Noble Group Buys Into African Project Amid Default Concerns

LILONGWE (Capital Markets in Africa) – Noble Group Limited may be losing money on Asian operations, selling assets in the U.S., and battling concerns it’ll default, but the Hong Kong-based commodity trader has decided that now’s the right time to boost its presence in Africa with a bet on the electric vehicle boom.

The company is investing 500,000 pounds ($655,000) in an obscure mining project in Malawi, emerging as Mkango Resources Ltd.’s top shareholder, according to statements from the companies. While the sum is modest, it’s been committed as Noble Group faces serious liquidity constraints.

Noble Group has been locked in a spiral of decline for more than two years, with executives selling off once-core assets to pay down debt amid a collapse in its securities. While the investment in Mkango comes amid a rise in investor interest in the potential for electric vehicles and related commodities, it’s taking place with the trader due to report another $1 billion-plus loss this week. A spokesman for Noble Group declined to comment on the move.

“The outlook for the rare earths market is very positive, in particular for neodymium and other rare earths used in permanent magnets,” Mkango Chief Executive Officer William Dawes told Bloomberg in an email. The magnets are used in electric vehicle motors, and there could be “exponential demand growth” in coming years, he said.

Half a Million
Through a wholly-owned unit, Talaxis Limited., Noble Group paid 500,000 pounds for a 14.5 percent holding in Mkango, buying shares at 3.5 pence, according to an Oct. 27 statement. Mkango is listed on the Alternative Investment Market, as well as the TSX Venture Exchange. The London shares were last at 4.75 pence.

Mkango’s program is cantered on the Songwe Hill project. At present, it’s in the second phase of a research-and-development program that will include optimizing quality and customer appraisal of its product, as well as looking at opportunities from possible 3D printing of magnets.

“There are very few advanced-stage rare earths projects outside China, and Mkango is focused on one of them,” said Dawes, adding that it’s aiming to become a long-term, sustainable producer.

Noble Group’s quarterly earnings this week follow a warning from the company in October that it expects a loss of more than $1 billion for the three months to September, as well as announcing the sale of its oil unit. S&P Global Ratings has said “default risk remains for Noble within the next six months.”

On Monday, Noble Group’s shares closed unchanged at 28 Singapore cents in the city-state after swinging between a drop and gain of 1.8 percent. The stock has sunk 84 percent this year.

Source: Bloomberg Business News