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China buys US$3.5 billion of graphite extracted in Mozambique

Graphite mining operations in Mozambique can now move ahead after Chinese companies signed long-term purchase contracts worth US$3.5 billion, according to the Economist Intelligence Unit (EIU).

The most advanced of the projects underway is one run by Australia’s Triton Minerals in Nicanda (Cabo Delgado), already considered the world’s largest graphite reserve, which recently signed a contract with Chinese raw materials trading company Shenzhen Qianhai Zhongjin, securing financing of US$200 million.

In addition to this financing, split into equity in the project and credit, the Chinese partner has committed to buying 200,000 tons of graphite in the long term. The mineral is used to manufacture batteries, steel and lubricants for the automotive and electrical sector and other products.

Triton had already signed a similar agreement with Yichang Xincheng Graphite Co. (YXGC), valued at US$2 billion and so far has signed sales agreements totalling US$3.5 billion for the next 30 years, along with US$232 million in Chinese funding, said the EIU.

“In addition to increasing export earnings and government tax revenues, the project could bring wider economic benefits” such as job creation, said the EIU.

YXGC and Triton Minerals also extended the partnership to invest in two graphite processing lines, with annual production of 10,000 tons of derivative products, with an estimated annual turnover of US$30 million.

This project, the EIU said, “will signal that Mozambique has the potential to develop a value-added production chain alongside the extraction of raw materials, which will be vital to ensure that the country’s mineral wealth supports broad development.”

Headquartered in the region of Yichang, Hubei Province, YXGC develops products for various industries such as oil, chemical, metallurgy, machinery, automotive, aerospace, among others, acting in the Chinese market and in more than 20 countries.

Australia’s Syrah Resurces is another company developing graphite extraction projects and has also established sales agreements with a Chinese company, China Aluminum International Engineering Corporation (Chalieco).

The global demand for graphite has been growing and Mozambique has abundant reserves and low mining costs.

“If successful, these projects will establish Mozambique as a graphite producer with global expression and although graphite mining continues to be much more limited in scale than other resources, it will contribute to the diversification of the country’s export base and limit vulnerability to price shocks in the coal industry,” the EIU said.

Given the large weight of the Chinese market in these projects, the EIU also warned of the risk that a slowdown in the Chinese economy is likely to have on their development.

The developments in mining and, in particular, investment in the mining sector, support projections of “robust economic growth” between 2015 and 2019, at an annual average of 7.4 percent. (macauhub/CN/MZ)

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