Chinese Giant Attempts to Muscle in on Australian Miner’s Lithium Project

Read More

Australian company, AVZ Minerals, is locked in a legal battle with one of China’s largest miners, Zijin Mining, over an ownership stake that could determine control of one of the world’s largest lithium deposits located in the Democratic Republic of Congo.

This is not the first challenge Australian miners have faced from competing Chinese interests in Africa and reveals how aggressive the Chinese Communist Party has been in its scramble for the precious mineral.

On May 11, the Perth-based AVZ Minerals announced that it would be suspending trading on the Australian Stock Exchange after it was called into arbitration by Zijin Mining at the International Chamber of Commerce in Paris.

The dispute centres on competing claims for the joint venture company, Dathcom, behind the massive Manono Lithium and Tin Project in the south of the Democratic Republic of Congo—the project is estimated to contain 16.3 million tonnes of lithium carbonate, a key ingredient for electric vehicle batteries.

Nigel Ferguson, the general director of the Australia’s AVZ Minerals looks on while at the lithium mine in Manono in the Democratic Republic of Congo. The country is rich with lithium, an essential mineral for electric car batteries, which nests in the remains of the former mining town of the city of Manono in the south-east of the country in the province of Tanganyika, on Feb. 17, 2022. (Junior Kannah/AFP via Getty Images)

Australia’s AVZ says it has an ownership stake over 75 percent of Dathcom with the remaining 25 percent being held by the Congolese state-owned Cominiere—the company is supposed to cede 10 percent of this stake to the government, with AVZ in negotiations to purchase the leftover 15 percent.

At the same time, AVZ is progressing a deal to sell a 24 percent stake to China’s Suzhou CATH Energy Technologies to help fund the development of the project. This would leave AVZ with 51 percent ownership of Dathcom (excluding the 15 percent being negotiated).

However, on May 9, China’s Zijin published an announcement claiming it had a 15 percent stake in Dathcom—a claim that has been flatly rejected by Australia’s AVZ who called it “spurious in nature” and without merit, according to an investor announcement (pdf) on May 4.

Zijin claimed that between July and September 2021, it negotiated a deal with the Congolese Cominere where it apparently agreed to transfer a 15 percent interest to an “affiliate” of Zijin called Jincheng Mining, according to an update (pdf).

President of Democratic Republic of Congo (DRC) Felix Tshisekedi during the inauguration of the research centre for agribusiness at the International Institute of Tropical Agriculture (IITA) in Bukavu, DR Congo, on Oct. 8, 2019. (Tchandrou Nitanga /AFP via Getty Images)

It then claimed the deal was “obstructed” by AVZ, who refused to convene shareholder meetings and also filed two lawsuits forcing the issue into the courts.

In November 2021, the Congolese Commercial Court of Lubumbashi approved the sale of the 15 percent to Zijin’s affiliate and rejected any further attempts by AVZ to litigate.

If Zijin’s claims are upheld, it would bode poorly for Australia’s AVZ, which would effectively lose control of the mine.

Under the Chinese mining firm’s claim, AVZ would never have held a 75 percent stake in the joint venture, and instead would only have 60 percent.

Yet, Zijin stands by the deal for AVZ to sell a 24 percent stake to China’s Suzhou CATH Energy Technologies. The combined effect of both CATH and Zijin’s claims would see AVZ’s ownership stake drop to just 36 percent, leaving both Chinese firms with a 39 percent interest in Dathcom—a larger controlling interest over the lithium mine.

CATH is a subsidiary of China’s Contemporary Amperex Technology, the world’s biggest battery maker and a key supplier to major car manufacturers Tesla and BMW.

Tesla’s China-made Model 3 vehicles are seen during a delivery event at its factory in Shanghai, on Jan. 7, 2020. (Aly Song/Reuters)

The murkiness of the dealings in Africa highlights an ongoing trend in the continent of Western firms vying, and losing control, over mining projects from competing Chinese interests.

In December 2020, two Australian miners and a UK firm, launched dispute resolution proceedings against the Republic of Congo after it stripped the three companies of mining licenses and instead awarded it to a mysterious Hong Kong-based firm called Sangha Mining with no prior history in the continent.

The three mining companies were developing major iron ore deposits in the country.

Meanwhile, the Australian Foreign Investment Review Board is examining a move by China’s Shenghe Resources to buy a 20 percent stake in Peak Rare Earths, whose core asset is the Ngualla rare earth project in Tanzania, one of the world’s largest neodymium praseodymium deposits used for high-end magnets used in wind turbines and flares.

Rare earths and critical minerals are vital for consumer electronics, green technologies, medical equipment, and even fighter jets.

Competition for the minerals continues to heat up as democratic nations and Beijing vie for control of supply chains for the precious resource—exacerbated by the West’s push for more climate change action resulting in the need for components for green technologies.

China is believed to control around 90 percent of the world’s production of critical and rare earth minerals, spurring democratic nations to develop new supply chains independent of Beijing.