But the field trip came to an abrupt end when the team was just two hours away from the site.
“We drove for four days from Hotan to reach there. When we were almost there, we saw a mega whirlwind forming at the mountain that we were heading towards. It was definitely strong enough to topple our car, so we had no choice but to give up,” a member of the field trip said.
In the neighboring Teklimakan Qumluqi desert, “a place where nobody gets out alive” in the Uyghur language, sandstorms are common in the Kunlun Mountains.
The distance between the deposit, located in the Kunlun Mountains, and center of Hotan County is reported to be 300 kilometers.
“The actual journey [from Hotan] is more than 500 kilometers - and bear in mind that we climbed over three snowy mountains, each 5,000 meters high, to get there. Never in my life would I wish to return to Xinjiang.” the source added.
Despite the extreme mountain weather and high altitude, many are still eager to visit the Huoshaoyun deposit, which has combined recoverable zinc and lead resources of 18.87 million tonnes, according to the Xinjiang Bureau of Geology and Mineral Resources.
At the annual sitting of the National People’s Congress of the People’s Republic of China and the Chinese People’s Political Consultative Conference -widely known as the “twin sessions” - last month, the development of this largest zinc-lead deposit in Asia was listed as part of a grand plan to raise Southern Xinjiang from poverty.
Home to the indigenous minority of the Uyghurs, whose living conditions caught wide international attention, Southern Xinjiang is regarded as one of the most poverty stricken areas in China.
Adding to the difficulty of the location, the deposit is also close to the Sino-Indian disputed border of Aksai Chin in Xinjiang, where a deadly military fight broke out this week for the first time in decades. The area is now administered by China and claimed by India as a part of the Ladakh region.
“In terms of actually bringing such a project to the market, it all boils down to economics. While factors such as remoteness and altitude pose headwinds, they are factors miners have faced throughout history, while you only have to look at the scale and complexity of some of the civil engineering projects undertaken to know that these factors can be overcome, provided a project is economically viable,” Fastmarkets base metals analyst James Moore said.
The project’s scale not only goes far beyond the current total output of mined zinc and lead from the Xinjiang Uygur Autonomous Region, which is around 200,000 tonnes per year, but is also significant on a national scale. There are recoverable mined zinc resources of 44.39 million tonnes throughout China, according to data published by Ministry of Land and Resources in 2016.
Other than its massive absolute quantities, the Huoshaoyun grades are also extremely high at 23.95% zinc and 4.67% lead compared with the general trend of lower grade ores in new zinc projects.
Currently, the world’s most important sources of zinc are the Sedex deposits, which includes Glencore’s Mount Isa and Teck Resources’ Red Dog. Lady Loretta, located in Mount Isa, contains a total mineral resource estimated at 13.7 million tonnes, with 17% zinc and 6% lead grade. Teck’s Red Dog has a zinc grade of around 14%.
The two latest major greenfield zinc projects, MMG’s Dugald River and Vedanta’s Gamsberg, have zinc and lead grades of 12.4% and 6-6.5% respectively.
With its lucratively high grades and massive resources, several questions remain unanswered for the Huoshaoyun deposits: Who owns it? Who has the exploration rights? Who has the developing rights?
The answer to the first question is straightforward. According to the Mineral Resources Law of the People’s Republic of China, all mineral resources belong to the state, while rights of state ownership in mineral resources is exercised by the State Council.
Anyone who wishes to explore or mine mineral resources has to apply for separate licenses for the right of exploration and the right of mining.
A company called Xinjiang Zinc has managed to secure the exploration license, while the mining license has not been granted so far, leading to a multi-year deadlock in the construction of the mining facility, sources told Fastmarkets.
Xinjiang Zinc is jointly owned by five companies: Xinjiang Guanghui; Hotan Yuxin State Asset Investment & Management Co, Ltd; Xinjiang Baodi Mining, a wholly-owned subsidiary of the Xinjiang Geological Minerals Bureau; Khorgos Qianyuan; and Xinjiang Xinye State Asset Management Co, Ltd, according to Xinjiang Zinc’s website.
The company was established in May 2017, but the extreme weather and altitude have made it challenging to plan the mine’s construction, water transport and operations.
“It’s also going to be very difficult to hire workers and maintain their well-being,” another member of the field trip said.
While it is a tough nut to crack, it is probably worth the effort in light of the sluggish domestic output due to stricter environmental standards for zinc and lead mines.
In 2019, China’s zinc and lead concentrate output stood at 2.8 million tonnes and 1.23 million tonnes respectively, marking the third consecutive year of decline, according to the National Bureau of Statistics. Meanwhile, Chinese imports of lead and zinc concentrate surged by 31.7% and 17.5% year on year respectively.
Competition for foreign zinc raw materials has further intensified in 2020. Since March, Covid-19 lockdowns in South America caused some of the world’s top exporting mines to close.
“Obviously the Covid-19 disruptions have had a significant impact on [zinc concentrates] supply; off the top of my head we calculate more than 600,000 tonnes of supply has been lost this year directly due to the coronavirus, and that figure will likely rise further if more producers shutter uneconomical capacity,” Moore said.
Amid the continued supply uncertainty, Fastmarkets’ spot zinc concentrate treatment charge fell to $155-170 per tonne on May 29, its lowest level since October 2018 and down 45.4% from $285-315 per tonne at the beginning of this year.