Diversification will save mining sector - Experts

For almost 2 years now, miners have been counting losses following a decline in global prices of major minerals. The unstable prices particularly for metals, have significantly affected the mining sector, which is one of Rwanda’s leading foreign exchange earner.
Workers mine wolfram in Burera District. (File)
Workers mine wolfram in Burera District. (File)

For almost 2 years now, miners have been counting losses following a decline in global prices of major minerals.

The unstable prices particularly for metals, have significantly affected the mining sector, which is one of Rwanda’s leading foreign exchange earner. The country’s mining sector recorded poor performance in 2015, declining in both value and volume by 42.1% and 30.5% respectively.

Diversification and strong partnerships

However, to stay afloat, government and experts are now urging miners to diversify into other minerals that are still attracting competitive prices worldwide.

According to State Minister for Mining, Evode Imena, such minerals include gold and iron ore, among others.

“We want to focus more on diversification and optimally explore and extract other minerals in addition to what we have now. That is why we are encouraging exploration and extraction of gold, gemstone and other industrial minerals, including different types of clays that we can process and export,” Imena told Business Times last week.

Imena said that government and its stake holders are working around the clock to ensure that all the concessions are optimally exploited.

We are trying our best to attract mining companies with the financial capacity to develop these mines, Minister Imena added.

The Minister also called for strong partnerships to save the sector.

Mining experts have strongly advised miners to work through cooperatives and associations if they are to remain in business.

“They must equally work hard and attract investors with the strong financial and technical expertise to embrace value addition,” Abdul Gaffar Khan, the managing director of KNM combines Ltd, said.

The suggestion to open up the sector for more players, according to Minister Imena will help the sector stay afloat.

“We are working to ensure that the service providers in this sector form an association that will work together with miners to address the challenges threatening the industry,” he said.

The initiative according to experts is critical and poised to save the sector that has had its revenues drop terribly in 2015.

Addressing other constraints

Jean Malic Kalima, the president of Rwanda Mining Association said the move by government to address constraints such as high taxes, theft of minerals at the ports and access to credit brings a glimmer of hope about the future of the industry.

Kalima noted that price fluctuations, low production, and rejection of loan applications by commercial banks, still makes it hard for the sector to thrive amidst turbulent times.

For example, in 2015, the mining sector had the highest loan rejection rate by local banks among other sectors.

According to Central Bank statistics, almost 96 per cent of the total loan applications in the mining sector were rejected in 2015 up from 68 per cent in 2014.

The biggest loan request rejected from the sector was about Rwf4.5 billion owing to lack of tangible security and the business being a start up with no track record.

To address the problem, the government is currently in discussions with the World Bank on how to set up a guarantee fund that will facilitate access to finance for the sector.

Licensing more companies

As part of a strategy to boost competiveness and innovation, government has recently been issuing new licences and signing contracts with more than 20 mining firms as part of the solution.

The idea is to be able to attract more companies with the financial and technical capacity to boost the industry.

The strategy is expected to help local mining companies especially the small-scale miners and artisans gain more skills that will help professionalise the sector.

Last year, contracts were signed between the Ministry of Natural Resources, Rwanda Development Board (RDB) and the investors aiming at bolstering exports by at least 28 per cent.

This has however not yet paid off because statistics indicate that the revenues from the sector dipped to $149 million last year, from about $210 million in 2014 largely due to fall in international metal prices which declined by 21.1%. Exports of minerals such as cassiterite declined by 52.4% in value and by 35.4% in volume as its unit price declined by 26.3%.

Equally, the unit price for coltan also fell by 11.9% leading to a decline in its exports value and volume by 36.8% and 28.3%, respectively.

The fall in the unit price of wolfram (-19.1%) and its volume (-19.4%) led to a decline in its exports value by 34.8%.

The development board granted licences to four mining companies to take charge of six mining blocks in Ngororero District, Western Province.

The companies include; Ngororero Mining Company Limited who will take charge of Nyamisa and Nyabisindu blocks, KNM Combines Ltd for Bijyojyo mining block, Daba Supplies Limited was given Ndago and Nyabitare mining blocks, while SEAVMC Ltd will exploit Gasovu.

The total investment, according to the minister, is estimated at almost $38million (about Rwf28bn) for the next five years.

Early last year, six more private mining companies were given the green light to manage Gatumba mining concession.

The companies are expected to invest Rwf6.5 billion in the next five years to extract 3,300 tonnes of mixed tantalum, tin and tungsten ores from 10 blocks of the former Gatumba Mining Concession in Ngororero and Muhanga Districts.