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Large-Scale Investment of Chinese Enterprises in the Copper Industry in the Democratic Republic of the Congo

In recent years, with China's accelerated implementation of the "going out" strategy and promotion of the "Belt and Road" construction and development, Chinese enterprises have grown rapidly and achieved breakthroughs in terms of overseas investment in copper industries and overseas development of copper resources that are in short supply in China. As China Railway Resources Group (CRRG), Zijin Mining Group (Zijin Mining), China Molybdenum (CMOC) and other enterprises have successively obtained large copper mines in the Democratic Republic of the Congo (DRC) and enterprises such as China Nonferrous Metal Mining Group (CNMC) and Jinchuan Group International Resources (Jinchuan International) have built and put into production hydrometallurgical copper extraction projects in the DRC, "large quantity and high quality" has been regarded a characteristic of copper resources in the DRC and Chinese enterprises have shown growing enthusiasm for investment in the DRC's copper industry. Adapting to and grasping the environmental changes in copper investment in the DRC is a precondition for Chinese enterprises to scientifically and effectively prevent investment risks.

The DRC is located in the core area of the African Copper Belt and most of its copper mines are in its Katanga region in the Central Africa Copper Belt. The mines are primarily sedimentary rock ones that mainly produce oxidized ores, mostly associated copper and cobalt. According to the Mineral Commodity Summaries published by U.S. Geological Survey (USGS), by 2016, the DRC had copper reserves of 20 million tons, accounting for 2.8% of the world total, ranking eighth in the world. The country's copper resources are high in quality, with the grade of raw ores from copper mines basically above 2.5％ (even more than 20%). The copper resources in the DRC are characterized by "large quantity and high quality", and have a huge potential for development.

Due to the nature of copper ores (mainly oxidized ores), copper produced in the DRC is mostly SX-EW copper and there is only a small quantity of copper concentrates. Thanks to the large increase in copper prices, growing investments in copper resources as well as the stable production of some old mines and the commissioning of some hydrometallurgical copper extraction projects in recent years, copper output in the DRC has increased remarkably. WBMS data showed that the annual growth rate of copper output in the DRC was about 25.9% from 2002 to 2016. In 2016, the DRC produced 1.024 million tons of copper, a huge increase from 32,000 tons in 2002, accounting for about 4.9% of the world total and 49.7% of the Africa's total. Among them, there were 249,000 tons of copper concentrates, accounting for 24.3％ of the domestic total and 775,000 tons of SX-EW copper, accounting for 75.7％ of the domestic total and 20.5％ of the world total.

Before 2002, the mineral resources development in the DRC was basically dominated by the developed western countries in addition to Gecamines, the DRC's state-controlled mining company. After 2002, with the new mining law of the DRC opening up copper resources development, Chinese enterprises, mainly private enterprises and Chinese entrepreneur-established enterprises (about 10 enterprises such as Songhua Mining, Cota Mining, Jiaxing Mining and Huaxin Mining) began to acquire special ores (ores sorted manually) from the Congo people, and set up a copper smelting business. Due to low investment and fast efficiency, these enterprises once made huge profits. In 2008, as the financial crisis broke out, the copper price plunged, the business environment continued to deteriorate, and the gradual decrease of local sulfide mineral resources caused raw material supply problems. As a result, these pioneering enterprises closed down one after another and even the mining giant BHP exited from the DRC. But they gained valuable experience and paved the way for the comeback of a large group of powerful Chinese enterprises in 2012.

In recent years, Chinese enterprises have made continuous investment in the DRC's copper industry, have become one of the main forces of copper production in the country, and have also made great breakthroughs in mine development, geological exploration, financial investment and other sectors. The dominant copper companies in the DRC are mostly international mining giants and China's large state-owned enterprises that are catching up from behind. Powerful and experienced, these companies have strong anti-risk ability and obvious status advantages. Data of the International Copper Study Group (ICSG) show that (with project controlling parties as the main subjects), currently, the DRC has an annual capacity of about 1.33 million tons of copper, where Chinese enterprises have an annual capacity of 400,000 tons, accounting for 30%. Ranking first is Glencore, the largest copper company in the DRC with an annual capacity of 505,000 tons, accounting for 34% of the total domestic capacity. Ranking second is CMOC, a Chinese enterprise that acquired Freeport's TFM project at USD 2.5 billion in 2017. CMOC has an annual capacity of 210,000 tons, accounting for 15.8% of the total domestic capacity. The TFM project possesses 10.887 million tons of copper resources and averagely produces 15,900 tons of raw ores per day with a grade of up to 4.05％. Ranking third is Eurasian Natural Resources Corporation (ENRC), which has 6.27 million tons of copper reserves and an annual capacity of 160,000 tons, accounting for 12% of the DRC's total capacity.

Gecamines is the largest state-owned mining company in the DRC, which has production projects as well as equity in a large number of enterprises. At present, Gecamines has a capacity of 80,000 tons of copper, accounting for 6% of the total domestic capacity. Due to different calculation methods, despite a seemingly moderate capacity, Gecamines remains the largest copper enterprise in the DRC for its participation in many equity projects.

The Chinese enterprise CRRG entered the DRC early and has exchanged infrastructure projects for resources. Now, it has about 9.50 million tons of copper resources with an annual capacity of 125,000 tons of copper concentrates, accounting for 9.4% of the DRC's total capacity, and will expand the annual capacity to 250,000 tons in the future. In addition, other Chinese companies such as China Minmetals Corporation's subsidiary MMG Management Ltd (MMG), Jinchuan International and CNMC each have an annual capacity of 20,000-80,000 tons of copper and hold an outstanding position in the DRC's copper industry. Meanwhile, some other Chinese companies have invested in the cobalt smelting projects in the DRC that produce copper through hydrometallurgical exaction. Such projects include the 20,000-ton hydrometallurgical copper extraction project of Zhejiang Huayou Cobalt Co., Ltd., the 10,000-ton hydrometallurgical copper extraction project of Nanjing Hanrui Cobalt Co., Ltd. and the 10,000-ton hydrometallurgical copper extraction project of Ganzhou Tengyuan Cobalt New Material Co., Ltd. They have a total annual capacity of 40,000 tons of hydrometallurgically-produced copper.

The DRC's main copper projects under construction will be gradually completed between 2017 and 2020 and will have a total annual capacity of about 136,000 tons after achieving their designed capacity. These projects include ENRC's 70,000-ton hydrometallurgical copper extraction project, Jinchuan International's 20,000-ton copper concentrate project, Wanbao Mining's 15,000-ton copper concentrate project (already put into production in 2017) and Zijin Mining's 31,000-ton copper concentrate project. (These projects are expected to have a total annual capacity of 306,000 tons of copper concentrates after achieving their designed capacity. Then, the proportion of Chinese enterprises' copper output in the DRC will be further increased.) The largest project under construction is Zijin Mining's Kamoa copper mine project. After Zijin Mining acquired 49.5% equity in Kamoa Copper at a low price of USD 2.55 billion in 2015, another 12 million tons of copper resources have been discovered at the Kamoa copper mine, increasing its total copper resources to 36 million tons. The Kamoa copper mine is the largest undeveloped copper mine in the African continent with an average grade of 2.56％ and its Kakula mine section even has a grade of nearly 6％. This copper-rich mine is another super-large overseas copper mine developed by a Chinese enterprise after MMG's acquisition of Las Bambas in Peru.

The DRC has 8 copper mine projects during the feasibility study stage and 5 copper mine projects during the exploration stage. These projects are owned by international mining companies such as Glencore, Tiger Resources, Gecamines, Jinchuan International and CNMC and will produce results around 2021. Glencore's Kamoto mine, which was shut down in 2013 due to cost reasons, will increase its existing capacity of 60,000 tons of hydrometallurgically-produced copper to more than 100,000 tons after completion of its reconstruction and expansion.

As for proposed projects, 3 hydrometallurgical copper extraction projects and 1 flash smelting and fire refining project will be completed by 2022. The proposed projects will achieve an annual capacity of at least 240,000 tons of hydrometallurgically-produced copper by 2021, including Gecamines's 200,000-ton hydrometallurgical copper extraction project, Greenrock Resources's 40,000-ton hydrometallurgical copper extraction project, Jinchuan International's undated 30,000-ton hydrometallurgical copper extraction project and the Australian Ivanhoe Mines's flash smelting and fire refining project with an undetermined capacity. As for expansion projects, Pengxin Resources has put on its agenda the copper expansion project from 36,000 tons to 60,000 tons.