China leads the race
China is ahead of its competitors in the race for minerals.
Recognising their strategic importance early on, China invested heavily in developing the capabilities to mine and process resources. At present, it holds a commanding position in the critical minerals sector, producing approximately 60% of global rare earth elements, and processing and supplying about 85% of the global market.
As a result, China, an emerging global power, is pivotal to the global supply chain. Other major economies, such as the US and Europe, heavily depend on it. America sources 80% of its mineral imports from China, while Europe sources as much as 98%.
This level of dependency has raised concerns amongst American and European policymakers, who worry about the detrimental impact of supply limitations or disruptions – including Chinese export restrictions – on the energy transition. This has also prompted some countries to begin investing in the exploration, production, and refining of mineral resources themselves.
Whilst minerals are widely distributed across all seven continents, high environmental costs associated with exploration (amongst other reasons) have deterred national mining companies from operating in the Americas and Europe, leading them back to Africa.
Ultimately, the race to achieve zero carbon emissions has triggered yet another race, a competition to exploit Africa's mineral wealth, and Beijing was early to the starting line, enjoying a twenty-year head start on its competitors.
Africa's untapped potential
Africa holds 30% of the world's mineral reserves and approximately 40% of global gold deposits. The continent has the largest reserves of cobalt, uranium, and platinum on the planet, and is a major producer of chromium, manganese, tantalum, and diamonds.
Whilst lithium, cobalt, and copper – all essential to the energy transition – are abundant across Africa, they are largely concentrated in the five countries where Chinese companies are most active: Guinea, Zambia, South Africa, Zimbabwe, and the Democratic Republic of Congo (DRC).
DRC alone is responsible for 70% of global cobalt production, and Chinese entities either own or finance 15 out of 19 of its cobalt mines.
Africa also holds substantial REE deposits, particularly in its east and south, encompassing countries such as South Africa, Madagascar, Malawi, Kenya, Namibia, Mozambique, Tanzania, Zambia, and Burundi.
However, the continent has not yet realised its full potential. High costs and challenging political, security and regulatory conditions have dampened investor appetite.
There was only a 12% growth in the continent's mining exploration budget in 2021, far below Canada's 62%, Australia's 39%, America's 37%, and Latin America's 29%.
Exploration has focused mainly on gold, leaving major deposits of key metals and minerals largely untapped.
A new trajectory
Recent geopolitical shifts have negatively impacted the availability of some key minerals.
Russia's invasion of Ukraine, for example, has disrupted several major supply networks. Before it invaded Ukraine, Russia accounted for nearly 27% of global palladium production, 10% of global nickel production, and 6% of global aluminium production.