Country Office 501001 Novib This project will be supported by Oxfam Australia, with contribution from Oxfam Novib in Mozambique. The project is aimed at supporting activities related to extractive industry work in Mozambique.

Terms Of reference for  Mining Economic Governance Scoping Studyand Capacity Building.

Malawi#s mining sector has been touted as a potential driver of the economy and a major
Source of  government revenue. The sector has already generated considerable controversy.
Important work has been done to highlight adverse environmental and social impacts.
Some analysis has also been done on potential revenue loss, particularly related to royalties and withholdingtaxes from the Paladin uranium mine. The 2014 Report on Extractives prepared for Oxfam highlightsimproving extractive sector revenue and tax justice as one of two recommended overarching areas of work. It also highlighted #civil society#s limited capacity in terms of knowledge and awareness of how the extractives industry operates.# These prioritiesare consistent with the recently published Global Program Strategic Plan
(Achieving Natural Resource Justice) to #increase financial transparency and pro--#poor accountability for EI revenue generation and expenditure# by strengthening #CSO capacity to understand EI taxation and revenue collection.# Of strengthening CSO capacity on EI taxation is capacity building on project economics. Project revenues, project costs and the relevant fiscal terms ultimately determine revenue payments to government. These somewhat disparate elements are most easily understood within a comprehensive cash flow spread sheet model. Oxfam has pioneered the use of project--#specific economic modelling to build CSO capacity for petroleum projects in Cambodia, Mozambique, Kenya and Tanzania. Similar projects are currently underway for mining projectsin Zimbabwe and proposed for the Dominican Republic and Haiti. Projects have been selected where sufficient public domain data exists for both the project and also for the fiscal (tax) terms. A four--#part methodology has commonly been employed including:
1. Collecting and analyzing all public domain data with particular attention given to information contained in investor documents filed with relevant security exchange commissions;
2. Building an industry standard discount cash flow spread--#sheet model with a user--# friendly dashboard allowing non--#specialists to explore the implications for government revenue from changes in production volumes, commodity prices, project costsand individual fiscal instruments;
3. Preparing a comprehensive report on the project and the conclusions of the economic analysis with an  emphasis on potential government revenues;
4. Providing substantive in--#country training (normally two--#days) targeted in the first instance at CSOs, but extended in some cases to include researchers, journalists, and government officials.

One potential candidate for project economic analysis is the Paladin uranium mine- economic data in the public domain, butnotenough on project costs in order to prepare a compelling analysis of the least well understood fiscal instrument # corporate income tax.
Perhaps more importantly, plummeting uranium prices resulted in the mine being put on care and maintenance in 2014. According to the company, the reopening of the mine would require that prices, currently at about $30 dollars per pound recover to atleast $75. An analysis of Paladin might therefore say more about the past than the future.

Mkango#s Songwe Hill Project
Highly relevant to Malawi#s future mining prospects are rare earth elements (REE). Malawi is widely cited as one of the leading potential sources of REEs outside of China (See: Malawi is the next rare earth hub). There are several promising projects currently in the exploration phase. Among these projects, Mkango#s proposed rare earth project at Songwe Hill is the most advanced. The company recently published a detailed economic feasibility study. A project economic analysis the of the  Songwe Hillproject would make several important
Contributions including: a much--#needed analysis on the emerging rare earth elements sector (involving an important reality check); a general introduction to mine economics including the core elements for any government revenue analysis (i.e. production profiles, commodity prices, capital and operating costs, and fiscal instruments); and an assessment of potential government revenues for this specific project under varying scenarios (with  particular attention to the potential impact of changes in fiscal instruments).

Deliverables
The proposed project would involve three main deliverables:
1. An excel spreadsheet economic model of the Songwe Hill REE project drawing on all public domain information including published Technical Reports (43--#101);
2. A 10--#15 page narrative report explaining the methodology and conclusions relating to the relevant fiscal instruments and their implications for potential government revenues; and,
3. A 2--#day in--#country training program designed to introduce CSOs and others to the basic principles of mining economics and implications for government revenue.