Phoenix Metals, a tin smelting plant, is going into receivership over a loan owed to I&M Bank Rwanda, which the company failed to service.
Managers at the plant blame a tough domestic and global operating environment for the delay in paying the loan.
An official at I&M Bank Rwanda told Rwanda Today that Phoenix Metals used the company’s assets as collateral and their loan payments have accumulated due to the company’s failure to service their debt.
The amount of debt they owe has not been made public but it is understood that the loan was used to finance the plant’s expansion and increase the capacity of its cassiterite-tin ore smelter.
Rwanda Today has independently learnt that by 2015, the shareholders of Phoenix Metals had pumped over $10 million as equity and debt financing into the firm.
Phoenix’ managers however say high operating costs coupled with a fragmented tin export market forced the company to export unprocessed minerals.
Receivership comes at the peak of a conflict with mining authorities after Phoenix continued to export raw ore in violation of the provisions of their licence.
“The Rwanda Mines, Petroleum & Gas Board wrote to Phonenix Metals about closing their operations because they were buying and exporting raw cassiterite in breach of the privatisation contract the two parties entered into in 2002, which required some value addition prior to exporting,” said Frank Butera, the executive secretary of Rwanda Mining Association.
A global requirement for smelting plants to adhere to strict traceability standards also contributed to the financial woes facing Phoenix Metals.
Conflict-free smelting certificate
By June 6, when Phoenix Metals was stopped from exporting raw minerals, the company had not secured a conflict-free smelting certificate to enable it to export freely to global markets. This means the tin smelted at the plant could not freely compete on the global market.
Mr Butera added that unreliable and expensive power was another reason the smelting plant found business uncompetitive.
“Every time the power would go off, the smelted tin would get spoiled and the process would have to be restarted, which added to the cost of power and damage to the furnaces,” said a former employee of the company.
Rwanda also has low volumes of cassiterite due to a fragmented business with pre-financed exporters competing for the tin produced in the coun.
“The low volumes of cassiterite mean the furnaces were being underutilised, a challenge that has made it hard for Phoenix Metals to attract an equity investor,” a former employee told Rwanda Today.
The country has two leading cassiterite exporters: African Panthers Resources and Boss Mining, which compete for minerals with Phoenix Metals.
Sector players’ urge the government to ban export of raw cassiterite to improve returns on investment in mineral processing. They say the country can earn premium prices from the export of processed minerals.
“A fragmented domestic mineral market, high operational costs coupled with a long process in securing a conflict-free smelting certificate have to be addressed in order for the business of running a smelter to be attractive,” said industrialists.
On whether there are investors interested in Phoenix Metals, Francis Gatare, CEO of Rwanda Mines, Petroleum and Gas Board, said there are several international companies that have shown interest in the country’s mining sector.
Interest in the country’s mineral sector has been boosted by the government’s strict enforcement of the traceability process, despite its financial implications.
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