How China is winning the race to Africa’s lithium

Uis, a settlement in remote Namibia, seems unlikely to be a hotspot for a mineral war over electric vehicle future.

Uis is located in Erongo, an arid and sparsely populated region of South-West Africa. The only evidence of the country’s mineral wealth was the sale of gemstones to tourists by artisanal miner who made a living from a disused Tin mine.

The site of the mine will soon be part of the global race for lithium, an alkali metal which is essential for automotive batteries. Carmakers are facing huge challenges in securing reliable lithium supplies as they strive to make more electric cars.

Andrada, a London-listed miner is building a pilot plant to produce concentrated lithium. It will use ore from the resurrected, expanded tin mine.

The facility is located less than 300km away from Walvis Bay which is a major regional port. Anthony Viljoen is Andrada’s chief executive. He believes that the region will be “globally important” for not only lithium, but also other metals essential to the energy transition such as tin or tantalum.It is not the only competitor. The first African-owned Chinese-owned lithium concentrate plant began trial production last month at Arcadia in Zimbabwe. Huayou Cobalt bought the mine in 2021 for $422mn as part of a recent wave of Chinese lithium deals worth billions in a country that many western investors are afraid to enter.

Viljoen stated that the first wave of Chinese investment has occurred and that it has resulted in a rude awakening for western businesses. He was speaking after a tour of Andrada’s plant.

There is more to the issue than lithium. The concern about access to vital minerals is high in Washington, London and Brussels. This is despite increasing tensions between China and the West. The People’s Republic holds a dominant position in many minerals, which are vital for the energy transition. This includes cobalt and lithium, as well as rare earth metals. To catch up, the west will spend hundreds of billions of money.

Thierry Breton is the EU’s internal markets commissioner responsible for the bloc’s strategy to ensure supplies of crucial minerals. He was a recent visitor to Uis. On Twitter, he praised the mine for being “one of the largest lithium hardrock mining sites in the world”. Joe Biden’s energy security ambassador Amos Hochstein has been on a tour of Africa as well. He says that the US is looking to implement a strategy to invest the continent’s minerals.

He says, “We need to have the mining in multiple countries, companies and there needs be competition.”

It is evident that the Chinese have already taken the lead on the continent. It’s not about fear of China getting there first. They’re there first. It’s already happening,” Russell Fryer, executive Director of Critical Metals, which is a London-listed investor and promoter of African mines, said.

Next in line for Chinese investors is Namibia, after Zimbabwe. Huayou Cobalt gained an interest in Erongo last month with a symbolic but small investment in Askari (an Australian company exploring Uis). Xinfeng is a Chinese exploration company that has been active in Erongo and has shipped hundreds of thousands of tonnes of lithium ore to China.

Lithium, also known as “white gold”, is the lightest solid element on the periodic table. Because of its high electrochemical potency, lithium is essential for electric vehicle batteries. It can be produced from the brines in Latin America, Australia’s hard-rock ore bodies and other parts of the globe, including Africa and China.

There is plenty of lithium on the planet. This means that there will be plenty to go around, provided money is invested in the right projects. Timing is the challenge: The rapid adoption of electric vehicles will drive a nearly fivefold increase in lithium consumption by 2030.EU and growing numbers of US states, including California and New York, want to end the sale of petrol and diesel cars by 2035. This deadline leaves little time for finding good lithium deposits or developing them into consistent production. General Motors, a carmaker, has invested in mines to avoid deeper shortages later in the decade.

It will be a huge step towards overcoming the current energy transition bottleneck if Africa can quickly bring online lithium projects in this decade. Commodity trading giant Trafigura believes Africa will supply half of the world’s lithium by 2030. Rystad Energy analyst Susan Zou says Africa “could be an emerging star for lithium minerals”.

“If you look at Africa’s mining development, you will see that they are rapid,” she said. Huayou Cobalt’s development in Arcadia, Zimbabwe by Huayou Cobalt was “outside people’s expectations.”According to a source familiar with the project, equipment was ordered long before the deal was signed. Construction was also non-stop. Another source said that Chinese financiers are more likely than western commercial and development banks to take large risks.

Capital markets are challenging junior African miners. Andrada’s market capitalization is below PS100mn, so it must focus on showing that it can produce high tin throughput while keeping costs down.

While US and European officials promoted African partnerships and compiled lists of crucial minerals, Chinese investors have been buying up African mines to make these minerals and building refineries in China to process them.

China leads the way in converting metal into raw materials for battery manufacturing. The International Energy Agency estimates that China has a 58% share of the global refining capacity. China will continue to be Africa’s main customer until similar facilities in the US, Europe, and Africa are available.

“It’s obvious [that] Africa has closer to Europe, and shipping the product would make economic sense to somewhere in Europe, but China already has a lot of infrastructure,” said Bernard Aylward chief executive of Kodal Minerals. This London-listed lithium developer is active in Mali and received $110mn funding from Fosun subsidiary Hainan Mining.

Chinese companies invested in lithium supply in Africa, Latin America and Latin America when prices were low. China is increasing its focus on developing countries as Australia continues to build domestic processing plants for its mineral riches, and the Canadian government has ordered Chinese investors not to invest in certain Canadian mining companies.

Hadley Natus (chair of Tantalex), a group that explores for lithium in the Democratic Republic of the Congo, said, “We have to fair to the Chinese.” They put money in much earlier than anyone else.

China’s dominance in the lithium supply chain has led western officials to pitch their investment proposal to African countries as a socially responsible alternative. Nusrat Ghani (UK minister responsible for critical minerals) says that African counterparts “see us as fair arbiters, as someone who can help with greater transparency.”

However, this is only the beginning when faced with real challenges. These include corruption and unpredictable politics as well as a lack of transportation infrastructure. AVZ Minerals Australia is currently in a legal dispute with Zijin Mining, China, over the concession’s ownership structure. As a result, its shares have been suspended from May last year.

Marius Mihigo is a Congolese businessman that acts as a intermediary for AVZ Africa. He claims that Zijin orchestrated a misinformation campaign against Australia after a proposal to pay him a $5mn bonus for success if the company secured an exploitation license was leaked to media.

Mihigo, speaking from London’s hotel, said that he accepted $1mn upfront and that the success fee was dropped in the final contract. Zijin dismisses his claims and calls them “biased” and misleading.In March, Atlantic Lithium, the London-listed developer of a Ghanaian mine to supply the US, was accused by a short seller of bribing government officials to secure licences. It denies the claims, which it says are “false and misleading”.

The unpredictable politics of Zanu-PF’s government is also responsible for Zimbabwe’s lithium boom. The country has banned the export of raw lithium ore in December to curb informal mining and favor local processing. However, this could lead to higher project costs.

Even though the lithium is processed in part at home, it would still need crossing a border to reach the global market. Other African lithium projects are further away from ports. Andrada’s mine may be a rare exception, but Uis still doesn’t have a tarred road.

To get Lithium metal from Manono to Zambia, a 630km road will be required. There have been queues of up to 70 km for trucks carrying copper and cobalt. A dispute between the Chinese contractor and the government has stalled any plans to upgrade the route.

Tantalex’s Natus states that “Governments must start working on cross country logistics and infrastructure if they really want to open Africa up,” Tantalex says. It is difficult. Hochstein, the US presidential advisor, cited 12 months of hard work to secure western operators to the Lobito Corridor. This section is a section of a railroad that runs across Africa from Angola’s Atlantic coast through DRC’s Katanga region and Zambian copper belt to Dar es Salaam in Tanzania.“We’re using critical minerals to incentivise the financing of the rail and port,” Hochstein says. “Once you do that, you can extend that rail to build agribusiness and other kinds of business that wouldn’t go into these countries if there wasn’t a way to get equipment in and out.”

African governments would prefer that value be added to their mineral wealth in Africa, rather than being exported to other countries. Tom Alweendo is Namibia’s mining minister. He has suggested that his country might follow Zimbabwe’s lead and ban exports of raw material.

A full-scale lithium hydroxide plants requires power, chemicals, and raw lithium to be processed. These are not all available in every location on the continent at this time.

“The faster the west accepts that this is a business environment then the sooner they’re going be able to get a very substantial foothold,” George Roach, chief executive at Premier African Minerals, a lithium producer in Zimbabwe who has committed half its supply to China.

Andrada’s investment in tin has created jobs in Uis and cash in ATMs. The local grocery store also sells dairy products. The company is looking for a partner to build a large-scale lithium mining plant in Namibia. This will allow them to produce high-quality lithium chemicals and concentrates.

“Nine months back, it would have been simple — we’d sell [ore] in China. Viljoen says that there are many options if you want to work with a strategic partner over the long-term.But the history of Uis is also a reminder that mining is hard and that international politics and commodity markets are fickle. The old Uis pit closed in 1990 after Namibia gained independence from South Africa and the collapse of the international tin agreement led to prices tumbling.

Colles Hoaeb is a local gem miner and hopes that he will be living in an African boom town. He says, “It’s good that the mine has returned.” Hoaeb states that while Western miners are well-paid and provide long-term stability but Chinese competitors hire faster to obtain the resources more quickly. They are small-scale miners — they hire 50 men to do the mining, and then finish the job quickly.

Fryer, Critical Metals’ director of operations, says that there are plenty of buyers for lithium but very few people want to own a mine. They want someone else to do all the hard work. They don’t want to get their hands dirty.

Investors should hedge their bets for other reasons. Lithium prices are volatile. They soared to $80,000 per tonne in December 2022, but have fallen to $55,000 since then. Even though this is almost four times what the long-term average of $15,000 is, some western miners have felt the pressure from investors to reduce their investment plans as Chinese firms continue to push ahead.

Others believe that the best way to solve the problem of potential lithium shortages is not to dig more out of Africa’s rock but rather to develop substitutes in laboratories such as sodium-ion battery.

Fryer states, “The amount intellectual capital and brainpower that are looking for substitutes for lithium-ion battery is quite remarkable.”

Some investors prefer to invest in projects that can produce multiple metals or have multiple uses to reduce the risk of substitution. Copper is one example of such a metal. Although it is being substituted in some areas for aluminium, it is still used in electrical cables and plumbing. African copper deposits often yield valuable cobalt byproducts.

African lithium miners are optimistic that the new technology will be used in electric vehicles for many years to come. However, they cautioned that it may take some time for it to become widely accepted and supply chains to adjust. They are currently in a race for new deposits, not only with Chinese-owned competitors but also with rivals in established jurisdictions like Australia and Canada.

Viljoen states, “We have to show as fast as possible that our product can be brought to market faster than them.” “As in all gold rushes the best gold is the first.”

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