Western miners are beginning to process their metals in Africa in an effort to create supply chains for electric-vehicle batteries that bypass China. China currently dominates the production and processing of critical minerals like cobalt and lithium, which are crucial for the energy transition. This has raised concerns among Western governments about their dependence on Beijing. Despite the risks associated with operating in Africa, Western companies and investors are increasingly willing to build processing plants on the continent. These investments not only address the demand for local processing from African governments but also provide an alternative to China for Western auto manufacturers.
One example is Australian mining giant BHP Group, which has invested $100 million in a nickel mine in Tanzania and plans to build a processing plant in the country. This facility, expected to be the first of its kind in Africa, will produce battery-grade nickel for the US and global market by 2026. The trend of investing in processing facilities in Africa is likely to continue due to the growing demand for battery metals and China’s current dominance in the industry. London-based fund Vision Blue Resources has invested in a graphite mine in Madagascar and a processing facility in Mauritius, both of which are touted as the first of their kind outside of China. The company is also backing a cobalt refinery in Zambia, which is set to become the world’s third-largest and the largest outside of China. Western companies are willing to pay a premium for materials that meet environmental and labor standards, are traceable, and are produced outside of China. Despite the challenges, many Westerners believe the opportunities in Africa outweigh the risks, as they seek non-Chinese sources of battery metals.
Pressure on Western Miners to Process Metals in Africa as China Dominates Battery Supply Chain
Western miners are facing increasing pressure to establish supply chains for electric-vehicle (EV) batteries that bypass China, as Beijing dominates both the production and processing of critical minerals such as cobalt and lithium. This dependence on China has raised concerns among Western governments, prompting some companies and investors to build processing plants in Africa. By processing the raw materials they mine on the continent locally, these companies can export the refined materials directly to Europe and the U.S. This move also aligns with the demands of African governments for more local processing of metals and minerals extracted from their soil.
Australian mining giant BHP Group has invested $100 million in a nickel mine in Tanzania, along with U.S.-based Lifezone Metals. The companies plan to build a processing plant in Tanzania, which will be the first of its kind in Africa. The plant is expected to deliver battery-grade nickel to the global market, including the U.S., by 2026. London-based investment fund Vision Blue Resources has also invested in a new graphite mine in Madagascar and a processing facility in Mauritius. The company aims to establish the first graphite processing facility outside of China. Additionally, Vision Blue is backing a cobalt refinery in Zambia, which is expected to be the world’s third-largest and the largest outside of China once completed.
According to Jacques Nel, head of Africa Macro at Oxford Economics Africa, investments in processing facilities in Africa are likely to increase due to the expected boom in demand for battery metals and China’s current dominance in the industry. Western companies are willing to pay a premium for materials that meet certain environmental and labor standards and are traceable, as long as they are produced outside of China. This presents an opportunity for African countries to become alternative suppliers to Western auto manufacturers and other green-tech manufacturers in Europe and the U.S.
Despite the growing interest from investors, there are significant challenges for companies doing business in Africa. Some countries, such as the Democratic Republic of Congo, Guinea, Namibia, and Zimbabwe, have implemented resource nationalism policies, seeking a larger share of mining companies’ revenue. Zimbabwe, for example, banned the export of raw lithium, forcing foreign companies to process it within the country. Chinese competitors also have an advantage due to their established presence and appetite for risk in Africa.
However, many Western companies believe that the opportunity in Africa outweighs the risks. Chris Moorman, Chief Commercial Officer at U.S.-based refiner ReElement Technologies, stated that doing business in Africa is not as daunting as some people believe. The company recently signed an offtake agreement to process lithium mined in South Africa and is building a processing facility in the country. They are in talks with four Western automotive manufacturers interested in purchasing African-sourced lithium. This shift in attitude reflects the growing demand for non-Chinese sources of battery metals.
In conclusion, the pressure to establish supply chains for EV batteries that bypass China is leading Western miners to build processing plants in Africa. By refining the raw materials they mine on the continent locally, these companies can export the refined metals directly to Europe and the U.S. Despite the challenges and risks associated with doing business in Africa, Western companies are increasingly willing to invest in the region. This trend is driven by the expected boom in demand for battery metals and the desire for alternative suppliers to China in the Western world.