China is making another big bet on copper in the Democratic Republic of the Congo (DR Congo), deepening its presence in a nation that has proved difficult for Western business.
Congo holds huge reserves of copper, but is also one of the hardest countries to navigate, with problems with security, transparency and infrastructure.
A case in point is Glencore PLC, the biggest producer of copper in the DR Congo. The company is facing three court cases and a possible UK bribery probe related to its dealings there, as well as a tax hike and tougher mining laws.
Citic Metal Co (中信金?), a Chinese conglomerate, on Monday agreed to spend about US$555 million for a 20 percent stake in Ivanhoe Mines Ltd, which holds the Kipushi zinc and Kamoa-Kakula copper projects.
China’s Zijin Mining Group Co (紫金礦業) already owns almost 10 percent of Ivanhoe.
The investment shows how China, the world’s biggest commodity consumer, is looking to Africa to secure natural resource supplies and how it is positioning industry to take advantage of the move to battery and electric-car technology.
Electric vehicles and renewable applications use four times more copper than traditional cars and energy sources, according to Freeport-McMoRan Inc.
“This is China in the ascendancy,” said Paul Gait, an analyst at Sanford C Bernstein & Co in London. “The West is losing its tolerance and appetite for securing what is necessary to power an economy.”
However, it is not easy to mine in the DR Congo, which is the world’s sixth-biggest source of copper. In the past 10 years, other major competitors, such as Rio Tinto Group and BHP Billiton Ltd, turned away from the DR Congo’s rich resources, while China’s influence is on the rise.
China Molybdenum Co (洛陽欒川鉬業) last year bought a stake in one of the DR Congo’s biggest copper and cobalt mine, Tenke Fungurume, as part of a US$3.8 billion deal, and Freeport-McMoRan has left the country.
China’s Zhejiang Huayou Cobalt Co Ltd (浙江華友鈷業) is developing a copper mine near Kolwezi in the nation’s southeast.
In March, Glencore agreed to sell about one-third of its cobalt output to GEM Co (格林美), a Chinese supplier of battery chemicals.
The DR Congo last week approved the final parts of a new mining law that would make it more expensive for mining companies to operate and give the government a bigger stake.
The law has faced fierce criticism from the biggest miners in the nation, including Glencore and Randgold Resources Ltd, which say it would reduce investment.
Citic’s investment in Ivanhoe could help Glencore reassure investors that its Congolese assets still have value, Gait said.
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