The government has bought back Phoenix Metals, a tin smelter for Rwf1.2 billion to save its initial investments in the plant.

The government bought the plant through Ngali Holdings, a business arm of the Ministry of Defence.

“We bought the smelter from I&M Bank Rwanda through a bidding process, which attracted two bidders,” an official from Ngali Holdings told Rwanda Today.

Last year, Phoenix Metals was put under receivership over a loan owed to I&M Bank Rwanda, which the company failed to service.

The failure to pay the loan, showed the struggles the smelter was going through in a bid to stay in business even after the owners invested over $10 million in the plant.

Financial woes

The company’s financial woes were exacerbated when the Rwanda Mining Board banned the company from buying and exporting raw minerals in June last year.

The mining board accused the company of breaching the privatisation agreement, which restricted it to only process and export minerals from Rwanda.

With their major revenue source closed, the company could not service its loans, which resulted in its assets being auctioned.

The company’s financial woes were made worse by the low global mineral prices in 2013-2016, which exerted more pressure on the company’s revenue streams.

The company also failed to get a conflict-free smelter certification, which allows it to export the minerals freely in the global markets, coupled with unstable and expensive power, and shortage of minerals.

Analysts say Ngali Holdings has inherited some of these challenges. The company has to re-apply for conflict-free smelter certification, a lengthy and tedious process, which Phoenix Metals had started, but failed to secure.

However, Ngali Holdings has a competitive advantage partly because it is a shareholder in Rutongo Mines — the biggest tin concession in Rwanda — and this assures the smelter of a steady supply of raw minerals.

Trading data from the London Metal Exchange shows tin closed trading at $20.5 per kilo, however in Rwanda mineral exporters earn $10-$12 per kilo.

High transport costs

This is almost a 50 per cent loss in the value because of exporting minerals in their raw form.

Exporters are also incurring high transport costs. The average market price of transporting a container from Kigali to Dar es Salaam costs about $5,000 and for a container carrying minerals is slightly expensive.

Despite the challenges, Ngali Holdings ventures into mineral processing on a strong note as mining sector revenues hit an all-time high in the year ending December 2017.

Official data shows that export earnings from tourmalines and amethyst increased from $80 million in 2016 to $248 million in 2017.

The increase in the value of the gems helped boost mining sector growth by 21 per cent.