Around the globe, mining projects are facing disruptions, delays, spiraling costs and even the threatened end to ownership. These types of issue are not new but come as demand for the products miners aim to produce intensifies.
There are multiple current examples, such as Mali. The west African country has been under military government since 2020 and is set to leave the regional bloc Economic Community of West African States (ECOWAS) at the end of this month. Its ruling military junta has clashed with miners since taking over, leading even the most established of operations at imminent risk of closure.
Difficulties arose for Leo Lithium, which was developing the Goulamina lithium spodumene project in Mali in an equal joint venture with China’s Ganfeng Lithium Group. The project had an annual Stage 1 capacity of 506,000 tonnes and was due to come onstream by the second quarter of 2024.
But after a dispute with the Mali government related to the provisions of a new 2023 mining code, Leo Lithium had to suspend its shares. As the months progressed, the Perth, Australia-based company was running out of capital for its portion of the project, and ultimately agreed to sell its Goulamina stake to its Chinese partner.
Not quite the result Leo Lithium had expected when it set out to develop the project.
Mali’s new mining code has also caused a rift between the government and Barrick, which has been active in the country for over three decades. Staff at Barrick’s Loulo and Gounkoto gold mines have been detained, the company has been restricted from making shipments, and its chief executive officer has said the operations will be forced to close if the situation persists.
While gold isn’t a critical mineral in the energy transition, the tension between Barrick and the Mali government over the lucrative operations demonstrates the junta is willing to stick to its guns, no matter the size or in-country history of the company it is dealing with.
There are also difficulties developing new supplies of graphite, a key component in batteries and the critical mineral, which governments and consumers are struggling to find western sources for.
Syrah Resources has experienced this first-hand at the Balama graphite project in Mozambique. The company has been forced to close the operation, declare force majeure on shipments and seek a waiver on to avoid default on its loans because of civil unrest and protests.
It’s not a new story in Africa – Zambia and the Democratic Republic of Congo have over the years revised their respective mining codes and associated taxation, often several times, leading to tense disputes, temporary shutdowns and longer lead times for project development.
There’s nothing to suggest these projects won’t ultimately achieve their production goals. It’s just that the stakes are now higher given the push by governments and corporations to secure diversified supplies of critical minerals.
Minerals race
Host nations’ desire to have a fair share of miners’ profits while ensuring companies fulfil their license to operate is natural, and not new.
But these issues couldn’t have come at a worse time. While there have always been risks to bringing mining projects online, countries’ heightened desire to achieve decarbonization goals has coincided with a less globalized approach to trade on national security grounds, particularly in the United States.
Add an amped-up geopolitical backdrop plus a competitive financing landscape amid declining commodities prices to the mix, and the path to production has often become fraught with friction.
According to the International Energy Agency (IEA), anticipated mine supply from announced projects meets only 70% of copper and 50% of lithium requirements out to 2035, while balances for nickel and cobalt look tight relative to confirmed projects.
Graphite and rare earth elements may not face supply volume issues but are among the most problematic in terms of market concentration: over 90% of battery-grade graphite and 77% of refined rare earths in 2030 originate from China, the IEA notes.
At the same time, China is leaps and bounds ahead of the West in terms of its technology in many areas. Chinese engineers were flown to Australia to assist with teething problems at new lithium refineries, and it’s no coincidence that China holds 85% of battery cell production capacity and 90% of cathode and 98% of anode material production capacity globally.
Where it doesn’t have the ability to produce domestically, China goes out and invests. In 2023, Chinese investment in the metals and mining sector related to the Belt and Road Initiative was $19.4 billion, up 160% from 2022 and its highest in a decade, data from the Griffith Asia Institute shows.
Similarly, China’s investment in and acquisition of overseas mines has grown massively in the past decade, reaching record levels in 2023 with a particular focus on battery metals like lithium, nickel and cobalt.
With broader issues facing miners unlikely to vanish overnight, there’s clearly quite some way to go to establish more resilient and diversified critical minerals supply chains. It’s also leading some market observers to wonder whether it’s even possible.
In Hotter Commodities, special correspondent Andrea Hotter covers some of the biggest stories impacting the natural resources sector. Read more coverage on our dedicated Hotter Commodities page here.
