South going South
Published by MAC on 2006-03-24
South going South
by Nostromo Research
24rd March 2006
A barely-noticed new era in mining started, in a modest way, five years ago. Although one or two South-based mining companies were investing in lesser developed countries back in the seventies (eg. the Malyasian Mining Corporation), it wasn't until China joined the WTO in 2001, that the trickle began developing into a stream. Soon afterwards, Brazil and India became favoured partners of the big powers in the Doha round, and CVRD - the world's biggest iron ore producer - started buying into projects and companies overseas. Two huge Indian minerals companies, Tata and Jindal, began diversifying, not only in the South but, in the case of Tata (India's largest private company) in Europe too.
CHINA
To date there's been a lot of promise (or threat) but not much South-South investment in the African hard minerals sector. China is leading the way. Its initial US$30 ivestment in Chambezi, Zimbabwe, by state-owned China Non-ferrous Metal Industries was the first that the regime ever made overseas in the non-ferrous sector - this figure has since risen to US$170 million.. Chinese companies have also bought into South Arican coal mines, with various projects underway in the DRCongo. These are relatively small plays, however: currently China is much keener on timber and road building - and above all finding oil, notably in Sudan and Angloa.
Still, the world's most minerals hungry state isn't leaving metals investment far behind. Last June it was in serious talks with Zimbabwe over securing platinum and - last month - Eritrea's president said he wanted to increase Chinese investment in the country's mining and other sectors (see below). Going in the other direction, African investment in China is so far almost negligible (the most notable is AnglogoldAshanti's investment in Sino Gold which it has just hiked up to 14%).
INDIA
The Indian government has been racing to catch up with China in overseas acquistions and joint ventures, and we're going to see considerably more targeting of Africa in the near future. But, to regard this as a crude "race for resources" would be erroneous. In January the world's two most populous states signed oil & gas, and mining, cooperation treaties. Already China's CNOC state oil company, and India's equivalent (ONGC) have stakes in the Darfur region of Sudan (much to the chagrin of human rights groups), while in February 2006, they sealed a US$2.3 blilion agreement to exploit oil in Nigeria..
In early March, the joint venture ONGC-Mittal (Mittal is the world's largest steel producer) announced they would be exploring for minerals in a dozen countries, including Egypt, Ivory Coast, and Libya, as well as Nigera and Sudan. (Times of India, March 10 2006).
India's largest private company, Tata, is now in competition with Mittal, to secure South Africa's Highveld Steel - the country's second largest steel maker and the world's leading producer of vanadium'; one of its competitors in Mittal.
And, in February, India's state-owned National Mineral Development Corporation (NMDC) announced an investment of around US$ 5 million in exploration for gold in Tanzanzia, including Kahama distrcit, site of the notorious Bulyanhulu mine.
(see below).
South-to- South cooperation in the mining sector is threfore rapidly taking on a new significance; but so are North-South partnerships, as Australian, Canadian and, to a lesser extent, UK,companies and consultanices, get invited into both India and China, to modernise their minerals technology, form joint ventures and invest in both new mines and productiion stakes.
US
In this scenario, so-called US "Neo-cons" (rightwing policy brokers, like the Heritage Foundation - see below) are warning that, not only is Africa becoming the key battleground for securing influence and resources, but that China has become the single most important geopolitical threat to the US.
When Bush recently visited India, it clearly wasn't just to sign a spurious nuclear deal, but also ensure that India's growing collaboration with the Great Power to the East will be swiftly curbed.
Africa of Key Strategic Importance to U.S., World, Scholar Says
United States Department of State (Washington, DC)
7th March 2006
Posted to the web 8th March 2006
by Charles W. Corey, Washington, DC
Africa has evolved into a region of key strategic importance to the United States, China and many other countries worldwide as a supplier of energy and natural resources.
Brett D. Schaefer, a research fellow in regulatory affairs at the Heritage Foundation in Washington, made that point March 7 at a conference entitled "Chinese Influence: Expanding in Both Africa and Latin America."
The fact that both the Chinese and U.S. governments are discussing
Africa, along with Latin America, as a major area for investment, Schaefer told his foreign affairs audience, clearly shows Africa's ever-growing importance. "Fifteen to 20 years ago, Africa would not have been here" as a discussion topic on such a panel, he said.
"Africa is increasingly important to the United States as a source of oil," he said. In 2005, Africa supplied the United States with 18 percent of its oil imports -- more than the United States presently imports from the Middle East.U.S. oil imports from sub-Saharan Africa have increased by a third since 1999, while imports from the Persian Gulf have decreased. As a result, he said, "the importance of Africa as a source for petroleum and the import of oil cannot be overestimated."
Within the next decade, Schaefer predicted, Africa's oil exports will double. The scholar cited forecasts that say U.S. imports of African oil will rise from their present level of 18 percent to 25 percent -- so one-quarter of all U.S. oil imports are expected to come from Africa in the not-too-distant future.Increasingly, he said, instability and humanitarian crises, such as the situation in the Darfur region of Sudan, are getting more attention from the United States -- first on humanitarian grounds, but also because of strategic interests.
Additionally, he said, the War on Terror has made Africa more important. "As a battleground on the war on terror, sub-Saharan Africa is increasingly vulnerable to radical Islam, which," he said, "has been trying to spread its influence across the Sahel and eastern Africa," as evidenced by the bombing of the U.S. embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania.
Additionally, he said, Africa is important because its countries make up a large bloc at the United Nations and in international fora like the World Trade Organization, and therefore merit closer attention from the United States.
CHINA'S INFLUENCE
With regard to China's influence on Africa, Schaefer said China now has surpassed the United States as the world's largest consumer of many raw materials, ranks as the world's second-largest importer of oil and accounts for 31 percent of growth in global oil demand -- and thus is looking to Africa for these resources.
"China's emergence as a significant player on the economic scene, with its seemingly inexhaustible demand for raw materials, natural resources and oil, presents a significant challenge for the United States," he said, since the United States "is increasingly relying on the region for a lot of these materials" as well.
China is now active in every part of Africa, Schaefer told his audience. China's national oil company, he said, is especially active in Sudan, where it has built a pipeline to the Red Sea and a refinery outside Khartoum. It also controls most of an oil field in southern Darfur.
Besides Sudan, Schaefer said, China is active in Angola, where it provided a $2 billion aid package to secure oil rights and recently signed a crude oil purchase agreement for 30,000 barrels of oil a day for the next five years.
In Zambia, Schaefer said, China has invested $170 million in the copper-mining sector. China is investing in cobalt and copper activities in the Democratic Republic of Congo, is harvesting timber in Gabon and Liberia and is heavily involved in Zimbabwe as well.
Eritrea wants stronger economic ties with China
by ASMARA (Reuters)
11th March 2006
Eritrea wants strengthened economic ties with China, said an official Eritrean Web site, fitting an African pattern of closer links to the Asian economic giant.Based on a long history of outside interference, Eritrea is wary of the international community but appears to retain a certain warmth for China.
"President Isaias Afwerki said that Eritrea wishes to further strengthen bilateral cooperation with the People's Republic of China in the domains of infrastructure, trade and investment," said an article on an official Eritrean Web site.
Posted late on Friday, the article on shabait.com said the president made his comments while receiving the credentials of the new Chinese ambassador to Eritrea, Shou Chan.
"In the meeting, President Isaias underlined the need to push forward the existing bilateral cooperation in infrastructure, telecommunication, agriculture, mining and other sectors," the article said.
China has increased its presence in Africa as its own economic strength has grown. The continent is seen as not only a huge market for Chinese good but a rich source of raw materials -- from minerals to oil -- needed to power China's economy.
Despite rapid economic growth after official independence in 1993, Eritrea's economy has been stagnating since a 1998-2000 border war with Ethiopia that killed 70,000 people.
In February last year, the International Monetary Fund listed border tensions with neighbouring Ethiopia, drought, high defence spending, government debt, and administrative controls as constraints to economic growth.
In the same month, President Isaias made a rare foreign visit to Pakistan and China, where he reportedly returned to a military college where he once studied.
In August, Eritrea then received a senior military delegation from China.
© Reuters 2006. All Rights Reserved.
NMDC eyes gold in Tanzania
PSU had set a target to start a mine in the African country by 2004-2005
Press Trust Of India / Kolkata
15th February 2006
State-run National Mineral Development Corporation Ltd (NMDC) will spend Rs 6.5 crore [ within the next 12 months to prepare a detailed project report for its proposed gold mine operation in Tanzania.
"We are currently engaged in exploration of gold mines in Tanzania and have spent Rs 2.5 crore in the first phase. In the next phase, which will see an investment of Rs 6.5 crore, a detailed project report will be prepared to assess its feasibility," NMDC chairman-cum-managing director B Ramesh Kumar said.
The company has obtained all necessary permissions from both Indian and Tanzania governments for gold mining and an Ireland-based financial consultant has been entrusted to do the studies, he said on the sidelines of India Mining Summit.
"We hope to start our operation soon after completion of the detailed project report. The report is expected to be submitted within 18 to 20 months," he said.
Three prospecting licenses were granted to NMDC by the Republic of Tanzania to explore the gold prospect.
The licenses are identified as Bulyang'OMBE-i and Bulyang'OMBE-ii in Iguna district and Siga hills in Kahama district.
The first phase of exploration included drilling, survey, mapping, sampling and chemical analysis and geochemical and geophysical studies.
The studies revealed Bulyang'OMBE-i had a good prospect for good concentration where gold values were although erratic had shown maximum of 7.2 g/t.
The PSU had set a target to start a mine in the African country by 2004-2005.
A 'mini ratna' in category 1, NMDC was also expanding its activities to Nambia, Angola, Botsowana and Algeria by locating suitable deposits in mineral like gold and diamond.
On proposed disinvestment of NMDC, Kumar said it would not affect the company's operation.
"The government had 98 per cent stake in the company. Mostly small investors will pick up that 15 per cent stake with none of them exceeding one per cent share. So the proposed disinvestment will not affect the company's operation", he said.
NMDC was set to record a turnover of more than Rs 3,000 crore, while its profit after tax would cross Rs 1,500 crore by the end of this fiscal, he added.