How smelting firm lost licence to refine tin ore
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The Government recently terminated Phoenix Metal Ltd’s licence to operate Karuruma Tin Smelter in Gasabo District, citing non-compliance with an agreement entered into with the firm 15 years ago.
When the tin smelting company acquired the plant from Government in 2002, key among the prerequisites for the takeover was that it would refine and export smelted tin of at least 95 per cent content.
But this was not the case, and, according to Rwanda Mines, Petroleum and Gas Board, Phoenix Metal Ltd, which was then called NMC Metallurgie, resorted to trading raw tin and other mineral ores, including wolfram, coltan, tantalite and tin slag.
They did not have a licence to do this.
Several letters were written by the board to the effect, including one dated June 6, terminating the company’s operations.
In the letter, the board instructs the tin smelter to stop mineral ore trading activities after expressing disappointment over the company’s below par operations considering that there has been no investment in infrastructure for the last 15 years to support the smelter.
This is even after several assurances from the company that they would improve.
“During the whole time, the company has continued to trade and export raw mineral ores that otherwise should have been raw materials for the smelter, although no trading license for such material had been issued,” reads the June 6 letter, a copy of which The New Times has seen.
When The New Times last week visited Jabana Sector in Gasabo District where Karuruma Tin Smelter is located. There was little activity and there were several indicators that the plant could have spent a long time without refining tin ore.
Francois Munyankindi, the director-general of the company, was hesitant to speak to the media, but later opened up.
“It’s true we stopped operations few days ago. This came after government had previously requested us for a roadmap to full operation of the smelter which we failed to submit. This is because the company realised it wasn’t able to continue making further investments,” he said without further elaborating.
Long standing struggles
Several media reports over the years have indicated that the smelting company was struggling to kick-start the operations of smelting iron. Three years ago, some media reports indicated that Phoenix Metal Ltd was shutting doors.
In the brief interview, Munyankindi said that since 2008 Phoenix Metal has had issues of low and unreliable power supply, and that this hindered tin smelting.
Raphael Ritter de Zahony, the chief executive of Phoenix Metal Ltd, said it’s not clear why the Government stopped them yet they had previously held a series of discussions to iron out the way to re-establish the smelter.
“We were stopped from operating but we don’t know why the Government is doing so, yet we have had conversations showing them what held back the smelting plant and proposing what is required to re-establish it,” he said.
However, in another letter to the Government, the company admitted to the underlying issues, asking the board to allow them export the materials they have in stock to-date, or be able to sell them locally to another competitor to reimburse third parties that had pre-financed it.
The New Times, however, learnt that Government had tried to assist the company to establish partnership so that it can be able to easily operate, but the latter showed no interest.
For instance, last year, the Ministry of Natural Resources wrote to Rwanda Development Board (RDB) asking them to initiate negotiations with Phoenix Metal Ltd for reinvigorating the tin smelting plant, but nothing was achieved.
According to Francis Gatare, the chief executive of Rwanda Mines, Petroleum and Gas Board, Phoenix Metal Ltd has not been straight forward with the Government on its operations despite several efforts to support it.
“Karuruma Tin Smelter has not done any smelting for a long time, and this is what Government was expecting from the new company to do when the agreement was signed in 2002 so that they can add value to tin before export. When you visit the factory, the equipment (smelter) exists, it has been tested several times and it can work anytime if the company wants,” he explained last week.
Over the past 15 years, Gatare said, there has been one excuse not to operate it over and over, which was electricity.
“We went at length to bring dedicated power line to the factory. In fact, Government changed electricity tariff by subsidising it almost by half, especially during night time, so that the cost of electricity becomes competitive for operating the smelter. We also worked with Rwanda Energy Group and brought a standby generator that was made available for the company to demonstrate that it can work,” he said.
Gatare said that, despite all the efforts, the company continued operating on their business model that was to trade in raw materials instead of smelting.
He explained that, recently, Phoenix Metal Ltd wrote to government indicating that they were unable to honour targets they had submitted them previously.
He said it was evident that, while the company acquired a smelter with an understanding of processing tin, they changed their business model to trading raw materials, which they did not have the licence to do.
“They have been doing it illegally because if you ask them if they own any licence to trade in raw materials, which is unprocessed tin, they don’t have it. But they saw a loophole and went on trading. What we have done is to stop them from continuing to export unprocessed tin ore,” Gatare said.
“The reality is that we have lost an opportunity, because with value addition you create an opportunity for growing a cluster of businesses around it. Over the past 15 years, what we have lost is the opportunity of businesses that could have established to add additional value on the tin ingots (tin ore) that the smelter has been providing,” Gatare said.
About Karuruma Tin Smelter
The smelter was built in the early 1980s to produce tin from concentrate from the Société des Mines du Rwanda (SOMIRWA).
In 2002, the tin smelter was given to NMC Metallurgie during the privatisation process. Until end of 2003, the technical teams worked on the investment and maintenance in order to repair the factory, import and install the missing machinery, and restart the smelting activity with an optimisation of the process.
In 2003, tests were conducted with success and the industrial production was ready to start by the end of 2003. In 2005, the company decided to change the name of the company to Phoenix Metal Ltd.
Phoenix Metal promised to keep in mind smelting and make effort to restart the smelter at first opportunity.
It turned out that the company was experiencing financial issues that are stopping them from running the smelter, going by their previous letters where they suggested to the Government that they were looking for a potential investor who could take over the smelter.
Gatare said Government has commissioned an audit of the smelter to evaluate the investment done, the status of assets, and propose the way forward.
RWANDA TARGETING VALUE ADDITION
Rwanda’s mineral ores produced are 100 per cent exported as raw mineral concentrates, not as metals. The establishment of processing plants to smelt cassiterite into tin, refining wolframite and tantalite into tungsten and tantalum, respectively, is open to private investors. Gatare said this is part of adding value to mining, and that there are more strategies that have been devised to accelerate growth of the sector.
Rwanda exports about $200 million worth of minerals annually with the potential to double this every two years, Gatare said. The Government also wants to increase by three-fold the contribution of the sector to the economy through investment in advanced technology and attracting massive capital into the sector.