A new grievance mechanism for Chinese overseas mining needs to be free to use

As the world transitions to more renewable forms of energy, surging demand for critical minerals such as cobalt, nickel, aluminium and lithium could bring significant risk to communities affected by mining and mineral processing.

Yet many such communities have no channels available to raise concerns or seek redress. This leaves the door open for abuses and greenwashing. These not only harm affected communities but are bad for companies managing environmental and social risks in their investment and supply chains. They are also bad for investors, buyers and end users seeking to avoid the pitfalls caused by unethical operations.

China is a vital node for global supply chains in electric vehicle batteries, solar photovoltaic equipment, and other mineral-intensive technologies necessary for a green transition. Recent developments in China suggest stronger accountability to local communities may be coming.

In November 2022, the Responsible Critical Mineral Initiative (RCI; formerly the Responsible Cobalt Initiative) and the China Chamber of Commerce of Metals, Minerals and Chemicals Importers and Exporters (CCCMC) announced that they are creating a new accountability mechanism for the mining sector.

Covering the value chains of all minerals, it will be the first accountability mechanism established by a Chinese industry association allowing communities to raise concerns about the social and environmental impacts of an overseas mining project. If designed and implemented well, it will be a significant step toward closing the “accountability gap”.

The role of accountability mechanisms

Accessible, fair and effective accountability mechanisms provide an important forum for affected people to express concerns and address grievances.

We have worked with many communities affected by mining who have successfully leveraged such mechanisms. These include a community in Guinea that, after being evicted at gunpoint to make way for a gold mine owned by a South African firm, filed a complaint to the accountability mechanism for projects supported by the International Finance Corporation (IFC).

They ultimately secured agreements with the company to improve access to basic facilities at the resettlement site, including water and schooling, and received increased compensation, among other outcomes.

We also worked with herders in Mongolia who filed complaints to IFC’s mechanism regarding gold and copper mines that had depleted water resources and disrupted pasture lands. They secured commitments from the mining company and local government to resolve key issues.

Accountability mechanisms also create channels for investors and corporate executives to hear about environmental and social risks directly from local communities, who are well-placed to know if a project is not complying with environmental and social safeguards.

This gives companies the opportunity to address issues before they escalate, making accountability mechanisms a crucial component of a company’s risk management framework.

The accountability gap

Many mining and mineral-processing projects that are crucial to the energy transition unfortunately cause social and environmental harms.

These include deforestation, pollution and water scarcity, labour standards violations and displacement of local communities. Companies linked to such damages through their supply chains are under increasing scrutiny.

For example, Tesla, Apple, Google, Dell and Microsoft were all sued over alleged forced child labour in mines in the Democratic Republic of the Congo producing cobalt for use in their products. Zhejiang Huayou Cobalt, a major Chinese firm, was named as one of the suppliers.

CCCMC has established various standards and guidelines since 2014, to help companies address the social and environmental risks in their overseas mining and mineral operations.

It also launched the Responsible Cobalt Initiative in 2016 – the precursor to the Responsible Critical Mineral Initiative – which developed a due diligence standard for the cobalt supply chain in 2018 (revised in 2021).

However, without mechanisms to hold companies accountable, implementation of these voluntary guidelines has been limited. With the new initiative backed by CCCMC and RCI, that could be changing.

Will the new accountability mechanism work?

In December 2022, RCI and the CCCMC sought public input on the proposed accountability mechanism. Its draft policy states that communities impacted by mining-sector activities can file complaints alleging that companies did not adhere to “recognised codes for responsible business conduct”.

These codes include CCCMC’s Guidelines for Social Responsibility in Outbound Mining Investments, the Chinese Due Diligence Guidelines for the Mineral Supply Chain, and the United Nations Guiding Principles on Business and Human Rights, among others.

The mechanism will offer a mediated dialogue process for communities and companies to negotiate redress for environmental and social impacts.

Depending on the nature of the case, the process also includes fact-finding by independent experts to support the resolution of disputes. Aspects of the case process will be documented publicly.

Currently, it is not clear exactly which companies the mechanism will apply to, but it is likely to be particularly relevant to members of RCI and CCCMC.

RCI members include Chinese mining companies, refineries and other companies along the critical minerals value chains. They also include international end users such as automotive manufacturers and tech companies.

(Huayou Cobalt and Jiana Energy – Chinese suppliers of cobalt products and battery materials – as well as BMW and Dell, were on the board of the Responsible Cobalt Initiative when it was first established.)

Many Chinese mining companies are CCCMC members. Increasing these companies’ accountability to affected communities would be a significant step toward ensuring a just transition, but only if designed and implemented well.

What constitutes an effective accountability mechanism is well established. United Nations guidelines state it must be accessible, legitimate, predictable, transparent, equitable, rights-based and a source of continuous learning for companies and investors. In practice, this means it needs to provide communities with a safe and fair process for achieving redress for environmental and social harm.

The mechanism proposed by the RCI and the CCCMC has important strengths to this end, including provisions regarding the right to representation, the commitment to rights-based agreements, confidentiality and the prohibition of coercion and retaliation.

However, some questions about its effectiveness remain. For one, there should be further clarification as to which corporate actors are governed by it so that communities can better predict whether it is a relevant avenue for justice.

Right now, it is challenging to find a list of current RCI and CCCMC members. Moreover, the mechanism needs to demonstrate how it is independent from the companies who could be parties in a complaint, and should disclose the makeup of the committee that processes complaints.

There are two additional steps the mechanism should take to improve accessibility for all stakeholders, including communities who often face financial limitations, language or technical barriers, logistical issues and reprisals.

First, strengthen the commitment to preventing and responding to reprisals against community complainants by building in concrete protection measures. Second, establish an adequate budget for the functioning of the mechanism so that community applicants do not pay for the case process. Establishing such budgets is common practice in existing accountability mechanisms.

Toward greater accountability for Chinese overseas projects

RCI and CCCMC’s proposed mechanism is an important part of a larger move toward accountability for Chinese overseas investments.

In June 2022, the China Banking and Insurance Regulatory Commission (CBIRC) published Green Finance Guidelines that require Chinese banks and insurers to set up their own accountability mechanisms to hear and address concerns from impacted communities overseas. This means policy banks, such as the China Development Bank and the Export–Import Bank of China, and commercial banks, like the Bank of China and the Industrial and Commercial Bank of China, need to set up accountability channels to hear from the people they impact. It remains unclear, however, when and how this requirement will be implemented by each financial institution.

For over a decade, Chinese state institutions and industry groups have issued guidance to companies and banks on how to improve overseas environmental, social and governance performance, but the lack of strong implementation frameworks and accountability mechanisms has limited their impact.

The move towards establishing such a mechanism in the critical minerals sector represents an important first step. It could inform the development of mechanisms for other sectors, especially as we have yet to see any public action by Chinese banks or insurers to set up their own mechanisms.

The mining sector accountability mechanism is expected to be released in the first half of this year. As an industry-led initiative, it will only be legitimate if communities determine it safe and worthwhile to use.

At a minimum, this will require the process to be free for community complainants, the people managing the cases to be independent from company respondents, and safeguards be put in place to prevent and respond to retaliation.

If designed and implemented with the rights of impacted communities in mind, the new mechanism could be positive for communities, companies and the environment, setting an example for more accountability mechanisms for Chinese overseas investment.

If the mechanism fails to meet these expectations, the accountability gap will persist, and both communities and companies will continue to pay the price, China Dialogue writes.

More investments are needed to unlock Mongolia’s ‘huge potential

Resource-rich Mongolia is positioning itself as an alternative to China in supplying minerals used in the renewable energy sector but needs help from foreign investors to develop the necessary mining infrastructure, its deputy prime minster says.

“We will be one of the main players [in critical minerals], I’m sure, but it will take time,” Amarsaikhan Sainbuyan told Nikkei Asia while in London to celebrate 60 years of U.K.-Mongolian diplomatic relations. “The Mongolian government is open for all kinds of investments and partnerships.”

Minerals such as copper, nickel, lithium and cobalt are crucial for manufacturing battery-powered electric vehicles, as are rare-earth metals that largely come from China.

The National Geological Office of Mongolia had registered reserves of 61.4 million tons of copper and 3.1 million tons of rare-earth minerals as of July 2022. Last year, Southern Mongolia’s Oyu Tolgoi mine — one of the world’s largest known copper reserves — received approval to begin underground operations.

Sainbuyan said unlocking Mongolia’s “huge potential” to supply minerals crucial for the green transition would require help from foreign investors in developing environmentally friendly and energy-efficient mining technology.

“A country like Germany, or European or Western producers, they are interested in securing the raw materials, especially in critical mineral and rare-elements metals,” as they seek to reduce their dependence on China, he said. “We have to capitalize” on this interest.

Several high-level German visits have been planned to discuss cooperation on such matters, he said. Germany, a leading vehicle maker, has been eyeing Mongolia’s potential for over a decade, co-founding the German-Mongolian Institute for Resources and Technology.

When German Chancellor Olaf Scholz welcomed Mongolian Prime Minister Oyun-Erdene Luvsannamsrai to Berlin last October, he said Mongolia would be “an important partner” for “many raw materials” in Germany’s diversification strategy but emphasized that concrete projects need to be identified.

Mining accounted for roughly a quarter of Mongolian GDP in 2021 and 29.6% of budget revenues, according to the Extractive Industries Transparency Initiative. The pandemic slowed activity, but now is the time to “pick up,” Sainbuyan said.

Corruption allegations over coal exports to China by a state-owned enterprise led to demonstrations in December. Investigations are ongoing and several people have been arrested.

Sainbuyan said the government is committed to fighting corruption. “This is the main concern of the government, to reduce poverty and stop corruption,” he said.

Wedged between Russia to the north and China to the south, landlocked Mongolia faces limitations on export routes for coal — a factor that could also affect its ability to ship strategic minerals. Despite strong interest for coking coal from the likes of India, South Korea, Japan and Europe, China will remain its main coal market because of “limited access,” Sainbuyan said.

The government has been building and upgrading infrastructure to better connect the country, mainly through industrial railway links to China and Russia.

“Unfortunately, because of the geographical location, we have limited access and exit — either we have to go to Russia or to China and export,” Sainbuyan said, Nikkei reports.

Battle for Lithium

In the hunt for lithium and other crucial minerals for the electric car supply chain, the United States must compete not just with Chinese competitiveness and manufacturing capability, but also with internal Western limits.

While the US does not appear willing to significantly change their Inflation Reduction Act, which will guarantee nearly $400 billion in “green” subsidies to companies operating in the US over ten years, and while the EU is preparing a response that could include a mix of further easing of state aid and the creation of a “sovereign” fund made up of the residues of the Recovery Plan and little else, but without the coveted (by the Italians) Eurobonds, Consider the case of lithium.

The price of this essential mineral for electric vehicles has more than quadrupled to $75,000 per ton by the end of 2022. It is required to seek for new sources and build refineries to process them. All of this, in accordance with Washington’s approach, without relying on supplies from Beijing or any other “hostile” country. According to the Financial Times, the Biden administration has given the Australians of Ioneer a 700 million dollar conditional loan to establish a mine and processing complex in Nevada. Mining might begin in 2026, but supply contracts with Ford and Toyota have already been struck. Production may support roughly 400,000 electric automobiles per year.

The Inflation Reduction Act’s public financial support for the supply chain is based, above all, but not exclusively, on benefits of up to $7,500 for buyers of electric vehicles produced by companies that procure components and raw materials in the United States or in countries with which Washington trades under a free trade regime, defined not as a formal treaty but rather as “friendship” and partnership.

The administration then invoked the Defense Production Act, a law enacted during the Korean War to direct domestic production toward the war effort, and has so far distributed 2.8 billion to approximately twenty companies involved in the electric vehicle supply chain, as well as activated agreements with Canada, the EU, the United Kingdom, and Australia to invest in critical extractive projects.

In the hunt for lithium and other crucial minerals for the electric car supply chain, the United States must compete not just with Chinese competitiveness and manufacturing capability, but also with internal Western limits. Beijing is aggressively forging partnerships in Africa and Latin America to get minerals in less demanding regulatory environments for use in its home refineries. In reality, China owns 80% of the world’s lithium hydroxide processing capacity, a structural advantage that will be tough to overcome in a reasonable amount of time. It is also required to address the internal limits associated with the mining activity’s permission processes. This is an objective problem in the United States, relating to environmental impact assessments.

Nevada has just one operational lithium mine, and another is awaiting a court decision after a fight with conservation groups safeguarding a rare species of wildflower. A similar tragedy befell a mining project in North Carolina, which failed due to environmental limits, forcing Tesla to rely on Canadian supply. The expansion of the EV chain necessitates mining, which has an environmental effect, as well as the building of processing capacity for these minerals, which necessitates time, money, and administrative difficulties. In the battle between Americans and Chinese, the latter has an obvious edge, owing to the relatively minimal limits imposed by local territory on the establishment of extraction and processing systems.

Europe is in the middle. Which engages in extractive project funding but risks being undermined by the appeal of American environmental subsidies? At the World Economic Forum in Davos, the White House’s special envoy for climate, John Kerry, asked the EU to move quickly on its own version of the Inflation Reduction Act, in order to shorten the development timelines of the Western approach. Because, in Kerry’s words, “money, money, money” is required. Even on our continent, attempts to build lithium mining and processing factories face stiff opposition from local residents.

Examples include the $2.4 billion Serbian Jadar mine project, which Rio Tinto’s Anglo-Australians aimed to exploit but which ended up stalled by the resistance of local communities, which led to the revocation of the initial authorizations by the Serbian government. Or the cancellation of a mining project in Portugal, by government decision.

To these obvious critical issues, which demonstrate that Green Mining is not an oxymoron, is added the European Chemical Agency’s (ECHA) request to classify lithium salts as dangerous to human health and, as a result, subject their extraction and processing to a more stringent and onerous regulatory framework. This might swing the cost balance in favor of imports rather than domestic manufacturing, with all of the associated geopolitical risks. The EU will have to give answers to these crucial operational and budgetary challenges. Keeping in mind that if the new “sovereign wealth fund” is simply a repackaging of the Recovery Fund’s unspent leftovers, individual nations with fiscal ability will act alone, posing a relative danger to the integrity of the single market, Europeans 24 writes.

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

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.

Chinese monopoly

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.

Fighting talk

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.

Another way?

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.”

Source: supchina.com

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.

Source: dw.com

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.

Source: proactiveinvestors.com.au

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.

Source: seenews.com

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.

Source: seenews.com