Mining companies will soon receive long term licenses, thanks to the new mining law, Evode Imena, the Minister of State in charge of Minerals has said. Speaking in an exclusive interview with The New Times' Ivan Mugisha, on various issues in the mining sector, Imena said it was previously challenging for government to grant long term licenses to investors. Government says it targets large scale investors under the amended mining law published early this month in the Official Gazette, as part of efforts to ensure maximum productivity of the sector. Under the previous law, government was only allowed to grant a license of five or 30 years - nothing in-between-but the duration of five years was too short to small-scale investors. Imena says this has now changed. Excerpts
What is the essence of the new mining law that was recently passed?
The capacity of several miners was challenging and not giving us the confidence we needed to grant them long term licenses.
But with the new law, the duration of a license will depend on three things; size or nature of the deposits in a concession, the investment plan, and the feasibility study.
Once the investor proves to us that they have the right kind of technology to extract the minerals in a certain concession, they will also show, through the feasibility study, for how long the concession can withstand mining activities.
After this, an investor will be given a license for the years in which they are expected to exhaust the minerals, with a provision to extend the license if there are still deposits.
The new law is adaptive to the nature of the mining environment in Rwanda. The smallest companies will be given five years and the largest 25 years - but in-between we can give anything depending on the nature of the mine.
Several miners I talked to said they were frustrated because their licenses were taking too long to be renewed. Does this law solve the problem?
It took long for us to get a new law but now that it is here, it comes with lots of advantages for the government and the investor. One of the hindrances was that investors were not ready to declare how much they were investing in mines yet they were managing very large concessions.
Now we have three categories; large scale, small and artisanal mines and for each category, we have different standards, meaning that they will not use the same model of mining contracts.
We have more than 300 mining companies operating in Rwanda, but although we call them "companies", as many as 60 per cent of them are just small enterprises relying heavily on artisanal mining. We also want to slowly phase out artisanal mining and make sure that all mining is done professionally and in a modern fashion.
Major mines got their licenses. These include Wolfram Mining and Processing Limited which has sites in Rwinkwavu and Gifurwe, New Bugarama Limited and Musha. We have several others which we are finalising.
Why did a large mine of Gatumba's size close down? What is going on?
Gatumba Mining Concession was a joint venture between a private company and the Government of Rwanda. They invested in exploration and did some drilling in 2010, but the minerals they discovered were not of a standard grade.
Their plan was to carry out good exploration and then raise funds on the international market. But the results did not allow them to raise the expected funds. Then the ownership of the private arm of Gatumba changed from one investor to another.
So recently, in 2012, a new management came in with a new plan and brought in a large plant with them. However, when they brought in this large plant, they hadn't made a feasibility plan, yet in mining, the fact that there are resources does not justify bringing in a large plant.
You need to do a feasibility study to show that the plant you have matches the characteristics of minerals at the concession.
Once they realised that their processing plant was not matching with the deposits in their concession, they decided that they would no longer exploit the concession but rather go back to exploration.
However, the previous exploration had lasted for seven years, so we told them that we could not accept another exploration phase. We informed them that we needed them to mine and not to explore - and it is at that level that we failed to understand each other.
So in the end the board of directors decided to stop everything at Gatumba and start winding down operations up to the point where the company would be closed.
What is your plan for Gatumba then? Is it headed for total closure?
Gatumba as a concession will no longer exist. Instead, we will have several blocks which can be optimally managed by different companies.
We observed that Gatumba is too large to be exploited by one company. Rwanda is hilly and sometimes it is difficult to access minerals which are scattered in small veins across the hill. So we decided to divide Gatumba into small blocs.
We are working with RDB and soon we will put those blocs on tender. We have tried to attract investors and have already noticed interest from here in Rwanda and from other countries. They will apply for those blocs and once successful bidders are selected, we shall show them the criteria of what we expect from them.
These blocs will not be of the same size. There will be blocs reserved for large scale, medium sized and small companies.
It sounds like Gatumba had more problems than the one you just mentioned
Among the reasons why Gatumba failed was because of the size of the concession. Due to its large size, the management would not control it effectively and so, illegal mining was being conducted on several hills without their knowledge.
But now it is in blocs, every company will have its perimeter within view and they will be held accountable.
What if investors think of it as an empty concession?
The reality is that it is a good mine. With minimum investment, it can generate up to 40 tonnes of coltan and cassetirite per month. Today, it is not even producing two tonnes because of these problems.
A recent study we conducted showed that you can even get 80 tonnes in a month from that concession. You cannot dispute its potential.
We want to communicate the reality so that people can invest in Gatumba knowing the truth and what to expect.
Another company called Natural Resources Development (NRD) is also having problems. The company's ownership is being contested by two different parties and one has gone on to cease its assets. Who is the rightful owner of NRD?
They went to court and both sides continue to tell their side of the story - so let the relevant institutions deal with that problem.
Does that mean that your office does not know who owns NRD?
NRD went to court and the court made decisions. We just have to wait and see what will happen. What I know is that there is a big problem of ownership which needs to be sorted out as soon as possible.
There is a fight between two parties claiming ownership of the company. That fight should be resolved. Our courts and institutions are doing their best to resolve it, and soon, the rightful owner of NRD will be established.
There has been acute price fluctuation of mineral prices since the start of the year. How badly did this affect your projects?
Prices for minerals depend on various factors which we do not control. It is a kind of cycle. At the beginning of the year, prices of coltan reduced and then in the middle of the year, they started going up and in October and November, they fell again.
Do you have any strategy to shield the miners from effects of price fluctuation?
What we are doing is to sensitise our miners so that they can understand the price cycle and be ready to sell more whenever prices are favourable.
But this needs huge investment, whereby mining companies should continue running operations and stockpile when prices are really down and wait to sell when prices have gone up.
If we put up in place a system to that will them to have enough cash and run operations without exporting when the prices are down, it will help solve the problem of price fluctuation.
Will you adjust your targets due to bad mineral prices?
Our targets remain to collect $400 million from mineral exports by 2017. At the beginning of the year, prices were not good as you noted. We had an increase of 5.6 per cent in terms of volumes between January and May, but in terms of value, there was a decrease.
For the same period last year, we achieved $96 million, while this year we achieved $74 million, which is a decline of around 20 per cent. However, prices have slightly gone up and tin has at least stabilised, while the prices of both wolfram and coltan are rising.
Earlier in March, a container carrying 24 tonnes of Coltan, worth over Rwf600 million, was reportedly stolen at the Dar es Salaam Port while on its way to China. Have you caught the culprit and how did this happen?
The problem is not yet solved... we need more cooperation with port authorities. The transporting company and the mineral trading companies here in Rwanda wanted to put a tracking device on the container so that we monitor what happens while the track is on its way.
But at that point, the port authorities did not agree the use of the tracking device on the container. We need them to change their position because it is a serious concern for us.
Following the "conflict minerals" controversy, minerals from Rwanda had been shunned by the West, in spite of having implemented all international requirements for mining. How is the reception now?
The situation is greatly improving. We have even started selling to the US. Even European countries are getting interested, especially in tungsten.
The Chinese have put more control on tungsten and do not want to export it. Now other countries are looking for other sources and when you remove China, we are a few remaining countries with tungsten, which is a big opportunity for Rwanda.
However, the only challenge is about these conflict minerals, which should not be there in the first place, because Rwanda is not a conflict country - we should be allowed to conduct our business freely.
What we are doing as a ministry is to put up a transparent system which complies with all international requirements, and this will make our clients ready to invest in Rwanda.