Region, What next for the big miners?
As 2022 looks to be this bull market’s peak for earnings and dividends, opinions are split about what comes next for major miners
It goes without saying that commodity cycles are tricky to time right. Even picking an indicator is tough – does a dip in copper or iron ore prices mean the worm has turned, or do low inventories in Chinese ports mean sales at Rio Tinto (RIO) and BHP (BHP) will be protected? These are blue-chip companies that will likely be buy-and-hold shares for most investors, but being clear on what is coming next is important.
The pressures on these companies are clear: rising costs and an uncertain macroeconomic landscape. And uncertainty here does mean a lack of clarity on the near-term future rather than just another way to describe a negative sentiment. China has remained committed to keeping Covid-19 cases low, with lockdowns still a fact of life for many people in the country. There were whispers of a step down in the harsh pandemic policies earlier this month, but so far it looks as though these will continue.
For the miners, this means lower demand from China, the key global industrial metals buyer. Rio and BHP are the most exposed, given their reliance on iron ore, while Anglo American (AAL) and Glencore (GLEN) have more varied portfolios, with proportionally more copper as well as other base metals like zinc and lead, Investors Chronicle writes.
EU wants to mine its way out of reliance on China for raw materials
The EU knows it’s heavily dependent on foreign powers like China for valuable materials needed to power its green transition.
Europe wants to start mining its own backyard in an attempt to end reliance on China for raw materials crucial for green technologies like electric car batteries.
But for the Europeans who live near mineral-rich grounds, opening new mines — with their potential for local environmental damage — is out of the question.
“It’s been my family’s home area since time immemorial,” said Carina Gustafsson, a campaigner who lives near a major reserve of rare earth minerals in southern Sweden that’s a potential mining site. “I really feel like it’s personal — this mining is threatening in so many ways.”
The pushback from campaigners like Gustafsson around the bloc is causing a headache for EU leaders.
Critical raw materials like lithium, cobalt and rare earth elements are found in technologies ranging from electric vehicle batteries to wind turbines and solar panels — tech that lies at the heart of the bloc’s push to go carbon neutral by 2050.
For now, the EU depends in large part on autocratic regimes for its supply of these materials, especially China, which provides nearly 98 percent of the EU’s supply of rare earths.
“Lithium and rare earths will soon be more important than oil and gas,” European Commission President Ursula von der Leyen said last month. “Our demand for rare earths alone will increase fivefold by 2030.”
To avoid the risk of being cut off, Brussels is cooking up new legislation expected in the spring to diversify where it gets these materials from, including by starting new mining projects.
Yet in order to ensure a steady pipeline of such materials and avoid potential blackmail by autocratic providers, the bloc needs to revive certain industrial activities that its environmentally conscious residents would prefer not to have to worry about again.
The EU woke up to its reliance on foreign powers for this green gold dust late in the game, developing its first strategies on raw materials in the late 2000s.
“The overall situation in terms of China has become even worse over time and around 80 percent of all critical raw materials [are] coming from China,” said Frank Umbach, research director at the European Centre for Climate, Energy and Resource Security at King’s College London.
The country entered the raw materials market in the mid-1980s and quickly became a major supplier.
Part of China’s strategy is not only to control raw material mines at home, but also abroad, he said. The Democratic Republic of Congo — where Chinese companies have already invested billions of euros — supplied about 70 percent of the cobalt in 2021.
Beijing has a “record of blackmailing this dependency,” Umbach said, pointing to a two-month embargo China imposed on rare earth exports to Japan in 2010. Tokyo had captured a Chinese fishing boat in Japan-controlled waters that have long been also claimed by China.
Such incidents risk becoming more frequent, Umbach warned.
The European Commission is acutely aware of the danger. As part of its plan to avoid replacing one dependency with another, the EU executive seeks to establish priority mining projects within the bloc — and ensure they can benefit from streamlined permitting procedures and private investments.
Many countries — including some with ongoing mining projects — support the plan. A Franco-German paper calling for greater financing for raw material production within the bloc last month received support from several countries including Denmark, Ireland, Poland, Greece, Portugal, Finland, Belgium and Romania.
But while the EU executive may have these countries on board, it faces a harder time convincing local residents.
Mining still has a “dirty” image, conceded EU Internal Market Commissioner Thierry Breton in a blog post. Environmentalists warn that the possibility of opening new mines within the block risks harming biodiversity and polluting groundwater. That’s making local residents aware of the environmental cost of the green transition — currently being paid by communities on the other side of the globe.
The trade-off is being felt acutely in Jönköping county, Sweden, home to the EU’s most notable deposit of heavy rare earth metals, an area of forest and farmland named Norra Kärr.
Campaigners have long fought back against attempts to mine it. The proposed site is located nearby a Natura 2000 area — meaning it’s protected by EU law — and uphill of Lake Vättern, Sweden’s deepest and second-largest lake which provides 250,000 people in Sweden with fresh water.
Most recently, Canadian company Leading Edge Materials presented a plan for an open cast pit. The proposal has sparked intense debate in recent years — but campaigners have so far succeeded in staving off the plans.
“It has been the sustaining life force and still is — not just for humans but for farmlands,” said Gustafsson, the Swedish campaigner. “[The plan] is mental to me. Mentally insane.”
The situation is a microcosm for the puzzle of how to marry the hunt for green transition technologies with protecting valuable water sources, biodiversity and sustainable agricultural livelihoods, said geologist Julie Klinger. “The potential [environmental] fallout from [mining Norra Kärr] is really quite serious,” she added.
The mining project’s future remains in limbo.
The project is far from the only contentious mining plan in the EU. From lithium mines in Western Spain and Central Portugal, to a copper mine in Romania — where opponents have been buying up land within the project development area — campaigners could hamper the EU’s attempt to mine its way out of China’s monopoly.
Umbach, the King’s College London researcher, said that where “promising projects” emerge in Europe, they run “immediately also into local environmental protests. So it’s obviously difficult.”
Other aspects of the Commission’s plan might hold more promise, according to Klinger, the geologist. While the EU may need to open new mines, she said, this should be a “distant third [choice] behind reprocessing waste and behind recycling,” adding that Sweden is also reprocessing mining waste to extract rare earth elements.
In addition to strong pockets of local resistance, mines can take a long time to start producing, she pointed out — the EU needs new supplies of critical raw materials yesterday.
NGOs also want to see the EU think more about how to reduce consumption, by promoting public transport over the production of new electric vehicles, for example.
“The EU really focuses on the supply side, but you should really think about the demand side, it’s much more important,” said Benjamin Sprecher, an assistant professor at TU Delft.
He expects the EU to go through “a long period of making many mistakes … The question is whether we can afford that long period”, Politico writes.
Coal trade issue of China and Australia hurting Mongolia’s environment
Last year China turned its back on Australian coal; in October, customs officials in China began rejecting shipments of coking coal from Australia. Beijing claimed the turnbacks were due to “environmental quality” concerns, but the act was largely viewed within the context of the ongoing diplomatic spat between the countries.
It proved to be bad news for both economies. Overnight, Australian coal operators lost access to one of their most lucrative export markets, worth $10.4 billion the previous year. In the months that followed, soaring electricity prices left much of China’s southeast without heating or electricity.
While the decision hurt both Australia and China, many third parties benefited, as they stepped in to plug China’s coal shortfall. Countries as far afield as Colombia and South Africa scrambled to send coal to the mainland; more established partners, including Indonesia, Russia, Canada, and the United States, also upped existing shipments dramatically. But with China’s northern steelmaking hubs crying out for coking coal, Beijing couldn’t afford to wait a month or more for shipments to round the Indian Ocean — and so, it turned to Mongolia as a band-aid solution to short-term demand.
For reasons that remain unclear, this “band-aid solution” has continued well into 2021. In March, Mongolian coal exports to China were up by 4,270.5% compared to the previous year. It’s a volte-face from 2019, when Mongolian government policy was squarely aimed at breaking the country’s addiction to coal. With as many as 1,000 trucks heading for China on a daily basis, it seems the Mongolian administration is now committed to the opposite.
Since China began freezing out Australian supplies, the coal business has boomed. The Mongolia Energy Corporation recently announced last month that it has doubled its profits year-on-year, and the Mongolian Mining Corporation similarly announced it doubled its coal export volume across the second half of 2020. Investor confidence was so high that even an Australian-owned venture stood to reap the rewards — Aspire Mining Ltd, which mines entirely within Mongolia, shot up twofold on the Australian Stock Exchange (ASX).
Few in Mongolia, though, are celebrating this development. The nation’s capital, Ulaanbaatar, consistently ranks atop lists of the world’s most polluted cities, and since last October, coal mines perched on the city’s fringes have been kicking up much more chemical and dust pollution than usual.
“To give you an idea of the scale of the issue,” says Ankhbayar Ganbold, country director (Mongolia) at the Nature Conservancy, “Baganuur Coal Mine, which sits within the city limits, produced 4,600 tons of CO2 in December 2019. Across the same month last year, it churned out as much as 18,400 tonnes.”
“The other coal mine within Ulaanbaatar’s nine düüregs, or districts, is Nalaikh — which, at least officially, ceased operations in the 1990s. Since early December, it’s been up and running again. In fact, it’s now the primary local contributor of CO2 emissions and particulate matter (PM) 2.5.”
In the summertime, air quality in Ulaanbaatar often hovers around levels deemed safe, per WHO guidelines. But in the winter, when temperatures regularly drop below minus-40°C, it averages a pollution level 27 times worse than the safety benchmark. Little wonder then that, in October, air quality in Ulaanbaatar again ranked as the worst in the world.
The competition for the list, in 2020, wasn’t all that stiff — lockdowns and reduced transport activity due to COVID-19 saw skies clear over some of the world’s most polluted cities. But “this just hasn’t been the case for Ulaanbaatar,” says Dmitri Sokov, head of international development at the Mongolia Nature and Environment Consortium. “In fact, thanks to the increase in coal exports, it’s been an atypically poor year in terms of air quality — PM 2.5 levels were up 132% across the winter period.”
Much like Beijing, Ulaanbaatar sits at the bottom of a valley, which traps smog beneath a blanket of warm air. And there’s plenty of smog around to get trapped, since residents of the city’s “ger” districts, who live in yurt tents without access to electricity, have traditionally had to burn sacks of cheap coal in order to cook and stay warm. On average, a ger household burns three tons of raw coal per year.
Hugalu Altan, a textile worker who lives in the western Tolgoit district, recently told SupChina that the past winter was noticeably worse than those in previous years. “It’s horrible living here, particularly this year,” he said. “On cold mornings, I watch the gray smoke roll out toward the hills. That’s why many of the young people like to move away…but this year, they’re stuck.”
Local politicians have been promising for years to fix the issue. They claim that a ban on raw coal — and subsidy on refined coal briquettes — saw a 60% reduction in pollution in 2019. But those gains haven’t carried over to 2021, according to Hugalu. “No one could afford to buy even the cheap [illegal] coal this year,” he said, amid city-wide lockdowns. “So instead they burnt trash.”
In a sense, he’s luckier than others. Living and working on the city’s western fringes, Hugalu is tucked far away from the coal-fired electric plants which ring the east. Many of these, says Sokov, have also benefited from excess coal destined for China. “It’s been a dramatic increase, so it’s natural that there is going to be some degree of internal transfer. I think this is, in part, why we are seeing levels of pollution this year that don’t quite tally with the picture from the last two.”
“It’s a three-pronged problem,” he says, “but the government focuses only on restricting domestic usage, while letting industry run rampant.”
China’s dominance of strategic resources
Cobalt and germanium are all both rare ores and vital for the production of everyday items like smartphones, solar panels and electric vehicles.
The European Union has identified 30 such resources — which cannot currently be substituted — as crucial for the defense and renewables sectors, as well as in the manufacture of robotics, drones and batteries. Unlike steel, cement and oil, the global production of many critical raw materials amounts to just a few thousand tons per year. And it is controlled by only a handful of countries.
Where does all the ore come from?
Though not readily available across the globe, there are several critical resources hot spots. South Africa’s north has reserves of platinum and vanadium, while Congo is home to cobalt deposits and the United States extracts beryllium. China, meanwhile, has mining access to two-thirds of the different 30 critical raw materials, including antimony, baryte and rare earth elements. The unequal geographical spread of critical raw materials is reflected in market share. China is one of the top three suppliers of many of the elements, way ahead of the United States and Russia. This dominance is partly attributable to deposits across China itself, but it is also down to deliberate planning.
China’s plan to dominate the markets
“China has strategically developed mining and processing. […] These days it’s the Shanghai Metal Exchange that’s important, not the London Metal Exchange,” said Hanns Günther Hilpert, head of the Asia Research Division of the German think tank SWP.
“There is a quote from Deng Xiaoping: ‘The Middle East has oil, China has rare earths.’ But that was just the beginning.”
The 1987 quote by China’s former leader described the country’s global market dominance not only in the mining sector but also in the processing industry. Smelting, for example, is also primarily done in China.
“The country has built a know-how that is unique worldwide,” said Hilpert. “Even when alternative deposits are mined, most of the processing take place in China — before being exported abroad again.”
That makes China both the biggest producer of critical raw materials, but also the leading importer of those mined elsewhere. To secure yet further direct access, Chinese companies invest in foreign mines, extracting cobalt in Congo or platinum in South Africa. It’s a strategy Beijing applies to resources China lacks, as well as to those it has in abundance — such as fluorspar or silicon metals used in solar panels.
According to Hilpert, besides controlling supply chains of critical raw materials, China’s dominance has been facilitated by lax regulations that allowed it to neglect environmental follow-up costs and pay low wages. But this dominance is also obtained by the use of export restrictions and by offering subsidies for companies to build factories — all to promote its processing industry and technology providers. This allows China to fight off competitors. “Ultimately, the Chinese have been able to force other suppliers out of the market with ruinous price competition,” Hilpert said.
The 10 biggest suppliers cannot keep pace, and their collective share of global production is just 35%, as opposed to China’s 45%.
Risks for producers and purchasers
China’s dominance isn’t the only concern for future supply.
Many materials are mined in Asian or African countries characterized by civil unrest, corruption or authoritarian leadership. Cobalt is a prime example. Almost 60% of global supply originates from Congo, where internal conflict has been rife for decades. As such, cobalt is a so-called “conflict mineral,” meaning it is subject to closer public scrutiny by dint of being extracted in a place of unrest and sold to perpetuate fighting. There are question marks over the future supply of a further 10 critical raw materials quarried in countries with non-independent courts and high corruption rates. The concerns are around antimony, bismuth, gallium, germanium, light and heavy rare earths, which are mined in Tajikistan, China, Russia and Laos as well as magnesium, niobium, phosphorus and tungsten found in Kazakhstan, Vietnam, Russia and China. They can be seen in the bottom left quadrant of the following chart.
Experts agree their future supply could be affected by nepotism, undemocratic leadership, trading restrictions, civil unrest or even inner-state military conflicts.
The possible consequences for the processing industry include disrupted supply chains, high downtime costs for halted production and boycott calls by consumers when products are publicly associated with human rights violations. Such risks affect producers and buyers alike. Industrialized economies suffer from a lack of resources for future technologies, while mining nations stand to lose income and paid jobs. In 2019, for example, the Swiss mining company Glencore announced the closure of its Mutanda Mine in southern Congo due to higher taxes, rising costs, a lower world market price of cobalt and the increased pressure to stop importing the metal from a war zone. Thousands of workers could lose their jobs. However, these plans have not yet been implemented. The mine is “on maintenance,” Glencore said.
EU plan: Mining in Europe, a corporate alliance and the WTO
In its capacity as a buyer, the EU is currently developing a new strategy to ensure “open and unrestricted trade in raw materials,” said a spokesperson for the defense industry and space division at the European Commission.
“When other countries restrict the export of critical raw materials, the EU takes the necessary action to get the export restrictions removed,” the spokesperson said.
In 2012, Europe, the US and Japan won a case brought to the World Trade Organization (WTO), that forced China to drop export restrictions on critical raw materials.
In February of this year, following a request by the EU, the WTO established a panel to assess Indonesia’s export restrictions on raw materials.
To reduce its dependency on external suppliers, the EU is pursuing two main approaches. According to its 2020 action plan, the bloc proposes diversifying the sources of its raw materials — including though the use of deposits within the EU. The EU Commission spokesperson said member states have been asked to identify mining and processing projects within their territories “that can be operational by 2025.”
The mission of the European Raw Materials Alliance — a network largely consisting of mining companies — is to financially support existing new mining sites or to establish new ones “to increase EU resilience in […] value chains, as this is vital to most of EU industrial ecosystems, such as renewable energy, defence and space.”
The second main approach is to “reduce dependency through circular use of resources.” It’s disputed whether recycling will have a significant impact, or whether industries will ultimately have to find substitutes.
Aspire Mining in Mongolia to benefit from China’s shift away from Australian coal
China recently introduced tariffs on Australian goods including wine, barley and beef and the unofficial coal ban has only increased tensions between the two countries.
Aspire Mining Ltd is the only ASX-listed company to have coking coal assets in Mongolia and could be well-placed to benefit from recent speculation that China is shifting away from Australian coal.
The company owns the world-class Ovoot Coking Coal Project, and while rumours around the Chinese sentiment focus on thermal coal, the company experienced a sharp share price bump last week as investors anticipated a complete coal ban. The company sat at around 7.2 cents per share and after Chinese State Media alluded to restrictions on Australian coal and a refocus to prioritise imports from Mongolia, Russia and Indonesia, the share price doubled before levelling out at around 8.6 cents.
Coal market in Mongolia
Mongolian coking coal export volumes to China have been recovering from a border shutdown between the two countries earlier in the year. For the six months ended June 2020, China imported 7.2 million tonnes of coking coal from Mongolia (a 56% decline from the prior year) while imports from Australia rose 65% year-on-year to 24 million tonnes. However, for the balance of the second half of the year Mongolian coking coal exports are expected to revert to more normalised levels while Australian exports to China slow. In September 2020 Mongolia exported 3.9 million tonnes to China, which represented 58% of China’s coking coal exports. In contrast, Australia exported just 2 million tonnes to China that month. The first news of curtailments to Australian coal imports was reported in October, placing Aspire in the perfect position to benefit from any increase in Mongolian exports going forward.
Ovoot Project development
The company is targeting early production of washed coking coal from a first-stage development of the Ovoot Project, known as the Ovoot Early Development Plan (OEDP). The start of development is linked to the completion of the Definitive Environmental Impact Assessment (DEIA), which has been impacted with access the site to commence the ground activities halted by the deferral of local community engagement meetings due to COVID-19 control measures.The OEDP and pre-feasibility study is focused on a truck and rail operation to deliver up to 4 million tonnes per annum to end markets in China and Russia.
September trial shipment
During the September quarter, a trial shipment of 3,300 tonnes of coking coal was moved by rail from an existing mine in Mongolia to the city of Ulanqab in China, which after beneficiation will be railed further to Tangshan and the Port of Caofeidian. This is an important target market for Ovoot coking coal as the company plans to truck coking coal from the mine site to access rail at the city of Erdenet.
Strong financial outlook
At the end of the September quarter, the company was fully cashed up, with a cash balance of A$38.5 million to fund the Ovoot Project development and no debt. This strong financial outlook is partially due to a $33.5 million placement in September 2019, which saw major shareholder Tserenpuntsag Tserendamba increase his holding to 51% and strategically reposition Aspire as a Mongolian led company. Notably, the placement price was 2.1 cents per share, and with a share consolidation of 10 to 1 in December 19– makes for a placement price the equivalent of 21 cents today which is substantially higher than the current share price.
Funding commitments through to production
In addition, financial support is secure with Tserenpuntsag supplying a letter of intent around provision of a corporate guarantee for up to $100 million to support future project financing for the OEDP and pro-rata equity contributions to maintain a 51% shareholding in Aspire alongside all shareholders to fund Ovoot into production. The company is confident that the development of the Ovoot Coking Coal Project will leave Aspire well placed to take advantage of any shift from China away from Australian coal.
Zijin copper production to rise because of its operations in gold-copper mine in Serbia
The Chinese group injected $350 million in the capital of Serbian copper mining and smelting company RTB Bor in December 2018, acquiring majority ownership, and renamed it to Zijin Bor Copper.
China’s Zijin Mining Group expects mined copper production volume to increase by up to 11% in 2020. This increase is backed by the expansion of the company’s production capacity in Serbia.
“Mined copper production volume will increase 7%-11% in 2020 benefiting from ramp-up of Bor copper mine in Serbia,” Standard and Poor’s said in a press release.
Production commencement of Timok gold-copper mine in Serbia and Kamoa-Kakula copper mine in the Democratic Republic of the Congo will contribute to another 35%-40% copper volume addition in 2021, Standard and Poor’s added.
The ratings agency has revised down the outlook on the ‘BBB-‘ long-term issuer credit rating on Zijin to negative from stable, due to the risk that the global coronavirus pandemic or a disruption to new-projects ramp-up could derail the company’s deleveraging trend in the next 24 months.
In January, Zijin Bor Copper, the Serbian unit of China’s Zijin Mining Group, said it targets a profit of $8.5 million (7.7 million euro) this year. The company plans to process 437,000 tonnes of copper concentrate and produce 122,000 tonnes of anodes, 90,000 tonnes of cathodes,370,000 tonnes of sulphuric acid, 1,833 kg of gold and 11.9 tonnes of silver in 2020.
Zijin Bor Copper to start production of copper ore at the Novo Cerovo mine
Deputy general director Hu Shaohua said that the Serbian unit of China’s Zijin Mining Group, plans to start production of copper ore at the Novo Cerovo mine in June. Zijin Bor Copper has purchased a new jaw crusher for Novo Cerovo and a tertiary crusher was ordered for producing finer ore in the mill sections, Hu Shaohua said.
“In accordance with the Serbian legislation and after obtaining all the necessary permits and licenses, access roads to the mines were made, numerous machinery was purchased and about 200 young people were hired,” Shaohua said, as quoted in a statement by Zijin Bor Copper.
In January, Serbian media reported Zijin Bor Copper plans to invest $800 million (705 million euro) in expansion of its production capacity in Serbia in 2020. Zijin aims to launch a project for expansion of the Veliki Krivelj and Majdanpek open-pit mines and to launch an investment aimed at opening the Novo Cerovo copper and gold mine this year.
The Chinese group injected $350 million in the capital of Serbian copper mining and smelting company RTB Bor in December 2018, acquiring majority ownership, and renamed it to Zijin Bor Copper.
Kyrgyz authorities scrapped a Chinese investment project after mass protests
Mass protests broke out against a planned $275mn logistics centre. Local residents have protested several times since January against the project, with the latest demonstration involving hundreds of protesters occurring on February 17 near the village of At-Bashi in Naryn Region.
Artur Baiterekov, head of Kyrgyzstan’s Naryn Free Economic Zone, was cited by RFE/RL as saying late on February 17 that the deal with China was off. The Kyrgyz-Chinese At-Bashi Free Economic Zone Joint Venture subsequently stated that the investment contract had been rescinded because “it is not possible to work on a long-term large project in circumstances” in which part of the local population opposes the construction of the logistics centre.
Overall distrust of China among Kyrgyz locals has been amplified by worries over how the Chinese might roll out major projects under Beijing’s huge Belt and Road Initiative for modern trade transport corridors as well as by the treatment of ethnic-Kyrgyz minorities—they are among Muslim groups that have been placed en masse in “reeducation camps” in China’s Xinjiang region. The camps are also said to hold thousands of ethnic-Kazakhs and over one million ethnic Uyghurs. Chinese investors have lately faced similar hostility in Kazakhstan to the north of Kyrgyzstan.
The agreement on the Chinese logistics project was reached during Chinese President Xi Jinping’s June 2019 visit to Kyrgyzstan. The logistics centre was expected to house a network of production facilities and small businesses that would be granted trade benefits.
The rally’s organisers said over 2,000 people took part in the rally. However, the government’s envoy to the region, Emilbek Alymkulov, said only 700-800 people took part, downplaying the popularity of the demonstration.
“No Kyrgyz Land To China!”
The demonstrators held large banners such as “We Are Against the Logistics Center,” and “No Kyrgyz Land To China!”
Last year saw several protests in Kyrgyzstan against Chinese investors. Protests last August led to violent clashes between Chinese workers and Kyrgyz villagers at the Chinese Zhong Ji Mining-operated Solton-Sary gold mine. Dozens were injured. The conflict started brewing in July after locals complained that the Chinese mining firm had contaminated the local environment in a way which led to the mass death of livestock. Authorities said they found no chemicals or high levels of radiation after testing soil samples.
The ex-Soviet state has also found itself in a tense situation with another Chinese gold miner, Full Gold Mining, in 2018 and again in January this year. The investor was confronted by angry Kyrgyz villagers at the Ishtanberdi mines. They staged protests and roadblocks and engaged in illegal “ninja-mining”.
Some 370 workers at the mines subsequently refused to accept amendments to contracts which cut salaries. The workers in the contractual dispute may not have done anything wrong, but the row again highlighted the inability of Chinese companies to enter the Kyrgyz mining sector with any kind of ease and hinted at the wider problem of corruption among officials.
Zijin Company in Bor, environmental issues lead to court in Serbia
The Ministry of the Environment initiated proceedings against Zijin Bor Copper for the release of hazardous substances into the air in November 2019 and January 2020. The ministry has controlled the company several times, and at least five times it has identified failures since the mining basin was privatized in late 2018. While the authorities shift responsibility to each other, the lives of 45,000 Bor citizens are endangered.
At the end of one working week, an employee at Zidjin, formerly RTB Bor, waited for an unpleasant surprise at the door of the administration building – their fellow citizens whistled and shouted: “You betrayed the city. ” With the support of residents of the surrounding towns and political activists, on November 15, 2019, part of Bor residents protested over months because of pollution coming from the mining basin. With the message “Our Health or Your Profit” and with face masks, the Chinese investor was asked to reduce production volumes and thus the air pollution that suffocates them.
“Sulfur dioxide directly damages the health,” Dr. Dragica Radosevic addressed the event. Heavy metals such as arsenic, which can also lead to malignant tumors, are even more dangerous, he explains.
Katarina Vaskovic, a protest participant, complained to the media that life in Bor was quarantined.
“Our children live in quarantine, we can only take them outside when we estimate that there is not so much smoke. Every other kid in the neighborhood gets an asthma pump, ”Vaskovic said.
The protesters supported the speakers for a full two hours.
However, on the day of the protest, Bor was not contaminated. The air did not scratch his throat, and eyes did not tear, as Bor residents otherwise claim, and there was no need to close into homes. Local clean air is explained by the decline in Zidjin’s production of copper and precious metals – because of protests and television cameras.
Data obtained by the Center for Investigative Reporting in Serbia (CINS) confirms that there was no excessive pollution on the day of the protests, as well as for the next five days, but then came back – stronger than the Air Protection Act allows.
One week after the protest, environmental inspector Emila Tosic visited Zidjin and found that sulfur dioxide (SO2) concentrations had gone up to 4.6 times the statutory limits during those two days, November 21 and 22. In some hours, the amount of SO2 in the air was 8.3 times higher than allowed, according to the inspector’s report. SO2 is a gas of sharp odor that causes frequent coughing and pharyngeal irritation. It is the cause of respiratory and cardiovascular diseases and is most harmful to children, the elderly and people with chronic lung diseases.
Pollution was measured just a five-minute walk from the mining pool gate, at a station maintained by the Environmental Protection Agency (SEPA) in the city park.
In January 2020, the inspection controlled Zidjin and found the same omissions, the documentation obtained by CINS shows.
Due to the release of hazardous substances into the air and the company did nothing to reduce pollution, the proceedings before the Commercial Court in Zajecar against the company Zidjin and the deputy head of the TIR branch causing the problem, Boban Todorovic. They are charged with an economic offense for which a fine of between 1.5 and 3 million dinars has been imposed, and the court can impose a sentence commensurate with the damage done.
Nataša Djereg from the NGO Center for Environment and Sustainable Development (CEKOR) believes that such punishment does not help:
“Our fines are ridiculous – of course it pays for all polluters to continue to pollute, especially at such large plants, to pay the fine and move on. A fine is not a measure, the penalty would be to stop production. ”
Former head of the TIR branch, Paun Jankovic, in an interview with CINS, said stopping production was not in the interest of the majority owner – currently China’s state-owned Zijin International Finance Company Limited (63%), while the Serbian government is the second largest co-owner with 36.9%. Cessation of work means less income, but it can affect problem solving, Jovanovic explains:
“There are technical solutions – to urgently eliminate the causes of this bad show. If necessary, stop production for a week, two weeks, mechanically repair what is needed and then go back to normal. ”
Zijin’s earlier omissions
This is not the first time that Zijin, formerly RTB Bor, has not adhered to the rules. Since the privatization of the mining basin, in December 2018, Inspector Tosic has noticed at least five times various omissions.
As early as April 2019, the inspector had ordered the company to take action against air pollution of the environment, human health and the environment, because it emitted excessive SO2, reports CINS reported. Zijin then explained in a letter to the Ministry of Environment that the power outage had caused pollution.
However, control a few months later, in August, showed another omission – Zijin did not have a system for wet dust removal during the transportation of tailings on the Bor mine, which also threatened human health and the environment. Zijin was ordered to solve the problem, and the company later told the Ministry that a dust suppression system had been installed, which was put to trial.
In November 2019, CINS sought an interview with Zidjin on the topic of air pollution, to which the company responded with a press release. It says that by the end of the year, the company will have a total of five SO2-neutralized dust spray machines. Documentation obtained by CINS shows that by that time, two of the machines purchased had been in operation for about two months, but pollution data showed that it had no significant effect on the reduction of sulfur dioxide – in October the number of days with more SO2 in the air it was slightly smaller.
Zijin announces other investments – a dust and exhaust gas collection plant, and by the end of 2021 the construction of an additional facility to ensure that “the emission of gases is always and fully in line with the prescribed standards”.
Bor residents are not satisfied with communication with the Ministry, as they do not receive answers on measures taken to reduce air pollution.
From a recording of a phone conversation between activist and chairman of the Dveri District Committee, Sasa Stankovic, with Aleksandar Blagojevic of the Ministry’s inspection sector, posted by Bor activists in October 2019 on Facebook page 1 of 5 million Bor, it appears that the inspection does not go out on the field exploration at all but to notify Zijin about the pollution by phone as part of the procedure.
Blagojevic explained that the inspector “called the company and told them that there were exceedances of one-hour values and that they should reduce production or put more fresh raw material than slag.” He also stressed that there is a legal obligation for the City of Bor to adopt a Short-term Action Plan that specifies when Zijin should stop production for several hours or days.
From Municipality they say the Short-term Action Plan has nothing to do with the work of the Republic Inspectorate.
“The inspectors are known to work. When any accident occurs, the inspector goes out to see what is going on, the real record, measures are taken regardless of the Short-term Action Plan. We will see when we come up with a Plan, how much we will be able to influence the work of the company, “said Ljiljana Lekic of the City of Bor’s Environmental Protection Office.
She explained that they started drafting the Plan and that representatives of local environmental associations, including those organizing protests, are involved. Still, Lekic says the plan will only provide guidance for solving the problem.
Toplica Marijanovic, formerly Deputy Director of Environmental Protection at RTB, says the action plan is not binding, and even the inspector cannot ask the polluter to implement it.
“This is an effort for the Ministry, or the state, to shift all responsibility for the state of air quality to local self-government, and local self-government has no power or ability to react in any way in industrial and mining facilities for which the state license is issued,” Marijanović said.
In the meantime, pollution is still present in Bor. SEPA issued a warning that they were dangerous to human health on January 24 and 26 due to the concentration of SO2 at two measurement sites.
While Aleksandar Milikic, Bor Mayor and SNS official, says the pressures are political because the protest is led by Alliance for Serbia member and Dragan Djilas associate, Irena Zivkovic, she, along with three other activists, including Sasa Stankovic from of the Dveri movement, in late November, filed criminal charges against the director of Zijin Bor Koper, Long Ji, the mayor of Bor, and the Minister of the Environment, Goran Trivan.
The Ministry did not respond to CINS’s questions regarding local government control over the adoption of the Short-term Action Plan, or whether it would be able to order production to be halted in Zidjin.
New owner – new pollution
According to the regulations, SO2 in one measuring point may be exceeded only three days a year. It has not been respected in Bor for years. The metering station in the city park, near the mining basin, showed SO2 pollution for an average of five months in 2014, to a total of 13 days by 2018, and then jumped to 40 with a Chinese investor, SEPA data shows.
The findings of the Bor Mining and Metallurgy Institute’s 2018 report are not encouraging. There were more than allowed SO2 and harmful PM10 particles on an annual basis, most commonly affecting blood and respiratory diseases. Arsenic was 24 times more than allowed in Bor. Pollution in Serbia is in many places above the legal limit.
High concentrations of pollutants affect the health of Bor residents.
About two-thirds of pre-school children and half under the age of 18, who in 2014-2018 sought the help of a doctor, had problems with their respiratory organs. They most often suffered from sore throat and tonsils, according to data on the health status of residents of the town of Bor published by the Institute for Public Health Timok in Zajecar.
These inflammations are the second most common disease in adults, with nine cases in every 100 inhabitants.
Although dominant, these diseases have a slight downward trend over the five-year period, coupled with declining production of the mining basin and a decrease in air pollution.
After the privatization of RTB Bor, pollution increased again.
Zijin Timok copper-gold mine in Serbia to reach production target in 2023
China’s Zijin Mining Group expects the future Cukaru Peki Upper Zone mine of the Timok copper-gold project in Serbia to reach production target in 2023, it said.
“Efforts will be made to ensure that the Timok copper (gold) mine in Serbia, Camoa-Kakura Copper Mine in DRC will start production in 2021 and reach production target in 2023,” Zijin said in a statement.
Zijin also noted that it aims to accelerate the development of three open-pit mines and an underground mine in the Bor copper mining complex in Serbia, as well as to boost the smelter’s technological improvement and expansion.
Serbia’s energy minister Aleksandar Antic said that he expects Zijin Mining Group to open the Cukaru Peki Upper Zone mine in the second half of 2021.
The Timok copper and gold project located in eastern Serbia consists of the Cukaru Peki Upper Zone and Lower Zone. Zijin owns 100% of the Cukaru Peki Upper Zone plus a 60.4% stake in the Cukaru Peki Lower Zone, while US-based Freeport McMoran owns the remainder. In November, Zijin signed an agreement to acquire Freeport McMoran’s copper and gold assets in Serbia for up to $390 million (351 million euro).
Zijin also holds majority ownership in Serbian copper mining and smelting company RTB Bor. The Chinese group injected $350 million in the capital of RTB Bor in December 2018 and intends to invest a total of $1.26 billion to improve its production operations, open new mines and increase efficiency.