Control of Africa’s resources riches at stake in move on ASX-listed lithium hopeful
At face value, Zijin’s claim to hold a minor stake in a project led by an ASX-listed miner is a murky and complex corporate dispute. But it also signals Beijing’s African ambitions.
The corporate shadow war over China’s access to Africa’s vast deposits of critical minerals has taken a fresh twist, with ASX-listed AVZ Minerals suspending trading amid claims the company could lose control of a major lithium project in the Democratic Republic of Congo.
AVZ says it owns 75 per cent of the giant Manono lithium deposit in the DRC, courtesy of a complex set of deals with the deposit’s original DRC-based owners dating back to 2016.
DRC-based Cominiere holds the remaining 25 per cent stake, but must cede a 10 per cent stake to the DRC government as a condition of the grant of the mining licence for the deposit.
But AVZ’s claim to control of Manono has now been challenged by Hong Kong-listed Zijin Mining, a state-backed company that has been among China’s most aggressive movers on lithium and other critical minerals over the past few years.
In a release last week, Zijin claimed to have bought a 15 per cent stake in Manono from DRC-based Cominiere, one of the original owners of the deposit, in September last year.
AVZ hotly disputes that claim, saying it had pre-emptive rights to Cominiere’s holding in the deposit, and any claim from Zijin was “invalid and of no force or effect”. But, with Zijin pressing its claim in arbitration proceedings in the International Chamber of Commerce in Paris, AVZ suspended trading in its shares on Thursday as the company tries to sort out the mess.
At risk is control of the massive lithium deposit, given the ASX-listed company had already planned to sell 24 per cent of the project to a second Chinese company – Souzou CATH Energy Technologies – in exchange for funding to back development of the mine.
Under AVZ’s plan for ownership of the deposit, the ASX-listed company would sweep up Cominiere’s 15 per cent remaining holding, sell down to CATH and emerge with a 66 per cent stake in the giant lithium deposit.
But Zijin claims AVZ never held legal control of 75 per cent of Manono, saying its 2021 deal with Cominiere means AVZ effectively holds only 60 per cent of the deposit. With another 15 per cent still in play through Cominiere – and presumably bound to the Chinese state-backed mine – and the CATH selldown still on the cards, AVZ could wind up with a minority interest in Manono as small as 36 per cent.
While the murky dealings will ultimately be sorted out behind closed doors in Paris, Zijin’s hardball tactics extend China’s campaign to win a dominant position in the race to develop Africa’s vast mineral wealth.
AVZ is only the latest of the run of African mineral rights lost by Australian companies in the firing line in Africa, as China presses ahead with its long-held desire to control more of the resources needed to feed its massive industrial heartland.
African iron deposits have been at the centre of those plans for more than a decade, as China looks to break its dependence on exports from the Pilbara.
The entry of a Chinese state-backed consortium to half of the giant Simandou iron ore deposit in Guinea has effectively forced Rio Tinto to accelerate development of its portion of the long-stalled project – along with its own long-term partner, Chinese state-controlled major Chinalco.
Despite its reputation as a “Pilbara killer”, Simandou’s output will not damage the Pilbara in itself. But hardball games elsewhere in West Africa offer China the opportunity to open up another 100 million-tonne-a-year province in Cameroon and the Republic of Congo.
In 2020 the Republic of Congo moved to strip Australian-based Sundance Resources of its right to develop the Mbalam-Nabeba deposit, which straddles the border with Cameroon.
At the same time it confiscated nearby deposits controlled by ASX-listed Equatorial Resources and UK-based Avima Iron Ore. Together the cluster of iron ore projects could easily sustain a new 100 million-tonne-a-year Africa iron ore province.
Disputes over those stripped rights have also entered arbitration, but only last month Sundance was forced to seek urgent injunctions to prevent Cameroon from handing its iron ore tenements in the country to Chinese interests. And the increasing push to end reliance on fossil fuels has opened a new front in the shadow-boxing over control of deposits, as so-called critical minerals – rare earths used in hi-tech devices and battery-making materials such as lithium – become an increasingly important asset.
Only last month the head of US military forces in Africa, General Stephen Towsend, warned a US congressional committee that the superpower was losing the battle for influence in Africa to China – with potentially strategic, as well as economic consequences. “These resources are the key supplies that America relies on to produce 21st century technologies and transition to clean energy, including mobile phones, jet engines, electric-hybrid vehicles, and missile guidance systems,” he told a defence committee.
“The winners and losers of the 21st century global economy may be determined by whether these resources are available in an open and transparent marketplace or are inaccessible due to predatory practices of competitors.
“China continues to focus on the long game, as its dominant position in African markets has allowed it to buttress autocracies and influence global political norms, technological standards and commercial practices while offering an entry point for their military.”
Zijin’s move on Manono is only one of the company’s recent moves into critical minerals. Its acquisition of Toronto-listed Neo Lithium caused controversy in Canada after regulators waved through the deal, despite having previously signalled it would apply higher scrutiny thresholds for critical minerals acquisitions under foreign takeover rules.
Similarly, ASX-listed Peak Rare Earths is still waiting for a response from Australia’s Foreign Investment Review Board over allegations China’s Shenghe Resources breached Australian takeover laws in its acquisition of a 20 per cent stake in the company – which controls the Ngualla project in Tanzania, one of the biggest undeveloped rare earths deposits in the world.