China acquires Zim lithium mine for US$1,75 billion but local owner losing

China Natural Resources Inc. (CHNR) says it has entered into a definitive agreement with Feishang Group Limited and Top Pacific (China) Limited to acquire Williams Minerals (Pvt) Ltd, which owns the mining permit for a Zimbabwean lithium mine.

The sale is for a total consideration of US$1.75 billion.

Expected growth of electric vehicle sales has led to concern about securing mineral inputs used in EV batteries such as lithium. China accounts for over 70% of global EV battery production capacity.

Feishang Group Limited owns 70% of Williams Minerals and Top Pacific (China) Limited, a non-affiliate, owns the remaining 30%.

Under the Sale and Purchase Agreement, it is expected that the company will indirectly acquire all interests in Williams Minerals in the second fiscal quarter of 2023, and that the company’s “ownership” of the Zimbabwean lithium mine will vest cumulatively, region by region from 2024 through 2026, contingent upon the issuance of independent technical reports and the company’s full settlement of the purchase consideration in cash and restricted shares.

“For each region of the lithium mine, until the company’s ownership vests, the sellers will maintain legal possession and control, including the right to exploration, sales of lithium, and the revenue derived therefrom, as well as liability for operational costs and third-party claims,” read the statement by CHNR.

Concern, however, has been raised about how much money or benefits the original owners of lithium mines get in Zimbabwe.

Economic analyst Brains Muchemwa argues that, in all these transactions, the indigenous claim holders are not benefitting enough.

“Zimbo registers 900ha of lithium claims, sells it to a foreign junior miner for US$500,000. Junior miner does exploration for US$10million, courts big listed Co abroad and flogs the claims for US$1 billion or so! Plenty similar examples are happening in our domestic lithium industry,” he said.

“The indigenous claim holders are losers. They don’t have access to funding for exploration. The local banks have no appetite nor the money to fund exploration. They have very small balance sheets. There aren’t local PE funds taking risk. This should change.”

Muchemwa further argues that the Zimbabwe Indigenous Lithium Miners and Processors Association should structure facilities for indigenous claim holders to fund exploration and get maximum value from their investment.

“This lithium window won’t last forever. Indigenous Lithium Miners can’t be poor forever

“Equally, the Ministry of mines should not rush to forfeit lithium claims of indigenous who are frantically trying to raise money for inspection fees and exploration.

“We need strong advocacy for our own! The foreigners are getting bumper tax holidays. Same exemptions should be afforded to locals,” the observer said.