The persistent concerns by miners and other players along the mining industry value chain regarding the high costs of implementing mineral traceability could find a solution in blockchain technology.
This follows entrance in the local mining industry of Circulor, a British start-up specialised in blockchain technology, which is set to roll out a traceability system built around blockchain technology.
Currently, Rwanda relies on the ITSCi Traceability and Due Diligence System, an international requirement designed to prevent illegal trade in minerals.
On average, miners currently incur about $3.5 per kilogramme to implement the system.
However, the costs could go down significantly once the new system is up and running.
According to Circulor Chief Executive Officer, Douglas Johnson-Poensgen, the new system will change the current model of incurring traceability costs shifting it from miners to the end users.
How it works
Firms will use Circulor’s platform to tag and trace tantalum mined in Rwanda as it goes through the supply chain as opposed to manual tracing systems that rely on paperwork.
Unique tags will be electronically generated from various mining cities which will act as an online record tracing the minerals from the dirt to refinery.
The system, which also relies on technology such as facial recognition, geographical longitudes and latitudes, among other aspects, is foolproof as it generates an open, distributed ledger that can record transactions along the value chain.
Users will only require a smartphone application to tag and trace the minerals.
Poensgen told The New Times that this will be opposed to previous practice where costs of traceability were incurred lower in the value chain by miners who do not get much in terms of returns.
He explained that surveys and studies they have conducted show that there is more demand for traceability higher in the value chain among users of the minerals and end consumers and are willing to pay for it.
The new system distributes the cost such that less of it is incurred by miners.
“It will also dramatically reduce costs for miners who currently shoulder a disproportionate share of the cost of compliance. We came up with a concept of the value stack whereby we realised that end users would be willing to pay slightly more for end products to be sure that the inputs are conflict-free. That is where the value is,” Poensgen said in an exclusive interview.
Companies can trace metal even as it is processed into intermediate products and mixed with other raw materials.
“Circulor’s technology will bring greater transparency to the tantalum supply chain. Our blockchain platform will empower consumers to understand where the materials in the products they buy come from and also make it harder for materials that are not ethically sourced to pass through the supply chain,” he added.
The firm is pilot testing the solution with a local company PRG Resources, who produce tantalum, are along the supply chain of Apple, the multi-billion American firm that specialises in manufacturing of high end consumer electronics.
The development follows concerns by the association of miners in Rwanda who said that traceability was hurting productivity and undermining efforts to professionalise the sector.
Speaking at the General Assembly of the Tantalum-Niobium held in Kigali last week, Jean Malic Kalima, the Chairman of Rwanda Mining Association, said that incurring traceability fees locally and at the international level bordered on double taxation and unfairness.
Mining companies spend a combined $5 million (about Rwf4.4 billion) every year on treatability and certification of minerals from Rwanda.
However, even with the high costs, the Tantalum Niobium International Study Centre (TIC) admits that the current system in use is not perfect or as efficient as it should be.
Francis Gatare, the Chief Executive of the Rwandan Mining, Petroleum and Gas Board, told The New Times that they had reviewed how the technology works and what it is capable of doing.
He said that despite the buzz about blockchain technology in recent years, there were few solutions to prove its intervention in the sector.
He said that the new intervention had all indicators of a viable solution but was yet to be tested in the local market.
He said that after piloting across the value chain with PRG plc and reviewing performance and reception, the sector stakeholders will consider approaches of its adoption or integration.
However, he said that there are provisions on the use of multiple traceability mechanisms.
But he said that the current system, ITSCi Traceability, which has been in place for the last eight years, ought not to be undermined as it has served the purpose over time.
He said that there are multiple lessons learnt from the current system which is currently under review to identify avenues to improve it.
Among aspects being considered for review include; cost, costs distribution, as well as the incorporation of modern technology to increase efficiency.
Traceability came into force at the beginning 2012 when the US Securities and Exchange Commission (SEC) approved a law mandated by Dodd-Frank Wall Street Reform and Consumer Protection Act requiring companies to publicly disclose source of minerals that originated in DR Congo or an adjoining country.
It requires companies to disclose whether the sourcing of minerals in their products benefited armed groups.
Section 1502 particularly requires mining companies to disclose whether they source “conflict minerals” – tin, tungsten, tantalum and gold – from DR Congo and nine neighbouring countries, including Rwanda.
It affects DR Congo and all its neighbours including Angola, Burundi, Central African Republic, Republic of Congo, Rwanda, South Sudan, Tanzania, and Zambia.