mining

Executives of the U.S. auto industry – flanked by their cadre of lobbyists – are now busy begging lawmakers for handouts. So far, GM, Ford and Chrysler have failed to present a strong case for using taxpayer money in their resuscitation. We know that Wagoner (GM), Mulally (Ford) and Nardelli (on behalf of Cerberus Capital, owner of Chrysler ) will get one more chance to prove their case once Obama takes office, if not sooner. And regardless of whether the “big 3″ automakers end up filling their golden chalices with federal money, a mandate stipulating an increase in the production of plug-in electric cars will emerge. This much is sure.

So it seems that this is an opportune time to consider what the next era of America’s auto industry might usher in. Let’s start by taking a quick trip back to high school chemistry class since the future of the auto industry and the new fleet of next generation cars starts with the letters “Li” on the periodic table.

The element lithium is one of nature’s more flexible atoms. Lithium salts were used during the 19th century to treat various ailments and millions of people around the world today rely on it to treat psychosis and manic-depression. Lithium is also used as an industrial agent to kill algae and to filter carbon dioxide from the air in spaceships.

Lithium is the lightest metal and the least dense solid element and because of this it is very effective in heat transfer applications used in rechargeable and primary batteries because of its high electrochemical potential, light weight, and high current density. A lithium-ion battery is the “engine” (non-combustion of course) of today’s electric cars and will likely remain so in the foreseeable future.

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Popularity: 5% [?]

Here is a tale of a multinational mining company, Goldcorp, doing business in a rural community on Honduras. The environmental and social impacts bring harm to the local peasants and it is unclear what, if anything, this company is doing as a corporate citizen.

Take a look at this video.

Popularity: 2% [?]

It has been reported that the government of the Democratic Republic of the Congo is planning to privatize its mining operations in that country. As reported by FT.com, the DRC government is intending to transform its state-owned companies into private concerns.

According to Victor Kasongo, Congo’s deputy minister of mines, the privatization would take place later this year. As reported by Global Investment Watch earlier this year, the government has undertaken a review of its mining contracts negotiated by the previous government. “Mr. Kasongo said that of the 61 mining companies involved in the review, the government was satisfied that 14 were developing their projects in a way that was fair and transparent. But 25 companies would have their contracts modified and a further 22 companies “have contracts so far out of line with mainstream international practice as to warrant cancellation”. These groups would have to renegotiate their contacts completely.” [1. FT.com 9/8/2008]

Some of the companies impacted by the contract review include Freeport McMoRan, Lundin Mining, Anvil Mining, Katanga Mining and First Quantum Minerals. All of these companies are currently in negotiations with the government.

According to Mr. Kasongo, “The first mining flotation should happen “in less than 12 months. “Gecamines [the state copper company] is a very interesting asset. And Okimo [the state gold company] has a lot of good reserves, it could be a good company for an IPO.”

Though there have been improvements in control of corruption in the country, the DRC remains one of the worst countries with respect to this problem. Despite any changes in contract terms with the private sector and the privatization of state-owned mining interests, it is unclear whether this effort by the Kinshasa government will have any significant, positive impact on its citizens.

Popularity: 10% [?]

China signed a $9 billion deal with the Democratic Republic of the Congo last year to allow China access to the African country’s mineral resources. In return, China plans to invest (by way of Chinese contractors) in a new transportation network—a 1,000-mile road from the Zambian border to northeastern Congo. Infrastructure improvements such as this are coveted in the Congo, one of the poorest countries on the continent.

But China’s investment doesn’t come free; the loans coming from China will need to be paid back in copper, cobalt and road tolls. After that, the two countries will split the profits of Socomin, a new massive mining company, with Congo owning 32 percent and China owning 68 percent.

Concerns over transparency and corruption have left many skeptical of the deal—worrying that China’s billions could end up unaccounted for. Other foreign companies attempting to do business in the Congo have had to jump through far more hoops than China and have had to pay taxes and royalties that China doesn’t. Furthermore, Western companies must adhere to Congo’s mining code—a code that may or may not apply to the Chinese.

For a country in which mining has contributed largely to a slew of social and environmental abuses, (not to mention the country’s second civil war), resource extraction from new mines in the Congo could open up a whole new can of worms. This remains to be seen. But one thing seems clear. The deal has secured a strong foothold on the African continent for China and the Congo may just be getting the short end of the stick. 

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Company Background

The current conglomerate was formed when Australian minerals and oil company BHP Limited acquired UK mining company Billiton Plc back in 2001. The result of the merger is a two-headquartered company that is run as a single entity with the same board of directors and common management. The company is listed on both the ASX and LSE exchanges. The Melbourne side is called BHP Billiton Limited while the London business is BHP Billiton Plc. The two collectively are known as BHP Billiton. The company ranks among the world’s top producers of iron ore and coal (thermal and metallurgical) and is a major producer of petroleum products such as crude oil and natural gas. Other units produce aluminum, base metals, diamonds, manganese, and stainless steel.

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Popularity: 12% [?]

Central African Mining & Exploration Company (CAMEC) has announced that it will begin mining platinum in ZImbabwe next year. As reported in today’s Financial Times, the company has been criticized for doing business with the Mugabe regime in Zimbabwe but defends its position:

There have been reports linking these assets to members of the ruling Zanu PF party in the country, but Camec has denied any of the proceeds of the sale were paid to Zanu PF.

Camec on Thursday defended its strategy of entering politically risky parts of the world, saying it believed its approach of “making early stage investments in countries in transition is the best way to generate shareholder value”.

CAMEC has extensive operations in ZImbabwe, the Democratic Republic of the Congo, Mali, South Africa and Mozambique. Recent news reports indicate that the company has successfully renegotiated its mining contracts with the government of the DRC after government officials announced earlier this year that it would review all of its contracts entered into by the previous government.

While the company states that it is a responsible corporate citizen in the countries in which it operates, it does not adhere to any of the industry principles of conduct nor does it publish a code of conduct. While it claims that its recent contract in Zimbabwe has no links to the ruling party, we find it difficult to grasp how such a contract can be negotiated without such complicity by the ZANU-PF.

Popularity: 8% [?]

As was reported in the Financial Times on March 20th, “The government of the Democratic Republic of the Congo on Thursday published plans for the review of its mining contracts, in a move critics see as an attempt to strong-arm international companies into giving state mining companies greater ownership of their assets. “

The government of president Joseph Kabila had previously announced its intention to overhaul 61 different mining contracts, including some signed during Congo’s 1998-2003 civil war. 

Some of the companies whose contracts are subject to review include De Beers, Freeport McMoRan, Anvil Mining and First Quantum Mining. According to reports, this will give a bigger role to state-owned copper mining group Gecamines.

Though critics  have harsh words for the government’s contract review plans, we wonder if such a plan is justified. The government points out that many of these mining contracts were negotiated under less transparent conditions. In addition, the question of the fundamental fairness of the contract terms has been raised.

As was noted in the FT article, “The report by the government-appointed Review Commission was released to the public on Thursday, although the companies involved had been informed of the recommended changes last month. Toronto- and London-listed First Quantum Minerals has been told that its title to its huge copper and cobalt project at Kolwezi in Congo’s southern Katanga province was improperly structured. The Review Commission said the Kolwezi title had been sold off too cheaply and has advised the contract to be redrawn to include ”up-front payments” of cash and a more active role for Gecamines in management.”

If companies disagree with the Review Commission’s proposed changes, they can appeal to a taskforce of government ministers in Kinshasa, the capital, and submit any fresh data.

In light of the horrific suffering of the Congolese people over the last 20 years, let’s hope that they may be the ultimate recipients of these revised contracts as a result of this exercise by the DRC government.

Popularity: 9% [?]