- Chinese companies are rapidly increasing their investments in global mining operations, particularly in critical minerals like copper and cobalt, to secure raw material supply chains.
- This accelerated investment by China is occurring worldwide, with significant deals in Africa, Asia, and Latin America, and has reached record levels under the Belt and Road Initiative.
- Western governments are becoming increasingly aware and uneasy about China's growing dominance in the critical minerals sector, leading to a tightening of investment conditions and prompting Chinese companies to expedite their acquisitions.
China has been buying mining operations around the world for years to sate its appetite for raw materials, which remains much stronger than what it can produce domestically. Over the past couple of years, however, this shopping spree has acceleratedChinese investors are in a rush.
In 2023, Chinese companies invested some $16 billion in mines globally, and this did not include minority stake purchases, the Economist reported in November last year. The publication listed several large deals, including a $5-billion investment in a copper mine in Afghanistan, a $1-billion investment in a gold operation in Ghana, and an investment commitment for $5 billion in Zambia over the five years to 2028. The investment list also included the acquisition of a stake in the largest copper mine in the Philippines, Tampakan.
Clearly, copper is a key investment destination for Chinese companies given the wide use of the basic metal in everything from construction to electric vehicles. Back in 2023, more than half of Chinese companies foreign mining investments focused on copper. But there is also another major investment destination for Chinese buyers: critical minerals.
China is the biggest mining investor in the Democratic Republic of the Congo, which is home to the largest cobalt reserves in the world, at 6 million tons out of a global total of 11 million tons. And cobalt is just the start. The DRC has the highest-grade copper ore in the world, with the copper content exceeding the global average four times, according to an overview of the countrys mineral resources compiled by bne Intellinews. Rare earth minerals are also abundant, along with most of the elements in the periodic table. It is little surprise that China dominates the mining investment landscape there.
Yet it is still investing ever more elsewhere as well. Last year, a report produced by a Chinese and an Australian university showed that global mining investment by Chinese companies had broken a record. Commitments under the Belt and Road Initiative in 2024 reached $21 billion, the report said, which was the highest since the initiative was launched, back in 2013.
It is likely that Chinese policymakers are also welcoming strategic control by Chinese often private companies in critical minerals, one of the authors of the report, Christoph Nedopil from Griffith University in Australia, said.
There are no signs that the investment rush will weaken anytime soon for the worlds largest processor of critical minerals and largest investor in energy transition technology, even as the West shows signs of awareness and unease about this total dominance in an area that most of the West, except the United States under Trump, considers a top priority for the future.
The Financial Times reported this month that Chinese companies with mining interests abroad had stepped up activity markedly in 2024. The publication cited analysts as saying one big reason for that activity was precisely that awareness among Western governments that China was becoming too dominant in the sectorso they were starting to shut investment doors in its face.
There has been more activity in the past 12 months because Chinese groups believe they have this near-term window . . . Theyre trying to get a lot of M&A done before geopolitics get difficult, Appian Capital Advisory founder, Michael Sherb, told the FT. The geopolitics referenced in the statement involves the growing mistrust of China by governments in Europe and North America, which is leading to a tightening of investment conditionseven as Europe considers closer cooperation with China on the energy transition.
In the next few years we are likely to continue to see a healthy level of dealmaking activity from Chinese mining companies, Standard Chartereds global head of metals and mining, Richard Horrocks-Taylor told the Financial Times. The publication cited two recent deals as examples, the $1.2-billion deal sealed by Zijin Mining for a gold mine in Kazakhstan and the $420-million acquisition of Appian Capital Advisorys Brazilian copper and gold mine, Vale Verde, by Chinas Baiyin Nonferrous Group.
To be fair, Chinese companies have not exactly been scrambling to get a piece of mining action in Canada or the U.S. for reasons more to do with regulation than geopolitics. They have focused on Africa and Asia, as well as Latin Americaall fertile ground for infrastructure investments under the Belt and Road Initiative. But China has given Western governments a new reason for worry now: Chinese companies have developed sophisticated ways of beating Western rivals for mining assets in emerging markets. Because the West also has to rely on resources in Africa, Asia, and Latin Americaexcept perhaps Canada, which has the capacity for a reasonable degree of self-sufficiency in at least some critical metals and minerals.
Perhaps, then, Chinese companies are right to go on a shopping spree while the governments of their Western rivals mull over their next steps and whether it might be a good idea to step up government-backed investments in foreign mining operations.
By Irina Slav for Oilprice.com
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