, having his exposure for us is particularly beneficial, obviously that relationship with Mota. And then Dennis Wilkins is our company secretary, another board member, and Dennis is very experienced with ASX workings, and been involved with them for 20-odd years. So, we've got a pretty well-rounded board and I think collectively we're quite tight and we're just trying to add value for shareholders in this early stage.

Paul Sanger: And, Cadell, we're already in December, the year's coming to a close, can you give investors a little insight into what they should be expecting from Chilwa in early 2024?

Cadell Buss: There's a couple of things we'll look to do. I mean, obviously, now, as I said, we've recently made this announced about the second rig and checking for clays. But, first and foremost, we are a mineral sands company. So, we have been drilling, and assays, we're expected to come to the market with those results in the first quarter of 2024. That's been done with ALS. So, ALS Johannesburg, we've got good relationships with them, and ALS in Perth will be doing the final assay. We'll also be obviously testing for some of the results with the diamond. And then also we'll be really… We need to solidify and work within the Mota-Engil group and our service agreement and potentially look at how that works for us in the future because it is a really good arrangement. And that arrangement, which was articulated in the prospectus, finishes on 31 December, so we'll need to make sure that in the new year we have some announcements regarding that. So, yeah, we've got a lot of activity and, yeah, it's quite an exciting time.

Paul Sanger: Cadell Buss, many thanks for your time today.

Cadell Buss: Thank you, Paul.