Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
First published Mar 18, 2018
China is spearheading the auto world’s push toward electrification, a shift that is transforming once-niche materials like cobalt and lithium into hot commodities. And it’s Chinese companies leading the way in securing the raw materials needed for a massive expansion in battery capacity. From mines in Africa to huge metal and battery material plants in China, here are some of the suppliers with a key role in feeding the country’s electric vehicle ambitions.
Ignore the company name. China Moly became a major force in battery metal in 2016 after buying control of the cobalt-rich Tenke Fungurume mine in the Democratic Republic of Congo. That purchase — one of China’s biggest mining deals this decade — made this little-known specialist in the steelmaking ingredient molybdenum into a big copper-cobalt bet. China Moly’s high profile was confirmed this month when Chairman Li Chaochun joined mining bosses including Glencore’s Ivan Glasenberg at a tax showdown in DRC with President Joseph Kabila.
Huayou increased its refined cobalt output by more than 35 percent last year, according to Darton Commodities Ltd. It gets about half its cobalt requirements from its DRC subsidiary, Congo Dongfang Mining, and the rest from third-party sources, according to Darton. It recently invested 6.4 billion yuan (about $1 billion) to build a 150,000-ton battery materials plant over three years and has partnered with South Korean steelmaker Posco to produce battery materials including cathodes. Shares hit a record high last week as cobalt prices rocketed past $40 a pound, the highest since the metal’s extraordinary spike more than a decade ago.
This year should see the world’s number three lithium compounds producer gain a higher investor profile with a planned listing in Hong Kong. Ganfeng Lithium, founded in 2000 by chemistry graduate and current chairman, Li Liangbin, plans to spend proceeds on adding to existing mine investments in Australia, Argentina and Ireland, according its prospectus. It’s also spending on battery plants and development of solid-state batteries (using more lithium) as well as on battery recycling.
This firm dates back more than a quarter of a century, but its biggest global step was in 2014, when it took a controlling stake in Australia’s massive lithium minerals resource, Greenbushes. It also has reserves in Sichuan province and Tibet and is building a lithium hydroxide base in Western Australia. Success for Tianqi’s bid to buy a bigger stake in Chilean miner SQM would be another quantum leap — but that’s at risk from official opposition in Santiago to the purchase by a state-linked Chinese firm. Like Ganfeng Lithium, Tianqi is said to be in the early stages of considering a public listing in Hong Kong, with a target of raising as much as $500 million. Chief Executive Officer Wu Wei is a rare female leader in China’s metals sector.
Nickel producers worldwide are thirsting at the prospect of a new wave of demand from batteries to complement stainless steel, and finally end years of price drift. Jinchuan, China’s biggest nickel producer, is increasing the amount of its nickel output in the sulphate form that’s required for battery producers, aiming to produce 70,000 tons this year. It’s also China’s second-largest cobalt refiner, and operates the century-old Ruashi copper-cobalt mine in DRC as well as copper mines in Zambia. The company plans to nudge up cobalt production to 11,000 tons this year from 10,000 tons in 2017, though warned in January that some of the gains in prices weren’t yet justified by demand.
Until 2018, this leading Chinese battery cobalt, nickel and materials producer got most of its raw metal from the recycling of used batteries and other electronic waste from at least 10 cities across China. But a major long-term supply deal with Glencore changes that, taking about a third of the miner’s planned output up to 2020. That should help it support a planned expansion of its battery chemicals units, and further downstream, major investments in battery precursors.
Formerly a maker of shirts and suits for gentlemen, after an old-to-new economy pivot it’s now an emerging major producer of battery materials. In a private placement last year, it bought 1.8 billion yuan of shares in China Moly that will fund expansion of the latter’s Congo cobalt mine, in exchange for rights to the extra output. It plans to spend 5 billion yuan on a 100,000-ton production base for battery materials in central Hunan province, to be completed by 2025. According to its website, it has anode capacity of 43,000 tons, 50,000 tons of cathode and 30,000 tons of electrolyte capacity.
NOTE: Production estimates marked with an * are from Darton Commodities Ltd. All other data is obtained from company websites, prospectuses and previous reporting and may be subject to change.
— With assistance by Martin Ritchie, and Winnie Zhu
