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Thursday, October 21, 2021

Communist China’s grand strategy for a small African country

The recent military coup in West Africa has put the Republic of Guinea on the world stage. Although this small country is among the poorest in the world, its abundant mineral resources, including bauxite and iron ore, make it strategically important for the Chinese Communist Party (CCP).

Guinea covers an area of ​​just 94,981 square miles and is home to 12.7 million people. Huge unnecessary Simando mines located in the southeastern part of this country. A 2019 report from Singapore Shipping said the mine contained 2.6 billion tonnes of high-grade iron ore (more than 60 per cent fee content) that was shallow and easily accessible but unknown.

By comparison, China ranks fourth in the world for its 20 billion tons of iron ore, but unlike Guinea, 98% of China’s iron ore is classified as low quality (35 percent Fe content) and makes it difficult to access. For this reason, since 2003, China has become the world’s top importer of iron ore. Four major mining companies, including the Australian company BHP Billiton, Rio Tinto and FMG (Fortesque Metals Group), supply eighty percent of imports; And Vel in Brazil.

Since April last year, the CCP has imposed a ban on imports of agricultural and livestock products from Australia, in retaliation for an investigation into China’s role in creating the CCP virus, which causes the Covid-1 disease. To reduce Australia’s reliance on iron ore, CCP began targeting the Simando mine.

Although Simando’s iron ore mining rights have been exchanged several times since 2003, none of the previous owners have taken steps to extract the mineral. Extensive property rights were divided into four major manufacturing mines. Two at the northern end of the border and two at the south.

The rights to the southern edge mines were once fully owned by Rio Tinto. It now owns 45.05 per cent of the initiative, after allocating 39.95 per cent in 2016 to a Chinese consortium led by the Aluminum Corporation of China (Chalco). The remaining 15 percent is in the hands of the Guinean government.

Twenty-five years of mining rights for the two north-end mines were acquired in June 2020 by a consortium of producers SMB-Winning, a Chinese company and Singapore’s Winning Shipping for 1 billion. In September of this year, a military coup and the arrest of Guinea’s pro-Chinese President Alpha Kondo disrupted the consortium’s work.

Condন্ড was first elected president in 2010. He later amended the constitution in Guinea to provoke criticism and protests so that he could extend his third term. Within days of the coup, AFP News released a video of 3-year-old Condy being guarded by Guinea Special Forces. The leader of the coup, Lieutenant-Colonel Mamadi Dumbua, said Condo had mismanaged the country and that despite Guinea’s vast mineral resources, people were still living in poverty because of Condo’s corruption.

Condom’s relationship with Beijing was close throughout his tenure. He traveled to China on multiple occasions and actively participated in the CCP’s controversial Belt and Road initiative. He was recently under investigation for handing over mining rights on the northern side of the border from the Israeli mining company, BSGR, to a Chinese consortium, SMB-Winning.

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Simandu is not an alternative to Australian iron ore

Consistent with the move to limit Australian imports, the CCP state-run media has promoted the idea that China and Australia are no longer dependent on iron ore. But facts show that the Simando mine does not compare to the total iron ore reserves and annual production of iron ore in Australia.

A map compiled by the US Geological Survey (USGS) confirmed that Australia had the world’s largest reserves of iron ore in 2020. Its 50 billion tons is 10 times more than the potential of the border, which is not enough to meet China’s demand.

China has imported more than 1 billion tons of iron ore annually since 2016. In 2020, this number has increased to 1.1 billion billion tons. Brazil supplied 21.1 per cent, while Australia supplied 66.3 per cent or about 76 million tonnes. Annual production of 100 million tonnes by the two northern mines of Simandar is much less than China needs and Australian iron ore imports will fall slightly.

Inadequate production of Simando iron ore does not pose the only risk to China. A study published in 2020 by Chinese academics examines whether operating in Guinea could jeopardize its ability to repay a five-year loan for SMB-winning mining rights. The study estimates that the cost per ton for production, investment modification and freight could reach a little over $ 70. Per ton And may reduce the likelihood of profit. This is certain if demand for Chinese iron ore weakens or mining companies join to reduce their asking price per tonne.

The study said China’s demand for steel from iron ore could weaken on a small scale in 5 years and on a much larger scale in 10 years. This could be nearing completion for China’s major construction and infrastructure projects, in which case the price of iron ore in the international market is likely to fall.

Nevertheless, China faces another risk: Guinea’s additional operating fees and a total tax rate of 66 percent for business. This is double the tax rate paid to Australia by Rio Tinto in 2019 (39.3 per cent) and Vail to Brazil in 2018 (32.3 per cent).

Finally, there are political risks for China posed by Guinea’s current military dictatorship, as well as environmental issues and labor disputes that could jeopardize mining rights if left unresolved.

Although Guinea’s military junta promised to establish a “national government of Kyrgyzstan”, lead a transition to civilian rule, and “respect all mining agreements”, it closed the 9 September government-linked bank account, raising suspicions. A spokesman said the move was necessary “to protect state assets”.

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This News Originally From – The Epoch Times

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