China’s global mineral rush Learning from experiences around controversial Chinese mining investments Luis Scungio June 2021 Colophon China’s global mineral rush Learning from experiences around controversial Chinese mining investments June 2021 Author: Luis Scungio Acknowledgements Layout and infographic: Frans Schupp The author would like to thank his Cover photo: istockphoto.com, Bim colleagues at SOMO for their contribution This photo does not represent any projects to this report, in particular Alejandro from this report González, Gerhard Schuil, Saskia van Drunen and Camiel Donicie. He is also This publication is made possible with grateful to Mark Grimsditch and Zelda financial assistance from the Dutch Ministry Liang for their review and the feedback of Foreign Affairs. The content of this they provided on an early version of this publication is the sole responsibility of report. SOMO and does not necessarily reflect the views of the funder. 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China’s global mineral rush Learning from experiences around controversial Chinese mining investments SOMO Luis Scungio Amsterdam, June 2021 Contents Executive summary ..................................................................................................... 4 Key findings ................................................................................................................ 4 Characteristics of Chinese mineral investments abroad ......................................................... 4 Responsiveness of Chinese actors to social and environmental concerns .................................... 5 Introduction .............................................................................................................. 6 Research questions ....................................................................................................... 7 Content of the report ................................................................................................... 7 Research methodology .................................................................................................. 8 Infographic: Controversial mineral investments of Chinese companies ..................................... 10 1 Chinese enterprises and their investment arrangements .............................................. 11 1.1 Overview of companies, ownership structures, and partnerships .............................. 11 1.1.1 Other types of outward investments .................................................................. 14 1.1.2 Remarks about Chinese enterprises involved in overseas mineral investments .............. 15 Key findings of sections at 1.1 .................................................................................. 16 1.2 Available information about financial arrangements ............................................... 17 1.2.1 Chinese investments in Indonesia’s nickel industry and the Morowali project ................ 19 Key findings of sections at 1.2 .................................................................................. 20 1.3 Deals for infrastructure financing backed by mineral resources ................................. 21 1.3.1 The Sicomines copper and cobalt deal in DRC ..................................................... 21 1.3.2 The Sinohydro bauxite deal in Ghana ................................................................. 22 Key findings of sections at 1.3 .................................................................................. 24 Chapter 1 conclusions ............................................................................................ 25 2 Actions taken to address projects’ risks and negative impacts ...................................... 26 2.1 Examples of community protests turning into violent conflicts and follow-up actions ..... 26 2.1.1 Actions taken by enterprises to address social conflicts in Guinea and Myanmar........... 28 2.1.2 Host government agencies ordering specific measures against Chinese investors ......... 29 Key findings of sections at 2.1 .................................................................................. 31 2.2 Legal claims against actors involved in Chinese overseas mineral investments .............. 31 2.2.1 Rio Blanco mine, Ecuador ................................................................................ 32 2.2.2 Atewa Forest, Ghana ...................................................................................... 32 2.2.3 Hwange National Park, Zimbabwe ..................................................................... 33 2.2.4 Observations about litigation strategies and responses by Chinese actors ................... 34 Key findings of sections at 2.2 .................................................................................. 35 2 2.3 Advocacy within mineral projects’ investment and supply chains .............................. 35 2.3.1 Identifying project’s downstream buyers ............................................................. 35 2.3.2 Identifying project’s upstream investors .............................................................. 37 Key findings of sections at 2.3 .................................................................................. 39 2.4 Additional actions undertaken to influence Chinese actors ....................................... 39 Key findings of 2.4 ................................................................................................ 42 Chapter 2 conclusions ............................................................................................ 42 3 Challenges faced by community stakeholders ............................................................ 43 3.1 Limited pre-investment analysis related to social and environmental risks .................................................................................. 43 3.1.1 Weak risk analysis also affects companies’ planned activities ................................... 44 3.1.2 Reliance on relationships with authorities generates information gaps ....................... 46 Key findings of sections at 3.1 .................................................................................. 47 3.2 Lack of communication and engagement with community stakeholders ..................... 48 3.2.1 Examples of companies’ lack of engagement ....................................................... 49 3.2.2 Insights on the lack of engagement and review of the Mirador mine ......................... 50 3.2.3 Examples of companies’ public responses ........................................................... 53 Key findings of sections at 3.2 .................................................................................. 55 Chapter 3 conclusions ............................................................................................. 57 Conclusion .............................................................................................................. 58 Chinese corporate actors and investment arrangements ..................................................... 58 Advocacy actions to try to address projects’ risks and negative impacts .................................. 59 Challenges faced by community stakeholders ................................................................... 60 Questions for further research ...................................................................................... 61 Annex List of Chinese mineral investments overseas reviewed in the report and cases that were initially identified but excluded from this study ........................................ 63 Endnotes ................................................................................................................ 66 3 Executive summary China imports a large share of the mineral ores extracted around the world as the country’s own mineral reserves are insufficient to meet the demand for industrial metal by key sectors of its booming economy, including the development of renewable energy technologies in which China is a dominant player. Since the early 2000s, the Chinese government has supported companies to invest in mineral assets overseas. These investments guarantee China a steady supply of raw materials and reduce the country’s dependency on fluctuating commodity markets. Chinese companies have particularly been attracted by the investment opportunities offered by developing countries with abundant mineral resources. These countries are also often characterised by poor governance, and the exploitation of natural resources frequently goes hand in hand with social and environmental conflicts. When Chinese mining companies invest in such fragile environments, it is hard to hold them to account for any adverse impacts resulting from their business. Local communities, civil society organisations, and other public interest groups, have criticised Chinese mineral operations in foreign countries because of their links to ecological degradation and human rights