Miners are reeling from financing challenges after most of their buyers stopped the pre-financing arrangement.
Mining sector players say the pre-financing model helped them at a time financial institutions could not finance them, and that this is likely to dampen a year for players at a time prices on the international market were promising to give good returns.
“The pre-financing arrangement has been holding fort for many mining companies, but this option has closed due to the pandemic, it is already hurting players and the industry,”
“Most of our miners don’t get financing from banks but from our buyers in this pre-financing model, however, since the pandemic broke-out they have been reluctant to provide the finances,” said Butera Frank, executive secretary ofRwanda mining association.
In the past two months of 2021, many mineral traders didn’t have cash to buy minerals, there were stocks but people were are not buying because of financial limitations.
The rise in mineral prices on the international market restored optimism for mining companies as they entered the New Year 2022, but they are now concerned that the financing limitations could affect their fortunes.
Mineral prices have been steadily recovering from the slump that started in 2020, which together with the pandemic related disruptions like cargo glitches had affected the sector. Mr Butera said although there have been challenges; the recovery of the prices has been a ray of hope in a sector whose prices have been volatile for the last few years.
He said the price of tin rose to $36000 per tonne, while coltan now stands at $1.7 per Ta, from $1.1 per Ta before the pandemic.
The three minerals fetched $31.6 million in revenues in the first half of 2020, down from $56.6 million in the same period in 2019, largely due to disruptions in the sector brought forth by the coronavirus pandemic.
Players noted that mineral buyers, especially makers of electronic devices, stopped purchase of minerals used in the manufacture of the devices for the better part of 2020 and early 2021 as production slowed down worldwide on back of the pandemic.
But even before the pandemic, Rwanda’s principal minerals were being sold at relatively low prices on the international market.
They fetched $99 million in 2019, down from $143 million in 2018 — which was the sector’s best performing period in five years.
From January to November 2021, tin prices rose from $21,920 per tonne to $39,159 per tonne, reaching the highest level ever, according to a report by a market research firm Index Box. That spike was instigated by a deficit of the metal due to rising demand from the electronics sector, while global production stagnated over the past decade.
Increased energy prices and high freight rates coupled with the limitation of metal smelting in China due to environmental restrictions further propelled tin prices.