THE GOLDEN VISION OF TIBET’S COPPER- COLOURED MOUNTAINS IN CHINA’S CENTRAL PLANS
[A shorter version of this detailed analysis was published by China Dialogue on 5 September 2011]
Gold and copper are at the heart of China’s 12th Five-Year Plan for Tibet. Only tourism has a similar wealth-creating potential. Like tourism, intensive exploitation of Tibet’s mineral wealth has been named repeatedly in successive Five-Year Plans. Official media routinely announce stupendous mineral finds in Tibet, making it seem as if deposits –proven or not- are already mines. Likewise, ambitious targets for tourism have been announced in previous Five-Year Plans, only to be swept aside in further political crackdowns that make it almost impossible for any relaxed, authentic encounter between Tibetans and visitors.
Although many Tibetans believe Tibet’s patrimony of natural resources has long been raped, one could argue that what is striking is not how much Tibetan resources are mined, but how little. For all the boasts of Tibetan riches in Chinese hands, in Tibet Autonomous Region, in 2011, chromite mining is in steady decline, even though China has no other domestic source for a metal essential to the manufacture of stainless steel; and copper mining has barely begun. Only gold is mined intensively, in many locations, usually illegally, in defiance of official policy that encourages large scale mining and outlaws small scale operators.
This may soon change, as a decade of xibu da kaifa –opening up the great west- at last emplaces sufficient infrastructure –railways, highways, power stations, urban centres- to make profitable mining feasible and even attractive compared to the usual alternative of importing ores and concentrates from overseas. Both copper and gold prices have risen steadily to record highs, at a time when China’s demand is at an all-time high, the global price rise being the result. There is little reason to think the prices of either will fall significantly any time soon, providing strong incentives for extraction from Tibet.
China’s 12th Five-Year Plan for Tibet centres on copper and gold, with not only dramatic intensification of extraction but also a state-driven agglomeration of the entire Chinese copper industry, in order to create copper giants sufficiently capitalised to finance major expansions in Tibet.
On the basis of latest available data from the US Geological Service http://minerals.usgs.gov/minerals/pubs/country/asia.html#ch and http://pubs.usgs.gov/of/2008/1155/ and http://tin.er.usgs.gov/porcu/find-porcu.php and also the International Copper Study Group http://www.icsg.org/index.php?option=com_content&task=view&id=17&Itemid=16 it is possible to situate China’s Five-Year Plan for Tibetan copper in a global context, since China is simultaneously reducing the diversity of its copper industry, bulking up a few national champions to be big enough to compete on a world scale.
China’s copper industry is growing fast, in 2009 alone, copper consumption rose by 38 per cent, and China is by a long way the world’s biggest smelter of copper and consumer of copper. However, it is far from being the world’s biggest miner, and relies instead on importing copper ore concentrates, finished smelted copper metal, and recycled copper scrap. China’s demand, which dipped only briefly during the global financial crisis, is the long term driver of global prices, and there is little sign prices will come down in the foreseeable future, hence China has strong incentives to increase copper mining, and reduce reliance on expensive imports. The consistently high price of copper changes the economics of mining, processing and smelting, making marginally profitable mines highly profitable.
INTRODUCING CHINA’S COPPER GIANTS
In 2009 China’s copper industry was dominated by 15 companies which each have smelting capacity of at least 100,000 tons of copper metal a year. In the 12th Five-Year Plan, if central leaders succeed in overriding provincial bosses protecting their provincial champions, the top 15 companies will, by command, be reduced to only three or four big players, all state owned. At present the biggest companies are Jiangxi Copper, with capacity to smelt 900,000 tons of copper a year, at Guixi in his home province of Jiangxi. Second is Tongling Nonferrous, with a total of 770,000 tons smelting capacity annually, in three smelters in Anhui and Jiangsu provinces. These are the two giants.
Not so far behind is the only significant smelter in inland China, anywhere even remotely near Tibet: Jinchuan Nonferrous, in Gansu, with a smelting capacity of 400,000 tons, owner of the Shetongmon copper mine near Shigatse in Tibet. Yanggu Xiangguang, in Shandong province, has a similar smelting capacity; and there are several other smaller smelters in Shandong. If, as planned, smaller smelters are required to merge, all the Shandong smelters grouped together would have a capacity of 900,000 tons a year.
In size, fifth ranked is Chinalco Yunnan, in a province adjacent to eastern Tibet which has a long history as China’s oldest source of copper, with current smelting capacity of 250,000 tons a year. Chinalco has been especially active globally, and is the biggest shareholder in a global giant, Riotinto. In 2008-9, in the most critical phase of the global financial crisis, Riotinto proposed a takeover by Chinalco, as the only way to relieve it of its heavy indebtedness after expensively buying a Canadian competitor. When the crisis eased, Riotinto backed away, to China’s evident annoyance. The sixth biggest Chinese copper maker is Daye Nonferrous based in Hubei province, smelting capacity 200,000 tons a year.
Which of these six top Chinese copper manufacturers will emerge as China’s favoured national champions? There is no certainty that the 12th Five-Year Plan target will be attained, since they are powerful and have strong backing at provincial level to retain their identities. But the push to consolidate the copper industry and scale up production is being driven from above, and may prevail. Which companies come to dominate, how big they are, what capital is available to them to invest in production in Tibet, whether they prefer to invest internationally or in Tibet, will all shape the decisions to be made. Most of these companies already have a global presence, and will have to choose where their investment capital is best deployed: in buying deposits around the world, mining them, concentrating and perhaps smelting the ores internationally, then shipping to China; or whether profitable returns are better achieved by investing in Tibetan mines.
UNTIL NOW, ANYWHERE IS BETTER THAN TIBET
These big state owned enterprises never publicly contradict official policy, but they can be adept at not implementing it, even when they are supposed to follow the Five-Year Plan. The stubborn refusal of China’s steel corporations to unite as a cartel is an example. The managers of such large corporations cannot simply be ordered to invest in Tibet, if the returns from investing worldwide are quicker and bigger. Jiangxi Copper is determined to stay number one, announcing in February 2011 plans to increase production from the current 900,000 tons to 1.5 million tons by 2015. (Jiangxi Copper’s cathode output to top 1 mln tons in 2011, 14 February 2011, China Knowledge Press)
All of China’s copper companies are making extraordinary profits, due to the rise in world prices, with Chinalco benefiting further from its significant equity stake in the global miner Riotinto. Increasingly, China’s big companies, even when state-owned, make investment decisions on a commercial basis, calculating the comparative rate of return on capital of investing in Tibet as against Africa or Latin America or elsewhere. In recent years, it has usually been cheaper and easier to invest in an African project, or in the Americas, often with an experienced partner familiar with dealing with the logistic and political problems of operating in remote third world areas. Tibet, by comparison, represents massive upfront costs, to be expended many years in advance, before production starts and profits are earned.
Although China’s national government invests hugely to put in place the basic infrastructure needed to attract commercial investors, the barriers and risks remain daunting. From a conventional Chinese perspective, Tibet is very cold, the people are unwelcoming, the air is perilously thin, there are very few amusements and distractions, and very few of the local population are employable. Since 2008, despite the consequences, Tibetans have frequently protested at mining and made it clear they see mining as theft. From the viewpoint of senior mining executives, a posting, even in a remote part of Africa, routinely offers flights home to China, often with stopovers in major shopping centres such as Dubai or Bangkok en route.
Tibet is for all these reasons not an attractive choice, and the numbers resulting from a comparative cost/benefit analysis, as well as a risk analysis usually tip the balance in favour of abroad, even if Chinese companies feel they have to not only source their raw materials internationally but also buy the ore deposit and even build the railway to get ores to port.
A major consideration is scale. China wants its copper mining companies to operate globally, which means the cost per ton of ore extracted has to be competitive with the cheapest –usually the biggest- mines worldwide. The biggest copper mine in the world is BHP Billiton’s Escondida mine in Chile, able to extract 1.3 million tons of copper content a year, which means digging up, crushing to powder, chemically cooking and smelting over 100 times that amount of rock, since even the richest copper deposit in the world contains less than one per cent actual copper. Of the 20 biggest copper mines worldwide, the smallest is La Caridad in Mexico, with an annual capacity of 195,000 tons of copper a year.
In addition, new mines are fast coming on stream, some close to China, in Kazakhstan and Mongolia; and existing mines are being scaled up. One example is the Oyu Tolgoi deposit in Mongolia http://tin.er.usgs.gov/porcu/show.php?labno=389 has an orebody that is over 3000 million tons, containing on average 0.67% copper and also 0.24% gold. That’s a massive orebody, with grades of both copper and gold that are highly competitive with the most profitable mines worldwide, and it is due to start production within the 12th Five-Year Plan period. Oyu Tolgoi sets the benchmark for its competitors, including the major copper & gold deposits in Tibet, at Shetongmon near Shigatse, at Gyama, upstream of Lhasa, and at Yulong, near Jomda and Chamdo, all locations being in Tibet Autonomous Region.
All three Tibetan mines are already in production on, by world standards, a modest scale (Yulong and Gyama) or soon to begin production, at Shetongmon. Yet ownership of all three has changed hands with remarkable frequency, not unusual in a global mining industry where deals are common, and small miners sell out to big miners who alone have the capital to turn a proven deposit into an actual extraction and processing zone. But the frequent changes of ownership of these Tibetan deposits also suggests that the long succession of state-owned owners are not keen to put in real money, and instead show Beijing they are willing to comply with Five-Year Plan targets, but actually do little, since other alternatives beckon. Having held a Tibetan deposit for a few years, they then sell to another minerals SOE, which is also unenthusiastic about scaling up to a major mine. Thus several Five-Year Plans have rolled by, each announcing a major emphasis on mining of copper in Tibet, as a “pillar industry” that will hold up the rest of the Tibetan economy, and generate economic take-off. Will the 12th Five-Year Plan, for 2011-205 be any different?
The actual targets are ambitious. “China will push for further consolidation in its copper manufacturing sector, aiming to create three to four big producers during the 12th five-year plan period from 2011 to 2015, a senior official at the China Nonferrous Metals Industry Association said. The country wants to achieve 30% self-sufficiency in copper production by the end of the 12th plan period and build new processing and recycling plants in the central and western provinces, said Duan Shaofu, head of the copper department at the Association.
“Speaking at China International Copper Conference 2010, Duan said the primary objective of the move will be to increase China’s competitiveness and pricing power in the global commodities market. To increase production, Beijing will encourage miners to step up mineral exploration in the southwest, northeast and Tibet. China wants to develop new mines in Yunnan, Tibet, Jiangxi and Qinghai, said Duan. Local governments have been rationing power to metals producers in response to Beijing’s call to conserve energy and reduce emissions. China has phased out 400,000 tons of outdated copper smelting capacity during the 2006-10 11th five-year plan period, Duan said.” (China to Consolidate Copper Production, Raise Capacity – Exec; Dow Jones Chinese Financial Wire, 2 November 2010)
The key target is 30 per cent self-sufficiency by 2015. In 2009 China produced 4.1 million tons of copper but mined only 1 million tons, a self-sufficiency of around 25 per cent. 2010 production grew, to But by 2015, China’s copper smelters expect to produce at least 7 million tons of copper, so if 30 per cent of this is sourced domestically, copper mine production must quickly double, from 1 million tons in 2009 (USGS figure) to 2.1 million tons by 2015.
“Copper smelting capacity will reach seven to 7.5 million tons by 2015, said Zhao Bo, deputy director of the CNMIA’s (China Nonferrous Metals industry Association) copper department. ‘The [central] government’s continuing investments in the domestic electricity, home appliance, transportation and information (which includes computer programming and telecommunications) industries will ensure China’s copper demand remains strong throughout the period of the Twelfth Five-Year Plan [2011-2015],” Zhao said. (China’s refined copper demand to reach 8 mln tons by 2015, China Mining and Metals Newswire, November 18, 2010)
Is it possible that China can double its copper mining output in six years? Where will the copper come from? The 12th Five-Year Plan identifies the location of new mines in four provinces, three of which are Tibetan in their copper deposit locations: Tibet Autonomous region, Qinghai and Yunnan. The only other province named is Jiangxi, a traditional copper production base far from Tibet. The copper mines in Jiangxi are already the largest in China.
How likely is it that Tibetan areas, not only Shetongmon (Xietongmen in Chinese), Gyama (Jiama in Chinese) and Yulong, but also copper deposits in Tibetan areas of Qinghai and Yunnan, will so quickly be producing up to one million tons of copper metal a year? The best known, yet-to-be-exploited copper deposit in Tibetan portions of Yunnan are Pulang/ Xuejiping, which is also rich in gold and silver, http://tin.er.usgs.gov/porcu/show.php?labno=229 ; with other copper deposits in Yunnan beyond the Tibetan Plateau. It is in Qinghai (Amdo in Tibetan) that there is considerable potential for intensified copper mining, at Ridanguo http://tin.er.usgs.gov/porcu/show.php?labno=231 and at Saishitang, where there is a well-established mine that has been producing for some years. http://tin.er.usgs.gov/porcu/show.php?labno=231 Little information is available about the size and richness of Ridanguo, but it is not far from the Yulong cluster of mines near Jomda in TAR, giving it a route to market.
Saishitang is in Golok prefecture, about 400 kms from Xining, the industrial capital of Qinghai. It is a deposit of 50 million tons, with remarkably high concentrations of copper, at 1.13 per cent of the ore, and of gold, 0.48%. In 2008 copper mining in Qinghai produced 22,700 tons of copper. (Qinghai Statistical Yearbook 2009, table 12-20) Golok is remote, with very limited employment opportunities for Chinese immigrants, making the Saishitang mine particularly significant.
China’s fast growth continues, largely financed by state investment and, until very recently, cheap finance from the state-owned banks. Fast growth and massive infrastructure construction mean heavy usage of metals, energy and raw materials. Although the last Five-Year Plan and the new 12th plan for 2011-2015 talk about balancing environmental protection and social needs as well as the fastest possible growth rate, nothing so far has slowed China’s accelerating consumption of global resources.
In order to access natural resources in insufficient supply within China, the new national champions –the state-owned minerals giants- now reach out globally, doing deals in remote areas of Africa and the Americas to extract what Chinese industry needs. As a consequence, the world has now experienced almost a decade of record commodity prices, pushed up for everyone by Chinese demand.
Few in China see anything problematic about this, arguing that China is simply catching up, regaining its place in the world, and, on a per person basis is still far behind the richest countries. That may not, however, be true for much longer. Take copper, for example. Not only is China by far the world’s biggest producer of copper metal, consumption per person is already higher than in Canada, France or Russia and will soon overtake Australia, the European Union and Japan. This is not surprising, when one looks at where copper is used. By the end of this decade, China’s auto sales could reach as high as 60 million-70 million vehicles a year, China Daily reported, citing Liu Shijin, deputy director of the Development Research Center of the State Council.
In 2010 China made 14 million cars (http://oica.net/category/production-statistics/) and the whole world made 58 million. China, already the biggest car maker in the world, has very ambitious growth targets, despite the talk of balanced development.
Where will the copper come from, for all those cars, and the cables transmitting ultra high voltage electricity across China from Tibetan rivers to the smelters and factories?
And then there is gold, a metal often found in the same ore deposits as copper, with an allure in a class of its own. Because gold is hard to find, never occurs abundantly, holds its value, and is yet again at a record price, it has many uses beyond industrial necessity. As a store of value, many Chinese investors believe it will always rise faster than bank deposits, fickle stock exchanges, and may even be a better bet than speculating on real estate bubbles. As a result, to much surprise, China has emerged as the world’s second biggest consumer of gold too, surpassed only by India, where gold jewellery has long been culturally embedded. The World Gold Council confidently expects gold consumption in China will double in a decade, if not sooner. http://www.chinamining.org/News/2011-05-23/1306113993d45685.html
Both copper and gold are booming, new mines are coming on stream around the world, as prices dipped only briefly during major financial crises, and then rose to even greater heights. This has not been a problem for China’s metals manufacturers, which have ridden the boom. The coastal location of most smelters, and their manufacturing customers has helped, giving them ready access to global supplies.
All this is now changing. Demand continues to rise, not only globally but as wages of coastal factory workers begin at last to rise, increasing numbers of domestic consumers can afford to buy what they make. Manufacturing is moving inland, encouraged by central plan policies for softening the extreme inequality between east and west, coast and inland. In western China, in the Chongqing-Chengdu area, a new industrial hub and a new capital of the whole of the west is fast emerging. Chongqing, directly under the patronage of Beijing, has gown especially fast, even by Chinese standards, readying itself to export to the world via the Yangtze and the promise of the Three Gorges Dam to make it possible for big ships to navigate far inland. It is as if the coast of China now extends 2000 kms inland.
But where will the Volvo cars made in Chongqing, the Ford cars made in Chengdu, the Hewlett-Packard, Acer, Asustek, Dell, Apple iPad and Lenovo computer factories in these two cities, get all the copper and gold they will need?
The solution, if we are to believe the central planners, has been anticipated and integrated into the plan; tapping into sources of copper and gold more remote than China’s current mines in Zambia, Peru, Mongolia, Laos, Congo and Kazakhstan. The answer to China’s accelerating demand for copper and gold is the Tibetan Plateau.
Gold and copper are found in many places in Tibet, often where India collided with Eurasia, the enormous pressure melting the rock which separated into elemental concentrations as it slowly cooled.
China has long known of the mineral wealth of the Tibetan Plateau but until now it has been easier and cheaper to buy minerals overseas. Tibet has been too far, too cold, the air too thin, the local labour force uninvolved, the infrastructure absent. Small-scale extraction of surface gold from riverbeds has been frequent, and environmentally destructive, with much use of dredges, cyanide and mercury that kill aquatic life and poison streams; but large scale exploitation is new. Publicly, small-scale mining is now banned, but in practice it persists, especially in districts where there are no longer Tibetan on their lands to protect it, having been removed in the name of watershed protection.
Now a new era is under way. The state has paid for the necessary infrastructure of roads, railways, power stations and urban facilities. State geological exploration teams have spent decades mapping known deposits, preparing sites for fullscale extraction. Chinese mining companies now have every reason to ensure that Tibet will soon supply the car and computer factories of Chongqing and Chengdu with copper, gold and other metals as well. Tibet Autonomous Region Chairman Pema Choling (Baima Chilin), reporting on the achievements of 2010, said: “With the focus on opening up to the country’s hinterland region, we have actively merged with the Chengdu-Chongqing economic sphere.”
The biggest copper and gold mines are, from west to east, Shetongmon, Gyama and Yulong districts, in which there may be many deposits, many mines, ore crushers, chemical concentrators and smelters. World-scale industrial mining has arrived. All have silver, lead and zinc as well as copper and gold, although the lead and zinc will go to waste, with no attempt at recovery, with only the copper, gold and silver poured off separately while molten. All are in the watersheds of major rivers for hundreds of millions of people downstream, who live on international transboundary rivers that originate in Tibet.
Shetongmon (Xietongmen) http://tin.er.usgs.gov/porcu/show-porcu.php?rec_id=242 was the first major project to attract publicity, partly because its sensitive location is so close to the major river of southern Tibet, the Yarlung Tsangpo/Brahmaputra; partly because it was for some time owned by Canadian investors; and also because it is close to the second city of Tibet, Shigatse, the historic seat of the Panchen Lamas. The proximity to a major river raises major environmental concerns, since steep site will have to securely hold at least 75 out of every 100 tons of rock mined and crushed to powder to extract a concentrate that can be sent by rail to a distant smelter. According to recent baseline research by Tibetan scientists, there is already a natural heavy metal load in the river; any leakage from the hillside dam waste tailings could be disastrous. http://epublications.uef.fi/pub/urn_isbn_978-952-61-0020-3/urn_isbn_978-952-61-0020-3.pdf Not only would downstream India and Bangladesh be affected; if the planned water diversion of Tibetan rivers to the Yellow River (Huang He) includes capturing the Yarlung Tsangpo, downstream China’s water purity would be threatened too. By the time the rail line to nearby Shigatse is completed in 2014, the mine, owned by Jinchuan, China’s biggest nickel producer, will be operational.
When Jinchuan, China’s biggest nickel producer, and owner of the Shetongmon copper mine in Tibet, acquired a Congolese copper mine, Metorex, the company said it is determined to buy more African mines. According to the Financial Times “Zhang Sanlin, Jinchuan’s vice-president, said: ‘Africa is a key focus for our company. We have and will be looking to develop assets there in copper, cobalt and nickel’.”
GYAMA & CHULONG
Gyama (Jiama) is already operational, and already a threat to the purity of the water in Tibet’s most sacred city, Lhasa. http://tin.er.usgs.gov/porcu/show-porcu.php?rec_id=218 Gyama, controlled by Vancouver-based China Gold International is not far upstream of Lhasa, in an area of great historic significance. Like most of Tibet, the area is seismically unstable, vulnerable to earthquakes. The mine is close to the route of a new rail line to be built, at state expense, from Lhasa to Nyingtri (Nyingchi). In 2010 in the academic journal Science of the Total Environment, a team of Tibetan and Scandinavian scientists, after analysing river water below the Gyama mine, reported that “elevated concentrations of Cu, Pb, Zn, Mn, Fe and Al in the surface water and streambed at the upper/middle part of the valley pose a considerably high risk to the local environment. A high content of heavy metals in the stream sediments as well as in a number of tailings with gangue and material from the ore processing, poses a great potential threat to the downstream water users. Environmental changes such as global warming or increased mining activity may increase the mobility of these pools of heavy metals.”
Tibetans living near the mine have protested, according to Tibetan Review: http://www.tibetanreview.net/news.php?showfooter=1&cp=35&&id=4103 “Tibetans petitioned a group of visiting Tibet Autonomous Region officials and demanded the complete withdrawal of the miners. And the miners were indeed removed from the area on the following day. However, the local residents were then visited by a work team which warned the Tibetans against opposing the mine. They were told that they would be charged with engaging in political activities if they continued their protest. But because of the seriousness of the mine’s harmful effects, the local residents have now petitioned the Chinese authorities, the report said. The mining operation was reported to have led to the drying of spring waters, poisoning of drinking water and destruction of flora and fauna in the region. More than 1,000 domestic animals were reported to have died after mine poisoned water.” The Gyama mine, now with access via Canada to international investors, plans to expand to dig up and crush to powder 12,000 tons of rock a day for 31 years, with 99 per cent of crushed rock left forever on site after the most valuable minerals have been extracted. This is a highly profitable operation, competitive with copper mines around the world, with mining costs of only 200 yuan, less than US$30, per ton, according to a detailed technical report by commercial geologists. http://www.dolbear.com/projects/asia
This is the first highly profitable project in Tibet, both for the mining company, which will have sales of 45.6 billion yuan over the mine’s life, and for China, which will earn 4.9 billion yuan in revenue from VAT sales tax, resource tax and corporation income tax. Those figures, from the 2010 technical report, are based on copper and gold prices lower than actual current prices. If mid-2011 prices are used, profit will be a lot higher.
Of particular concern for human health, especially the growing brains of the children of Lhasa, is the lead content of the Gyama deposit. Only in the first two years of operation is it commercially profitable to extract the lead, and even then at least 20 per cent of the lead in the ore will not be recovered, and will lie forever in powdery mud, in the mine’s waste dumps. On average, of every ton mined and crushed to powder, there is a half kilo of lead.
The Gyama mine has already operated for many years on a smaller scale, under various owners, which lacked capital for best practice health and safety practices. The Gyama deposit contains less than one million tons of copper metal, but nearby, also upriver from Lhasa, is Chulong, a much bigger copper deposit (seven million tons) and commercially attractive molybdenum metal as well. Chulong, only 50kms east of Lhasa, is in a mountain chain that drains northwards to the great Ganden monastery and Lhasa; and southwards to Samye, location of the first Buddhist monastery built in Tibet, over 12 centuries ago, and thus deeply venerated. Heavy metals from Chulong escaping to air and water would be an even greater threat to all these places in one of the most densely populated parts of Tibet.
Yulong is one of a cluster of copper and gold deposits in eastern Tibet, in a remote and rugged area between the watersheds of the Yangtze and Mekong rivers. http://tin.er.usgs.gov/porcu/show-porcu.php?rec_id=245 Electricity sufficient to power a smelter will be supplied by hydropower dams on these great rivers and their major tributaries, massive interruptions to wild mountain rivers.
These mines are planned to add hundreds of thousands of tons of copper each year to China’s supply, which is both a lot and not much. For Tibet it is a lot, nothing less than the integration into the Chinese industrial economy of a huge area which right up until now has not been much industrialised at all, and which increasingly appeals to urban Chinese because of its beauty. It is a lot, in Tibetan eyes, since Tibetans, even after the mines are exhausted and closed, will have to bear the environmental costs, but are not permitted to establish NGOs to give voice to environmental concerns. Nor do Tibetan communities receive royalties.
CHINA’S COPPER INDUSTRY AND ITS GLOBAL REACH
Yet these mines cannot do much to reduce China’s reliance on global sources for raw materials. The world’s factory is thoroughly integrated into the global economy, both for sourcing raw inputs, and for selling the finished manufactures to the world. If China’s copper and gold consumption continue to rise as predicted, the new mines in Tibet will fall far short of domestic self-reliance. Even if the new mines meet production targets, despite several recent delays, China’s imports of copper and gold will continue to rise.
China’s copper smelting capacity is just over four million tons a year, with a further 600,000 tons due to begin production soon, but China’s copper consumption is now seven million tons a year, so imports will continue. China’s smelters are used to relying on imported copper scrap and concentrates, as well as domestic sources.
Although Chinese state owned mining companies are now adept at operating globally, and at raising capital by listing shares bought by investors in IPO floats in Hong Kong and Shanghai, they are also good at drumming up resource nationalism. The reality is that the Tibetan deposits being turned into mines are far from being on a world scale. Mining them will be profitable, because the state pays all the costs of bringing rail lines close, constructing the hydro dams and power pylons that electrify the energy-intensive processes of crushing rock to powder, chemical concentration and smelting. Without such heavy state investment in infrastructure it would still be cheaper to import, as it has been for many years.
The biggest copper deposits globally hold over 100 million tons of actual copper metal each; while Gyama holds less than one million tons of actual copper; and the biggest deposit in Tibet (and therefore in China) holds at most five million tons. Anywhere else in the world, such a mine would be a marginal proposition.
These deposits are currently the biggest in China, a fact strongly emphasised by their corporate owners, keen to elicit state infrastructure subsidies for domestic Chinese resource nationalism.
While patriotic Chinese netizens might presume it is better to source copper from Tibet than Peru or Zambia, China’s export driven wealth creation also depends on importing raw materials cheaply, in a global competition. China’s mining companies, whether state-owned or not, choose where to invest on commercial grounds, choosing the biggest and fastest rate of return. On such criteria, the new mines and smelters in Tibet struggle to make a good case for investment. Despite being massive compared to mining in Tibet until now, they are still too small, and too far from market to compete against low cost copper mines elsewhere.
The 20 biggest copper mines in the world each have, on average, a capacity to produce 345,000 tons of copper a year, and none produce less than 200,000 tons. That is the global benchmark, if the playing field is level, with no hidden subsidies. By comparison, the first big copper mine in Tibet, at Gyama, will produce 25,000 tons of copper a year, a bit more in some years. Yulong is a bigger deposit, capable of sustaining a more intensive rate of extraction. The mine currently produces 10,000 tons of copper a year, due to rise in coming years to 20,000 tons smelted at Yulong and a further 20,000 tons smelted elsewhere from Yulong concentrates. After 2015, extraction from Yulong might eventually achieve 100,000 tons of copper metal a year, according to official announcements. While bigger than Gyama, Yulong has been slow to get going, having been announced in one Five-year Plan after another as a “pillar industry” of Tibet, yet still on a smaller scale than a world-class copper mine. This is not surprising, since Yulong, though frequently announced as the biggest copper deposit in China, actually has a proven reserve of 6.5 million tons which, with more drilling, might perhaps double.
Why are these mines going ahead, if they cannot be justified on market economy grounds? Commercial considerations are only part of the picture. The mining companies benefit from state financing of railways, power stations and much other infrastructure, as well as receiving finance at concessional rates to corporate borrowers, tax holidays, minimal environmental standards and costs, no royalty payments to local communities and subsidised rail freight rates to get concentrates to smelters or metal to markets. It is these state subsidies that tip the balance towards medium-scale mines in several Tibetan locations, rather than one more big Chinese copper mine overseas.
Chinese mining companies would seldom invest abroad in copper deposits of only a few million tons, especially if bigger deposits are on the market. Logistically, Tibet has always been more remote than the mountains of Laos or Peru, where Chinese mining companies are currently extracting copper. The commodity chain infrastructure simply has not existed. Until now. It is China’s state-directed infrastructure investment that makes all the difference. The Shetongmon mine was originally scheduled to begin production in 2010, under Canadian owners, but the operational date has been put back to when a rail line connecting via Lhasa to inland Chinese smelters and markets can be completed. The same is true of the Gyama mine, which is on the route of another new rail line from Lhasa to Nyingtri in southern Tibet. And the Yulong mine has been slow to develop beyond a modest scale, while awaiting the completion, at state expense, of hydropower dams and a rail line, still some years away.
A further reason for delay is the difficulty, in steep terrain draining to both the Yangtze and Mekong, of guaranteeing no leakage of toxic metals to rivers. The owners of Yulong, in Jomda county, are Qinghai-based Western Mining and Zijin, China’s biggest gold producer. In early 2011 Zijin was found guilty of a toxic spill http://www.shanghaidaily.com/sp/article/2011/201102/20110201/article_463004.htm that poisoned fish and polluted the drinking water of tens of thousands of people. On 16 March 2011 Xinhua reported that “after a short period of trial operation, the Yulong project was suspended due to environmental issues. It is unclear when the project will be continued.” Shanghai Daily also reported that “China’s press watchdog has said Zijin had tried to bribe reporters to cover up the toxic spill. The company is also being sued by a city government in Guangdong Province for 19.5 million yuan over a fatal dam collapse at a tin mine there in September, which killed at least 22 people.”
When Zijin bought its Peruvian copper mine, it announced it would spend $80 million on helping local peasant communities with projects chosen by the communities. http://www.infomine.com/index/pr/PA530181.PDF In Tibet, there is no such corporate social responsibility, nor do Chinese mining companies belong to industry bodies such as International Council on Mining and Minerals, which promote high standards of local community and indigenous involvement in how mining is done and who benefits. Although ICMM publishes Chinese language manuals on human rights in mining, http://www.icmm.com/chinese no Chinese miner has joined. The biggest copper miner in the world, Codelco, joined ICMM in 2011, but Chinese miners, reflecting national policies on refusing international accountability, stays aloof, unaccountable, answerable only to the party-state.