China to buy another African mine as it elbows in to lead global green energy revolution
In one of the most recent investments, Chinese firm JCHX Mining Management is close to finalising a deal to buy Zambia’s Lubambe copper mine.
The deal, which is awaiting approval from the Zambian authorities, would see the Shanghai-listed mining services and contracting firm hold an 80 per cent stake in the mine which is currently held by Australian-based investment firm EMR Capital, according to Reuters.
Technically insolvent, Lubambe copper mine would be acquired by JCHX Mining for just US$2, the firm announced early this year. The Chinese company will set up a project company to buy the stake for US$1 from EMR Capital and pay another US$1 to buy off the company’s US$857 million debt.
According to JCHX, it has been in Zambia for more than two decades in the contract mining and resources investment sectors, and has been the underground mining services provider of Lubambe copper mine since 2017.
Lauren Johnston, associate professor at the University of Sydney’s China Studies Centre, recalls the seeds of EMR Capital from meetings in Beijing some 15 years ago, when current EMR chief executive Jason Chang was advising another set of Australians on setting up a resources fund in Australia using Chinese investment.
Johnston suggested this earlier familiarity with both the Chinese and Australian minerals investment landscape could inform a pre-emptive approach to geopolitical tensions.
This, and the importance of copper to new energy fields in general, she added, may help to explain both the interest of Chinese firm JCHX Mining to invest in Zambia’s Lubambe mine and Melbourne’s EMR Capital to sell its 80 per cent stake.
The acquisition in Zambia comes a few months after Chinese company MMG, backed by state-owned mining giant China Minmetals Corporation, bought Botswana’s Khoemacau copper mine for about US$1.9 billion from Cuprous Capital, a private company that has produced copper at Khoemacau since 2021.
According to a recent study by Washington-based think tank Carnegie Endowment for International Peace, Africa’s mineral “exports to China are on a rapid ascent, reaching nearly $50 billion in 2021 from $15 billion in 2010”. Moreover, the report said, Chinese investments are beginning to cover not only the extraction of ores but also the refining and processing of them on the continent.
If the EV industry continues to grow, then we can expect an associated growth in demand for the African minerals and metals used in the manufacturing of EV batteries, especially cobalt, lithium and graphiteDr Zainab Usman
She said the growth momentum of African mineral exports to China will, in many respects, depend on the continued growth of those industries that require the minerals. For example, China is now the world’s largest producer, consumer and exporter of electric vehicles globally.
“If the EV industry continues to grow, then we can expect an associated growth in demand for the African minerals and metals used in the manufacturing of EV batteries, especially cobalt, lithium and graphite,” Usman said.
But she said the growth trajectory might not necessarily be linear because a few other factors could complicate the situation.
She noted that in the longer term though, the commercialisation of newer types of EV batteries, such as various types of sodium-ion batteries that require less cobalt, copper and lithium, may have vast consequences for African mineral exports to China.
Christian-Géraud Neema, Africa editor at China Global South Project and non-resident scholar at Carnegie Endowment, said geopolitics remains an important factor behind China’s mining acquisition.
“These minerals have both economic or industrial use and defence purposes,” Neema said, explaining that the slowdown in the Chinese economy may have impacted certain imports but it will not impact mining imports for China.
“When you look at the profile of all these acquisitions, they’re all critical or strategic minerals for China.”
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Chinese-made electric vehicles face additional EU import tariffs of up to 38%
Chinese-made electric vehicles face additional EU import tariffs of up to 38%
Neema said another geopolitical factor is stockpiling. China has been doing that for cobalt though it uses more LFP (lithium iron phosphate) batteries than NMC (lithium nickel manganese cobalt oxide batteries or lithium-ion batteries) in its EV industry.
Yet, he said, China keeps on not only buying, but also producing, more, even though prices are tanking.
“With that, it can maintain prices low and raise the cost of entry for new players,” Neema said. “So geopolitics is an important factor.”
Mark Bohlund, a senior credit research analyst at REDD Intelligence, said China has been driving copper demand for the best part of the past two decades, mostly due to the need for copper fittings in new property developments.
“The need to secure copper supply from overseas has been taken over by the demand for it from the electrical vehicles and renewables sector,” Bohlund said.
“High ore grades and relatively unexploited deposits make Africa an interesting prospective for copper investments, with the weaker position of established players also allowing Chinese companies to more easily take a stake.”