Global Mining Policy Changes and Implications in 2023

Global Mining Policy Changes and Implications in 2023

Abstract:

In 2023, amidst a slow and uneven global economic recovery and fluctuating commodity prices, the demand for mineral resources surged due to the accelerating transition to clean energy and the rapid development of strategic emerging and high-tech industries. This led to increased attention to mineral resource security, especially critical minerals, and intensified international competition for these resources. Meanwhile, resource-rich developing countries sought to diversify their economies and enhance the benefits from their mining industries. Consequently, major countries worldwide adjusted their mining policies to strengthen resource sovereignty, control resource flows, and increase resource value.

This paper reviews the significant changes in mining policies of major resource countries in 2023 and analyzes their impact on international mining investment and the global resource governance system. It observes the strategic intentions and implementation paths of all parties in the global resource game and provides insights for Chinese enterprises to navigate risks in overseas mining investment policies.

The paper discusses the strengthening of global resource competition by developed countries through continuous updates of strategic minerals and the formation of international alliances on critical minerals. It also examines how developing countries are revising mining laws, tightening mineral export controls, and promoting local processing to enhance resource management and industrial development.

Furthermore, the paper analyzes the impact of these policy changes, including the development of campification and fragmentation in the global resource governance system, the increase in the cost of mineral exploration and development, and the trend towards regionalization, localization, and green development of mining policies.

Based on these insights, the paper offers recommendations for Chinese enterprises, including advocating for a more inclusive global framework for critical mineral cooperation, strategically planning international mining capacity cooperation bases, and improving the overseas mining investment protection system. These recommendations aim to help Chinese enterprises navigate the evolving landscape of global mining policies and mitigate risks in overseas mining investments.

0 Introduction

In 2023, global economic recovery was slow and uneven, with fluctuating prices of bulk commodities. As the global transition to clean energy accelerated and strategic emerging industries and high-tech industries developed rapidly, the demand for mineral resources, which are the foundation of economic and social development, increased significantly. Countries around the world are paying increasing attention to mineral resource security, especially for critical minerals. The international competition for mineral resources continues to intensify. Meanwhile, developing countries rich in mineral resources face the dilemma of a single and fragile economic structure. There is an urgent desire for industrial restructuring, hoping that the transformation and upgrading of the mining industry, which serves as an economic pillar, will further increase the benefits to their governments and people. In this context, many countries worldwide have made corresponding adjustments to their mining policy systems, adopting measures to strengthen resource sovereignty, control resource flows, and increase resource value. This paper reviews the significant changes in the mining policies of major resource countries in 2023 and analyzes their impact on international mining investment and the global resource governance system. It aims to observe the strategic intentions and implementation paths of all parties in the global resource game and provide reference for Chinese enterprises to avoid risks in overseas mining investment policies.

1 Strengthening Global Resource Competition by Developed Countries

1.1 Continuous Update of Strategic Minerals

As important material bases for maintaining national economic security, strategic minerals, which are crucial for the future development of strategic emerging industries such as new energy vehicles and new-generation information technology, have seen their strategic status significantly elevated in recent years. In the face of increasingly fierce international competition, countries have strengthened their attention to strategic minerals, and the issue of resource security has been elevated to the national strategic level by more and more countries. In 2023, countries (regions) such as South Korea, Australia, and the European Union successively promulgated strategies for critical minerals, formulating or updating lists of critical minerals and strategic minerals vital to the transition to clean energy, further strengthening the development planning of their own (regional) mining industries.

1.1.1 Publication of National Mining Development Strategies

In 2023, South Korea issued a strategy for critical minerals, establishing a critical mineral supply chain center around the Ministry of Industry, Trade and Resources to strengthen the management of critical minerals and strategic minerals, formulate a global mineral supply and early warning system, strengthen high-level diplomacy with resource-rich countries, encourage private sector investment in overseas mining projects, and ensure the stability of critical mineral supply chains. Australia promulgated the "2023-2030 Critical Minerals Strategy", emphasizing strengthening cooperation with investors and international partners, developing the critical minerals processing industry, and becoming a globally important producer and processor of critical minerals by 2030. The European Union issued the "European Critical Raw Materials Act", encouraging member states to increase domestic mining investment, promote exploration activities, and simplify the licensing and administrative procedures for critical raw material projects. The UK updated its critical minerals strategy and issued its first battery strategy, proposing to accelerate domestic production capacity of critical minerals, expand international partnerships, increase market access for critical minerals trade, and achieve the goal of establishing a globally competitive battery supply chain by 2030.

1.1.2 Publication or Adjustment of Lists of Critical Minerals

In 2023, South Korea's critical mineral strategy identified 33 critical minerals, including lithium, cobalt, nickel, and other 10 minerals crucial to high-tech industries, which need to be prioritized for strengthened management and are listed as strategic critical minerals. Australia adjusted its list of critical minerals from 26 to 30; although the supply chain vulnerability of aluminum, copper, nickel, phosphorus, tin, and zinc did not meet the standards of critical minerals, they still have broad strategic application prospects and are listed in the strategic mineral list. The EU's "Critical Raw Materials Act" updated the list of critical raw materials to 34, including 17 particularly important or scarce raw materials listed as strategic raw materials. The act has not yet formally come into effect (Table 1).

Table 1 Lists of Critical Minerals and Strategic Minerals Published by Developed Countries in 2023

1.2 Increasingly Significant International Alliances on Critical Minerals

With the deepening of global energy transition, a new round of technological revolution, and industrial transformation, critical minerals have become a new area of strategic competition among major powers worldwide. The competition categories overlap significantly, geopolitical layouts are evident, capital from all sides is intensively competing, resource diplomacy continues to exert efforts, and the international alliance trend of critical mineral supply chains becomes increasingly significant.

1.2.1 Actively Deploying Critical Mineral Supply through Bilateral and Multilateral Cooperation Agreements

According to incomplete statistics, in 2023, the United States, the European Union, the United Kingdom, Australia, Canada, South Korea, Japan, and countries (regions) such as the Democratic Republic of Congo, Zambia, Chile, Argentina, Kazakhstan, and Mongolia successively reached more than 20 memoranda of understanding, joint statements, cooperation agreements, and trade agreements in the field of critical minerals. For example, the United States reached a critical mineral trade agreement with Japan. Electric vehicles using critical minerals purchased or processed in Japan will qualify for tax relief under the US "Inflation Reduction Act". The US-led Critical Minerals Partnership has been joined by Norway, India, and Italy, expanding its membership to 14 countries, and has convened high-level meetings several times, rapidly promoting the landing of partnerships globally and promoting investment in critical mineral projects involving regions such as Africa and the Americas. The United States, together with Australia, Brunei, Fiji, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam, established a critical minerals dialogue mechanism under the Indo-Pacific Prosperity Economic Framework. The European Union has successively established sustainable raw material value chain partnerships with Argentina, Chile, the Democratic Republic of Congo, and Zambia. The UK reached agreements on critical mineral supply with countries such as Saudi Arabia, Kazakhstan, Canada, and Australia.

1.2.2 Comprehensive Coverage of the Mining Industry Chain

The participating countries of established international mineral alliances such as the Critical Minerals Security Partnership have formed a relatively complete mining industry chain. Upstream in the industry chain are resource-rich countries with geological advantages, such as Australia, Brazil, the Democratic Republic of Congo, and Canada, which are the main producers of critical minerals; the middle reaches of the industry chain include smelting and processing powerhouses such as Japan, South Korea, and Finland; and the downstream of the industry chain includes major consumer countries such as the United States, Japan, South Korea, and Germany. The 17 global critical mineral projects supported by the Critical Minerals Security Partnership cover various stages such as mining, processing, and recycling.

2. Developing Countries Strengthen Domestic Resource Management

2.1 Continuous Revision and Adjustment of Mining Laws

In 2023, countries such as Mali, Burkina Faso, Mexico, Russia, and India revised or planned to revise their mining laws, stipulating the proportion of national or local government interests and royalty rates to promote mining rights reform, attract investment, and increase fiscal revenue.

2.1.1 Increasing the Proportion of National or Local Government Interests

The new mining law in Mali increases the mandatory national share of benefits in mining projects, raising the government's equity stake to 10%. Within two years after commercial production begins, the government can repurchase an additional 20% of shares, increasing its holding from 20% to 30% in mining projects. Local private enterprises can also obtain a 5% share of mining projects, bringing Mali's total share to 35%. Namibia's government has included the revision of mining and petroleum laws in its current government work plan, considering future government ownership in mining or oil companies. Huay Province in Argentina stipulates that provincial companies must hold an 8.5% stake in lithium mining projects. Increasing government shares in mining projects is a concrete manifestation of resource-rich developing countries' stronger stance in mineral resource management, reflecting their increasing awareness of the importance of mineral resources for global energy transformation and the economic and social value they can create for their country and people.

2.1.2 Increasing Royalty Rates

Burkina Faso revised its mining law to increase royalty rates, implementing tiered royalty rates based on gold prices, raising them from 5% to 6%-7%, applicable to existing and new mining contracts. Specifically, for gold prices ranging from $0 to $1500/oz, the rate is 6%; for prices between $1700 and $2000/oz, the rate is 6.5%; and for prices above $2000/oz, the rate is 7%. Madagascar's new mining bill aims to increase royalty rates from 2% to 5%. The new mining law is expected to significantly increase the two countries' government revenue and contribute to the mining industry's share of gross domestic product.

2.1.3 Promoting Mining Policy Reform and Mining Rights Management

The Mexican Senate passed amendments to the mining law, changing mining rights from a first-come, first-served basis to open bidding. The validity period of mining rights was reduced from 50 years to 30 years, and renewal terms were shortened from 50 years to 25 years, with tightened provisions on mining right transfers, surface land use rights, and water concession rights, requiring at least 5% of mining profits to be returned to local communities. Colombia announced plans to revise mining laws in the coming year, focusing on environmental and social governance and streamlining the mining project development approval process, including establishing a national mining company to lead strategic mineral exploration and development. By reforming the mining management system, optimizing the mining rights management system, strengthening mining activity supervision, encouraging strategic mineral exploration and development, orderly mining activities can be promoted, and effective mining governance achieved.

2.1.4 Promoting Small-Scale Mining Development in Remote Areas and Deep Mining Exploration

Russia aims to revitalize small-scale gold mining in the Far East and Arctic regions and has enacted the "Individual Gold Mining Act," planned to take effect in March 2024. Residents can register as prospectors and mine gold non-industrially in small alluvial deposits or already mined sand mines, with plans to pilot in the Baikal region and Magadan region. India introduced deep mining and critical mineral exploration permits in the 2023 "Mines and Minerals (Development and Regulation) Amendment Bill," to be awarded through auctions, encouraging private sector exploration of deep-seated minerals and critical minerals.

2.2 Further Tightening of Key Mineral Export Controls, Increased Local Processing Value-Added Requirements

Currently, the mining industry chain has become a strategic focus of competition among countries worldwide. Many resource-rich developing countries face the dilemma of a single and fragile economic structure. To achieve industrial upgrading and improve their position in the global value chain, resource-rich countries commonly restrict the export of raw ore of key minerals such as lithium, cobalt, and rare earths, increase the export tax rates on copper, iron, lead, zinc, and other concentrates, invest in local processing value-added, and extend the domestic mining industry chain.

2.2.1 State Involvement in the Entire Lithium Resource Development Process

In the context of escalating global mineral resource competition and the rise of supply security to the national strategic level, resource countries have taken various direct intervention measures besides market mechanisms to strengthen control over their important minerals. For example, Chile issued a national lithium resource development strategy, establishing the "National Lithium and Salt Commission" to promote the nationalization of the lithium industry. For projects of strategic national importance, Chilean state-owned enterprises must hold controlling stakes, actively promote the creation of a national lithium industry company, which will play a leading role in cooperation with investors for the development of value-added products.

2.2.2 Prohibition of the Export of Key Mineral Ores such as Lithium, Increase in Concentrate Export Tax Rates

Zimbabwe bans the export of all mineral ores except precious metals such as gold and platinum, gemstones, oil, and gas. Namibia prohibits the export of unprocessed lithium, cobalt, manganese, graphite, and rare earths to encourage local processing. Mali temporarily suspends the export of raw ore from the Goulamina lithium mine and is negotiating equity and ore export with investors. Ghana approves a green mining policy, prohibiting the export of lithium ore. Tanzania will ban the export of unrefined lithium ore from May 2024, requiring lithium miners to have refining plants domestically and increase the mineral value-added by at least 5% to obtain export permits. Malaysia will ban the export of rare earth raw materials and only allow the export of processed rare earths. Indonesia gradually raises the export tax rate on copper concentrates from 5% to 10% based on the progress of smelter construction and adjusts the export tax rates of iron, zinc, and lead concentrates to 7.5%, planning to suspend copper concentrate exports in May 2024. The Philippine House of Representatives proposes to impose a 10% tax on nickel ore exports. Diverse mineral export control measures mean that resource-dependent countries no longer rely solely on short-term prosperity from commodity exports but explore how to leverage their own resource endowments to promote industrialization, enhance their position in the mining industry chain, and drive economic transformation.

2.2.3 Government Requires Mining Companies to Increase Investment in Mining Value-Added Business

Nigeria requires mining companies to invest in local mining processing, requiring submission of a value-added operating plan before obtaining a license to strengthen the refining and processing of minerals such as lithium and zinc. Zimbabwe requires lithium mining companies to submit plans for battery-grade lithium production by March 2024. Bolivia plans to build a lithium plant and promote lithium mining bids. Brazil, Argentina, Chile, Ecuador, Colombia, and other major resource countries in Latin America are accelerating the construction of the entire mining industry chain to ensure that resource value is transformed into economic value domestically.

2.3 Implementing Diverse Incentive Measures

The incentives for mining development in host countries and the complexity of administrative approval procedures are important factors affecting investor enthusiasm. Implementing exploration and development incentive plans, streamlining approval processes, and improving the ease of mining rights registration are essential to attract more mining investments.

Saudi Arabia considers the mining industry a key component of its "2030 Vision" strategy and held mining block tenders in 2023, issuing hundreds of mining licenses and initiating exploration incentive programs. India initiated the auction of 20 key mineral blocks for the first time, involving multiple minerals such as lithium, nickel, graphite, and rare earth elements. Zambia launched an online mining cadastre system to simplify the mining rights application and approval process.

2.4 Prioritizing Environmental Protection and Sustainable Mining Development

Development and safety are always balancing goals for countries worldwide when it comes to mineral resource development. With increasing global emphasis on ecological security, more countries tend to prohibit mining in nature reserves and areas crucial for water sources and nearby areas, emphasizing green and sustainable development in mining.

Colombia announced it would cease issuing licenses for open-pit mining, but existing mines and granted mining permits remain unaffected. Peru suspended the granting of new mining rights in the Nanay River Basin, a tributary of the Amazon, for 12 months. The Supreme Court of Panama declared unconstitutional the concession contract for Canada's First Quantum Minerals' Cobre Panama copper mine. The publication of the contract text had previously sparked protests and demonstrations in society regarding environmental protection, human rights, corruption, and bribery. The Panamanian government has ordered the suspension of the copper mine's operations, leading First Quantum Minerals to initiate two international arbitrations against the country. Credit rating agency Moody's pointed out that Panama's abolition of mining contracts would affect investor confidence and significantly increase the risk of government credit rating downgrades.

Kazakhstan issued the "National Strategy for the Development and Use of Mineral Resources (2023-2030)" to promote the sustainable development of the mining industry, enhance its competitiveness and efficiency, and protect the environment and social interests. Tajikistan proposed the "Tajikistan Green Economy Development Strategy (2023-2037)" and formulated a three-year implementation plan, focusing on institutional reforms, reducing greenhouse gas emissions, ensuring the effective utilization of natural resources, attracting investments, introducing modern and innovative technologies, enhancing international cooperation in green economy, planning to invest over 21.5 billion somoni in the next fifteen years to develop the "green economy.

3. Impact Analysis of Mining Policy Changes

3.1 Development of Campification and Fragmentation in the Global Resource Governance System

Under the combined influence of the Russia-Ukraine conflict and the COVID-19 pandemic, the issue of supply chain security has received greater attention from countries worldwide. The role of ideological barriers in critical mineral supply chains has become more prominent, and geopolitical conflicts driven by increased demand for critical minerals have intensified. Western countries are attempting to reconstruct global mineral resource governance rules through initiatives such as the "Energy Resources Initiative," "Mineral Security Partnerships," "Critical Minerals Dialogue Mechanism under the Indo-Pacific Economic Framework," and bilateral resource diplomacy agreements. These efforts reflect strategic intentions to "de-risk" supply chains vis-à-vis China. Many established critical mineral alliances and planned mineral supply chains share three common characteristics: they are centered on Western countries, seek to maximize the involvement of resource-rich countries in Asia, Africa, and Latin America, and completely exclude China. The essence of these collaborations is to establish strong national alliances in mineral resource fields, garner support from other member countries for the international order and cooperation rules based on Western interests, and exclude China from the global mineral supply chain and value chain. This poses a significant challenge to China's international mining cooperation, increases the geopolitical risks faced by overseas mineral resource interests, and hampers the process of globalization.

3.2 Increase in the Cost of Mineral Exploration and Development

In the short term, mandatory export bans on raw and refined minerals, increased concession fees, and export tax rates by host countries will push up the costs of mineral exploration and development. This will negatively impact the profits of foreign investment enterprises and dampen investment enthusiasm. Foreign companies may delay or adjust existing investment decisions, which is detrimental to the stability of mining investment and attracting foreign investment. It is also unfavorable for the increase in mineral production, which may exacerbate the contradiction of mineral supply shortages.

In the long term, the demand from host countries for increased value-added processing in the mining industry to extend the industrial chain will compel investors to increase downstream and midstream investments in mining. However, many developing resource-rich countries typically face challenges of weak infrastructure such as electricity and roads. Therefore, the vigorous demand for downstream and midstream production capacity and supporting infrastructure cooperation in the mining industry may give rise to opportunities for China to engage in international capacity cooperation.

3.3 Trend Towards Regionalization, Localization, and Green Development of Mining Policies in Major Resource Countries

Regional agglomeration effects are becoming prominent. Regionalization represents a manifestation of nearshore value chain adjustment and diversification under economic security, focusing on the strategic multi-point layout of value chains among neighboring countries and major regions to avoid dependence on certain economies. Since the outbreak of the COVID-19 pandemic, with the series of industrial chain return policies implemented by developed countries, the regional layout of global industrial chains and mining value chains has accelerated, tending more toward regional agreements or groups characterized by geographical and ideological proximity to maintain stable international investment and trade cooperation. For example, the Democratic Republic of the Congo (DRC), Zambia, and Angola signed the Lusaka Corridor Railway Corridor Agreement; the European Union signed memoranda of understanding on critical raw material value chain partnerships with Argentina, Chile, and other countries; and the United States signed a critical minerals trade agreement with Japan. Through laws and regulations such as the Infrastructure Investment and Jobs Act, Inflation Reduction Act, and Chips and Science Act, the United States is promoting the so-called "Democratic Supply Chain Alliance" to prioritize strengthening the resilience of supply chains in regions with similar ideologies.

Localization trend is significant. Against the backdrop of intensified competition for critical mineral resources globally, many countries have implemented interventionist mining policies to enhance the integrity and international competitiveness of their domestic mining industry chains. Developing resource-rich countries that have long relied on primary mineral exports are tightening controls on the export of critical minerals such as lithium and raising export tax rates on refined minerals. They are also requiring foreign companies to increase mineral processing locally to increase the value-added of mineral products. These measures reflect a strong desire to develop the mineral refining and processing industries, as well as the practical need to upgrade industrial levels and increase economic value. Western countries such as the European Union and the United States are also actively promoting the localization of entire value chains from mining, processing, and recycling to substitution. For example, the EU's Critical Raw Materials Act aims to strengthen the mining and processing of critical minerals within EU member states, streamline strategic project licensing procedures, and increase investment support.

Green development leads the mining and related industries towards sustainability. While the clean energy industry sees broad development prospects, the competition over environmental and social governance standards and regulations has become a focus of major power competition. European and American countries, as well as resource-rich host countries, are beginning to emphasize green and sustainable development in mining. There is an increasing emphasis on legal regulations and policy systems requiring environmental protection, community development, and human rights and labor protection. Green supply chains may change global power distribution and interstate relations in the future, reshaping the geopolitical and economic landscape.

4. Insights and Recommendations

The security of critical mineral supply is crucial to the economic lifelines of major world powers and is one of the focal points of current international competition. Due to the uneven distribution of resources, the differentiation of major powers' competition and cooperation in the critical mineral field has led to the "clubbing" of international cooperation and exacerbated geopolitical risks dominated by competition. Meanwhile, to increase resource value and revenue, promote industrialization, and advance the development process, resource-rich developing countries have implemented diverse incentive and intervention policies to leverage their resource advantages, extend the mining industry chain downstream, and process primary raw materials into high-value-added products for export, leading to continually increasing environmental protection requirements in mining development. Overall, the trends of regionalization, localization, and green development in the global mining industry chain are further highlighted. Facing the intensive adjustment of global mining policies and escalating geopolitical conflicts, Chinese enterprises' overseas mining investments also face new risks and challenges. The legal system for protecting overseas investments urgently needs improvement to address both traditional and non-traditional risks in the mining investment field.

4.1 Explore the Establishment of a More Inclusive Global Framework for Critical Mineral Cooperation

In the face of exclusive and group-based mineral security partnerships led by the United States and the West and the strategic intent of "risk avoidance" vis-à-vis China, it is proposed to advocate for the establishment of a more inclusive global multilateral cooperation mechanism for critical minerals. This mechanism should unite a vast number of resource-producing countries, primarily developing countries, and strive to enlist more mineral-consuming countries, primarily developed countries, into the cooperation framework. It should form a mutually beneficial cooperation mechanism to resist regionalization through globalization and jointly promote the optimal allocation of global resources. By promoting openness, cooperation, and reciprocal trade, it should facilitate the construction of a global community of shared future for critical mineral security.

4.2 Plan and Layout International Mining Capacity Cooperation Bases

In response to the localization requirements of resource-rich countries' industrial chains and the opportunities for capacity and infrastructure cooperation, it is recommended to seize the opportunity of the Belt and Road Initiative to strategically deploy copper, cobalt, lithium, and bauxite processing and value-added downstream businesses in important resource-rich areas. Unified planning and layout of overseas mining capacity cooperation bases should be carried out, drawing on successful models such as "dual parks," to explore the establishment of a paired cooperation mechanism for industrial interconnection, facility interoperability, and reciprocal policy incentives. This will promote interconnection and interdependence between infrastructure and mining development, address major concerns of host countries such as employment and taxation, and establish commodity development, smelting, and initial processing industrial chains in Africa. It will also advance sustainable and responsible mineral development processes in Latin America, fully leverage the opportunities for infrastructure connectivity and investment and trade facilitation with neighboring countries, consolidate advantages in mining investment cooperation, and develop comprehensive industrial parks for the development, smelting, and deep processing of minerals such as nickel, cobalt, and potash.

4.3 Improve the Overseas Mining Investment Protection System

In the face of the complex international environment and the rising risks of overseas mining investment, it is recommended to continue strengthening direct communication and bilateral cooperation mechanisms with governments of important resource countries. This includes promoting high-level visits, diplomatic dialogues, and intergovernmental cooperation mechanisms to enhance bilateral investment protection systems. This will help facilitate the signing and implementation of investment promotion and protection agreements with important resource countries and improve international investment dispute resolution mechanisms. Following the principle of win-win cooperation, it is essential to address disputes properly and prioritize the protection of overseas investment interests. Chinese enterprises should establish risk prevention and response mechanisms, timely engage with foreign enterprises, local communities, and stakeholders, actively undertake social responsibilities, and practice green, coordinated, and sustainable development principles to mitigate overseas investment risks.