chinese mog operations in africa_conservation international
DESCRIPTION
This report compiles, maps and overlays Chinese mining, oil and gas extraction operations in eleven African countries where Conservation International has a significant presence. The report also outlines strategies for CI to catalyze a working relationship with perticular Chinese extraction firms.TRANSCRIPT
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Acknowledgements This report was prepared by Douglas Ian Scott under the Trott Internship for Conservation International
(CI). Special thanks go to: The CI Africa team, the Beijing Axis group, as well as friends and colleagues in
Angola, Zimbabwe, Liberia, Madagascar, Johannesburg and Pretoria for all their assistance and advice.
Particular thanks is given to Rowena Smuts (Mining Engagement Advisor at CI) based in the Cape Town
office who conceptualised the project and supervised the research, Benoit Kisuki i, Sean Gilbertii, Martin
Sneary iii, Kathryn Sturman and Chris Aldeniv, Sanusha Naiduv, Yoon Jang Parkvi, Johanna Jansson, Lucy
Corkinvii, and Peta Thornycraft. The Trott Family Foundation for kindly funding the research and CI for
providing the opportunity to conduct this research.
Sean Gilbert and Chris Alden are both thanked for their comments provided on the draft report.
All country maps displaying areas of environmental concern were compiled using the Integrated
Biodiversity and Assessment Tool (IBAT).viii
The opinions expressed in the report and any possible factual errors are the responsibility of the author.
CI is not responsible for content derived from external sources.
For further information please contact [email protected] or [email protected] or
i Conservation International Country Director for the DRC ii China Director at the Global Reporting Initiative (GRI)
iii Senior Information Management Adviser at BirdLife International and Conservation International; IBAT project.
iv Dr Kathryn Sturman and Dr Chris Alden are Project and Programme Heads respectively at the South African
Institute of International Affairs (SAIIA). Particular thanks are given to Dr Chris Alden for reviewing this report. v Former Director of the Emerging Powers project at Fahamu now at the Human Sciences Research Council
vi Formerly of the University of Johannesburg, Senior Researcher in the Centre for Sociological Research
vii School of Oriental and African Studies, PhD candidate
viii IBAT, retrieved: 3 March 2011, https://www.ibatforbusiness.org
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Executive Summary The study aimed to address three main questions. Firstly, do Chinese mining, oil and gas (MOG)
operations in Africa occur in areas of conservation value as defined by the Integrated Biodiversity and
Assessment Tool (IBAT) and Conservation International (CI)’s geographic areas of interest? Secondly, if
there are common areas of interest which countries and which companies should CI focus its efforts on
with respect to engaging Chinese actors. Thirdly, how should CI strategically pursue possible
collaboration with select Chinese companies in order to ensure the conservation of biodiversity and the
ecosystem services that underpin human wellbeing in Africa.
The body of this report is broken up into three sections. The first section provides background on
Chinese MOG investments in Africa, the importance of these investments to China, how this is changing,
and describes the companies involved. The second section includes a country by country account of
Chinese MOG activities accompanied by maps which illustrate their location in relation to areas of
conservation value. The third section outlines five alternative strategies of engagement with the
relevant Chinese extraction companies. The study was made possible through funding obtained for the
Trott Internship and the research was undertaken over a 3 month period. The study relied primarily on
desktop research, reports from select African as well as international media sources, and interviews with
professionals in Sino-African studies and the extractives industry.
Chinese firms intend to continue expanding their extraction operations across the globe. Africa, along
with Australasia and South East Asia have all seen an exponential increase in the number of Chinese
mining investments since 2004. Given China’s continuing rapid economic growth and industrialisation
this trend looks likely to continue for a number of years to come. Despite this rapid increase the actual
number of Chinese extraction operations in the African countries identified through this desktop study
was less than would have been expected based on the literature.
The Corporate Social Responsibility (CSR) policies of Chinese companies today are in a similar state to
the CSR policies of their western peers in the mid-1990s. Although there is growing awareness and an
increasing interest in CSR and environmental impact mitigation policies by Chinese companies operating
outside of China there is still considerable room for improvement with regards to how these companies
address environmental issues associated with their extraction activities.
Chinese mining operations in Africa can be divided into two different types. Investments held and
driven by State Owned Enterprises (SOE) and private investments largely controlled by a small group of
private individuals who happen to be Chinese nationals.
The vast majority of the extraction operations described in this report involve Chinese SOE. Most of
China’s investments (both private and SOE) in African extraction projects are in the form of joint
ventures with all of the operations that Chinese SOE are involved in being joint ventures. Joint venture
partners are either public SOE owned by the local African government, privately owned local companies,
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western based corporations (often Australian), East Asian firms (often from Hong Kong) or some
combination of the above.
Operations owned by SOE tend to be better run and more interested in and capable at implementing
environmental impact mitigation and CSR programs than privately owned Chinese mining operations.
They also tend to be considerably larger in size and scale. These factors indicate that should CI seek to
engage Chinese mining and extraction companies that are operating in Africa the best firms for CI to
approach would be operations that are run by SOE.
The study identified that there are a number of Chinese mining, oil and gas operations which do occur
either in or adjacent to areas of conservation value as defined by IBAT. Of the eleven African countries
studied it is recommended that CI focus its efforts to engage Chinese actors on Liberia, Madagascar and
South Africa. Of the 27 extraction operations investigated the specific projects that may warrant further
investigation by CI include Soalala iron ore mine in Madagascar run by WISCO; Sheba mine run by Zijin,
Tweefontein and Dilokong chrome mines run by Sinosteel and the Frischgewaagd-Ledig platinum mine
run by Jinchuan Group all located in South Africa; and Bong Mines run by China Union mining iron ore in
Liberia.
It may also be recommendable for CI to monitor some of the other projects still in their early stages of
development and which may impact on nearby environmentally sensitive geographical areas. These
include Muali mine in Zambia run by Jinchuan Group, Riversdale Zambeze project in Mozambique, and
Oil blocks 3113 and 2104 in Madagascar being done by Shaanxi Yanchang Petroleum Group.
Alternative strategies for approaching and establishing relationships with the recommended Chinese
extractive industry companies were evaluated. It is recommended that the best approach is one that
would involve lobbying both the Chinese government and African governments with an emphasis placed
on African governments. Chinese companies and Chinese SOEs in particular would find it very difficult
to ignore overtures by any organisation should that organisation be recommended to them by the
relevant African government. The approach may also differ depending on the objective of a potential
cross-sector partnership. If the intention was to shift the benchmark within the sector in terms of how
CSR and social and environmental aspects of these projects area addressed it might make more sense to
approach Chinese actors in Beijing whereas working with a particular company at a particular project
site might require direct engagement in that country.
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Contents
Acknowledgements…………………………………………………………………………………………………………………………………2
Executive Summary ....................................................................................................................................... 3
Contents ........................................................................................................................................................ 5
List of Acronyms ............................................................................................................................................ 7
Definitions ..................................................................................................................................................... 8
Introduction .................................................................................................................................................. 9
Study Approach ........................................................................................................................................... 11
Scope of study ......................................................................................................................................... 11
Methodology ........................................................................................................................................... 11
Background ................................................................................................................................................. 12
China in Africa and mining ...................................................................................................................... 12
China in Africa and the environment ...................................................................................................... 14
Country Profiles .......................................................................................................................................... 16
West Africa: Liberia ................................................................................................................................. 16
Middle Africa: .......................................................................................................................................... 18
Angola ................................................................................................................................................. 18
Congo, The Democratic Republic of .................................................................................................... 19
Equatorial Guinea ............................................................................................................................... 20
East Africa ............................................................................................................................................... 21
Madagascar ......................................................................................................................................... 21
Mozambique ....................................................................................................................................... 23
Zambia ................................................................................................................................................. 24
Zimbabwe ............................................................................................................................................ 27
Southern Africa: ...................................................................................................................................... 30
Botswana ............................................................................................................................................. 30
Namibia ............................................................................................................................................... 31
South Africa ......................................................................................................................................... 32
The Way Forward ........................................................................................................................................ 37
Projects of interest .................................................................................................................................. 39
Focus Justification: .............................................................................................................................. 39
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Approaching Chinese companies ............................................................................................................ 41
Five possible strategies of approach ................................................................................................... 41
Appendix ..................................................................................................................................................... 45
Chinese Mining Firms .............................................................................................................................. 45
Jinchuan Group ................................................................................................................................... 45
Qingdao JISCO ..................................................................................................................................... 45
China Non Ferrous Metal Company (CNMC) ..................................................................................... 45
Chiman Manufacturing Ltd. ................................................................................................................ 46
China Minmetals Corporation ............................................................................................................. 46
China North Industries Group ............................................................................................................. 46
Sicomines ............................................................................................................................................ 46
Sinosteel .............................................................................................................................................. 47
Sinopec ................................................................................................................................................ 47
Shaanxi Yanchang Petroleum Group .................................................................................................. 47
Wuhan Iron & Steel Group .................................................................................................................. 48
Zijin Mining Group Co. ........................................................................................................................ 48
List of Chinese owned ore processing companies in the DRC ................................................................ 48
Selected Biography ..................................................................................................................................... 49
References .................................................................................................................................................. 50
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List of Acronyms
CAD Fund China-Africa Development Fund
CI Conservation International
CNFC China Non Ferrous Metal Company
CNMC China Nonferrous Metals Mining & Construction Inc
CNOOC China National Offshore Oil Corporation
CREC China Railway Engineering Corporation
DRC Democratic Republic of the Congo
EIA Environmental Impact Assessment
EITI Extractive Industries Transparency Initiative
EMP Environmental Management Plan
ESIA Environmental Social Impact Assessment
ESMP Environmental and Social Management Plan
EXIM Bank Export-Import Bank of China
HBWA High Biodiversity Wilderness Area
IBAT Integrated Biodiversity and Assessment Tool
JISCO Jindal Iron and Steel Company
MOG Mining, Oil and Gas
NORINCO China North Industries Group
OECD Organisation for Economic Co-operation and Development
SASAC State-Owned Assets Supervision and Administration Commission of the State Council
Sinopec China Petroleum & Chemical Corporation
SOE State Owned Enterprise
Sonangol Sociedade Nacional de Combustiveis de Angola
SSI Sonangol-Sinopec International
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WISCO Wuhan Iron & Steel Group
ZMDC Zimbabwe Mining Development Corporation
Definitions Key Biodiversity Area
A site identified as a conservation priority for a variety of species. These sites are ideally based
on manageable land units defined by local experts using global standards.1
Biodiversity Hotspot
Regions of global conservation importance due to the large number of endemic plant species in
area (at least 1,500 endemic plant species) that are threatened due to at least a 70% loss of
habitat. One hotspot can include multiple eco-regions. These hotspots represent the set of
broad-scale priority regions for work by Conservation International.2
High Biodiversity Wilderness Area (HBWA)
Large areas of at least 10,00km2 in size and consisting of regions that have a relatively
undisturbed environment that is at least 70% intact. In addition these areas also have a at least
1,500 endemic plant species. These three factors combined form a supplementary broad-scale
priority to biodiversity hotspots for Conservation international. 3
Endemic Bird Area
A region, identified by BirdLife International, of global conservation importance that lays within
the habitat of two or more restricted-range bird species. These birds are restricted (endemic) to
an area of 50,000km2 or smaller. Half of all restricted-range species are already globally
threatened while the other half are vulnerable due to the loss or degradation of habitat owing
to the small size of their ranges. These unique landscapes amount to just 4.5% of the earth’s
land surface. The EBAs also support more widespread bird species as well as other animal and
plant groups. These areas are often particularly rich in unique human cultures and languages. 4
West Africa, East Africa, Middle Africa, Southern Africa
This report uses the United Nations geographic classification scheme5 to determine which
geographical region in Africa a particular country is in.
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Introduction China’s increasingly significant presence in Africa is one important effect of the country’s rapid economic
growth and its rising importance on the world stage and has attracted a lot of attention in the last five
years. Many misunderstandings and inaccuracies exist about China’s presence in Africa, particularly
amongst western observers. One of which is the scale of China’s investment in Africa – often thought to
be much larger than it actually is – the other is the callous disregard for the environment by Chinese
companies.
Whilst it is true that Chinese investors are greatly expanding their investments in the continent those
investments are not as large as many might expect. The small number of Chinese investments in the
mining, oil and gas (MOG) extraction industries in relation to the large presence of western and South
African companies with such investments in Africa is still remarkable. The Organisation for Economic
Co-operation and Development (OECD) has noted that “while natural resources-seeking is clearly a
primary motivation for Chinese investors, China’s outward foreign direct investment in Africa has not
been particularly skewed towards the natural resources sector in international comparison.”6
Similarly, whilst it is also true that Chinese companies have had a bad environmental track record in the
course of their own country’s economic rise there is also an increasing awareness and desire to improve
their environmental footprint with noticeable progress being made by a subset of companies although
not by the majority.
While a number of studies have been made into the nature of Chinese overseas investment and how to
deal with it none of these studies have looked specifically at the eleven African countries in this report
or made any attempt to chart and locate those investments.
Shankelman (2009) has looked in great detail at how the expansion of overseas Chinese investment has
affected the governance of resource wealth and the state of corporate social responsibly (CSR) policy
within Chinese companies. 7 How to deal with the outward expansion of Chinese investment and trade,
its impact on the environment of countries other than China, and how to mitigate that impact on the
environment is covered by Pamlin and Long (2007).8 Chinese engagement in the energy and extractive
sectors in Gabon and Angola and their perceptions of EITI are looked at by Burke, Jansson & Jiang
(2009).9 A broad and extensive overview of Chinese engagement in Africa is covered in Brautigam
(2009).10
A report compiled by Executive Research Associates named China in Africa: Strategic Overview (October
2009) for the Institute of Developing Economies of the Japan External Trade Organization tracks the
reasons behind China’s successful rise in Africa and argues that Western institutions fail to take into
account the true motivations behind Chinese investments in Africa. Namely the pursuit of long term
national security and strategic interests over and above the pursuit of profit; and that financial and
institutional support provided by the Chinese government to Chinese investors has “had the effect of
insulating Chinese companies from traditional risk factors that face Western companies, providing them
with an important competitive edge in the race to acquire resources in Africa.”11
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The study aimed to address three main questions. Firstly, are companies from Chinese mainland with
large investments in mining, oil and gas (MOG) extraction operations in Africa present in Conservation
International (CI)’s geographic areas of interest? Secondly, if Chinese companies are present in
environmentally sensitive areas which countries and which key companies should CI focus its efforts on
with respect to engaging Chinese actors. Thirdly, should CI strategically pursue possible collaboration
with select Chinese companies in order to ensure the conservation of biodiversity and the ecosystem
services that underpin human wellbeing in Africa and if so how what should the strategy of engagement
with said companies be?
The structure of this report reflects these three goals. The first section gives a general background of
Chinese mineral extraction and resource demands from Africa and a brief overview of the most
important Chinese companies with a substantial interest in the mining sectors of the countries studied.
The second section illustrates the location of extraction operation in relation to environmentally
sensitive sites as defined by the Integrated Biodiversity and Assessment Tool (IBAT), ownership structure,
and what each company is extracting. The third and final section evaluates various strategic options for
approaching firms and recommends the best course of action for establishing a partnership with these
firms so as to help them minimise any negative environmental impact their operations might have.
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Study Approach
Scope of work
This report focused on eleven African countries where CI has a strong presence and/or the capacity to
work with partners on the ground. The countries investigated included Angola, Botswana, Democratic
Republic of Congo (DRC), Equatorial Guinea, Liberia, Madagascar, Mozambique, Namibia, South Africa,
Zambia and Zimbabwe. These countries are broken up into four sub-regions, West Africa, Central Africa,
East Africa and Southern Africa.
Exploration and prospecting activities were not included in this report. Only sites where mines already
exist or are confirmed to be underdeveloped were included in this report. Due to the large number of
smaller Chinese operators, their rapidly changing profile, and limited resources this report only focused
on large scale investments in MOG extraction by Chinese interests, both public and private above the
value of US$10 million. The report did not include the beneficiation and processing of mined ore.
Further study on Chinese prospecting operations and prospecting and exploration operations in Africa in
general would be useful and informative due to the scale of such operations currently taking place in the
region.
Methodology
The study relied primarily on desktop research and informal interviews with experts in relevant fields to
gather information on this ever evolving and poorly understood topic. Numerous experts in the field of
Sino-African relations in addition to CI staff on the ground in the relevant countries were contacted and
informal telephonic and face to face discussions were carried out. A number of other experts from the
mining industry and other disciplines such as the head of the Namibian Chamber of Mines, geologists,
African journalists and Sino-African researchers have also been contacted and interviewed for this
report.
Desktop sources included but were not limited to academic articles, media sources (both international
and African) and mining newswires. Particular attention was given to African media sources as they are
closer to the physical location of these investments.
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Background Since 1997 the Chinese government’s economic policy has been to establish a “socialist market
economy,” an important component of this is converting SOEs into more independent profit-seeking
corporations in which the state has a controlling share.12 An important objective of the Chinese
government since Deng Xiaoping’s economic reforms is to increase the number of Chinese Global
Fortune 500 companies and multinationals. As of 2008 China has turned eight of its large SOE’s into
such companies. The State-Owned Assets Supervision and Administration Commission of the State
Council (SASAC) have been given the mandate to carry this out.13 This means that unless one is
negotiating with a truly private Chinese firm one is not negotiating with an organisation whose
immediate goal is profit –although that is an increasingly important objective of Chinese SOEs- but more
likely with an organisation that by and large seeks to serve the long term economic policy priorities of
the Chinese government as its primary objective.14
The Chinese government has had some success at achieving this. A growing number of Chinese
extraction companies are now comparable in size to their OECD-based counterparts and are becoming
increasingly integrated into world markets. State owned mining firms in China are currently going
through a period of consolidation that is increasing their economies of scale and making them more
internationally competitive. In addition ever more Chinese mining firms are listing themselves on
international stock markets to reduce their reliance on Chinese state owned banks by giving them access
international capital.15
China in Africa and mining China’s rapid economic growth and vast size has
turned the country into the prime driver of world
commodity prices. A number of African countries
have become important beneficiaries of this trend.
China has moved from a net exporter of many
primary resources in the 1970s and 1980s into a
massive importer of most raw materials today.16
China’s domestic sources of oil and minerals met
most of the country’s needs until the late 1990s.17
Since then China has become increasingly reliant on
imports of raw materials.
Despite producing five percent of total world oil
production in 2007 China consumed nine percent of
total world oil production in the same year, thereby
necessitating the importation of four percent of
world oil production to make up the short fall. By
2008 oil imports exceed domestic production for
the first time.18 In 2008 China imported US$100
0% 50% 100%
lead
zinc
copper
iron & steel
aluminium
Percentage consumption of annual global output of base
metals in 20081
China Rest of the world
13
billion worth of base metals representing more than twenty five percent of the world’s production of
base metals.19 Almost all of China’s cobalt (a strategic metal used in the production of super-alloys)
comes from Africa, predominantly the DRC. Most of China’s manganese imports come from the three
African countries of Gabon, Ghana, and South Africa. South Africa, Madagascar, and Sudan each supply
around one seventh of China’s chromium. Chromium is an important strategic resource that is rare in
China. Currently China imports over ninety-five percent of its chromium.20
Gabon, Cameroon and the DRC are also important suppliers of hardwood timber to China. Sub-Saharan
Africa is a small but increasingly important supplier of iron ore and copper to China. 21 China has been
showing increasing interest in acquiring mineral deposits throughout southern Africa particularly in
Zambia, South Africa, Tanzania, and Mozambique. Currently a large prospecting boom is taking place
throughout southern Africa with Chinese interests making by far the largest part of this boom.22
Ever since Australian mining giant Rio Tinto was accused by
the Chinese government of bribery and espionage – in an
effort to fix Chinese iron ore prices - in July 2009,23 Chinese
companies have had greater reason to expand and acquire
more overseas iron ore reserves to reduce China’s reliance
on imports from foreign firms.24 Companies such as
Minmetals, Wuhan Iron & Steel Group (WISCO), Chinalco,
and other Chinese mining giants have been rapidly
expanding their overseas holdings so as to meet this goal.
One common aspect of almost all the deals that Chinese
SOEs –who are involved in by far the largest number of
Chinese owned extraction operations- have entered into is
the common use of joint venture partnerships with local
African companies. Often targeted companies are
government owned enterprises of the host African country
where the operation is situated.
In return for the necessary equipment, technical training and financing Chinese producers get a secure
source of important raw materials. This is a model that the Chinese have learned from their own
developmental experience, primarily from Japan prior to the reform and opening up of the Chinese
economy in 1978.25 Chinese extraction companies like this model both because it is one that they have
firsthand experience with, but also because it brings on board domestic players from host African
countries that have an interest in protecting their investments. These same actors -their local joint
venture partners- also have access to local knowledge that Chinese extraction companies are well aware
they do not have. Thereby decreasing risks whilst, securing a source of raw materials as well as allowing
the Chinese to pay in Chinese goods and services. This often gives Chinese firms the opportunity to gain
a foot hold in many African countries.
“By the end of 1978, Chinese
officials had signed seventy-
four contracts with Japan to
finance turn-key projects that
would form the backbone of
China’s modernization. All
would be repaid in oil.”
- Brautigam (2009): 47
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China in Africa and the environment
A persistent and widespread belief amongst NGOs and other sustainable development stakeholders is
that Chinese mining and extraction companies do not take social and environmental issues seriously.26
It is true that in the past, particularly in the early years of China’s opening up and industrialisation in the
70s and 80s, Chinese firms had very little (if any) regard for CSR and the environment in China. However
these days there is a growing interest in CSR and the environment in China and this interest has largely
been driven by the state. The steps that most companies have taken to improve their social and
environmental performance are comparable to those taken by western companies in the late 1990s.27
However basic social and environmental regulatory compliance in China is still weak with much room
for improvement as Shankelman (2009) points out:
[T]hey have not yet developed detailed policies or procedures for impact mitigation so
that projects can be evaluated in advance, nor have they undertaken detailed analyses of
their impacts or of the complexities of operating in countries with different cultures,
where the support of officials is no guarantee of a “license to operate.”28
Shankelman (2009) also notes that while the pressure for western companies to improve their
environmental policies came from NGOs, for Chinese firms pressure comes from government29 and
popular opinion.ix
As the Chinese have become increasingly concerned about improving their commitment to CSR they
have developed a number of new innovations to encourage polluting industries to clean up their act.
One such innovation was the ‘Green Credit Policy’ which is designed to improve the compliance of
Chinese companies with China’s environmental regulations by limiting their access to commercial credit
if they fail to sufficiently implement mandatory environmental assessments or are unable to pass
pollution checks.30 Another two innovations are the “Shanghai Corporate Social Responsibility Notice” and
“Shanghai Environmental Disclosure Guidelines” created by the Shanghai Stock Exchange in 2008 to create a
voluntary forum for Chinese investors to confidently invest in companies with good environmental records;31
however very few Chinese companies have as yet chosen to sign up to the Shanghai Environmental
Disclosure Guidelines. There is a small cross-section of very large companies that are developing the same
type of management systems as established leading multinationals, but this does not necessarily translate
into good regulatory compliance. Most environmental management skills are focused on resource efficiency
and pollution control with virtually no mention of biodiversity protection – at least this has not emerged at
sustainability conferences (Sean Gilbert, pers. Comm. Global Reporting Initiative - Beijing).
In cases where Chinese companies are operating in countries with poorly developed environmental
protection regulations Chinese companies will often adopt Chinese environmental regulations as a way
to set at least a basic set of environmental standards so as to mitigate risk in case they are accused of
intolerable environmental degradation.
ix Instances where popular opinion has changed the environmental policies of Chinese companies is often the
result of a wide spread public outcry over a particular issue often leading to public protests. This was the case in 2007 in Xiamen, Fujian Province where the local government agreed to relocate a paraxylene chemical plant after repeated protests by local residents.
15
Need for Cooperation?
Chinese companies are aware that their environmental record both within and outside China is an important issue and that by improving their environmental and social policies and practices they are reducing risks and improving their corporate image. Some western mining companies have formed partnerships with conservation NGOs to assist in strengthening their environmental commitments and ensure that their activities are aligned with international good practice that guides how the company should address environmental and social issues. CI has a history of engaging mining oil and gas companies through its Centre for Environmental Leadership and Business (CELB). CI has worked with eleven different mining companies in fourteen different countries over the past decade. CI engages partners in the mining industry who demonstrate a genuine commitment to pursuing a leadership position on environmental sustainability and corporate social responsibility. CI has provided objective, science-based advice to companies focused on: strategy and policy development, environmental risk identification and management, the development of field demonstration models and conservation investments. Based on the heavy reliance by Chinese MOG companies of investing in Africa through joint ventures it is possible that Chinese partners may be required to comply with the environmental protection policies of the joint venture partner. Where these policies are aligned with international good practice the potential associated environmental and social risks would presumably be addressed through the partner company’s existing regulatory structures.
16
Country Profiles The countries highlighted on the map of Africa in turquoise indicate countries that are located within
the region discussed but are not described in this report whilst countries investigated are highlighted in
green
West Africa: Liberia
Liberia
1. Bong Mines Co., Ltd.
Bong Mines Co., Ltd.
Ownership: WISCO (though ownership of
China Union)
Mining: Iron ore
Status: Currently carrying out their EIA,
ESIA, and other studies for EMP and ESMP
In late April 2010 China Union, a joint venture between Wuhan Iron and Steel (WISCO) and China-Africa Development Fund (CAD Fund), officially launched the Bong iron ore mining project. WISCO has bought a 60% controlling share from CAD Fund for US$68.46 million; in total the Chinese have
17
invested US$2.6 billion into the project. This is the largest investment in Liberia since the end of the second Liberian Civil War in 2003.32 33 34
The project will give WISCO access to 1.31 billion tons of proven iron ore deposits and a potential 2.78 billion tons of as yet unproven reserves of iron ore. The mine is connected to the country’s ports by an 80km railway.35 The government of Liberia has signed a 25 year mineral development agreement with the joint venture in 2008. The project is projected to create over 20,000 jobs.
The Bong Mine lies within both an endemic bird area and a biodiversity hotspot.
Given the scale of the Bong Mine project, its location in an environmentally sensitive region, CI’s strong presence in Liberia, and the number of other projects of interest that WISCO is involved in, mean that this should be a high interest project to CI in the context of a Sino-African environmental mining impact mitigation project.
18
Middle Africa:
Angola
1. Block 15
2. Block 17
3. Block 18
Apart from oil and gas extraction operations run by directly or indirectly by China Sonangol and its subsidiaries there are, as yet, no significant Chinese mining operations in Angola. A report by the U.S.-China Economic & Security Review Commission36 postulates that it is part of a collection of investments and companies all run from 88 Queensway, Hong Kong; that have ties to “Chinese state-owned enterprises and government agencies, including China International Trust and Investment Company (CITIC), and China National Petrochemical Corporation (Sinopec), and possibly China’s intelligence apparatus.”37 In September 2009 Sinopec and CNOOC attempted to buy a 20 percent stake of Marathon Oil’s stake in
block 32 for US$1.3 billion. However this deal was blocked by the Angolan government owned oil firm
Sonangol.38 Sonangol-Sinopec International (SSI) is a joint venture established in March 2006 between
19
China Sonangol - which holds a 45 percent equity stake - and China’s China Petroleum & Chemical
Corporation (Sinopec) which holds the remaining 55 percent of the venture.39 SSI has a 20 percent stake
in block 15, a 27.5 percent stake in block 17 and a 40 percent stake in block 18. Block 17 and 18 are
estimated to have a combined 4 billion barrels of oil.40
China Sonangol currently owns shares in blocks 3, 31 and 32. In February 2011, China Sonangol was
awarded three deep-water concessions in blocks 19, 20 and 38.41
Angola has traded its oil concessions to the Chinese for infrastructure development; using its oil reserves
to take out US$8- 12 billion worth of loans from China for that purpose between 2004 and 2007.42
All three of these oil and gas blocks are located offshore in areas that are not marked by IBAT as being of
any particular biodiversity importance and therefore should not be of too much interest to CI.
Congo, The Democratic Republic of
1. Dima mining complex
Although there is a substantial Chinese presence in the
Democratic Republic of the Congo’s (DRC) mining sector,
very few of them are directly engaged in mining
activities. Most are involved in the beneficiation of
minerals and choose to buy their unprocessed ore from
many freelance miners in the locality of their operations.
In one report published by Bloomberg Moise Katumbi,
the governor of Katanga province estimated that at
least 60 of the province’s 75 processing plants are
owned by Chinese nationals.43 These firms are
predominantly privately owned operations that often
flout local labour and environmental laws.44 45 Because these firms are not directly involved in the
mining of ore they are excluded from this report. 46
Due to various administrative challenges the implementation of EITI in the DRC has been stalled. As
such very few Chinese companies operating in the DRC are aware of EITI to the extent that none of the
respondents to a study undertaken by the Centre for Chinese Studies at Stellenbosch University had
heard of it or its core principles.47 However in the same study they expressed a strong interest in
learning more about and possibly implementing EITI but also stated their scepticism at their ability to
implement it under current conditions in the DRC; noting that poor governance as well as high levels of
corruption in the mining sector would complicate their efforts at implementing EITI.
20
DIMA mining complex
Ownership: Sicomines
Mining: Copper and Cobalt
Status: will come on line, at the earliest, in 2013.
The Dima mining complex refers to a collection of three open pit copper mines (Mashamba West,
Mashamba East, and the Dikuluwe mine) outside of the town of Kolwezi in the western area of Katanga
province (see map).48 It is estimated that the complex contains 10.6 million metric tons of copper and
626,619 metric tons of cobalt.
In a deal initially worth US$ 9 billion at inception in April 2008, and funded by China’s EXIM Bank, US$3
billion would go into rehabilitating the mining complex whilst the remaining US$6 billion was to be used
for infrastructure investments across the country. The deal is structured as a resource backed loan.
Critics of the deal believe that the total value of the mine could be well in excess of US$9 billion.49
The IMF criticized the deal stating that it would disqualify it from the World Bank’s debt cancellation
program as the deal would mean that the country would be taking on new debts after the old ones had
just been cancelled by the bank. In May 2009 US$3 billion of the project, the mining phase, was put on
hold while mineral concession feasibility studies were being completed.50
The DIMA mining complex is located in a high biodiversity wilderness area.
Equatorial Guinea
Block S
In February 2006, China National Offshore Oil
Corporation (CNOOC) Africa Limited, a subsidiary of
the China National Offshore Oil Company (CNOOC) Ltd,
signed a five year long production sharing contract
(PSC) for an oil block in Equatorial Guinea. Currently
CNOOC is drilling for oil in Block S51&52 which covers an
area of approximately 2,287km2 and contains the Ceiba oil field and is capable of producing 40,000
barrels of oil per day.53 In 2007 China was Equatorial Guinea’s largest export market, accounting for
18.3% of the total export earnings, mostly from oil.54
21
East Africa
Madagascar
1. Soalala
2. Block 2104
3. Block 3113
Soalala project
Ownership: WISCO Guangxin
Mining: iron ore
Status: purchase complete
Location: Soalala, about 100km west
of Mahajanga.
In May 2010, through a joint venture company
named WISCO Guangxin, Wuhan Iron & Steel Group
(WISCO) paid $100 million for iron-ore exploration
rights55 in the Soalala iron-ore deposit roughly
100km west of Mahajanga. WISCO Guangxin is a
22
joint venture company of which 42 percent is owned by WISCO, 38 percent is owned by the Guangdong
Foreign Trade Group Co and 20 percent by Hong Kong based Kam Hing International Holdings. This deal
gives Wuhan Steel access to 800 million tons of iron ore deposits. The project covers an area of more
than 430km2.56 Thirty percent of the projects capital comes from the partners that make up the joint
venture with the remaining 70 percent coming from EXIM Bank.
The Soalala iron ore project is located within a key biodiversity area, a biodiversity hotspot and an
endemic bird area. The project is located close to the Baie De Baly National Park.
Block 3113 and Block 2104
Ownership: Shaanxi Yanchang Petroleum Group
Mining: oil & gas
Status: early stages of exploitation
Location: see map
In the early 2000s Chinese oil companies formed alliances with local partners to develop oilfields on the
island. These operations were expected to produce its first barrel of crude in 2007.57 However in June
2006, Sinopec and CNPC halted negotiations with Madagascar Oil for participating in the exploration and
development of heavy oil in Madagascar because of doubts over the reserve size of the Bemolanga
oilfield.58
In January 2010, Shaanxi Yanchang Petroleum Group struck a deal with Sino Union Energy Investment
Corp (Hong Kong) to allow Yanchang to tap two oil blocks -- block 3113 and block 2104.59 60
Due to the wide area that block 3113 and block 2104 lie within and the environmental sensitivity of the
area it would be worth approaching Yanchang to both illustrate the area’s environmental sensitivity and
how they might be able to mitigate the negative effects of their operations in the area.
23
Mozambique
1. Riversdale Zambeze project
Apart from the Riversdale Zambeze project that is
currently in the early stages of development, no other
large scale Chinese mining investments of note in
Mozambique have been made public.
Former Prime Minister Luisa Diogo of Mozambique
gave the following reason for China’s apparent lack of
interest in Mozambique’s mineral reserves when she
stated that:
“China wants Mozambique to give some guarantees, like natural resources, “which we cannot
do under Mozambican law”. Any use of natural resources -- minerals, land, fish, timber -- must
be based on project proposals. By law, Mozambique cannot set aside resources for anyone, and
Mozambique is very careful in following the laws.”
- Luisa Diogo, Speech at SOAS, 24 November 201061
This is a clear indication that China’s strategy of gaining access to resources by securing guarantees to
access them is not compatible with the law or the business culture of a number of African countries.
Riversdale Zambeze project
Ownership: WISCO has signed a non-binding memorandum of understanding to buy 40% of
the operation.
Mining: coal
Status: early stages of mine development, feasibility study is expected to be completed
by the end of 2012, mine is estimated to be online in 2014.
Location: lower sections of the Zambezi River, will be located somewhere in a 24,700
hectare 62area between Tambara and Chinde (spaced roughly 280km from each other).63
WISCO bought a 40 percent equity stake in the Zambeze project from the Austrailian based company
Riversdale for US$800 million. The deal gives WISCO the right to buy 40 percent of the coking coal
produced by the mine. Riversdale has also signed deal with the China Communications Construction
Company (CCCC) to conduct a mine-to-ship logistics study. The US$800 million will be paid in three
phases with the first US$200 million paid upon signing the deal, a further US$150 million will be payable
upon the completion of a commercial feasibility study and on condition that the mine is able to produce
more than 30 million metric tons of coal a year. The last and final payment will be payable when the
24
project is has obtained all the necessary regulatory approvals, including its environmental impact
assessment.64
However it is important to note that Australian mining giant Rio Tinto and Brazilian mining giant Vale are
currently looking to purchase Riversdale.65 Should this happen then there is a good chance that WISCO
will be dropped from the project.
The mine is estimated to have 9 billion metric tons of coal and is projected to produce 45 million metric
tons a year66 but could be capable of producing as much as 90 million metric tons a year.
The lower section of the Zambezi River where the project is likely to be located is an endemic bird area.
Substantial parts of the 24,700 hectare area running between Tambara and Chinde are also high
biodiversity wilderness areas or bio diversity hotspots.
Due to the fact that there is only one mine of significance with any degree of Chinese ownership being
opened up in the country and that mine being a joint venture with an Australian firm that is dealing with
the environmental affairs of the mine it is unnecessary for CI to approach the Chinese partners WISCO.
This is not a project for CI engage firms within the context of CI’s planned engagement with Chinese
extraction companies in Africa.
Zambia
1. Chambishi
2. Luanshya
3. Mpongwe
4. Chinese Collum
5. Kabwe
6. Munali
Of all the African countries looked at in this
report Zambia has the most advanced
engagement with China. Around 26 percent of
Zambian copper exports and 100 percent of
Zambia’s manganese exports went to China in
2006.67 Zambia also has one of the largest deposits of copper in the world and in 2007 was the fourth
largest producer of the metal.68
However China’s long and intensive relationship with Zambia has not been without its problems. In April
2005 fifty-one employees at a Chinese-owned explosives plant were killed in an explosion that levelled
the plant. Five Zambian workers were shot and wounded by a panicked Chinese manager at the
Chamibishi mine that same year. The issue of Chinese investment and labour relations on Chinese-
25
owned mines became one of the biggest issues of the 2006 Zambian presidential elections. Opposition
candidate, Michael Sata, took a strong stance against Chinese operations in Zambia and would abandon
Zambia’s recognition of the PRC should he be elected president. 69 Although Sata had one of the
strongest electoral showings in his career he still lost by a substantial margin.
Chambishi and Luanshya mines
Mining: copper
Owned by: China Non Ferrous Metal Company (CNMC)70
Status: both mines are online and active.
Location: in and around Luanshya, Zambia
CNFC purchased 85 percent of the Chambishi copper mine in 1998 for US$20 million and invested a
further US$130 million in rehabilitating the mine, reopening it in 2003. The purchase of the Chambishi
mine was one of China’s first mining investments outside of China.71
In total more than US$200 million has been invested into the mine pushing up the mines production
capacity to 150,000 tons of copper per year in 2008.72 The Musakashi Tailing Dam, situated 10km north
of the mine, is due to be expanded to a 700m long, 21.5m high dam with a storage capacity of 23 million
tons contaminated material from the mining site.73
Both the Chambishi mine and the Luanshya mine are located within a high biodiversity wilderness area.
Mpongwe mine
Mining: copper and other minerals
Owned by: CNMC Mpongwe Mining Company Ltd.
Status: initial start-up stage
Location: 10km west of Nuala, Copperbelt province74
In April 2010 CNMC entered into a joint venture with Sanshika Bulalo Enterprises Limited of Zambia to
found CNMC Mpongwe Mining Company Ltd. In the deal CNMC would get an 85% equity stake in the
new venture with Sanshika receiving the other 15% equity stake. Although the project is still in its early
stages three copper sites, one gold site, one uranium site and one graphite site have been confirmed.75
The Mpongwe mine is located within a high biodiversity wilderness area.
Chinese Collum Mine
Mining: coal
Owned by: privately owned
Status: online
Location: Sinazongwe, Zambia
26
The privately owned Chinese Collum Mine in Sinazongwe district was established by Chinese national Xu
Jianxue76 and his four brothers; each brother invested US$5 million into the venture in 2003 when the
mine came online.
The mine has been beset by environmental and labour relations problems in the past couple of years. In
February 2010 a Chinese manager at the mine was murdered by a Zambian employee.77 In October
2010 eleven Zambian mine workers were shot and wounded by a Chinese manager while complaining to
mine owners of dangerous working conditions and poor pay.78 79
In February 2011 local residents staged a demonstration protesting that the mine was destroying their
lively hoods and health by discharging coal effluent in the Sikalamba River. The river is used extensively
by local communities as the main source of drinking water for themselves and their livestock. The mine
has also been accused of causing numerous out-brakes of cholera in the surrounding area.80
The Chinese Collum Mine is located within a high biodiversity wilderness area.
Kabwe mine
Mining: manganese
Owned by: Chiman Manufacturing Ltd. (Private company)
Status: closed indefinitely
Location: Kabwe, Zambia
Chiman Manufacturing Ltd. began developing the mine with 4 million tons of proven manganese deposits in 2004.81 By early July 2007 the firm had invested US$10 million into the project and employed 120 Zambians and 11 Chinese nationals. 82 By mid July 2007 the Zambian government shut the mine down indefinitely due to excessively high levels of air pollution produced by the mine.83 84
The Kabwe mine is/was located a high biodiversity wilderness area.
Munali mine
Mining: nickel
Owned by: Jinchuan Group (majority holding)
Status: online
Location: 60km south of Lusaka
The Muali mine was run and owned by the Australian company Albidon Ltd. until it was closed in 2009
due to the financial crisis. The mine was reopened in March 2010 after Jinchuan Group bought a
majority share in the mine and invested a further US$37million into rehabilitating the mine.85 The mine
is expected to sustain operations for the next ten years.86
The Munali mine is located on the edge of a key biodiversity area and within a high biodiversity
wilderness area.
27
Zimbabwe
1. Kanyembe Uranium
2. Ngezi Platinum Mine
3. Marange diamond fields
Numerious chrome smelters in Zimbabwe are
owned by Chinese nationals. The largest of
which is Zimasco which was purchased by
Sinosteel Corporation of China in December
2007 for US$200 million.87 Much the like the
situation in the DRC, Chinese processing firms
do not mine their ore themselves but prefer to
purchase their ore from suppliers, most of
whom are freelance miners.
Despite having some of the largest and richest
deposits of platinum group metals and
chromium in the world and embarking on a
“Look East” policy the Zimbabwe government
has been unable to attracted significant Chinese
investment in its mining sector. This is largely due to the unreliability of the Zimbabwean government
and its inability to guarantee the safety of Chinese assets or pay for large capital intensive deals.88
Many of the investments and loans that the country has been able to obtain in the past ten years have
used access to resources to back up the loans due to the country’s lack of ability to repay the loans in
any other form. This includes a number of loans given by Chinese suppliers of military hardware such as
NORINCO in which sales of weapons to the Zimbabwean army were guaranteed by Chinese loans to
Zimbabwe that were backed up by Zimbabwean mineral deposits.89
In an article published by SW Radio Africa news professor John Makumbe of the University of Zimbabwe
has stated that Mugabe’s political party, ZANU PF, “will make every effort to maintain its relationship
with the Chinese, not only because the country is one of Mugabe’s key supporters on the United Nations
Security Council. China has used its position as a permanent member of the Security Council to block any
action against the ZANU PF regime.”90
However China’s real involvement in Zimbabwe’s mining industry and its economy in general -although
growing- remains relatively small. Due to the controversial nature of many of the mines in Zimbabwe,
particularly the diamond mines in Marange, it is advised that CI does not get involved in projects in the
country.
Kanyembe Uranium
Mining: uranium
Owned by: China Uranium Corporation (through Afri- Sino Resources Ltd)
28
Status: initial start-up stage
Location: 60km south of Lusaka
Local media reports in Zimbabwe have stated that the China Uranium Corporation has established a
joint venture with Zimbabwe’s state owned mining company the Zimbabwe Mining Development
Corporation (ZMDC) to exploit a uranium deposit close to the village of Kanyembe. The deposit is in a
500m by 1km area and lays 400m-deep in a location just south of Kanyembe village in the Dande
Communal Lands in the far north of Zimbabwe close to the Zambian, Mozambique boarder. It is
estimated that the deposit could yield up to 1500 metric tons of uranium.91
Afri-Sino Resources is a joint venture between the China Uranium Corporation, New On Investments and
the ZMDC.92
The site was originally to be mined by the German company Saarberg Interplan. However Saarberg
abandoned the project in 1992 due to low uranium prices. The Zimbabwean government has had a
difficult time finding new investors for the project partly due to the complex nature of the deposit. The
deposit is situated within a physically small area lying below a natural reservoir. 93
The Kanyembe site located within a high biodiversity wilderness area and just outside of a key
biodiversity area.
Ngezi Platinum Mine
Mining: platinium
Owned by: NORINCO Group
Status: established mine
Location: Ngezi, Great Dyke, Zimbabwe
China’s state owned NORINCO Group bought the Zimbabwean Army’s stake in Zimplats 70 percent share
in the Ngezi Platinum Mine.94 NORINCO is a large diversified SOE that specialises in the exportation of
weapons with no direct ties to the Chinese Army. Norinco has also bought a 60 percent stake in a joint
venture with the Zimbabwean Army and ZMDC to prospect for chromium in the Ngezi area.95
The Ngezi mine is located within a high biodiversity wilderness area.
Anjin Marange diamond mine
Mining: diamonds
Owned by: Anjin Investments Private Limited
Status: operational
Location: Marange diamond fields, 90km south west of Mutare
Anjin is a 50/50 percent joint venture between the Zimbabwean government and Anhui Foreign
Economic Construction (Group) Co. Ltd to mine the highly controversial Marange diamond fields
(otherwise known as the Chiadzwa diamond fields). In July 2010 Anjin completed and submitted an
29
environmental impact assessment outlining its commitment to and compliance with ISO 14 001:2001
Environmental Management Standards.96 As of March 2011 Anjin was in the process of obtaining a
certificated of compliance with the minimum Kimberly Process requirements.97
Anjin has established a large modern diamond mining operation in the area98 and is one of two Chinese
owned operations in the Marange fields. The other company being Sino-Zim which has recently laid off
most of its workers citing concerns that its operation in Marange might not have enough resources to be
viable99 and as such is not a feature of this report.
Numerous allegations of gross human rights abuses by members of the Zimbabwean army have taken
place in the area in an effort to exploit the diamond deposits.100 101
The Marange diamond fields lay within a high biodiversity wilderness area and on the south western
outskirts of an endemic bird area and biodiversity hotspot.
Due to the controversy around the Marange diamond fields amid the aforementioned human rights
abuses it is strongly recommended that CI does not involve its self with any project associated with the
area.
30
Southern Africa:
Botswana
As of February 2011 there are no major Chinese mining
operations in Botswana. However there are currently many
Chinese prospecting operations going on in Botswana. This is
part of a wider increase in the number of prospectors and
prospecting companies conducting surveys across southern
Africa. The Increase in the number of Chinese prospectors or
prospectors prospecting on behalf of Chinese firms has been
disproportionally larger.102
Botswana has issued more than 100 uranium prospecting
licences alone in the past few years. One hundred and twelve
prospecting licences were issued to prospect in the Central
Kalahari Game Reserve; with sixteen of those licences being
awarded for uranium exploration and forty for coal exploration.103
31
Namibia
1. Marenica Uranium Project
As of February 2011 there are no Chinese
extraction operations in Namibia. The
explanation given for this is that Chinese and
Namibian business and government styles are
too incompatible and the stakes for the Chinese
are too low in Namibia. There is a feeling
amongst Namibian mining companies that
Chinese companies expect the Namibian
government to dictate joint venture terms to
Namibian companies on the Chinese behalf.
This approach by the Chinese has, in the view
of the Namibians, been a big barrier to their
entry into the countries mining sector.104 A
check of all of the mining contracts currently
granted or in the process of being granted by
the Namibian Ministry of Mines and Energy
confirms this.105
However China remains interested in investing in Namibia and the Namibian mining sector. Of
particular interest seems to be gaining access to the country’s substantial deposits of uranium. China is
currently building twenty four nuclear reactors, more than the rest of the world combined.106 In 2010
Hanlong Energy Limited signed a relatively small debt and equity deal with Marenica Energy worth 5
million Australian dollars to help develop the Marenica Uranium project in the centre of Damaraland.
The project could produce as much as 1,590 metric tons of uranium per annum.107
The Marenica Uranium project is located on the border of a key biodiversity area.
32
South Africa
1. Grootvlei
2. Orkney
3. Frischgewaagd-Ledig
4.
i. Tweefontein
ii. Dilokong
5. Buffelsfontein
6. Blue Ridge
7. Sheba
8. Naboom
9. Townlands
“Chinese firms are encouraged by the government to grow their investments in
Africa – and South Africa.”
- Wang Yi108
Although around 15 percent of the US$150 billion traded between Africa and China in 2010 went to
South Africa, China’s investment in South Africa is remarkably different than it is in other African
countries. Despite the best efforts of numerous Chinese firms over the past ten to fifteen years
relatively few Chinese firms seem to be able to compete with local firms or adequacy adapt to the
country’s strong institutions and stringent labour laws so as to establish a foothold in the country.
South Africa’s complex affirmative action regulations have also been noted as a barrier to entry for
Chinese firms interested in investing in the country with at least one large deal involving a Chinese SOE
failing because of it.109
However South Africa’s vast deposits of gold, platinum group metals, manganese, chrome, coal, and
vanadium have attracted a slew of Chinese investments in the country’s mining sector. Of all the
countries looked at in this report South Africa has the largest number of Chinese mining operations and
investments.x Most of the mining investments that Chinese firms have made in the country have been
situated in the Bushveld Igneous Complex which has some of the largest deposits of chromium in the
world.
x A rough calculation of the value of Chinese investments in South African mines in this report is no less then
US$1.52 billion. This figure looks likely to expand greatly as China continues to seek mining investments in the country.
33
A relatively recent acquisition that is not illustrated on the map is the ownership of South African gold
and uranium mining firm Rand Uranium by a collection of Chinese firmsxi through their joint 59.7- 74.7
percent ownership in Australian mining firm Gold One.110 111
Orkney and Grootvlei
Ownership: As yet undisclosed (thought to be Shandong Gold)
Mining: gold
Status: closed established mines in final stages of ownership transfer
Location: Orkney Mine: Orkney, North West province112
Grootvlei: Grootvlei Proprietary Mines, Springs, South Africa 113
An as yet unnamed state owned Chinese company is in the final stage of talks to buy the Orkney and
Grootvlei gold mines114 in a deal worth US$100 million from a defunct South African gold mining
company named Pamodzi.115 A South African company named Aurora currently manages the mines and
is bidding to buy the troubled mines from their previous owner in a joint venture with the as yet
unknown Chinese company. The High Court has given the liquidators of the company that owned the
mines and its prospective Chinese buyer until the 15 August 2011 to finalise the deal. 116
One party involved in the saga – the National Union of Mineworkers – have accused the liquidators of
lying about any interest in the mine from Chinese investors.117 In late May 2011 two of the liquidators
have been fired so as to "safeguard the integrity of the liquidation process."118 As the drama around this
deal continues it looks increasingly unlikely that the deal will go ahead.
It is thought that an SOE named Shandong Gold is the as yet undisclosed Chinese company seeking to
purchase the Pamodzi mines.119 Shandong Gold is one of China’s largest gold mining companies and is
directly affiliated with the government of Shandong province.120
The Grootvlei mine currently discharges 100 megalitres of contaminated acidic water a day into the
Blesbokspruit river.121 The Blesbokspruit river is one of the largest feeder rivers of the Marievale
Wetland which hosts the Marievale bird sanctuary.
The Orkney mine is located about 10km outside of a key biodiversity area whilst the Grootvlei mine lays
15km North West from an endemic bird area. Should the deal be completed in due time it would be of
interest for CI to approach the owners particularly with regards to assisting them clean up the pollution
problem at the Grootvlei mine and improve the mine’s environmental reputation. However there is a
good possibility that the deal with the Chinese might not go ahead due to the complexities and politics
around the deal.
xi The three Chinese firms with a significant interest in Gold One are: Baiyin (a mining and metal smelting group),
China-Africa Development Fund (CAD-Fund) and Long March Capital. The geographical location and profile of the Rand Uranium mines were not added because the announcement of the deal was announced when this paper was in its final editing phase.
34
Frischgewaagd-Ledig
Ownership: Jinchuan Group
Mining: Platinum
Status: purchased in December 2010.
In one of the largest Chinese investments in Africa the Chinese SOE Jinchuan Group and CAD Fund
bought a 45% stake in South African based Wesizwe Platinum for US$877 million. The Chinese have
committed to invest a further US$650 million to develop the Frischgewaagd-Ledig mine. All of the
platinum group metals produced by the mine will be taken by Junchuang Group. 122
The Frischgewaagd-Ledig mine lies within a key biodiversity area and as such should be of interest to CI
for further instigation.
Tweefontein
Ownership: Sinosteel (50% ownership)
Mining: Chrome
Status: operational
Location: Steelpoort, Mpumalanga123
In 2006 Sinosteel spent US$230 million to setup a joint venture (Tubatse Chrome Minerals (Pty) Ltd.)
with South African firm Samancor with a 50-50 percent ownership structure. Tubatse Chrome Minerals
owns the Tubatse Ferrochrome Plant and the Tweefontein Chrome Mine in Steelpoort, Mpumalanga
roughly 30km south of the Dilkong chrome mine.
Sinosteel estimates that the mine is capable of producing one million metric tons of chrome ore a year
with reserves of more than 76 million metric tons. The total production capacity of the nearby Tubatse
Ferrocrome Plant is estimated to be 300,000 metric tons a year.124 125
The Tweefontein mine lays 15km south west of a key biodiversity area and within an endemic bird area.
This means that the mine lies within an area that is significantly environmentally sensitive and therefore
would be of considerable interest to CI.
Dilokong
Ownership: Sinosteel (through joint ownership of ASA Metals)
Mining: Chrome
Status: operational
Location: Ragopola, Greater Sekhukhune District Municipality, Limpopo Province126
35
A wholly owned subsidiary of Sinosteel, East Aisa Metals Investment, has a 60 percent share in the
company that owns and operates the Dilokong mine, ASA Metals. The remaining 40 percent of ASA
Metals is owned by the Limpopo Economic Development Enterprise.
The Dilokong mine has an annual production capacity of 400,000 metric tons with more than 50 million
metric tons of reserve chrome ore. Two large smelters are located within the mine and have an annual
production capacity of 120,000 metric tons of ferrochrome. Expansion plans are underway to expand
that production capacity to 360,000 metric tons of charge ferrochrome. The mine exports its
ferrochrome to China, Europe and other East Asian countries where it is used in the production of
stainless steel.127
The Dilokong mine lays 7km south west of a key biodiversity area and within an endemic bird area. The
Dilokong mine is of equal interest to CI as the Tweefontein mine that lies 30km north of it.
Buffelsfontein
Ownership: JISCO owns 26.1%
Mining: Chrome
Status: operational
JISCO has ownership of the Buffelsfontein mine through a 26.1% share in International Ferro Metals that
it bought for US$30 million. The mine has an annual production of 267,000 tons of ferrochrome. JISCO
will receive 50% of the mine’s ferrochrome production in addition to having marketing rights.128
The Buffelsfontein mine lies a couple of kilometres of a key biodiversity area. The mine is of limited
interest to CI although its relatively close proximately to a key biodiversity area might be of some
interest for further investigation.
Blue Ridge and Sheba
Ownership: Ridge Mining (29.9% owned by Zijing Mining Group Co.)
Mining: primarily platinum based metals but also gold, and silver
The mines have a reserve of 51 million tons of ore and an estimated life span of 18 years with mining
operations starting in late 2008. 129
During the course of writing and researching this paper it was strongly recommended to the author130
that Zijin be looked at as a good case study example. The reasons mentioned were that CI could come in
at an early stage as the mine needs to be built. The company’s efforts to get its South African project off
the ground have been frustrated by South African role-players. The company is trying hard to improve
its image as well as make more meaningful changes and is open to suggestions. Further research would
however be required to verify this. The Blue Ridge mine lies within no environmentally sensitive areas as
36
shown by IBAT. The Sheba mine lays on the edge of an endemic bird area, a key biodiversity area and a
biodiversity hotspot.
Both mines would seem to be of very little interest to CI.
Naboom
Ownership: Minmetals
Mining: Chrome
Status: completing feasibility study.
Location: near Lebowakgomo, Limpopo Province
Minmetals bought the Naboom ferrochrome mine in 2007 for US$6 million.131 Currently EMP, EIA and
public participation process for the Naboom mine have been completed using local consulting firm SRK
Consulting. 132
The Naboom mine is located within both a key biodiversity area and an endemic bird area.
Due to the mine’s location in a key biodiversity area and an endemic bird area it might be worthwhile
for CI to investigate this operation more closely. On the other hand it must be noted that, based up this
preliminary investigation, the Naboom mine’s environmental policies are just as good, if not better then,
the majority of other mining operations in South Africa.
Townlands
Ownership: Minmetals
Mining: Chrome
Status: final stages of feasibility study.133
Minmetals acquired the Townlands chrome mine when it purchased a 70% share of Vizirama in 2009
which owns the extraction rights for the area.134 It is estimated that the Townlands project will come on
line after March 2011 as the company plans to fast track the final stages of the feasibility study to bring
the mine online as soon as possible.135 Minmetals has already invested US$81 million in the Townlands
deal.
The Townlands mine is located just outside of an endemic bird area.
37
The Way Forward The Chinese strategy for entering into mining operations in Africa tends to involve joint ventures. The
majority of mining operations undertaken by SOEs as described in this report involve joint ventures,
either with a local mining company or a mining company from OECD countries, mostly Australia. There
are also a number of joint ventures between SOEs and Hong Kong based firms operating in Africa such
as the Soalala project in Madagascar.
Chinese companies often seem to expect African governments to facilitate joint ventures with local
companies in the extraction industry. In the oil and gas extraction industry in particular both “Western
and Asian oil companies are finding that African states are calling the shots and that joint venture
partnerships including with their rivals or host NOCs are the future.”136 Navigating the often complex
joint venture agreements between the Chinese and their partners will be difficult. In each case it will be
necessary to closely examine the joint venture agreement and understand what each party’s
requirements are towards the environment before CI (or anyone else) can work out who is responsible
for environmental protocols and how to improve them in the context of CI or any other conservation
NGO serving as a technical partner.
One method of lobbying a Chinese MOG firm to enhance its environmental standards might be through
their own joint venture partners. However, as has already been noted, if their partner already has a
well-defined environmental policy which is aligned with international good practice then it is possible
that they would be required to comply with these policies under the joint venture agreement. This is
the case in Australia where a large number of Sino-Australian joint ventures exist in the mining sector. It
must be noted thought that the extent to which a Chinese MOG firm’s joint venture partner is able or
willing to influence the environmental polices of their operation would still need to be investigated.
However as events in Namibia and Mozambique have shown the way in which prospective Chinese
partners go about looking for joint venture partners by expecting local governments to introduce and
force these relationships on local African firms does not always prove successful. This approach is often
incompatible with the way in which business is done in these countries. Mozambique and Namibia are
the two countries where this phenomenon appears to be most noticeable and is one of the best
explanations why Chinese investment in their mining sectors is relatively small. Often, as is the case
with the DIMA copper and cobalt mine in the DRC, these deals come in the form of resource backed
loans whereby the Chinese will give a substantial loan that is to be backed up and repaid in kind with
resources.
There is a sentiment within China that their involvement in Africa is being unfairly over examined whilst
other emerging powers, such as India and Brazil, with growing investment profiles in Africa are being
largely ignored. The fact that the biggest driver of research into China’s growing presence in Africa
comes from Western countries, most notably the United States and the United Kingdom, only serves to
reinforce Chinese suspicions. Western NGOs are already viewed by the Chinese government and
Chinese Communist Party as a fifth column of Western interests and so are treated with some
suspicion.137 For CI, a Washington based NGO, this means that any unannounced overtures to Chinese
companies, particularly to SOEs, may be met with resistance. However environmental NGOs such as CI
38
and WWF are treated with greater deference than other NGOs. The high esteem that China has for the
WWF is a good example of that.
Often it is the case that Chinese firms will simply revert to the best developed set of environmental
regulations based on where the project is located. If the project is located in a country with relatively
undeveloped or no environmental regulations then the Chinese joint venture partner is likely to insist
that Chinese regulations be adhered to; as they are likely to be better developed then the host countries
regulations, containing many of the host countries regulation as well as containing relatively higher
standard Chinese regulations. If it is located in a developed country with sophisticated environmental
regulations like Canada or South Africa then it is likely that they will adhere to those as they set the bar
very high relative to Chinese regulation.
Whilst SOEs might be interested in learning more about and implementing EITI and CSR than private
firms they are also more susceptible to being affected and influenced by political sentiments felt by the
Chinese government. If the Chinese government, and by extension Chinese SOEs, feel that they are
being unfairly treated, particularly by western institutions, in their operations and interactions in Africa
then it is unlikely that they will be receptive to unsolicited overtures by western based organisations to
engage with them in an African context. There is also a growing suspicion in African countries of western
and Chinese insertions collaborating and coordinating their activities within Africa without their blessing
and involvement.
The best way to overcome these problems would be to approach Chinese companies through African
governments on a country by country basis, using CI’s already well developed relationship with these
governments.
39
Projects of interest
Of the eleven countries looked at in this
report three stand out for particular
attention. Of the 27 extraction operations
looked at in this report the operations of
greatest interest to CI are:
Soalala iron ore mine in Madagascar
run by WISCO
Sheba mine in South Africa run by
Zijin
The Tweefontein and Dilokong
chrome mine in South Africa run by
Sinosteel
The Frischgewaagd-Ledig platinum
mine run by Jinchuan Group in
South Africa
Bong Mines in Liberia run by China
Union mining iron ore
It is also recommended that CI monitors the following projects due to the environmentally sensitive
geographical areas they could affect and the still early formative state of the projects:
Muali mine in Zambia run by Jinchuan Group
Riversdale Zambeze project in Mozambique
Oil blocks 3113 and 2104 in Madagascar being done by Shaanxi Yanchang Petroleum Group
Focus Justification:
Soalala iron ore mine:
Due to the mine’s location within a key biodiversity area, a biodiversity hotspot and an
endemic bird area as well as its close proximity to the Baie De Baly National Park there is a
strong environmental case to be made for engagement. CI’s strong presence in Madagascar
and the involvement of Chinese SOE WISCO in the project are additional reasons.
Bong Mines:
The Bong mine’s location within an environmentally sensitive region of Liberia and CI’s
strong presence in the country mean that this project should be of considerable interest to CI.
Another factor is that the company running the project, China Union, is a subsidiary of
WISCO (a company that is already of interest to CI due to its Soalala project in Madagascar)
adds emphasis to this projects importance.
40
The Tweefontein and Dilokong chrome mine:
The Tweefontein and Dilokong mine’s close location to a key biodiversity area (15km and
7km respectively) as well as being within an endemic bird area illustrate the fragility of the
local environment they might be effecting. Their close proximity to each other, being only
30km apart is also an important factor. Both mines are located in the north of South Africa
were the largest concentration of Chinese owned mines are located and where CI has its
African head quarters and a very strong presence as well as a long legacy of working with
South African mining companies. The operations are owned by Sinosteel, one of the largest
and most important ferrous-metal producers and traders in China.xii
The Frischgewaagd-Ledig platinum mine:
The scale of Jinchuan Group and the size of the company’s investment (US$877 million) in
the South African firm operating the mine as well as the mine’s location within a key
biodiversity area are three of the reasons that highlight the mine’s importance. The final
factor is the aforementioned location of the mine in South Africa and the strength of CI’s
presence in the country in addition to its established track record of working with the South
African mining industry.
Two companies stand out in terms of the scale, location, nature and potential environmental impact of
their projects in the countries looked at in this report, WISCO and Sinosteel. CI should seek to establish
a relationship - or at least dialogue with - these two companies. Additionally CI should seek to create a
relationship with Chinese financial institutions that are often responsible for financing these deals and
might be more sympathetic to the importance of the environment; institutions such as CAD-Fund, China
Construction Bank and the Development Bank of China.
Two countries that had surprisingly little in the way of large, established Chinese extraction activities in
environmentally sensitive areas are the DRC and Angola. There seems to be a strong but mistaken belief
that the Chinese mining presence in these two countries is vast. Whilst there are certainly a number of
very large and important extraction operations and a substantial small to micro-scale mining activitiesxiii
they are either all off shore in the deep ocean – as is the case in Angola - or there is only one, but very
large, operation in the DRC that has not yet taken off. Neither of these projects are located in
particularly environmentally sensitive areasxiv particularly when compared to the sensitivity of the areas
that the Bong and Soalala mines are located in.
xii
An important source of information for any further interest in this and other South Africa based projects would be the EITI and environmental reports that have to be compiled before any mining project can go ahead. xiii
It is noted that CI should not focus on operations with an investment value of less than US$5 million as they are too numerous to keep track of and the informal and chaotic nature of the companies often engaged in such small scale mining would be too difficult at this stage for CI to work with. xiv
It must be pointed out that whilst the Dima mining complex in the DRC is not in a particularly sensitive area it is located in a much larger high biodiversity wilderness area that stretches for many hundreds if not thousands of kilometres that is known for its abundance of wildlife.
41
Approaching Chinese companies
Should CI wish to engage Chinese firms in partnership to ensure conservation of important biodiversity
and ecosystem services the following section discusses which mines and companies would be of
greatest interest to CI and what the best strategy of engagement might be.
Five possible strategies of approach
1. Approach the firms directly.
This approach would involve directly contacting Chinese firms at their main offices in China
or their regional offices in Africa. Based on the experiences of other organisations and
individuals this approach would be considered less effective. It is even conceivable that an
unsolicited overture to a Chinese company (particularly if it is an SOE) might make it even
more difficult to approach them in the future. There is a possibility that they will grant an
audience and organise a meeting only to allow the organisation approaching them to save
face. If this happens then it is possible that it would only become apparent to the
approaching organisation that they are unlikely to make any progress after considerable
period of time and amount of resources have been wasted in pursuing that company.
It is unlikely that a Chinese executive would want to risk working with a western NGO
without any political cover should things go wrong or that NGO fall out of favour with
Beijing or the relevant African government. There is a good chance that particular
companies would be inclined to view enacting EITI and other environmental impact
mitigation policies as an added overhead that would reduce their competitiveness both in
China and internationally.
However there is a growing interest in learning more about EITI and other such
environmental policies amongst Chinese companies. This is partly due to an increasing
awareness of environmental issues within China on a political level.
2. Lobby the government in Beijing through CI’s office there, introducing the idea of working with
CI in Africa and allow government to introduce CI to the relevant companies.
This approach would involve using contacts that CI has already established within the
Chinese government and environmental ministries to facilitate and abridge establishing
relationships with the relevant Chinese extraction companies on the grounds of improving
their environmental record in an African context.
Lobbying any government is a slow and opaque process; this is particularly true of Chinese
government. However the Chinese government is increasingly receptive to environmental
NGOs as the country becomes more interested in improving its environmental record.
Lobbying the government can be done through a number of Chinese institutions. Most
notably the Ministry of the Commerce People's Republic of China, the State-owned Assets
42
Supervision and Administration Commission and Chinese financial and banking institutions.xv
A challenge will be to identify which institutions can influence Chinese foreign direct
investment. The Chinese Ministry of Commerce and the Ministry of Foreign Affairs often set
the framework for Chinese investment but a lot of investment falls outside of their mandate
and is not directly regulated.
3. Lobbying African governments to catalyse partnerships between CI and Chinese firms.
This approach involves approaching and working with African governments to get them to
catalyse relationships between CI and relevant Chinese companies. The drawback of this
approach is that it is indirect and working with government officials is slow and time
consuming. However it is better than simply approaching Chinese companies and
government actors for a number of important reasons and is highly likely to produce a
positive response. As such it is a strategy that should be given the highest priority.
One reason is that African governments are made key players in a project that directly
involves the welfare of their own countries. Working with the relevant African governments
is absolutely necessary sooner or later in any successful project of this type and magnitude
on the continent. CI already has a well developed relationship with many African
governments and working with them from an early stage as a key partner in a project like
this would only serve to improve that relationship.
Working through African governments to approach Chinese companies would greatly
enhance CI’s chances of success. Chinese companies would be compelled to comply with
requests by African governments as it complies with the Five Principles of Peaceful
Coexistence and the Ten Principles of Bandung that include the Five Principles; particularly
the first principle, that of “mutual respect for sovereignty and territorial integrity” and the
fourth principle, “equality and mutual benefit.” 138 Chinese leaders still regard the Five
Principles as the bedrock of their foreign policy. Any approach that does not directly include
African decision makers might be seen by Chinese decision makers as circumventing these
fundamental principles of Chinese foreign policy in developing countries.
4. Using Chinese research organisations would see CI using established and respected Chinese
research organisations to communicate the importance of good environmental standards for
Chinese firms operating outside of China. The same research organisations can also
communicate to them how they can improve their policies and who (for example CI) can help
them improve said policies.
By talking to as well as giving research, case studies and publications that CI has accrued
over the years to established Chinese research organisations to translate and disseminate;
CI may be able to inform Chinese companies of the importance of good environmental
xv
Such as China Construction Bank, China Development Bank, China EximBank and the China Africa Development Fund (CAD-Fund).
43
practices in developing countries that have not yet developed sophisticated environmental
impact mitigation policies of their own. Over the years CI has generated, gathered and
analysed a lot of research that Chinese companies would find very helpful.
Such a practice would create a win-win-win relationship. Chinese companies would benefit
from learning about the sensitivity of the environmental they are operating in outside of
China as well as gain access to ideas on how to improve their own policies. Chinese
research organisations would improve their own body of knowledge at no real additional
cost to themselves and it would help CI fulfil its mandate to work with companies to
protect the environment.
5. Mixed approach that seeks to lobby the Chinese government in Beijing as well as lobbying
African governments.
Whilst this approach has all the benefits of the previous three strategies (not including the
direct approach) but it is also more complex and difficult to pull off with if such a project is
only given limited resources. It would require that the team or individual responsible for
carrying out this approach be stretched between lobbying Beijing, meeting and working with
Chinese research organisations and lobbying the relevant African governments.
A small team of at least two or three individuals, each with separate tasks but a common
vision and in coordination with each other would be needed to pull it off effectively in a less
than two or three years. Each individual would need some support from their colleagues
(and should seek to harness their colleagues connections and institutional knowledge)
within CI’s country missions to gain access to relevant decision makers within government,
this particularly the case so far as working with the relevant African governments.
Despite the drawbacks of the Mixed approach it does ensure a greater degree of success by pursuing
multiple avenues of approach and engagement whilst bringing on board important African role players
and building off China’s own policies of engagement. As has already been noted above the Mixed
approach allows CI to build off of its existing relationships with African governments to bring them on
board and lobby on CIs behalf. It is hard not to over emphasise the importance of working with African
governments to make such a project work.
Chinese firms would be loathed to go against the advice and wishes of African governments for a
number of reasons. It runs counter to China’s established foreign policyxvi and opens them up to
criticism from within China as well as the rest of the world should an environmental problem emerge in
the future. Encouragement from African governments also gives the green light to Chinese executives
on the ground to take the intuitive and engage with NGOs without having to go through the very long
and tedious process of consulting all interested parties in Beijing.
xvi
Such an approach is consistent with China’s commitments to the Bandung Declaration which forms a central pillar of China’s foreign engagement policies. A fundamental aspect of the Bandung Declaration is the importance of state sovereignty.
44
The need is as apparent as is the assistance that CI could providexvii Chinese companies to improve their
environmental polices abroad. With sufficient commitment of resources dedicated over a three or four
year time period and with a clear objective in mind a project that seeks to enhance the quality of
Chinese companies environmental policies a great deal of good work can be done.
The end goal would be to catalyse change across industry sectors in the long run. However to attain this
it would be necessary to start on a more modest scale by working with a single company in a specified
location to improve its environmental policies and practices. Getting Chinese firms on board in the early
stages will be more difficult then it will likely be in later stages of the project when they start seeing and
learning about successful examples. As such it will be most prudent to select the a company that is
receptive to this idea and likely to be successful. This will be a company that has both the greatest
potential need for improvement of their environmental policies over and above industry norms for that
countryxviii and is most dynamic and open to adaption and change.xix On balance it would appear that
the best company – upon preliminary investigation, although it will need to be explored further –that
satisfies both aspects would be Zijin in South Africa.
xvii
For more information on CI’s partnerships with mining companies refer to: Smuts, Rowena (2010), Are partnerships the key to conserving Africa’s biodiversity?, Conservation International. Available at: http://www.cbd.int/impact/case-studies/cs-impact-USAID-africa-mining-conservation-en.pdf xviii
An example of such a company would be Zijin’s operation in South Africa xix
An example of a highly dynamic Chinese firm that is already taking its environmental record relatively seriously is Sinosteel.
45
Appendix
Chinese Mining Firms Below is a list of Chinese firms that currently have mining operations in the eleven African countries
looked at in this report.
Jinchuan Group
Jinchuan Group is a large integrated state owned non-ferrous metallurgical and
chemical engineering firm and based in Gansu province. Jinchuan was founded in
1958; the People’s Government of Gansu Province and the China Development Bank
are its major shareholders.
Jinchuan specialises in the processing and beneficiation of nickel, copper, cobalt, precious metals and
platinum group metals. The company currently processes or produces around 90 percent of China’s
nickel and platinum group metals output139 and is the 2nd largest producer of cobalt and 4th largest
producer of nickel in the world.140
Jinchuan is in the process of expanding its operations outside of China and is seeking to buy mines so as
to boost its copper holdings by 20 million metric tons.
Qingdao JISCO
JISCO is a privately owned firm that was originally founded in South Korea firm in
1980. In 2006 much of the company’s focus and manufacturing capabilities were
relocated to the Chinese port city of Qingdao, Shangdong province. Its Qingdao operations have made it
into one of the largest producers of nails in the world. Currently the firm owns 26.1% of International
Ferro Metals which in turn owns the Buffelsfontein chromate mine.
China Non Ferrous Metal Company (CNMC)
Is a large Chinese SOE based in Beijing, China that specialises in mining and mining
related activities. 141 The company was founded in 2002 by China Nonferrous
Metals Mining & Construction Inc. together with another sixteen shareholders.142
CNMC was listed on the Hong Kong Stock Exchange in 2005 in an effort to reduce its reliance on Chinese
state owned banks for capital.143
CNMC currently working on projects in over twenty countries and is currently in a process of expanding
its operations outside of the Chinese mainland. Currently CNMC has two very large operations in
Zambia’s copper belt. CNMC has publicly stated that it prides its self on its “strict compliance with
environmental requirements.”144
46
Chiman Manufacturing Ltd.
Chiman Manufacturing LtD. is a private firm based in Liaoning province, China and registered in Zambia
to mine and refine nickel. Its nickel operations were closed in Zambia due to excessively high levels of
air pollution.
China Minmetals Corporation
Minmetals is a State Controlled metals trading company based in Beijing, China. It is
currently one of the largest metals and minerals trading companies in the world
employing over 53,000 people and an annual turnover of US$26.6 billion. Founded in
1950 the company is one of the oldest SOEs in China. As of December 2010 the
company has indirect owner ship of the Naboom and Townlands chromium mines in South Africa.
The company’s executive director, Zhang Ye, has stated that over the next five years the company aims
to "multiply ferrous mining assets by tenfold during the next five years, with overseas mining assets
accounting for more than 50 percent."145
China North Industries Group
China North Industries Group (NORINCO) is a large transnational state owned
corporation specializing in a combination of weapons and engineering technology,
manufacture and trade that reports to the State Council. The company is one of
China’s top ten industrial defence complexes and is based in Beijing, China. The company was setup in
the early 1980s as an export arm of the Fifth Ministry of Machine Industry. In May 2003 the US
government imposed sanctions on NORINCO for exporting missile technology to Iran.146 The company
currently has mining interests in Zimbabwe.
Sicomines
Sicomines is a joint venture between a consortium of state owned Chinese firms (led by
CREC and Sinohydro) and the state mining corporation of the DRC, Gécamines. 68% of
the company is owned by the consortium of Chinese companies with Gécamines
owning the remaining 32%. Most of the Chinese companies in the consortium are
construction companies.147
The following Chinese firms, all of them SOEs, are involved in the joint venture:
Sinohydro
China Railway Engineering Corporation (CREC)
Water Resources and Hydropower Construction Group Corporation
Zhejiang Jiang Huayou Cobalt Company Limited
Sinohydro and CREC seem to be the most active Chinese firms in the joint venture.
47
Sinosteel
Is a large Chinese SOE founded in 1993 and based in Beijing, China. The company is the
country’s second largest importer of iron ore. Sinosteel is primarily an iron ore importer
into China but is also involved in the extraction and beneficiation of metals, primarily
ferrous metals such as iron and steel. It is one of China’s largest SOEs. The company is
the largest best established Chinese companies in South Africa and Africa as a whole.
A number of research and development companies exist within Sinosteel operating in areas such as
environmental protection, geological exploration, beneficiation, and engineering design. The company
is also a supplier and agent for a number of Chinese and international equipment and technology
companies.
Sinosteel has a significant interest in chrome mining and/or processing operations in South Africa and
Zimbabwe, specifically the Tweefontein chrome mine in South Africa and the chrome beneficiation
company Zimasco in Zimbabwe. Sinosteel is also has part ownership of chrome mining and processing
company ASA Metals Pty Ltd. of South Africa. A company that it established in a joint venture through
the Eastern Asia Metals Investment Co Ltd, a wholly owned subsidiary of Sinosteel, and the Limpopo
Economic Development Enterprise to establish in 1996.148
Sinosteel cut deals in Gabon in 2006, and two years later expanded in Zimbabwe and Cameroon,
bringing its total investments on the continent to about US$ 1 billion. It's now the largest, most deeply
rooted resource-based Chinese enterprise in South Africa. And it operates 10 companies with 8.9 billion
yuan in assets across Africa, all from a regional headquarters in Johannesburg.
Sinopec
Sinopec is an SOE based in Beijing, China and is one of country’s largest petroleum
companies. Sinopec is a subsidiary of China Petrochemical Corporation –otherwise
known as Sinopec Group- and is the largest petrochemical enterprise in Asia. 149 In 2008
Sinopec had an operating income of US$220.8 billion.150
Shaanxi Yanchang Petroleum Group
Shaanxi Yanchang Petroleum is an SOE directly owned by the Shaanxi Provincial
Government and based in the city of Yanan, Shaanxi. First founded in 1905 it is one of
four companies in China that is qualified in oil and gas expiration.
The company primarily engages in the exploration, exploitation and transportation of oil and gas. In
2008 the company’s gross assets were valued at over US$13 billion, making it China’s 93rd largest
enterprise.151
Currently it has entered into a deal with Hong Kong based Sino Union Energy Investment Corp to exploit
oil blocks in their possession in Madagascar.
48
Wuhan Iron & Steel Group
Wuhan Iron & Steel Group (WISCO) is a state owned Chinese iron and steel processing
company. WISCO was founded in 1958 in Wuhan, Hubei province as China’s first massive
iron and steel company. The company was listed on the Hong Kong stock exchange in
1999 and is one of China’s largest companies and China’s third largest steel producer by
output.152
In recent years the company has sought to reduce its reliance on foreign suppliers of iron ore by buying
iron mines of its own around the world, particularly in Brazil, Australia and Africa.153 The company
currently has the following operations in Africa:
Soalala, Madagascar (42% ownership)– iron ore
Bong, Liberia (60% ownership) – iron ore154
Riversdale, Mozambique ( 40% ownership) – coal155
Zijin Mining Group Co.
Zijin Mining Group is a provincial SOE based in Fujian Province, China. The
company specialise in the mining and beneficiation of gold and platinum base
metals and is publicly listed on the Hong Kong Stock Exchange. It is currently one of the largest gold
mining and beneficiation firms in China.156 Currently it owns a 29.9% stake in Ridge Mining which in turn
owns the Blue Ridge and Sheba’s Ridge.157
List of Chinese owned ore processing companies in the DRC
Although these firms have been exclude some of Chinese owned beneficiation firms have been listed
here for the convince of the interested reader:
Tongxiang, owned by Zhejiang Huayou Cobalt Co.
Congo Dong Fang International Mining Sprl: Kolwezi Depot and Lubumbashi smelter (owned by
Zhejiang Huayou)
Mining Company of Lubumbashi
Jiaxing Mining: Kolwezi depot and Lubumbashi smelter
Lida Mining
South China Mining Sprl.
Cota Mining Sprl: Lubumbashi smelter
Congo Loyal Will Mining: Lubumbashi smelter
Emmanuel Mining: Kolwezi depot
49
Huachin: smelters in Lubumbashi and Likasi
JMT: Kolwezi depot
Song Hua: Lubumbashi smelter
Feza Mining: Likasi smelter
Selected Biography Shankelman, Jill (2009), Chinese Oil and Mining Companies and the Governance of Resource
Wealth, Woodrow Wilson International Center for Scholars [Online], Available at:
http://www.wilsoncenter.org/topics/pubs/DUSS_09323Shnkl_rpt0626.pdf
Brautigam, Deborah (2009). The Dragon's Gift:The Real Story of China in Africa. New York:
Oxford Unviersity Press. ISBN 978–0–19–955022–7.
Pamlin, Dennis; Long, Baijin (2007), Re-Think China’s Outward Investment Flows, World Wide
Fund for Nature (WWF), April 2007, Available at:
http://wwf.panda.org/about_our_earth/all_publications/?100400/WWF-Report-Re-Think-
Chinese-Outward-Investment-Flows
Burke, Christopher; Jansson, Johanna; Jiang, Wenran (August 2009). Chinese Companies in the
Extractive Industries of Gabon & the DRC: Perceptions of Transparency. Centre for Chinese
Studies, Stellenbosch University.
Hon, Tracy; Jansson, Johanna; Shelton, Garth; Liu, Haifang; Burke, Christopher; Kiala, Carine
(2010). Evaluating China’s FOCAC commitments to Africa and mapping the way ahead, Centre
for Chinese Studies, University of Stellenbosch, Available at: http://www.ccs.org.za/wp-
content/uploads/2010/03/ENGLISH-Evaluating-Chinas-FOCAC-commitments-to-Africa-2010.pdf
Vines, Alex (2010). Thirst for African Oil, Global Policy Forum, Available at:
http://www.globalpolicy.org/images/pdfs/Thirst_for_African_Oil.pdf
Shambaugh, David (2008), China’s Communist Party: Atrophy and Adaption, Woodrow Wilson
Center Press: Washington D.C., second printing (2010), ISBN: 978-0-520-26007-8
Leonard, Mark (2008). What Does China Think, Fourth Estate: Great Britain, ISBN: 978-0-00-
723068-6
Edited by: Liu, Hongwu; Yang, Jiemian (2009). Fifty Years of Sino-African Cooperation:
Background, Progress & Significance – Chinese Perspective on Sino-African Relations, Yunnan
University Press: China, ISBN: 978-7-81112-932-8
Naughton, Barry (2007). The Chinese Economy: Transitions and Growth, MIT Press: Cambridge,
Massachusetts, ISBN-10: 0-262-14095-0
50
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Smuts, Rowena (2010), Are partnerships the key to conserving Africa’s biodiversity?, Conservation International, pg 55. Available at: http://www.cbd.int/impact/case-studies/cs-impact-USAID-africa-mining-conservation-en.pdf, Retrieved: 18 December 2010. 27
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51
32
Liberia sees Bong iron ore output in 18 months (22 January 2009), by Alphonso Toweh, Reuters, Available at: http://af.reuters.com/article/investingNews/idAFJOE50L0ER20090122, Retrieved: 17 February 2011. 33
Jessica Donovan, CI Liberia office, sent Tue 22/02/2011 08:17 34
US$2.6 Billion China Union Project Unveiled -As Country, China Sign Six Agreements, The Analyst, 27 April 2010, Available at: http://allafrica.com/stories/201004280514.html, Retrieved 22 February 2011. 35
Wuhan Iron and Steel officially launches Liberian mining project ( 28 April 2010). Steel Orbis, Available at: http://www.steelorbis.com/steel-news/latest-news/wuhan-iron-and-steel-officially-launches-liberian-mining-project-528025.htm, Retrieved: 17 February 2011. 36
Levkowitz, Lee; McLellan Ross, Marta; Warner, J.R. (10 July 2009), The 88 Queensway Group: A Case Study in Chinese Investors’ Operations in Angola and Beyond. Washington D.C.: U.S.-China Economic & Security Review Commission, Available at: http://www.uscc.gov/The_88_Queensway_Group.pdf, Retrived: 17 May 2011. 37
Ibid, pg i 38
Hon, Tracy; Jansson, Johanna; Shelton, Garth; Liu, Haifang; Burke, Christopher; Kiala, Carine (2010). Evaluating China’s FOCAC commitments to Africa and mapping the way ahead, pg 33 39
Sinopec to Acquire Angolan Oil Assets (29 March 2010), China Mining Federation, Chinamining.org, available at: http://www.chinamining.org/Investment/2010-03-29/1269828803d35006.html, Retrieved: 17 May 2011. 40
Hon; Jansson; Shelton; Liu; Burke; Kiala (2010), Ibid. 41
China Sonangol still hungry (May 2011), Africa-Asia Confidential, Vol 4: no. 7, Available at: http://www.africa-asia-confidential.com/article-preview/id/567/China-Sonangol-still-hungry, Retrieved: 17 May 2011. 42
Hold that Tiger (May 2011), Noesweek, #139, pg 28. Original source BBC journalist Lucy Ash in 2007. 43
China Lets Child Workers Die Digging in Congo Mines for Copper (22 July 2008), by Simon Clark, Bloomberg, Available at: http://www.bloomberg.com/apps/news?pid=nw&pname=mm_0908_story3.html, Retrieved: 15 March 2011. 44
Marks, Stephen (2010). Strengthening the Civil Society Perspective: China's African Impact, Published by: Fahamu, pg 12-15, Available at: http://www.fahamu.org/downloads/strengthening_the_civil_society_perspective.pdf, Retrieved: 15 March 2011. 45
Interview with Johanna Jansson, 25 January 2011. 46
A list of companies owned by Chinese nationals that engage in the processing of ore can be found in the Appendix 47
Burke, Jansson & Jiang (August 2009). pg 42. 47
CNOOC Inks Oil Deal with Equatorial Guinea. (Feb 2006), Available at: http://www.china.org.cn/english/2006/Feb/158520.htm 48
Partnership, Progress, Prosperity: Building a leading copper company (2007), Katanga Mining Limited, Mining Indaba 2007, Available at: http://ratcliffephotos.free.fr/kamoto/KMLpresentation%20feb%2007.pdf, Retrieved: 5 January 2011. 49
Hon, Tracy; Jansson, Johanna; Shelton, Garth; Liu, Haifang; Burke, Christopher; Kiala, Carine (2010). Evaluating China’s FOCAC commitments to Africa and mapping the way ahead, Centre for Chinese Studies, University of Stellenbosch, pg 53, Available at: http://www.ccs.org.za/wp-content/uploads/2010/03/ENGLISH-Evaluating-Chinas-FOCAC-commitments-to-Africa-2010.pdf, Retrieved: 18 December 2010. 50
Burke, Christopher; Jansson, Johanna; Jiang, Wenran (August 2009). "Chinese Companies in the Extractive Industries of Gabon & the DRC: Perceptions of Transparency". Centre for Chinese Studies, Stellenbosch University. 51
CNOOC Inks Oil Deal with Equatorial Guinea. (Feb 2006), Available at: http://www.china.org.cn/english/2006/Feb/158520.htm, Retrieved: 20 January 2011. 52
2006 First Quarter Review (31 March 2006), CNOOC Limited, Available at: http://www.cnoocltd.com/encnoocltd/tzzgx/yjhtjcl/Results/images/200941317.pdf, Retrieved: 12 March 2011 53
Lima, Gabriel Nguema (2006), Coping with Challenges: the African Perspective, Government of Equatorial Guinea, Available at: http://www.africacncl.org/Events/downloads/Hon.%20Gabriel%20Nguema%20Lima,%20Vice%20Minister%20of%20Mines,%20Industry%20&%20Energy,%20Equatorial%20Guinea.pdf, Retrieved: 13 March 2011. 54
Vines, Alex (4 July 2009). Well Oiled, VII: Role of the International Community – China, Available at: http://www.hrw.org/en/node/84252/section/9, Retrieved: 7 January 2011.
52
55
Madagascar's Failed Coup Deals Fresh Blow to Economy Crippled by Crisis (22 November 2010), by Hannah McNeish and Franz Wild, Bloomberg, Available at: http://www.bloomberg.com/news/2010-11-22/madagascar-s-failed-coup-deals-fresh-blow-to-economy-crippled-by-crisis.html, Retrieved: 2 March 2011. 56
Wuhan Steel gets green light for Africa ventures ( 25 May 2010), by Zhang Qi, China Daily, Available at: http://www.chinadaily.com.cn/bizchina/2010-05/25/content_9888548.htm, Retrieved: 18 January 2011. 57
China investment (2007). Dart Creations, Available at: http://www.dart-creations.com/business-tree/investment/china-investment.html, Retrieved: 20 January 2011. 58
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China's Yanchang to tap Madagascar oil blocks (13 January 2010). Reuters, Beijing, Available at: http://in.reuters.com/article/idINTOE60C02320100113, Retrieved: 16 January 2011. 60
Energy-Pedia, Available at: http://www.energy-pedia.com/article.aspx?articleid=137719, Retrieved: 16 January 2011. 61 Hanlon, Joseph (13 December 2010). Keeping Options Open, MOZAMBIQUE 174, Retrieved: 18 January 2011. pg
2. 62
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Riverdale Mining: Half Year Financial Report (31 December 2010), Riversdale Mining Limited, pg 4, retrieved: 9 March 2011. 64
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Chama, Brian (2010). Economic Development at the Cost of Human Rights: China Nonferrous Metal Industry in Zambia, pg 1, Available at: www.wcl.american.edu/hrbrief/17/2chama.pdf, Retrieved: 11 March 2011. 69
Brautigam (2009), pg: 5 70
Luanshya Copper Mine Hopes to Meet 2010 (2 January 2010), The Times of Zambia, accessed from AllAfrica.com, Available at: http://allafrica.com/stories/201001040191.html, Retrieved: 13 January 2011. 71
Brautigam (2009) pg: 5 72
China in Africa: Strategic Overview (October 2009), Executive Research Associates, Institute of Developing Economies: Japan External Trade Organization, Retrieved 3 March 2011. pg 46. Available at: http://www.ide.go.jp/English/Data/Africa_file/Manualreport/cia_08.html 73
Huderek, Richard (2009). Zambian Copperbelt, KML Document. 74
Ibid 75
CNMC's New Accomplishment in Zambia (22 April 2010), Company website:CNMC, Available at: http://www.cnmc.com.cn/418-1088-2921.aspx 76
The Zambian Shootings in the Chinese Media (5 December 2010), China Digital Times, Available at: http://chinadigitaltimes.net/china/zambia/, Retrieved: 5 January 2011. 77
Zambia: Miner gets death sentence for murdering Chinese boss (31 December 2010), Lusaka Times, Available at: http://www.lusakatimes.com/2010/12/31/miner-death-sentence-murdering-chinese-boss, Retrieved: 8 January 2011.
53
78
Chinese investors shoot Zambian miners for complaining of working conditions (15 Octover 2010), Zambian Watch Dog, Available at: http://www.zambianwatchdog.com/2010/10/15/chinese-investors-shoot-zambian-miners-for-complaining-of-working-conditions/, Retrieved: 8 January 2011. 79
Zambia Uneasily Balances Chinese Investment and Workers’ Resentment (20 November 2010), By Barry Bearak, New York Times, Available at: http://www.nytimes.com/2010/11/21/world/africa/21zambia.html?_r=4&hp, Retrieved: 8 January 2011. 80
Chinese Collum Coal Mine Management Taken to Task (18 February 2011), The Global Newspaper, Zambia. 81
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Zambia shuts down Chiman manganese mine indefinitely due to high pollution levels. (13 July 2007), London: Metal-Pages, Available at: http://www.metal-pages.com/news/story/28246/, Retrieved: 5 March 2011. 84
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Zambia's Munali nickel mine back in production (27 March 2010), by Chris Mfula, Mine Web, Available at: http://www.mineweb.com/mineweb/view/mineweb/en/page36?oid=101577&sn=Detail, Retrieved: 4 March 2011. 86
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Brautigam (2009), pg: 289 88
Brautigam (2009), pg: 289 89
Brautigam (2009), pg: 289-291 90
ZANU PF propped up by controversial Chinese businessman (14 March 2011), by Alex Bell, SW Radio Africa news, Avilable at: http://www.swradioafrica.com/news140311/zpfchinese140311.htm, Retrieved: 25 March 2011. 91
Chinese explores Zim’s uranium ore-body (16 March 2011), Southern African Report, Vol 28 No. 11, pg 12. 92
Mugabe's bank grudge (5 March 2011), by Zoli Mangena, TimesLive, South Africa, Available at: http://www.timeslive.co.za/sundaytimes/article949839.ece/Mugabes-bank-grudge, Retrieved: 16 March 2011. 93
Chinese explores Zim’s uranium ore-body (16 March 2011), Southern African Report, Vol 28 No. 11, pg 12. 94
Interview with Peta Thornycraft, veteran independent Zimbabwean journalist, 15 February 2011. 95
Mobbs, Philip (2006), The Mineral Industry of Zimbabwe, United States Geological Survey, Available at: http://minerals.usgs.gov/minerals/pubs/country/2006/myb3-2006-zi.pdf, Retrieved: 16 March 2011, pg 42.2 96
Kimberly Process Review Application (2010), Anjin Investments (PVT) LTD. 97
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Sino-Zim Temporarily Halts Marange Exploration (9 May 2011), Diamond Intelligence, Available at: http://www.diamondintelligence.com/magazine/magazine.aspx?id=9517, Retrieved: 13 May 2011. 100
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Thornycraft (2011) 102
Interview with Dr Andy Moore, Rhodes University Vice-President (Exploration, Diamonds), African Queen Mines Ltd, 16 February 2011. 103
New Uranium Mining Projects - Africa (17 February 2011), WISE Uranium Project, Available at: http://www.wise-uranium.org/upafr.html, Retrieved: 25 February 2011.
54
104
Interview with Veston Malango, General Manager, The Chamber of Mines of Namibia, 10 February 2011. This interview was conducted at the 2011 Mining Indaba, Cape Town, South Africa. 105
List Mining licences (January 2011), Ministry of Mining and Energy, Windhoek, Namibia, Available at: http://www.mme.gov.na/pdf/ml0111.pdf, Retrieved: 14 February 2011. 106
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New Uranium Mining Projects - Namibia (21 February 2011), WISE Uranium Project, Retrieved: 14 March 2011, Available at: http://www.wise-uranium.org/upafr.html, Retrieved: 14 February 2011. 108
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China goes for the gold (17 May 2011), by Pan Kwan Yuk, Financial Times blog, Available at: http://blogs.ft.com/beyond-brics/2011/05/17/china-goes-for-the-gold, retrieved: 18 May 2011. 112
GPS location: 26o58’14S 26
o46’13E
113 GPS location: 26
o24’07S 28
o48’05E
114 Aurora - Orkney and Grootvlei mines could soon be operational (25 February 2011), ABN Digital, Available at:
http://www.abndigital.com/page/multimedia/video/special-reports/307788-Aurora-Orkney-and-Grootvlei-mines-could-soon-be-operational, Retrieved 3 March 2011. 115
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Group Overview, Shandong Gold Group company website, Available at: http://www.sd-gold.com/en/about.do, Retrieved: 24 March 2011. 121
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GPS location: 24o44’30S 30
o11’44E
124 Tubatse Introduction, Sinosteel website, Available at:
http://tubatse.sinosteel.com/outline.jsp?column_no=0502, Retrieved: 24 March 2011. 125
SA a preferred destination for Chinese mining investment (20 June 2008), by Keith Campbell, Available at: http://www.miningweekly.com/article/sa-a-preferred-destination-for-chinese-mining-investment-2008-06-20, Retrieved: 6 March 2011. 126
GPS location: 24o33’8S 30
o08’48E
127 Overseas Organizations: ASA Metals Pty. Ltd., Sinosteel Corporation, Available at:
fhttp://en.sinosteel.com/qqzg/hwjg/2007-09-13/1761.shtml, Retrieved: 24 August 2011.
55
128
Ibid 129
Ibid 130
In the course of two informal interviews with sources that requested, for professional reasons, to remain anonymous Zijin’s operation in South Africa was recomened. The people who mentioned this are well informed and deeply involved in China’s mining interests in southern Africa and South Africa in particular. 131
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Minmetals to buy more assets (2 March 2011), by Zhang Qi, China Daily, Beijing, Available at: http://www.chinadaily.com.cn/business/2011-03/02/content_12100636.htm, Retrived: 12 March 2011. 134
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Alex Vines, “Thirst for African Oil,” Global Policy Forum, (2010), p.20, Available at: http://www.globalpolicy.org/images/pdfs/Thirst_for_African_Oil.pdf, (retrieved: 11 March 2011). 137
Shambaugh, David (2008), China’s Communist Party: Atrophy and Adaption, Woodrow Wilson Center Press: Washington D.C., second printing (2010), ISBN: 978-0-520-26007-8, pg 90-91. 138
Brautigam (2009), pg: 30 139
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Burke, Christopher; Jansson, Johanna; Jiang, Wenran (August 2009). "Chinese Companies in the Extractive Industries of Gabon & the DRC: Perceptions of Transparency". Centre for Chinese Studies, Stellenbosch University. 148
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56
150
Annual Report 2008, China Petroleum & Chemical Corporation, Available at: http://english.sinopec.com/download_center/reports/2008/20090330/download/AnnualReport2008.pdf, Retrieved: 11 March 2011. 151
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Wuhan Iron still keen on Riversdale stake buy (7 March 2011) 156
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