South Going South

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.