How Uganda is gearing up for strategic minerals bonanza

by Business Times
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In its unclassified Annual Assessment Threat report for 2023, the United States Office of National Intelligence cautions that China’s dominance in the extraction and processing of several strategic minerals represents a threat.

As an example the report states that by 2025, Chinese-based firms are on track to control 65% of the lithium-ion battery market, (the batteries that run electric vehicles), with China dominant in all parts of the supply chain. This explains why the bulk of Apple’s iPhone and Tesla’s car production are in China.

The strategic or ‘critical’ minerals list can include antimony, borates, chromium, cobalt, copper, diamonds, germanium, lithium, molybdenum, nickel, rare earths, silver, titanium, tungsten, vanadium and zinc.

A couple of years ago before publication of this report, it had dawned on the Americans that, apart from China,  many of the minerals that are essential inputs for high technology and the transition to the green economy, are found in some of the most problematic regions of the world, specifically sub-Saharan Africa.

The Americans came up with a simple plan. Roll out the diplomatic charm then begin locking up future supplies to avoid confrontation with the Chinese who already had a substantial head start on them. Rather ominously though, the Chinese are now imposing export restrictions on their own for locally sourced strategic minerals while shipping in as much as they can from other countries, particularly the Democratic Republic of Congo (DRC) and Zimbabwe.

Today, there is a frantic game of ludo being played to gain access to strategic minerals and Uganda has been earmarked as a potential supplier. In the coming years, exports of lithium, cobalt and rare earth minerals could earn substantial revenues for Uganda and depending on the deposits, could even rival oil sales.

In February 2018, a small Canadian resource company, M2 Cobalt, announced it was starting tests to verify the commercial viability of cobalt and copper deposits found around Bugajali in a project dubbed the’ Waragi Target’.

A year later, M2 merged with the larger Australian-based Jervois Mining Limited and now have cobalt prospecting licenses that cover about 1,800 square kilometres, including the area surrounding Kilembe.  

Shareholders were told, ‘Uganda has continuation of geological trends from neighbouring Democratic Republic of Congo but with greater political and regulatory stability’.

Meanwhile, in eastern Uganda, but subject to regulatory approvals, the Makuutu Rare Earths Project is set to go into production next year. The project is owned by Kampala-based, Rwenzori Rare Metals (RRM), however Australian company, Ionic Rare Earths (IonicRE) has taken up a majority stake. The project has been cited as a supplier of high-value critical and heavy rare earths.

In April 2021, IonicRE had talks with China Rare Metals and Rare Earth, a subsidiary of the giant state-owned, Aluminum Corporation of China, with a view of providing additional financial backing for the Makuutu project.

Supreme Gold, another Canadian firm, is currently carrying out geological studies across Uganda in a $75 million initial investment to mine for gold, copper and rare earth minerals.

Speaking to a Japanese audience in April, Dr. Akinwumi A. Adesina, the President of the African Development Bank (Afdb) said, “Africa holds the key for the world as it transitions towards electric vehicles. The market size for electric vehicles globally is expected to rise to $7 trillion between now and 2030 and could reach $46 trillion by 2050. The key for success will be access to minerals and metals such as platinum, lithium, cobalt, copper, and graphite.

Dr. Akinwumi A. Adesina, the President of the African Development Bank(PHOTO/Courtesy)

“Africa holds the largest deposits in the world of these green metals. Democratic Republic of Congo (DRC) accounted for 90% of the global supply of cobalt in 2020, while Zimbabwe, Namibia, Mali, among others are leading sources for lithium,” he said.

It is no accident that currently the largest concentration of private armies in the world is in the DRC protecting mining operations. For the leading industrial economies, the shift to clean energies is a top priority with added impetus coming from concerns about climate change. However, the manufacturing of the wind turbines, solar panels, electric vehicles and battery storage units all depends on having guaranteed long-term supplies.

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Lithium, nickel, cobalt, manganese and graphite are crucial for optimum battery performance. Rare earth elements are essential for permanent magnets that are vital for wind turbines and electric vehicle motors while electricity networks need a huge amount of copper and aluminium, with copper being vital for all electricity-related technologies.

Lithium chemical consumption is forecast to exceed supply annually between 2024 and 2027(PHOTO/Courtesy)

According to S&P Global Commodity Insights, lithium chemical consumption is forecast to exceed supply annually between 2024 and 2027. For copper, projected figures show the balance of refined copper supply and demand to tilt from a surplus to a deficit of 160,000 metric tonnes by 2027.

Prices for strategic minerals are volatile, but nevertheless fluctuating upwards as buyers scramble for reliable sellers.

In June 2022, the US State Department (foreign ministry) announced the setting up of the Minerals Security Partnership (MSP). This happened in Toronto, ‘the mining capital of the world’, where nearly half of the major resource companies are listed.

The official statement was encouraging, ‘The goal of the MSP is to ensure that critical minerals are produced, processed, and recycled in a manner that supports the ability of countries to realize the full economic development benefit of their geological endowments.

‘Demand for critical minerals, which are essential for clean energy, and other technologies, is projected to expand significantly in the coming decades. The MSP will help catalyze investment from governments and the private sector for strategic opportunities —across the full value chain —that adhere to the highest environmental, social, and governance standards’.

Apart from the US, other founding members were Australia, Canada, Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom and the European Commission. Italy is the latest entrant while India has expressed an interest to join.

During December 2022 at US-African Summit, the Americans signed MOUs with the DRC and Zambia to jointly develop a supply chain for electric vehicle batteries.  Basically, the US will support the DRC and Zambia in building a productive supply chain, from the mine to the assembly line, while also committing to respect international standards to prevent, detect, and take legal action to fight corruption throughout this process.

Then in February this year in Cape Town, a MSP vice-ministerial meeting invited representatives from Angola, Botswana, the DRC, South Africa, Tanzania, Uganda, and Zambia to observe their discussions with a view of having a sit down to explore areas of future engagement and cooperation.

But MSP have a disclaimer and quite obviously aimed at the Chinese: ‘the Minerals Security Partnership is to support projects that adhere to high environmental, social, and governance standards.  We want to make this a race to the top, not a race to the bottom’.

Critics say for all its noble attributes, MSP has all the makings of a cartel in the making. Recently, Global Times, which has ties to the Chinese government, wrote in an editorial that it is the US and the West that have imposed geopolitical meaning to the supplies issue, exacerbating disruption in the global industrial chain.

The authors write: ‘Because of the hype over the risks of the so-called over-reliance on China, some countries that only need a limited amount of the key minerals for domestic production now turn their eyes to investing in the stockpiling and mining of key minerals, leading to over-mining and damaging the environment.”

Gold mining in Uganda(PHOTO/Courtesy)

The challenge for the Americans is that the high ideals of the MSP may rub some African governments the wrong way. They would rather deal with the Chinese who ask few questions and come with no conditions.

When you have something that other people want badly, then the logical thing is to exploit the opportunity.  At least two African governments have suggested to the Indian government that it off-sets some of their official debt in exchange for gaining access to lithium and cobalt deposits. 

Earlier this year, the government unveiled plans for the Uganda National Mining Company (UNMC) which would be the commercial entity through which to acquire shares in selected medium and large scale mining operations.

As opposed to the Mexican government that recently nationalized all lithium mining, Uganda wants owners of mining companies to offer UNMC equity of at least 15% at zero cost as a basis for deriving mutual financial benefits.

Authorities are also looking at both knowledge and technology-transfer, because Uganda too, is committed to transition. That said, the government has to decide how much of any strategic minerals available can be exported and the percentage that should be left untouched for subsequent domestic use.

Development and production of strategic minerals in Uganda can accelerate growth of the homegrown electronics industry. However for exporters, concerns about adequate infrastructure, particularly cheap electricity, access roads and railways to mining operations and the ports are bound to affect their long term investment plans.

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