FEATURE:Does the mining industry have potential or is it in free fall?

The export figures for mining have registered a major drop in earnings in the first half of 2009 when compared to the first half of 2008. This was coming on the heels of relatively high exports in 2007 and 2008. Because of the hopes it created, this drop might be a disappointment and may raise questions whether the industry is worth any great focus or whether it is largely speculative. Is it an industry that has potential or is it in free fall? Mining in Rwanda has shown steady recovery since 1997 and its potential is appreciated when ones looks at its evolution in the country. Realizing the need for information on the realities of this sector I decided to write this small resume on the mining sector in Rwanda as a piece of information continuum to build about the sector in the public eye. Potential and history of mining The largest part of Rwanda land surface is underlain by an assembly of rock types widely referred to as the Kibaran System. This system extends right from Northern Tanzania through South Western Uganda, Rwanda, Burundi, Eastern parts of DRC, Zambia up to Angola. This rock system contains numerous granite-related ore deposits, which are rich in mineral ores like cassiterite (SnO2), niobotantalite (Nb,Ta)2O5, wolframite (Fe,Mn)WO4, beryl, spodumene, amblygonite, monazite, gold (Au), etc. These ore deposits are widespread in Rwanda. The main minerals currently being mined and traded are niobotantalite (coltan; source of the key metal Tantalum), cassiterite (source of the key metal tin), wolframite (source of the key metal tungsten) and gold (currently mined in small amounts; more effort is being put in research). The first three metals are referred to as strategic metals and are of relatively of high value. The importance of gold is common knowledge.Mining started in the country in the early 1930s and up to 1973 was largely carried out by various private companies and private individuals. These companies were Minétain, Géorwanda, Somuki, Corem and the individual miners were; Marshall, Stinglhamber, Greens, Cardinal, and De Borshgrave. In 1973 some of those companies combined with government to form a joint venture company called SOMIRWA with the government having minority shares (49 percent). This company became bankrupt in the mid 1980s and since it had a monopoly this led to the collapse of the whole industry. The lowest point in mining, during production years, was in 1994 when production was at its lowest point. At the height of production Rwanda exported 2239 tonnes (1977) of cassiterite and 836 tonnes (1977) of wolframite. In the 1940s Rwanda was producing 1 percent of world tin requirements. Current performance of the industry in exports and in investment Since 1995 many local mining associations/cooperatives and some in partnerships with foreign interests were born and between them, COPIMAR and REDEMI, mining and trading began to pick up again till 2001 when mining registered substantial exports due to exceptionally high coltan prices. A steady growth in export earnings and in its contribution to total export earnings (percentage) are indicated in the attached graphs. Extraordinary years when the prices are exceptionally high are clearly indicated with steep curves: 2001, 2007, and 2008 (though the prices were not good at the end of 2008). Such cycles are to be expected in the mineral market, though the current drop is a result of the current global financial collapse. It is prudent to base planning for the sector on a normal ‘year’ rather than an extra ordinary one. The general trend is of sustained growth. Comparing the performance of exports in the first 6 months for (2008-2009), there has been a 47.5 percent drop in US$ terms and a 22 percent drop in volume. The export growth in minerals had been projected at $54 million, $63 million, $72 million, $75 million , $89 million, $106 million and US$120 million for 2007, 2008, 2009, 2010, 2011, 2012 and 2013 respectively. The earnings for 2007 and 2008 were $72 million and $94 million respectively, far above the projected earnings due to price booms. The earnings were kind of windfalls in the two years. Looking at the figures now, the earnings in 2009 will be significantly lower than 2008 but will be above 2006 earnings which still would be encouraging for the industry. The sector has attracted substantial investment. Up to 2006 almost 90 percent of all known potential deposits belonged to government. But since the privatization drive within the last three years all those government concessions are in private hands, recording (100 percent) success. A total of more than 150 active mining permits are supposed to be operational. The majority of these permits belong to smaller operators who, though largely working traditionally, have been responsible for the bulk of production. Considering that this production is far below capacity speaks volumes on the potential that exists. Of the recent 14 external companies 11 have taken over the former government concessions and three have taken up an active role in gold exploration in areas outside those concessions and between them have shipped tens of thousands of samples abroad for analysis. All these companies have a responsibility of identifying specific deposits before entering negotiations for long term concessions. This will enhance the knowledge of our potential and hence compliment the work of Rwanda Geology and Mines Authority. In the drive to improve the quality of investment in the sector, the new mining law (published in 2008) requires every mining activity to be based on reliable estimates of the targeted resource, promoting the accumulation of knowledge of the resource as well. Companies are beginning to invest clearly in long term facilities and despite the current challenge in the commodity prices, many companies continue to knock the doors enquiring about investment opportunities. About nine (9) mineral cleaning and mineral dressing facilities exist in the country. Some of the companies involved in our market are world wide names like Wolfram Bergbau (producing 14 percent of world tungsten, Schtack and Niotan LTD). Initiatives being put in place to promote the sectorClearly the young industry is facing some challenges. This sector is still young and still trying to find its level both at the public support level and at the investment consolidation level. A number of initiatives are being devised to strengthen the support institutions, regulation, and investment and to raise production and promote value addition. Some of the initiatives include; • A new and modern mining law (2008);• A new mineral policy is being drafted to address all aspects that will favor the investment drive for the sector; • Consolidating existing data and generation of new data to clearly define the national mineral potential (an airborne gravity survey covering the whole country was flown in September/October 2008 and integration of existing good data is under way); • Strengthening the capacity of Rwanda Geology and Mines Authority (OGMR) in field surveys, in laboratory analysis and in regulating the industry; • Promoting the formation of cooperatives and partnerships leading to consolidation and hence better technical and financial capacities; • Sensitizing financial institutions to lend to mining business; • Emphasizing exploration before mineral exploitation (this is a requirement in the new mining law);• Sensitizing the private sector to invest in giving value to quarry products; • Improving the image of the sector by introducing good practice certification for the industry and this exercise has already began; The writer is the Director for Rwanda Geology and Mines Authority

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FEATURE:Does the mining industry have potential or is it in free fall?