March Newsletter – 13.03.2023

  • Rio Tinto commences underground production at Oyu Tolgoi
  • DIFC grants captive licence to Ma’aden
  • China could control a third of the world’s lithium by 2025
  • Cobalt market saw record-breaking supply boom in 2022
  • China gives new backing to coal even as clean energy accelerates
  • “Lithium OPEC” in South America could drive away investment, says Sigma Lithium CEO
  • Canada will not force Chinese state investors to divest stakes in Teck, First Quantum
  • Omani ministry signs nickel extraction agreement with UK’s Knights Bay

Rio Tinto commences underground production at Oyu Tolgoi

Rio Tinto on Monday said it commenced underground production at its Oyu Tolgoi copper mine in Mongolia.


Since the agreement between the Government of Mongolia and Rio Tinto in January 2022 to reset the relationship and move the Oyu Tolgoi underground project forward, 30 drawbells have been blasted and copper is now being produced from the underground mine.

Oyu Tolgoi is expected to become the fourth-largest copper mine in the world by 2030, operating in the first quartile of the copper equivalent cost curve, according to the company.

DIFC grants captive licence to Ma’aden

DUBAI – Ma’aden, the largest multi-commodity mining and metals company in the Middle East and one of the top five mining companies globally based on market capitalisation, has been granted a captive licence by Dubai International Financial Centre (DIFC), the leading global financial center in the Middle East, Africa, and South Asia (MEASA) region.

With 17 mines and sites and 6,000 direct employees, Ma’aden is among the world’s fastest-growing mining companies. It is also committed to responsible and sustainable operations and is developing the mining industry in line with Saudi Arabia’s Vision 2030.

Captive insurance is a risk financing mechanism in which a company insures itself against potential losses. In a captive insurance arrangement, the insured brings its risk in-house by creating a licenced company that provides insurance to its parent organisation.

The DIFC’s captive licence will provide Ma’aden with financial, strategic, and operational advantages. By forming its own insurance company to protect against unique business risks, Ma’aden can manage difficult-to-insure risk exposures, cover gaps in its risk management programme, and capture profitable premiums that would otherwise be paid to commercial insurers.

DIFC provides an optimal environment for captives, allowing firms to take full control of their risks while gaining greater financial flexibility and protection. Establishing a captive in DIFC gives Ma’aden a strategic location to convene board meetings, access the DIFC’s reinsurance market, and be close to its headquarters in Saudi Arabia.

China could control a third of the world’s lithium by 2025

China’s efforts to ramp up lithium extraction could see it accounting for nearly a third of the world’s supply by the middle of the decade, according to UBS AG.

The bank expects Chinese-controlled mines, including projects in Africa, to raise output to 705,000 tons by 2025, from 194,000 tons in 2022. That would lift China’s share of the mineral critical to electric-vehicle batteries to 32% of global supply, from 24% last year, according to a note on Friday.

The race to secure lithium is playing out at the highest levels, with nations including the US prioritizing access to the materials necessary for making batteries as the world turns away from fossil fuels. China’s needs are particularly acute because it’s home to the world’s biggest market for new energy vehicles.

The rise in Chinese output will include an increase in material derived from lepidolite, a lithium-bearing rock often overlooked as poor quality and environmentally unsound because of its low yield and high energy costs. UBS sees lepidolite in China accounting for 280,000 tons of lithium in 2025, or 13% of global supply, from 88,000 tons last year, as the government continues to support the sector.

Cobalt market saw record-breaking supply boom in 2022

A record surge in supply of cobalt last year coincided with weaker demand in the second half, to leave the crucial battery metal in a massive surplus by the end of 2022, according to specialist trading house Darton Commodities.

Congo is Africa’s top copper producer and mines more than half the world’s cobalt.

Mined cobalt supply grew by 23%, helping to wipe out a big deficit from a year earlier, Darton said Monday in its annual cobalt report. At the same time, consumption was affected by a slowdown in demand from the electronics sector, which vies with the electric-vehicle industry as the biggest consumer of the battery metal.

The glut in cobalt stands in sharp contrast to ongoing supply concerns for another key battery metal — lithium. Rising EV sales helped fuel a sharp rally in prices for both metals early in 2022, but cobalt has since slumped more than 60% from a June peak, while lithium has fallen far less aggressively.

The surge in cobalt production was driven by increases in the Democratic Republic of Congo — which accounts for about 75% of global supply — as well as Indonesia, an emerging powerhouse in the small but rapidly growing market, Darton said.

China gives new backing to coal even as clean energy accelerates

China signaled coal will retain its role as the country’s mainstay fuel even as the government continues to support the expansion of its world-leading clean energy industry.

The nation that mines and burns more than half the world’s coal will keep supporting the fuel, while targeting more efficient consumption and advanced production techniques, according to government reports released Sunday at the start of the National People’s Congress. In a speech in Beijing, Premier Li Keqiang highlighted the role coal played in ensuring energy supplies and keeping domestic prices at comparatively low levels last year despite global inflation.

The support for coal won’t come at the expense of clean energy, with the country’s top planning agency saying it would make renewable mega-projects, electricity storage and power grid upgrades priorities for 2023. The government also targeted a 2% reduction in energy intensity this year after leaving out a numeric goal in last year’s reports.

The measures highlight China’s unique approach to the energy transition as it seeks to peak emissions by 2030 and zero them out by 2060. Even as it spends far more than any other nation on clean power, it’s leaning more on the dirtiest fossil fuel to ensure reliable energy supplies and reduce dependence on imports.

“Lithium OPEC” in South America could drive away investment, says Sigma Lithium CEO

The creation of a lithium cartel in South America could drive away investment, according to Ana Cristina Cabral-Gardner, CEO of Sigma Lithium Resources.

Argentina, Chile, Bolivia and Brazil are analyzing the creation of a group in charge of expanding South America’s processing capacity, turning more of their mined lithium into batteries, and tapping into the electric vehicles manufacturing sector.

The group would emulate similar schemes, such as the Organization of the Petroleum Exporting Countries (OPEC), in terms of coordinating production flows, pricing and good practices, representatives of the Argentinean delegation said at the annual PDAC Convention, held this week in Toronto, Canada.

“What I worry about these initiatives is that lithium is not rare. Lithium is abundant and every time producers or actors tried to think of lithium like that, they made strategic mistakes that were costly for these countries,” Cabral-Gardner told MINING.COM.

She said recent examples like Congo and Chile taxing cobalt and lithium have shown that such initiatives can drive away investment and end up “being very nonbenign for the countries.”

“There’s plenty of capital chasing lithium. So any exclusionary initiative tends to punish those who are in the initiative because if we end up doing such a thing as an OPEC, it’s born out of the assumption that we are the only ones who have it, which is a colossal mistake,” said Cabral-Garnder.

Canada will not force Chinese state investors to divest stakes in Teck, First Quantum

TORONTO: Canada will not force Chinese state-investors in three of its large mining companies to divest stakes, as such a move would create policy uncertainty, the natural resources minister told Reuters.

In November, Canada had asked three Chinese companies to sell their stakes in Toronto-listed lithium explorers following a national security review, drawing criticism from the mining industry and raising questions about the future of other Chinese investments in the Canadian mining sector.

“If you start looking backwards at investments, it will create all kinds of uncertainty about whether an investment is ever really an investment,” Natural Resources Minister Jonathan Wilkinson said in an interview late on Tuesday on the sidelines of Prospectors and Developers Association of Canada (PDAC) conference in Toronto.

Three of Canada’s largest mining companies – Teck Resources, Ivanhoe Mines Limited and First Quantum Minerals Limited, – count Chinese state-owned enterprises as their biggest single shareholder.

This is the first time Canadian government officials have clarified what the future holds for other Chinese investments in the three Canadian mining companies.

According to Refinitiv data, the sovereign wealth fund China Investment Corp owns a 10.3 per cent stake in Teck, China’s state-owned CITIC Metal Group owns 26 per cent in Ivanhoe Mines while China’s largest copper producer Jiangxi Copper Corp Ltd owns 18.3 per cent in First Quantum Minerals.

Omani ministry signs nickel extraction agreement with UK’s Knights Bay

Oman’s Ministry of Energy and Minerals signed a mining concession agreement with British company Knights Bay to extract nickel and its derivatives with high purity.

The agreement is to obtain a concession right in mining area No. 21, located in the Wilayat of Ibra in the North A’Sharqiyah governorate. It is the first mining agreement with a foreign investor.

The extraction process will be carried out without any carbon emissions (zero carbon).

Dr. Salah bin Hafeedh Al Dahab, Director General of Investment at the Ministry of Energy and Minerals, said that this agreement comes in line with the government’s approach to allocate mining concession areas to develop investment in the mineral sector.

Initial investments related to the exploration and appraisal phase are estimated at around $25m to $30m in the first three years, to be spent to cover an area of 1,444 square kilometres, Oman News Agency quoted the director general as saying on Thursday.

This phase includes geological surveys and drilling of a number of exploratory and appraisal wells, as well as chemical analysis to confirm the quantities of mineral reserves, he added.

Meanwhile, Brian Spratley, board chairman at Knights Bay said that the company seeks, through the agreement, to build, develop and process battery minerals (nickel and cobalt) in Oman to meet the global demand for nickel through electric vehicle (EV) manufacturers.

Nickel is a versatile metals and its uses vary from the stainless steel sector to EV production. A shift towards electrification in the automotive industry is rapidly scaling the demand for nickel.

According to Statista, the global demand for nickel to be used in electric vehicle batteries amounted to 60,000 metric tons in 2018, and is expected to increase to some 665,000 tons worldwide by 2025.