Source of this article: Times Finance Author: Zhang Tingwen
Image source: Picture Worm Creative
China is the world's largest producer, consumer and trading country of mineral products, and the Global Mining Development Report 2023 released by the Ministry of Natural Resources shows that Chinese mining companies account for one-fifth of the list of the world's top 50 mining companies. Mining companies ranked among the world's top 50 are not only deeply rooted in their local areas, but also actively "going out" to invest and cooperate overseas.
However, in recent years, with the advancement of global new energy transformation, industrial transformation and scientific and technological transformation, critical mineral resources have also become a "must fight" for the strategic game of major powers. Chinese mining companies are not only facing fierce competition, but are also facing new challenges in overseas mining investment as they experience a wave of public-private partnerships.
The Malian government wants to acquire a stake in the mining company for free
Ganfeng Lithium (002640.HK) SZ) recently further strengthened its control over Mali Lithium, which was previously jointly funded by Leo Lithium and Ganfeng International, a wholly-owned subsidiary of Ganfeng Lithium, to develop the spodumene Goulamina project in Mali. However, after capital increase and acquisition, Ganfeng International will hold 100% of the equity of Mali Lithium in the future.
According to the announcement, Mali Lithium has Lithium du Mali SA (hereinafter referred to as "LMSA"), which is 90% and 10% owned by Mali Lithium and the Malian government respectively. According to the 2023 Mining Code issued by Mali and the implementation rules that may be promulgated in the future, the Malian government has the right to hold 10%~35% of the equity of LMSA, and so far the Malian government has not held a stake in the LMSA of the project company.
Times Finance has noticed that in recent years, in the development of overseas minerals, the local government's request for equity participation has become more and more common, and the public-private partnership of overseas minerals has become a general trend.
Hainan Mining (601969. SH) announced last year that its wholly-owned subsidiary, Xinmao Investment Co., Limited (hereinafter referred to as "Xinmao Investment"), intends to sign an additional issuance agreement and a capital increase agreement and related shareholder relationship agreements with Kodal Minerals PLC (hereinafter referred to as "KOD") and its wholly-owned subsidiary Kodal Mining UK (hereinafter referred to as "KMUK") respectively.
Xinmao Investment intends to subscribe for 14.81% of the additional shares issued by KOD to Xinmao Investment through cash of US$17.75 million; and a cash capital increase of US$94.34 million to hold a 51% stake in KMUK; At the same time, in order to provide the same proportion of borrowings from KOD to KMUK, Xinmao Investment intends to provide KMUK with a shareholder loan of US$5.66 million.
KOD is a UK-listed company focusing on the exploration and development of lithium mines in West Africa, especially in Mali. KOD owns the mining rights of the Bougouni lithium mine in Mali, covering an area of 97.2 square kilometres, and the certificate was obtained on November 8, 2021 and is valid for 12 years.
In addition, KOD owns three gold exploration rights in Fatou, Nangalasso and Slam in Mali and three gold exploration rights in Dabakala, Korhogo and Nielle in Côte d'Ivoire.
KMUK is a new addition to the transaction, and upon completion of the transaction, KOD will transfer all of its mining rights and prospecting rights to the Bougouni lithium mine in Mali to KMUK. As required by Malian law, KMUK will hold all of the exploration rights to the Bougouni Lithium Mine through its subsidiary, Future Mineral, and establish a new subsidiary to hold the mining rights of the Bougouni Lithium Mine; The Malian government has the right to participate in 10%~20% of the subsidiary.
Hainan Mining said that according to Mali's mining law, the Malian government will receive a 10% stake in a domestic mining company in Mali free of charge, and has the right to further purchase an additional 10% stake in the mining company, so the company's eventual interest may be reduced.
At present, the construction of the Bougouni lithium mine is being carried out in an orderly manner. On May 17, the relevant staff of the Hainan Mining and Securities Department told Times Finance that the Malian government has not participated in the related companies of the Bougouni lithium project.
Mali, whose full name is the Republic of Mali, is the second largest country in West Africa by area and one of the least developed countries in the world, with a GDP of $18.83 billion in 2022 and a GDP growth rate of 3.7%. Mismatched by economic performance is the abundance of minerals in the land, with the mining sector being an important pillar of Mali's economy, accounting for 10% of Mali's GDP and being the country's main source of foreign exchange.
Recently, Mali is pushing for mining reforms. In July 2023, Mali's new mining minister, Amadou Keita, took office, focusing on implementing mining reforms, including auditing gold mines across the country and expanding the country's share of profits from the extraction of gold and other mineral resources. In 2023, Mali's GDP growth rate was 4.7%, and it is forecast to reach 5.1% in 2024.
A person who has been engaged in overseas mineral trade for many years told Times Finance that the United States, Canada, Zimbabwe and other countries require many minerals to be reprocessed locally before they can be exported. Comparatively speaking, it is not too much to ask for a stake in a mining company similar to that of the Malian government.
Mining giants under the wave of "public-private partnerships".
With the exception of Mali, the rest of the world is also experiencing a wave of "public-private partnerships".
At the beginning of 2024, Zijin Mining (601899. SH) sold a 5% stake in the Kolwezi copper (cobalt) mine in the Democratic Republic of the Congo (DRC) to the DRC government. The mine has a resource of 2.51 million tons of copper and 38,000 tons of cobalt, and has been operating steadily for many years. In 2023, there will be 127,000 tons of copper and 2,306 tons of cobalt, and in 2024, 128,000 tons of copper and 2,305 tons of cobalt will be planned.
An expert in the lithium mining industry told Times Finance that in recent years, such a model has been found in Chile, Argentina, Africa and other places, "mainly to directly force equity participation and collect money in a different way".
近期，最备受瞩目的海外矿产“公私合营”事件是天齐锂业（002466. SZ)与智利化工矿业公司(Sociedad Química y Minera de Chile S.A.,以下简称"SQM")。
In December 2018, Tianqi Lithium spent US$4.066 billion to acquire a 23.77% stake in SQM, becoming its second largest shareholder. SQM operates the Atacama Project, the world's largest lithium salt lake, with a resource of about 10.8 million tons of lithium metal equivalent, a lithium-ion concentration of 1,840mg/L, and a magnesium-lithium ratio of only 6.4, ranking among the top in the world in terms of resources and grades.
On December 27, 2023, SQM and Chile's National Copper Company (hereinafter referred to as "Codelco") jointly announced that they have reached a non-legally binding memorandum of understanding on the operation and development of the Atacama salt lake for the period 2025~2060, and will form a joint venture company controlled by the government to jointly develop lithium resources.
SQM and Codelco have made a series of agreements and arrangements on the equity structure, corporate governance, profit distribution, mining amount, etc. of the joint venture. Once the joint venture is formed, SQM will own 50% of its shares minus 1 share and Codelco will own 50% of its shares plus 1 share.
On March 7, Xia Juncheng, CEO of Tianqi Lithium, held talks with Chilean Minister of Economy Grau on the situation of Chile's lithium industry and the national lithium strategy. In an interview with the media, Xia Juncheng expressed his dissatisfaction with SQM's expansion of restrictions on Tianqi Lithium, and said that he wanted to ensure that the rights of shareholders are respected and create a transparent and mutually respectful cooperation environment; On March 20, SQM announced that it would further revise the memorandum of understanding with Codelco and postpone the signing of documents that originally defined the partnership from March 31 to May 31.
Tianqi Lithium said that considering that the board of directors of SQM has only approved a memorandum of understanding that is not legally binding, and has not yet approved the final agreement document and joint venture relationship, the final agreement will be submitted to the board of directors of SQM for analysis and consideration again after being agreed by both parties before it can be formally signed and effective. The Company intends to use its best efforts during this period to actively seek SQM to convene a general meeting of shareholders to consider the subsequent legally binding agreements or transactions covered by the Memorandum of Understanding.
In addition to Codelco's "sideways", since the beginning of this year, Chile has also implemented a new mining tax, which applies different taxation rules according to the sales volume of mining enterprises.
It is worth noting that up to now, lithium mining enterprises have not been explicitly included in the scope of taxation by the current tax laws and regulations in force in Chile. Although there is no clear legislation, the tax bureau has expanded the scope of mining tax in practice to assess and tax other mining enterprises, such as lithium mining.
Against this backdrop, the Santiago Court of Chile ruled in April this year on the case for the 2017~2018 tax year (corresponding to the 2016~2017 fiscal year), reversing the conclusion of the Tax and Customs Court in 2022 that it had ruled in favor of SQM not to pay mining tax.
In this regard, SQM announced that it will re-examine the accounting treatment of mining tax paid and accrued in the historical period based on the latest ruling of the Chilean court in April, and is expected to reduce its net profit in the first quarter of 2024 by about 1.1 billion US dollars (covering the amount of mining tax in the 2011~2023 fiscal year).
As SQM is more likely to make accounting adjustments in the first quarter of 2024, Tianqi Lithium also provides for the impact of net profit based on its shareholding ratio of 22.16%, amounting to approximately RMB1.7 billion.
Chile's Ministry of Finance had estimated that mining tax revenues would reach US$1.35 billion, equivalent to 0.45% of GDP, after the new rules were implemented. According to the data of the Chilean Copper Commission and Capital Goods, the investment in the mining sector during 2024~2026 will increase significantly by 30%~40% compared to 2023. Chile's finance minister, Marcel, expects a further $10 billion increase in mining investment over the next five years.
However, the 2023 monetary policy report released by the Central Bank of Chile pointed out that internal and external uncertainties may bring risks to Chile's mining industry. On the one hand, there is a high degree of uncertainty in the implementation of investment plans by Chilean domestic companies, and 58% of mining companies that plan to start operations in 2023~2026 are still in the stage of environmental protection permit approval, which may cause delays. On the other hand, factors such as a stronger US dollar and tighter global financial conditions may also affect copper prices and related corporate investment plans.