Explained: exploration, gold demand, performance of 3Ts during pandemic…

In the recent interview with CNBC Africa, the Chief Executive Officer of Rwanda Mines, Petroleum and Gas Board Hon. Francis Gatare tackled a wide range of issues in the mining sector including exploration activities, increase of gold demand, performance of 3Ts during pandemic, reforms in the sector, minimum wage among others.

Picture of the sector since the outbreak

The CEO painted a picture of the mining sector performance since COVID19 pandemic outbreak.  He said that the mining sector is a very important sector for the economy of the country, it’s been one of the leading export revenue earning sectors not to mention its contribution to domestic industry particularly construction. He noted that 2020 given the COVID19 pandemic was a very challenging year for everyone in the sector but "in the end it turned out better than we had expected".

International earning grew up to seven hundred and thirty million dollars ($730 M) and this was very impressive given the challenges the sector faced. Production increased despite fluctuations in the price market but in the end “we found a silver lining around in the pandemic particularly in the second half of 2020 when some sections of the international economy reopened”. The nature of Rwanda’s mining sector was an advantage because small to medium operations were eagerly enough to rebound in operations and supply the commodities required to international market when most of the other large operations were closing.

CNBC: When you look at the sector, it has been mostly driven by 3Ts for quite some time now. But in the recent past especially 2-3 years we have seen the growth of these 3Ts dropping on the international market. What is the current situation for these three metals?  

CEO: In 2020, 3Ts (Tin, Tantalum and Tungsten) played a critical role because in the second half of the year when demand on international market rebounded we saw an increase in overall prices more than 25% increase in the prices of tin on international market. This increased revenue earning for mining sector. We also saw both tantalum and tungsten prices sort of fluctuate but around the average price which was pre-pandemic. And that was also sufficient to guarantee good revenue earning for the sector. However, there is also need to diversify which is why we have been looking for new minerals particularly gold, gemstone, and some new discoveries being made in Lithium and associated battery minerals.

CNBC: Still talking about diversification of minerals, we’ve seen gold emerging and I think last year we saw more than 22% increase what can this growth be attributed to?  

CEO: The growth for international demand for gold is understandable under restrained economic conditions. Gold played a very important safe haven for investors who otherwise didn’t want to keep cash on themselves and so the price increased in 2020 by over 30% and reaching some unprecedented amount of money like 3000$ an ounce which is unheard of. All that was a trigger to divert investments into gold prospection, gold mining and even conversion of gold holdings into refineries and trading. So, refineries and traders played a very important role in the response to the increased price signals and we saw that contributing significantly to the growth of our sector last year.  

CNBC: Last year, we saw a lot of reforms that the government put in place. I am interested to know these reforms paying off for you.

CEO: Mining sector in Rwanda is already a competitive. One, we want to attract investments, we want to continue to modernize operations and we want to continue to see mining sector adding value locally all those require reforms in the sector.

The first set of reforms was to establish our institution and give it a mandate and a budget to carry our exploration. So, the first level of exploration is done by public funds and we have been collecting sufficient geological and mineral information putting it online accessible to investment community so that prospectors and mining operators can reduce risk before they go on the ground.

The second set of reforms have been institutional regulatory in nature particularly in streamlining the nature of licenses and acquisition of licenses. We created new licenses that did not exist before particularly those that are focused on processing and value addition but also we delineated exploration and mining licenses creating small scale licenses, medium scale licenses, and large scale licenses and differentiating requirements for them so that we can create space for everyone who is keen to participate in the mining sector.  

Lastly, we created initiatives especially tax incentives that are associated with input and investment in equipment because we know that our mining sector needs to be professional it needs to invest in equipment and technology and know-how. We created reforms that were geared towards incentivizing companies to go into exploration because we know exploration is fairly a high risk business to go into but government has given a 10-year carryover period for any losses that are made during exploration phase so that they can be written off with their tax returns. All these are the things in addition to the general business climate that Rwanda provides for investment community. We are beginning to see this pay off despite obviously a very difficult year 2020 , we are still very optimistic in 2021 and looking forward we begin to see fresh and new investments joining the community in mining sector Rwanda.

CNBC: Exploration is business which investors have been shying away to invest their money because of its nature. How attractive are these new incentives you are giving exploration companies?

CEO: Obviously investments in exploration are driven by prospects for making money in the future and when you look at mineral commodities endowed in Rwanda, they give a very strong future prospect for growth. They are the so called technology metals but also increasingly we are discovering the so called battery minerals; lithium and associated minerals so that is number incentive for investments looking at those minerals that expect to get revenue in the future. Secondly, exploration being a risky business to get into companies is sensitive to that risk and so what we do is minimize that risk by carrying out initial investments in exploration; creating the information base that is sufficient for companies to know that the business they are getting into has got a strong chance and so government had been paying annually for exploration but also we have been creating fiscal incentives to make sure that investments made into exploration can be written off if they are not generating revenues in the short term. Lastly, we always guarantee that investments which are made in exploration translate into acquisition of mining licenses. This is very important to guarantee that a company which carries out exploration will eventually get a mining license when they do make a mining license when they do get a discovery and they do need to get into operations. So, these things are giving guarantees, reduce significant risk and incentivize companies to consider mineral exploration in Rwanda.

CNBC: The conversation around having a minimum wage for miners which is part of the solutions that people in the mining sector are suggesting. It’s long overdue. What kind of work are you doing to make sure that this achieved?

CEO: The topic of minimum wage is a complicated one from different perspective as a policy. What we are encouraging companies to do are to ensure that there is minimum income to the workers that participate in the mining sector. And the starting point matters, so called initial conditions matter because when you start from a background where most of the miners were artisanal used to having independence of their own revenue associated with minerals extracted and sold sometimes they are also resistant to the idea of getting employed into employed income. Because when windfalls happen they get sufficient revenue that offsets what they could get as employed workers.

On the other hand, also there is an argument by mining companies! We are looking at, increasingly, the hybrid of having minimum number of employees who are salaried not just in administration but also in technical operations. And then having also a set of employees who are seasonal who prefer to work in the mining sector when it’s convenient to them and to be off from mining when they have other things to do for example on their farms and other things. And what that guarantees is that there is minimum revenue associated with their work. Lastly, even those who are seasonal and depend on their production for income we want to make sure that companies actually pay them fairly for the minerals they produced that they share fairly, equitably and their productions associated with inputs whether is explosives, safety, gear that they wear whether it’s feeding and other general infrastructure it’s fair deductions so that their take home is commensurate with time and labor they are putting in.

This is going to be their continuous work, it’s not going to be something that we can attain overnight. What we find though is that the investors in the mining sector also realize that the so called social license to operate is very important for their long term sustainability. And so, they have a shared objective in ensuring that their labor force is also happy and getting fair revenue from their operations.