Published on 22 Jun 2022

Chinese firm boosts investment in Zimbabwean lithium mine

A new round of investment by Zhejiang Huayou Cobalt will see it emerge as the top Asian investor in the country

Chinese mining company Zhejiang Huayou Cobalt (ZHC) has announced that it will invest a further US$300m in its Arcadia lithium mine in Zimbabwe. This follows ZHC completing the purchase of the lithium project in April from Australia’s Prospect Resources. The investment will bolster the mine's production capacity, positioning ZHC as a major operator in Zimbabwe’s developing lithium sector during a period of increased global demand for the resource.

In a statement on 24 May, ZHC announced that it will invest approximately US$300m to further develop the Arcadia hard-rock lithium mine located in the Goromonzi district of Zimbabwe’s Mashonaland East province. The investment will be processed through the firm’s local wholly owned subsidiary Project Lithium Zimbabwe, which is the mine’s holding company. The funds will be used to hasten the ongoing development at the site as well as construct a plant that will have the ability to process 4.5 million tonnes of ore and produce 400,000 metric tonnes of lithium concentrate per annum. This development is expected to create 600 jobs during the construction phase, and as many as 900 permanent jobs when production commences in 2023.

This investment follows Zhejiang Huayou Cobalt’s initial outlay of US$422m to acquire the mine. This included securing Prospect Resources’s 87% stake for US$377.8m as well as buying out minority stakeholders – for a collective US$44m. The purchase of the Arcadia project was completed on 20 April 2022.

The new investment means that ZHC will end up having spent an estimated US$722m on the lithium project by the end of 2022. This significant outlay underscores the company’s desire to have the firm operational as soon as possible, at which point it will be the largest active lithium project in Zimbabwe.

This haste is likely driven by the growing global demand for lithium. The mineral is used in the production of lithium-ion, which is the essential component in producing lithium-ion batteries – the preferred power source for electric vehicles. Growing demand has caused the price of lithium carbonate – the compound that gets extracted from the ground prior to concentration – to increase by 432% between April 2021 and April 2022, reaching approximately US$62,000 per metric tonne; by mid-June 2022, the price of lithium was in excess of US$70,000.

ZHC is eager to take advantage of these burgeoning prices. However, the company’s investment in Zimbabwe also has long-term strategic value. Zimbabwe is estimated to have some of the world’s largest supplies of lithium and this sector is significantly underdeveloped in the country. The surging demand for lithium will drive increased investor interest in the sector. By investing heavily now, ZHC is positioning itself to be a major player in the Zimbabwean lithium sector in the coming years. Furthermore, its new Zimbabwean lithium assets dovetail well with ZHC’s significant cobalt and copper mining operations in Democratic Republic of Congo. Cobalt and copper are also key inputs in the manufacturing of batteries. The development of the Arcadia project will cement the company as a global leading provider of battery minerals; the company is already the world’s largest producer of cobalt.

This development also has geopolitical significance. The growing demand for electric vehicles and renewable energy – which often requires significant battery storage – has resulted in increased competition between the United States (US) and China for access to key minerals. This is increasingly evident in African states that have substantial untapped cobalt, copper, and lithium resources. ZHC’s investment in Zimbabwe will deepen ties between Zimbabwe and China’s corporate operators and position Chinese firms to be preferential operators in the country. Western firms will likely struggle to ensure access to the country’s untapped lithium resources given Zimbabwe’s poor relations with many Western governments due to past and present sanctions targeting influential individuals and entities in Zimbabwe.

The investment is also a promising development for Zimbabwe, adding another lucrative export to the country’s trade. The current high price of lithium and the country’s undeveloped deposits will fuel investment in the country, aiding Zimbabwe’s perpetually struggling economy.

References

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'Chinese Mining Billionaire To Invest $300 Million In Zimbabwe Lithium Project', Forbes, 30 May 2022

'Chinese Billionaire To Invest $300 Million In Zimbabwe Lithium Project', Zimbabwe Mail, 30 May 2022

'Lithium Is Key to the Electric Vehicle Transition. It's Also in Short Supply', Time, 26 May 2022

'China's Huayou Cobalt to invest $300 mln in Zimbabwe lithium mine', Reuters, 24 May 2022

'Chinese firm to invest 300 mln USD in Zimbabwe's lithium mine', Xinhua, 24 May 2022

'Prospect Resources closes sale of Arcadia lithium project to Zhejiang Huayou', Mining Technology, 21 April 2022

'Completion of Sale of Arcadia Project', Prospect Resources, 20 April 2022

'Financial sanctions, Zimbabwe', HM Treasury and the UK Office of Financial Sanctions Implementation, 18 March 2022

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'Chinese battery giant is buying Zimbabwe’s Arcadia lithium mine for US$422m. Here’s what you need to know', Zimbabwe Mail, 25 December 2021