Business Market Report

Global rivalries are miring the clean energy revolution


Just up a red dirt road, across an expanse of tall, dew-soaked weeds, bulldozers are hollowing out a yawning new canyon that is central to the world’s urgent race against global warming.

For more than a decade, this untouched land was controlled by an American company. Now a Chinese mining conglomerate has bought it and is racing to retrieve its buried treasure: millions of tons of cobalt.

This stretch of southeast Congo, called Kisanfu, holds one of the largest and purest untapped reserves of cobalt in the world.

The metal, typically extracted from copper deposits, has historically been of secondary interest to miners. But demand is set to explode worldwide because it is used in electric car batteries, helping them run longer without a charge.

But the quest for Congo’s cobalt has demonstrated how the clean energy revolution, meant to save the planet from perilously warming temperatures, is caught in a familiar cycle of exploitation, greed and gamesmanship, an investigation by The New York Times found.

In particular, a rivalry between China and the United States could have far-reaching implications for the shared goal of safeguarding the earth. At least here in Congo, China is so far winning that contest, with both the Obama and Trump administrations having stood idly by as a company backed by the Chinese government bought two of the country’s largest cobalt deposits over the past five years.

This past week, during a visit promoting electric vehicles at a General Motors factory in Detroit, President Joe Biden acknowledged the United States had lost some ground. “We risked losing our edge as a nation, and China and the rest of the world are catching up,” he said. “Well, we’re about to turn that around in a big, big way.”

China Molybdenum, the new owner of the Kisanfu site since late last year, bought it from Freeport-McMoRan, an American mining giant that five years ago was one of the largest producers of cobalt in Congo.

In June, the Biden administration warned that China might use its growing dominance of cobalt to disrupt the American push toward electric vehicles by squeezing out U.S. manufacturers. In response, the United States is pressing for access to cobalt supplies from allies, including Australia and Canada, according to a national security official with knowledge of the matter.

American automakers such as Ford, General Motors and Tesla buy cobalt battery components from suppliers that depend in part on Chinese-owned mines in Congo. A Tesla longer-range vehicle requires about 10 pounds of cobalt, more than 400 times the amount in a cellphone.

A review by the Times of documents filed with regulatory authorities in China shows the acquisitions in Congo have followed a disciplined playbook.

As of last year, 15 of the 19 cobalt-producing mines in Congo were owned or financed by Chinese companies, according to a data analysis by the Times and Benchmark Mineral Intelligence.

These Chinese companies have received at least $12 billion in loans and other financing from state-backed institutions. In fact, the five biggest Chinese mining companies in Congo had lines of credit from state-backed banks that totaled $124 billion, according to the documents reviewed by the Times.

The site at Kisanfu was just one of two major purchases in recent years by China Molybdenum. The first came in 2016, when it took control of Tenke Fungurume, a mine that on its own produces twice as much cobalt as any other country in the world. At least $1.59 billion of the $2.65 billion Tenke Fungurume price tag, financial records show, came from loans provided by Chinese state-owned banks.

At the same time, Chinese companies are running into new headwinds from Congo’s government, according to documents obtained by the Times and interviews with current and former senior U.S. officials.

Congolese officials are carrying out a broad review of past mining contracts, work they are doing with financial help from the U.S. government.

Congo’s president, Felix Tshisekedi, in August named a commission to investigate allegations that China Molybdenum, the company that bought the two Freeport-McMoRan properties, might have cheated the Congolese government out of billions of dollars in royalty payments. The company risks being expelled from Congo.

Separately, at least a dozen employees or contractors at the Tenke Fungurume mine told the Times that Chinese ownership had led to a drastic decline in safety and an increase in injuries, many of which were not reported to management.

“Things are falling apart in terms of safety,” said Alfred Kiloko Makeba, who retired last year after a decade working as a safety supervisor at the mine.

Vincent Zhou, a spokesperson for China Molybdenum, rejected the claims and questioned if there was an organized effort to undermine the company.

China has an idiom that goes something like: “Where there is a will to condemn, evidence will follow,” Zhou said in a written response to the Times. “Vaguely I feel that we may be caught in the gaming of greater powers.”

A Presidential Connection

African countries for years have been turning to China for help building infrastructure with loans or trades involving their natural resources.

A blueprint for those deals was sketched out in 2005 when Joseph Kabila walked into the Great Hall of the People in Beijing.

Kabila was the new president of Congo after the assassination of his father. This visit was about enlisting the help of President Hu Jintao in turning around Congo’s economy.

The United States, which had long provided economic and military assistance to Congo, was locked in wars in Afghanistan and Iraq and had become increasingly uninterested in the country. Congo’s poor record on graft and human rights was also scaring away many international banks and Western investors.

Kabila’s wish list was long: He wanted new roads, schools and hospitals. In exchange, he was prepared to offer up his country’s vast mineral wealth — unparalleled in much of the world.

The two presidents outlined a deal that would change central Africa’s balance of power, according to André Kapanga, a former adviser to Kabila who offered details of the meeting for the first time in an interview with the Times.

Hu explained that many people in China’s western provinces lived in poverty. Developing the area was a cornerstone of his domestic policy, and he needed minerals and metals to build out new industries. Congo was ready to help, Kabila assured him.

This potential deal with Kabila was more ambitious than any other, and a diplomatic drama would play out in the capital of Kinshasa before it was sealed.

The setting was Kabila’s inauguration in 2006. The Bush administration sent a delegation led by Elaine Chao, then the secretary of labor.

Kabila liked motorcycles, and she presented him with a Harley-Davidson trinket when she greeted him at a lunch. That would be the extent of their interaction, Chao believed, but members of her delegation urged her to ask for a private meeting, according to Laura Genero, an associate deputy labor secretary who was on the trip. To her surprise, Kabila complied with a meeting the next day.

The U.S. delegation congratulated Kabila on his democratic victory and listened as he talked about wanting to expand access to electricity across the nation. One of his aides characterized the meeting as mostly small talk.

But a similar meeting between the new president and Chinese officials played out differently, according to Kapanga, who was briefed on both the U.S. and Chinese discussions.

The Chinese used the opportunity to begin formal talks with Kabila that would result in a $6 billion agreement: China would pay for roads, hospitals, rail lines, schools and projects to expand electricity, all in exchange for access to 10 million tons of copper and more than 600,000 tons of cobalt.

Attracting a Phoenix

By 2015, China’s presence in Congo had become visible in numerous infrastructure projects: Soccer stadiums rose from the dust, roadways were expanded, work began on water treatment facilities.

That year, the state-owned China Nonferrous Metal Mining Group said it would partner with Congo’s state mining company, Gécamines, to develop the Deziwa site, then one of the largest copper and cobalt concessions in the country.

In 2017, Zijin Mining, a Chinese state-backed company, raised almost $700 million from a sale of private shares to develop its Kolwezi mine.

Corporate filings, including annual reports and bond prospectuses, examined by the Times show that the five biggest Chinese companies in Congo had been given at least $124 billion in credit lines for their global operations. All of the companies are state-owned or have significant minority stakes held by various levels of the Chinese government.

The biggest deal came in April 2016, when China Molybdenum, a company whose biggest shareholders are a government-owned company and a reclusive billionaire, made its $2.65 billion offer to buy Tenke Fungurume, an American-owned mine atop one of the biggest cobalt reserves in the world.

There was one complication. Freeport-McMoRan had a Canadian partner that had the right of first offer to buy its stake. China Molybdenum’s solution was to have a Shanghai-based private equity firm buy out the partner, but even that deal relied on money from the Chinese government.

None of the $1.14 billion raised to buy the partner’s share came from private investors, company filings show. Instead, it came from Chinese state-controlled entities, according to the filings.

The board of the private equity firm, commonly known as BHR, was dominated by Chinese members but also included three Americans: Devon Archer, a businessman who later was convicted of defrauding the Oglala Sioux tribe, and James Bulger, son of the former president of the Massachusetts state Senate.

Another was Hunter Biden, whose father was vice president at the time.

It is not clear…



Read More:Global rivalries are miring the clean energy revolution

2021-11-21 04:26:00

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