VZCZCXYZ0000
PP RUEHWEB

DE RUEHLGB #0862/01 3541009
ZNR UUUUU ZZH
P 191009Z DEC 08
FM AMEMBASSY KIGALI
TO RUEHC/SECSTATE WASHDC PRIORITY 5793
INFO RUEHDS/AMEMBASSY ADDIS ABABA 0218
RUEHBS/AMEMBASSY BRUSSELS 0358
RUEHJB/AMEMBASSY BUJUMBURA 0457
RUEHDR/AMEMBASSY DAR ES SALAAM 1271
RUEHKM/AMEMBASSY KAMPALA 2047
RUEHKI/AMEMBASSY KINSHASA 0597
RUEHLO/AMEMBASSY LONDON 0371
RUEHNR/AMEMBASSY NAIROBI 1379
RUEHFR/AMEMBASSY PARIS 0630

UNCLAS KIGALI 000862 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ENRG ETRD PGOV OPIC RW
SUBJECT: RWANDA MINING REVIEW - NEW INVESTMENT, STRONG 
GROWTH 
 
REF: A. KIGALI 417 
     ¶B. KIGALI 818 
 
¶1. (U) Summary: Since privatization in early 2007, the 
Rwandan mining sector has experienced a surge in foreign 
investment and explosive growth of export earnings.  2008 
mineral exports are expected to grow to over $100 million 
from $70 million in 2007 and less than $40 million in 2006. 
While trans-border trade from the Democratic Republic of the 
Congo (DRC) continues to contribute significantly to total 
mineral exports, domestic mineral production and processing 
attracted $105 million in new foreign investment over the 
last two years and employs an estimated 50,000 Rwandans.  The 
current downturn in global commodity prices will likely 
negatively impact demand for minerals in 2009, but with lower 
energy costs expected by 2012 (ref a) the mining sector will 
likely continue to play a key role in generating export 
earnings and new jobs. End summary. 
 
 
Growing Exports 
--------------- 
 
¶2. (U)  In the last five years, Rwandan mineral exports have 
exploded both in terms of total revenue and as a percent of 
total exports.  From 2003 to 2008, mineral exports grew from 
$10 million (less than 20 percent of total exports) to over 
$100 million, representing 40 percent of total export 
earnings.  In the last two years, mineral exports have 
outperformed the combined total exports of traditional 
exports tea and coffee (in 2008 total coffee and tea exports 
are expected to be $75 million).  The key minerals being 
mined and traded in Rwanda are cassiterite (used for tin), 
wolframite (used in tungsten), colombo-tantilite (used for 
coltan) and gold.  There is also increasing interest in local 
mining of construction materials such as granite, clay, 
Kaolin (used in ceramics) and peat. 
 
¶3. (U) Rwanda is part of the same geological formation of 
highly mineralized Kibaran Rocks that extends from northern 
Tanzania through western Uganda to southeastern DRC and 
Angola.  Mining and exploration concessions are located 
throughout Rwanda, but until recently exploration and 
exploitation were largely artisanal.  Weak management of 
government-owned mining concessions contributed to limited 
investment in new exploration.  Similarly, lack of investment 
capital and high energy costs resulted in small scale, labor 
intensive and inefficient production sensitive to world 
market fluctuations. 
 
 
Growth Fueled by Privatization and New Foreign Investment 
--------------------------------------------- ------------ 
 
¶4. (U) The privatization of the sector in 2006 brought in new 
foreign investors to acquire 16 of 20 government-owned 
concessions, and stimulated new exploration throughout the 
country.  Russian, British, American, Austrian, German and 
South African companies are actively expanding production at 
previously government-owned mining concessions and using 
modern exploration techniques to map new deposits.  According 
to statistics from the Rwanda Development Board, since 2006, 
foreign direct investment (FDI) in the mining sector has 
exceeded $100 million.  Investment has gone towards basic 
mining equipment (such as jack-hammers, compressors, 
explosives and backhoes), training in basic safety and mine 
management, infrastructure (roads, buildings, community 
clinics) and new exploration.  Such basic investment has 
Qclinics) and new exploration.  Such basic investment has 
delivered impressive results.  In the last 18 months, South 
African-owned Eurotrade has increased wolfram production in 
its concession from 18 tons annually to over 400 tons and 
increased employment from 135 workers to close to 1,000 (ref 
b).  EuroTrade's Managing Director expects mine production 
will increase to 2,000 tons annually as the company 
introduces new equipment and mining technology. 
 
¶5. (U) Most of the development of the mining sector has been 
driven by private investors with negligible involvement by 
the government, IOs and NGOs.  World Bank Country Manager 
Victoria Kwakwa told conference attendees that the "World 
Bank is not heavily engaged in Rwanda's mining sector" and 
(after hearing presentations from the private sector) noted 
 
"the sector's potential for growth and economic 
diversification dispels the prevailing notion that Rwanda has 
no mining potential and that all exports are re-exports." 
The primary focus of the World Bank and GOR in the mining 
sector has been on legislative reform, regulatory reform and 
capacity building. 
 
 
A Closer Look at Key Players 
---------------------------- 
 
¶6. (U) Key private sector players in the Rwandan mining 
sector include British-owned African Primary Tungsten (a 
subsidiary of ABS Industrial Resources Group) Russian-owned 
ROGI Mining, Canadian-owned Kivu Gold, South African-owned 
Transafrika (owned by founders of Eland Platinum), 
Austrian-owned Wolfram Mining and Processing (subsidiary of 
Wolfram Berghart Hutton WBH), German-owned Natural Resources 
Development (H.C. Starck is the major shareholder), 
British-owned Metal Processing Association (subsidiary of 
Kivu Resources), American-owned Bay View Group and South 
African-owned Eurotrade International. 
 
¶7. (U) For most of these companies, the pattern of investment 
follows a similar trend beginning with basic up-grading of 
existing artisanal mining concessions -- including investment 
in infrastructure, equipment and training -- while undergoing 
more sophisticated exploration and feasibility studies to 
evaluate the economics of modern large scale production. 
Most investors are optimistic about the sector and are 
projecting sizable increases in investment and revenue over 
the next five years. 
 
¶8. (U) Metal Processing Association (MPA):  MPA is owned by 
Kivu Resources headquartered in the UK which in turn has 
interests in both the DRC and Rwanda.  Rwanda-based MPA 
operates a tin smelter in Gisenyi using raw materials 
produced both in Rwanda and from its sister company in the 
DRC, Mining and Processing Congo (MPC).  Through MPA, Kivu 
Resources is also a joint venture partner with the GOR in the 
21,000 hectare Gatumba Mining Concession.  Investment in the 
tin smelting facility and concession have exceeded $4 million 
since 2006 and been focused on infrastructure development and 
advanced geological modeling and resource estimation.  Based 
on planned investment, the group projects an increase in 
annual turnover from $21 million in 2008 to $85 million in 
¶2012. 
 
¶9. (U) Transafrika:  Transafrika is a minerals (primarily 
gold) exploration company domiciled in Mauritius with 
exploration permits covering 220,000 square kilometers in 
Africa.  In Rwanda, Transafrika has three exploration permit 
areas totaling 100,000 hectares granted by the GOR in 
November 2007.  Management asserted to conference 
participants that Rwanda fulfills key investment criteria 
including a stable country operating environment, clear 
mineral rights legislation and the potential for discovering 
sizable deposits.  Since 2006, the company has invested over 
$13 million in its concession including geological modeling, 
soil sampling and exploration drilling. 
 
¶10. (U) African Primary Tungsten (APS):  APS is a subsidiary 
of UK-based ABS Industrial Resources Group which is active in 
specialty metals and has subsidiary operations in France, 
Germany, South Africa and Rwanda.  APS has been operating in 
Rwanda since 2002 and during the last 5 years has invested 
close to $28 million in the country including excavators, 
Qclose to $28 million in the country including excavators, 
tractors, water pumps and other mining equipment.  APS 
Managing Director J.P. Higiro told conference participants 
that annual yields of wolfram have increased from 80 tons in 
2004 to 800 tons in 2007.  The quality/purity of wolfram 
produced has also improved from 50 to 60 percent during the 
same period. The company employs over 500 direct and indirect 
hires. 
 
¶11. (U) Natural Resources Development (NRD):  Since 2006 NRD 
has invested nearly $40 million into five mining concessions 
covering over 32,000 hectares in west and south Rwanda.  The 
company employs 1,500 contract workers and has been upgrading 
access roads, reconstructing bridges and drainage canals, 
building housing and offices and equipping concessions with 
power and water.  The NRD Managing Director noted in a 
 
presentation honoring International Miners Day the company 
takes a long term perspective to its investment in Rwanda and 
is seeking to transform its concessions from an artisanal 
basis to modern technology.  NRD has also invested in 
advanced exploration techniques including use of ground 
penetrating radar. 
 
¶12. (U)  Wolfram Mining and Processing (WMP):  Since 2007, 
WMP has invested $12 million in its 5,635 hectare concession 
in Gifurwe, northwest of Kigali.  The company employs 900 
workers and is producing wolfram for the international 
tungsten market.  WMP's Austrian parent company markets 
tungsten for uses such as light filaments, and to harden 
metals used for armor and cutting tools.  WMP management 
noted that the tungsten market is closely tied to the auto 
industry and they expect demand for wolfram to drop in the 
near term as a result of the current global downturn.  Like 
NDR, WMP sees its investment in Rwanda as a long-term 
investment. 
 
 
Trans-border Trade Still Important 
--------------------------------- 
 
¶13. (U) Domestic mineral production represented approximately 
25 percent of total tons exported in 2007, the balance being 
minerals trans-shipped from the DRC (ref b).  According to 
Central Bank figures, however, raw material costs represent 
only 39 percent of the total value of exported minerals - 
thus much of the value of final exports is added in Rwanda. 
Added value such as smelting, processing, transport, taxes, 
financial fees, service fees and remunerations account for 61 
percent of the total value of mineral exports.  As Rwanda 
ramps up domestic production and adds processing capacity, 
the percentage of total export value derived from unprocessed 
minerals re-exported from the DRC is likely to decline. 
Assuming Central Bank numbers are accurate, we can roughly 
estimate the value of unprocessed minerals brought in from 
the DRC (before added value, fees and other re-export costs) 
in 2008 to be $25-30 million, less than one third of total 
exports. 
 
¶14. (U) The GOR is seeking to position Rwanda as a regional 
trading hub that will act a service center for the 
consolidation of minerals and light processing.  The GOR 
markets Rwanda to investors as a politically and economically 
stable state located in the heart of mineral-rich central 
Africa that can serve as a base for processing, logistics, 
administrative and financial services for the industry.  MPA, 
which imports cassiterite from its sister company in the DRC, 
smelts tin in Rwanda and exports tin ingots to its parent 
company in Europe, provides a model for this vision. 
 
 
Outlook 
------- 
 
¶15. (U) Export earnings and mineral production are likely to 
slump in 2009 due to recession in the advanced economies. 
Trans-border trade and Rwanda's artisanal mining industry are 
highly elastic and sensitive to global commodity price 
fluctuations.  However, foreign investment in the mining 
sector is likely to continue due to discovery of new deposits 
and long-planned-for modernization of existing concessions. 
Rwanda's political and economic stability is attractive to 
the long-term investment requirements of the mining industry 
and new mining legislation currently in parliament will 
further favor more private investment.  The growing demands 
of the domestic construction industry will also provide 
Qof the domestic construction industry will also provide 
incentives for the private sector to invest in the production 
of locally made building materials from exploitable domestic 
resources. 
 
¶16. (U)  A key deterrent to expansion of Rwanda's mining and 
mineral processing industry has been the country's high cost 
of energy, currently the highest in the region.  Transforming 
the industry from artisanal to modern technology requires 
plentiful and affordable power to run the compressors, water 
pumps, smelters and processing equipment.  New energy sources 
including methane from Lake Kivu, hydro and geothermal coming 
on line over the next five years (ref a) are expected to 
triple Rwanda's power generation capacity and reduce costs by 
 
half.  This is good news for the mining industry and will 
likely boost further investment in value added mineral 
processing. 
 
¶17. (U) Comment:  Rwanda's mining and minerals processing 
sector has been oft overshadowed by a history of illegal or 
quasi-legal trans-border trade with the DRC.  While some 
press and other observers suggest this illegal trade 
continues unabated, the GOR and many Rwanda-based minerals 
companies assert there is also a growing legitimate minerals 
trade between the two countries and an increasingly important 
extractive and processing industry in Rwanda.  The challenge 
for Rwanda is to leverage its symbiotic economic ties with 
neighboring DRC and expand legitimate border trade for the 
benefit of communities on both sides of the border.  With new 
energy sources becoming available in the near future, both 
countries have much to gain by expanding on this 
relationship. 
 
 
 
 
 
 
 
 
 
 
 
 
SYMINGTON