Chinese in mad rush for Zim’s ‘new oil’

As Chinese investors tighten their grip on lithium resources, especially in Africa and South America, in a bid to secure raw materials for its processing facilities back home, as the world transitions to cleaner energy electric vehicles, Zimbabwe has not been spared in the scramble for the “New Oil”.

Zimbabwe, which is believed to hold some of the largest unexplored lithium resources in the world, is among the countries that Chinese miners have been targeting in the past two years.

The byproduct of a push for more electric vehicles on the road is more lithium demand. As such, US carmaker, Tesla, billionaire chief executive Elon Musk deemed lithium as the “new oil” in a recent tweet.

Chinese scramble for Zim lithium

In February this year, state-owned China Non-ferrous Metal Mining Group said it would acquire a lithium project in Zimbabwe. Sinomine Resource Group, a China non-ferrous subsidiary, paid US$180 million to acquire a 74 percent stake in Bikita Mineral.

Bikita Mine initially opened in 1911 for tin excavation, with lithium mining only starting in 1953.
A report by the British Geological Survey said Bikita was the only mine in Africa producing lithium, although this was yet to be used in battery supply chains, media reports say.

With only a single lithium mine, Zimbabwe’s Africa’s largest and world’s fifth-biggest biggest producer.

In December last year Huayou, one of the world’s major producers of cobalt, completed a US$422 million acquisition of the Arcadia hard-rock lithium mine.

The Arcadia project, located 38 kilometres east of Harare, is considered to be one of the world’s largest hard rock lithium resources, a key component in rechargeable battery production. Huayou Cobalt’s Arcadia will start producing lithium-containing minerals spodumene and petalite next year, Xinhua news agency reported, citing the company’s official.

Another Chinese firm, Chengxin Lithium Group, spent US$77 million to acquire mining rights in the largely unexplored Sabi Star lithium-tantalum mine project in Buhera. The company said it had invested US$22 million in exploration, feasibility studies and civil works.

By the time the company started production, it would have invested US$130 million, officials say.
Shenzhen Stock Exchange-listed Suzhou TA&A Ultra Clean Technology bought shares worth about US$15,7 million from Premier African Minerals, a Zimbabwe-focused miner that is developing the Zulu resource near Bulawayo.

Why the scramble for lithium

The global desire to cut carbon emissions has created a compelling case for low-carbon technology across industries. The need for clean energy technologies to combat carbon emissions causing climate change has seen countries worldwide embracing solar, wind, and batteries for energy, as opposed to fossil fuels such as coal.

Lithium is a critical raw material needed in the transition to a green economy. Lithium-ion batteries are used to power electric vehicles and production of solar panels, among other uses for electronic gadgets.

A report from Research and Markets says the global revenue of lithium-ion batteries will top US$165 billion by 2030, reflecting a 15,3 percent annual growth rate.

Sales of electric cars (including fully electric and plug-in hybrids) doubled in 2021 to a new record of 6,6 million, with more now sold each week than in the whole of 2012, according to the latest edition of the annual Global Electric Vehicle Outlook.

Despite disruptions along global supply chains, more sales volumes have been recorded in 2022, with two million electric cars sold worldwide in the first quarter, up 75 percent in the same period last year. Electric cars on the world’s roads by the end of 2021 were estimated at 16,5 million, three times higher than in 2018.

In China, electric car sales nearly tripled in 2021 to 3,3 million, accounting for about half of the global total. China produces three-quarters of all lithium-ion batteries, according to the International Energy Agency. By contrast, America produces only 8 percent.

Analysts say Zimbabwe was unlikely to “maximize value retention” from lithium since the bulk of the resources were likely to be shipped to China to feed the world’s second processing facilities.

Meanwhile, the Government, as will later be reported in this report, says it is working on a policy that will, among other things, discourage exports of unprocessed lithium. This will, however, require substantial additional investments, analysts said.

While China, according to a study by Rystad, owned 65 percent of lithium processing and refining facilities in 2021, it accounts for less than 25 percent of deposits.

“The Chinese foreign policy when it comes to trade is earmarked on sourcing raw materials, which they do not have in their country; resources they need for further processing and industrialisation,” Harare-based economist Victor Bhoroma said.

“They definitely know what they want and are giving incentives to their businesses to look for source markets in the world. So you cannot fault them for having that particular strategic direction as a country.

What we need is to come up with a policy that provides incentives for foreign investors to add value; clear policies on how to incentivize investors to beneficiate locally, and how local investors can access cheap lines of credit so that they also value add,” Bhoroma added.

The Zimbabwe Coalition for Debt and Development (Zimcodd) recently raised some concern that the Government appeared to be parceling out strategic assets to foreign firms without giving legislators room to assess such transactions.

Zimcodd also said Zimbabwe’s lithium mines are being sold for a song by foreign investors to Chinese multinationals who have recently swooped on the finite domestic assets with little accruing to the majority of the country’s poor citizens.

But Deputy Minister of Mines and Mining Development Polite Kambamura said the Government was finalising a lithium policy that would govern all the aspects of its production.

These include prospecting, exploration, extraction, processing beneficiation marketing.

“We are not going to allow export of raw material so that we get maximum returns,” he said.
Kambamura said some investors had already indicated plans to set up beneficiation facilities while an unnamed investor recently signed a memorandum of understanding with the Government to set up a lithium battery plant in Mapinga.

Renowned mining engineer and form Hwange Colliery Company executive Fred Moyo said final mineral products must largely find their way into the overseas market for the production of final consumer goods.

Moyo, former deputy mines minister, however, said competitiveness in beneficiation and value addition relied on the quality of infrastructure, skills and competencies, levels of technological innovativeness and effectiveness of the financial sector.

“While we have the leverage of mineral resources, we fail on most if not all the above (imperatives) making us high-cost producers,” said Moyo. “We (will) only succeed when we successfully address the above variables.”

Another Harare-based economist Proper Chitambara said lack of value addition has been “a missing link to attain development aspirations.”

“It is an area where we have not been doing well across different sectors of the economy. We need to retain much value from our natural resources otherwise we will never optimally benefit from these natural resources,” Chitambara said.-ebusinessweekly