M a r k e t N e w s

U.S.$40 Million Fund to Turn Around Fortunes of Rwanda Mining Sector

Posted on : Friday, 18th December 2015

 The Rwanda mining sector is set to benefit from a $40 million credit guarantee fund.

 
The fund is to stimulate lending to the mining sector by reassuring lenders that in the event of default, part of the fund will meet the loss incurred.
 
Mining is the second export revenue earner in Rwanda, employing about 30,000 people. However, investors in the sector complain about lack of credit which has stall investments in the sector resulting into low volumes of minerals traded.
 
"Mining is a capital intensive investment that needs modern equipment and money to invest in green mining. But lenders in Rwanda require collateral for the loans," said Jeanettee Mutesi, vice-chairperson of the Rwanda Mining Association.
 
The central bank's 2014 Monetary Policy and Financial Stability Statement shows that lenders rejected 68 per cent of the loans application from mining sector were rejected by banks.
 
The low funding in the sector also reduced chances of the country achieving the revenue targets from the sector.
 
Rwanda targets to increase mining revenue receipts from over $200 million annually to $400 by 2017 from its tin mined as cassiterite, tantalum as coltan and tungsten mined as wolframite (3Ts), which are much sought after internationally.
 
It is against this backdrop that Rwanda's State Minister for Mining Evode Imena announced during the International Mining Day that the government was intervening on the supply side of the credit by sourcing the money from international funders.
 
Most likely, according to Mr Imena, the deal will be concluded next year.
 
Rwanda seeks to boost mineral revenue receipts through investments in value addition and shift mining from artisanal to commercial and later industrial to raise required volumes for the market in a short time.
 
The falling mineral prices globally have hurt the Rwanda local miner most as the revenue decrease. This has resulted in delayed payment of revenues with some miners threating to shut down the mines.
 
Currently, Rwandan miners earn $30 from a kilogramme of tantalum. But when smelted and refined, the same quantity fetches $200 when sold to electronic equipment manufacturers.
 
The tantalum is used in making capacitors used in mobile phones, computers, DVDs, supper alloys for jet engine components, nuclear reactors, missile parts, laboratory equipment.
 
Another threat to the mining sector cited by the Rwanda government officials, is the growing competition from scrap metal suppliers.
 
Dr Michael Byabarema, director general of Natural Resources Authority Geology and Mines Department (GMD) said in 2014, at least 53 per cent of the global consumed tungsten was extracted from scrap materials.
 
This, according to the officials, has resulted in low demand for the 3Ts, reducing the Rwanda mineral revenues as prices miners are paid dip.
 
Mr Byabareman said the international prices of a kilogramme of cassiterite dropped by 29 per cent in the first eight months this year compared with the same period last year.
 
The sector is also grappling with high cost of implementation of the traceability system.
 
Rwanda currently spends $6 million per year in fees. Mr Imena observed that the fees should to be reduced. The fees are paid even when the Kigali authorities declare their minerals are conflict-free.
 
Mr Imena, told the US House of Representatives that Rwanda had made great strides by developing a mineral traceability programme. And currently, according to the minister, the country's mineral supply chain was 100 per cent of the 3T traceable from the mine site up to the point of export.
 
The Rwandan government reduced the fees from $200 to $130 a tonne of cassiterite and Wolfram from $300 to $180 a tonne.
 
The miners complain that traceability fees add to the cost of doing business and make Rwanda minerals uncompetitive in pricing.

Source : allafrica.com
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