There is no doubt that mining in Africa has been attractive to Chinese investors. According to statistics from the Ministry of Commerce of the PRC (the “MOFCOM”), the National Bureau of Statistics of the PRC (the “NBS”) and the State Administration of Foreign Exchange of the PRC (the “SAFE”), in 2013, exploration and/or mining of oil and gas and non-oil and gas minerals attracted approximately 24.7% of China’s total direct investment in Africa in that year, and as of the end of 2013, the accumulated direct investment from China in mining in Africa reached US$6.92 billion, amounting to 26.4% of China’s accumulated direct investment in Africa.
2014 and 2015 saw a few further Chinese investments in mining in Africa, although China’s outbound mining investments has slowed down in general:
- In December 2015, Zijin Mining Group Co., Ltd. (“Zijin”) completed its acquisition from Ivanhoe Mines Ltd. of a 49.5% interest in Kamoa Holding Limited, which owns the Kamoa copper project in the Democratic Republic of the Congo (the “DRC”).
- In October 2015, Zijin, through its wholly owned subsidiary Jinjiang Mining Limited, completedfurtheracquisitionandnowowns 60.47% of the shares of NKWE Platinum Limited, which holds world class assets in the Bushveld Complex in South Africa.
- In April 2015 Shandong Iron and Steel Group acquired 75% stake in the Tonkolili iron ore mine in Sierra Leone from African Minerals, following which Shandong Iron and Steel Group now owns 100% of the mine and associated infrastructure.
- In November 2014, Zijin acquired a 51% stake in La Compagnie Minière de Musonoie Global SAS, which owns the Kolwezi copper mine project in the DRC.
So far Chinese companies have invested in or been involved in exploration and mining projects in many African countries, including Algeria, Angola, Cameroon, the Central African Republic, the DRC, Gabon, Ghana, Guinea, Liberia, Mozambique, Namibia, Nigeria, the Republic of Sierra Leone, South Africa, Sudan, Tanzania, Uganda, and Zambia.
Non-oil and gas minerals involved mainly include:
- Bauxite – e.g., the bauxite mining proj- ect in Guinea invested by China Henan International Cooperation Group Co., Ltd.;
- Chromium ore – e.g., the chromium ore mine in South Africa invested by Sinosteel Corporation;
- Copper – e.g., the Chambishi copper mine in Zambia invested by China Nonferrous Metal Mining (Group) Co., Ltd.; the copper exploration project in Tanzania invested by China Henan International Cooperation Group Co., Ltd.; the MKM copper and cobalt mine and the Luishia copper and cobalt mine in the DRC invested by China Railway Resources Group Co., Ltd.; and the Kolwezi copper mine and the Kamoa copper project in the DRC invested by Zijin;
- Iron ore – e.g., the Sicomines iron mine in the DRC invested by China Railway Group Limited and Sinohydro Corporation Limited; the Simandou mine in Guinea invested by Aluminum Corporation of China Limited; the iron ore explora- tion project invested by China Henan International Cooperation Group Co., Ltd.; and the Tonkolili iron ore mine in Sierra Leone invested by Shandong Iron and Steel Group;
- Manganese – e.g., the manganese mine in Zambia’s old industrial town Kabwe invested by Chiman Manufacturing Ltd., a private company from China; the Bembélé manganese mine in Gabon invested by CITIC Dameng Mining Industries Limited;
- Nickel – e.g., the Munali nickel mine in South Africa invested by Jinchuan Group Co., Ltd. (“Jinchuan”) and China-Africa Development Fund;
- Platinum-group metals – e.g., the Garatau and Tubatse projects in the Bushveld Complex in South Africa invested by Zijin; and the Frischgewaagd-Ledig mine in South Africa invested by Jinchuan and China-Africa Development Fund; and
- Uranium – e.g., the Langer Heinrich ura- nium mine in Namibia invested by China National Nuclear Corporation.
Having said that, China’s investment in mining in Africa has not constituted a substantial portion of China’s total outbound investment worldwide. Based on statistics from the MOFCOM, the NBS and the SAFE, as of the end of 2013, the accumulated direct investment from China in mining in Africa only accounted for approximately 1% of China’s total outbound investment worldwide.
Even considering China’s total investment in Africa alone, more than two thirds were invested in industries other than mining. Statistics from the MOFCOM, the NBS and the SAFE show that, by the end of 2013, construction (26.1%), finance (14%), manufacturing (13.4%), and scientific research and technical services (5.1%) had also attracted substantial portions of China’s investment into Africa.
It is worth noting that China is a very latecomer to mining in Africa. Major investments from China into mining in Africa did not happen until about only 20 years ago. China is also still a small player in mining in Africa compared to Western investors, in terms of both the investment amount and the number of projects.
Against this background, many challenges faced by Chinese investors, both from within and outside, are not at all surprising. Good projects are less available, hence the intense competition between Chinese investors and investors from other countries, and even among Chinese investors themselves.
Chinese investors in mining in Africa have been increasingly diversified. Large state- owned mining companies have been the major players, but privately owned companies, large and small, have become more and more active. However, there is still a general lack of strategic planning, outbound investment experience, necessary professional and language capabilities, understanding of local laws and regulations and grasp of cultural differences and social norms. This has often led to inconsistent decision-making, insufficient due diligence and underestimation of risks during transaction stages, and difficulties in compliance with local rules, challenges in cross-cultural communications with local workers and communities in day-to-day management of local companies. But failures have been reflected on by Chinese investors and lessons are being learned. It is reasonable to expect that Chinese investments into mining in Africa in the future will become more strategic, and the investment process more efficiently and professionally managed.
This article was first published in Mining Journal,19 January 2016