China has built a long head start over the West in securing access to Africa’s critical minerals.

That leaves North America and Europe in a weak position to develop new value chains, with African governments insisting on adding value to their minerals domestically, executives say.

A key failing has been the unwillingness of the West to put its money where its mouth is on the need for critical minerals, says Luke Knight, CEO of Central Copper Resources (CCR), which has projects in the Democratic Republic of Congo (DRC) and Zambia.

“There’s a disconnect between the rhetoric and where Western capital providers are putting their money,” he says. “There’s only one party playing: China.”

CCR had planned to list on Australia’s ASX index in 2023. Knight cites market conditions, due partly to global interest rate increases, as the reason for his decision to pull the plug on plans for an initial public offering. The company will remain private for the foreseeable future, he says.

Knight reads press coverage of the West’s need for critical minerals with a sense of irony. “Everyone is talking about the need for copper,” he says, but “a lot of it is just hot air. It’s rhetoric without follow-through”.

While Western investors demand a discount for perceived high-risk African jurisdictions, “China is very happy to work in the DRC”, according to Knight. He says it’s likely that Chinese investors will back CCR.

“When I present to the Chinese, they never worry about DRC risk. It’s obvious where I need to go for my capital.” The proactive approach taken to securing African minerals by Russia and Middle East governments as well as the Chinese means that “the West is being left behind”, he adds.

Cashflow focus

The decision not to list has affected the CCR’s operating strategy. Public market investors want more exploration to increase proven resources, while private markets focus on when cashflow can be achieved, Knight says.

Public market sentiment for junior miners is currently “dire”, but the door to a public listing is not completely closed. CCR’s shareholders have asked Knight to be ready to list at any time. That could be done within three to four months of a decision being taken, he says. “We’re ready to go.”

CCR has three main copper assets, the Mbamba Kilenda and Kayeye projects in the DRC, and the Lunga deposit in Zambia.

Mbamba Kilenda, where a drilling programme is planned for January 2024, is the closest to production, Knight says. The company is raising money privately for work there, which it aims to finalise by December. Further exploration on the company’s other projects is planned from May 2024.

Copper deposits in the DRC, Knight says, are sediment-hosted, which means they have much higher grades than typically found in Latin America. That reduces the required capital expenditure, he says. “You’ve got to move a lot of dirt when the grades are lower.”

The aim is to deploy X-Ray Fluorescence (XRF) technology, which can determine the chemistry of samples via X-rays at the mine as soon as possible, Knight says. This will reduce capital expenditure, increase profitability and allow direct shipping ore (DSO) concentrate to be supplied, he says. The company may be able to produce copper concentrate at the mine by June 2025, he adds.

China’s graphite export ban

China in October introduced export controls on graphite, which is used in lithium-ion batteries, on “national security” grounds. The country controls graphite refining, and in 2021 produced 79% of world output despite having only 22% of global reserves. China has been “unashamed” in trying to control global supply chains, says Phil Hoskins, managing director at Evolution Energy Minerals in Australia.

There need to be more non-Chinese sources of graphite, and East Africa has the best quality supplies, Hoskins says. Mozambique and Tanzania have the world’s fifth- and sixth-largest reserves of graphite and are likely to become major producers in coming years, according to Gracelin Baskaran at the Center for Strategic and International Studies.

Evolution Energy, which trades on the Australian stock exchange, in August agreed to supply Chinese battery anode producer BTR with fine flake graphite from its Chilaloproject in southern Tanzania, with BTR due to a stake of 9.9% in Evolution as part of the deal. 

It’s “naïve” to think that graphite prices will surge as a result of China’s export ban, Hoskin says. In Mozambique, Australian miner Syrah Resources is capable of producing 350,000 tonnes per year and meeting 25% of global demand, but is operating significantly below capacity, he says.

A number of hurdles need to be overcome for East Africa to be able to locally add value to graphite, among them chemical industrial parks and cheap, reliable power supplies, Hoskins says. 

Those conditions are not yet met in Tanzania, he adds. Hoskins expects that in 10 to 15 years, battery supply chains will become regionalised in North America and Europe. But the US will need Chinese technology to build its own supply chain, he says.

Lithium controls

Western access to critical minerals is further complicated by attempts by African governments to move up the value chain.

Zimbabwe, the world’s fifth-largest producer of the mineral, Namibia and Ghanahave all banned raw exports. Tanzania will end the export of unrefined lithium from May 2024, requiring miners to add value of at least 5%, a letter from the country’s minerals ministry shows.

That’s “the right strategy” for Tanzania, says Mark van den Arend, chairman of StraMin, which acts as an intermediary buyer of minerals from small and medium-sized miners in the east African country. It will be no surprise if the requirement is extended in the future to include other minerals, he adds.

Forward thinking by China in terms of securing mineral access puts it in a stronger position than the West to negotiate how such requirements are implemented. In the DRC, local copper smelting options are available, and government permission is currently needed for copper concentrate exports, CCR’s Knight says. But China will probably be able to negotiate the right to export copper concentrate initially, he predicts.

Industrial logic suggests that the negotiating power enjoyed by the Chinese may weaken over time. In the longer term, Knight says, miners prefer to sell to a local smelter if possible. “It makes sense if the capacity is there.”