A New Mining Cycle: China's Influence Wanes

By Patricia Miller

Jun 16, 2023

Exploring mining opportunities beyond China; spotlight on Vale, BHP, and Kavango amidst energy transition and decarbonization-driven market changes.

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China's dominance in the metal boom appears to be ending as a new era focused on energy transition and decarbonization gains momentum. It’s time to welcome other nations to the fore. A recent report from Jefferies LLC, as quoted by Bloomberg, highlights that China's influence over metals such as copper, aluminum, and iron ore is over. This article will examine the issue with reference to Vale SA (NYSE: VALE), BHP Group Ltd (NYSE: BHP), and Kavango Resources (OTC: KVGOF) (LON: KAV).

China's previous super cycle was driven by urbanization and industrialization, but with the country now transitioning towards a more service-oriented economy, its influence in buoying global demand may be waning. Nevertheless, there are plenty of opportunities elsewhere in the world. With operations in Canada, Indonesia, and Brazil, Vale Base Metals is one of the largest global producers of high-quality nickel, copper, and responsibly sourced cobalt. Meanwhile, BHP could benefit from China’s short to medium-term demand and emerging markets offer enticing opportunities.

Global Investors Eyeing Diverse Mining Opportunities

Investor interest in far-flung locations is evident as Vale SA (NYSE: VALE) is rumored to have potential bidders looking to acquire a minority stake in its nickel and copper operations. The stake, reported to be 10%, is valued at approximately $2.5 billion. Among the potential investors are the Public Investment Fund of the Government of Saudi Arabia, Mitsui & Co, and the Qatar Investment Authority. It is suggested that the Saudi Public Investment Fund is in advanced negotiations with Vale SA. The nickel and copper mining assets involved in this deal are in Brazil. Vale has recently confirmed its search for a partner in its Energy Transition Metals division to attract investment and drive business growth.

Meanwhile, Vale Base Metals, a top provider of energy transition metals, has announced that two of its Canadian mines received awards for excellence in safety from the Canadian Institute of Mining, Metallurgy, and Petroleum (CIM). In April, Vale appointed Emily Olson will take on the role of Chief Sustainability and Corporate Affairs Officer.

BHP Could Benefit from China’s Stimulus Measures

BHP Group Ltd (NYSE: BHP) operates in more than 90 locations including throughout Australia, Chile, the United States, and Canada. Its essential resources include copper, iron ore, nickel, potash, met coal, and more.

Although China’s period of high demand is said to be fading long term, in the short term opportunities remain. Matthew Haupt, portfolio manager at Wilson Asset Management, has expressed a bullish stance on BHP Group Ltd, based on China's ongoing economic stimulus efforts and expectations for the iron ore market. This outlook comes after BHP shares have already enjoyed a 10% increase over the past year.

Matthew Haupt's bullish view on BHP is rooted in his analysis of China's short-term economic stimulus measures, particularly its cuts to lending rates and the targeted stimulus of its real estate sector. Haupt predicts that these actions will boost demand for commodities like iron ore and copper, which are key revenue generators for BHP.

Furthermore, in working towards decarbonizing its operations, early action places BHP amongst the lowest absolute operational emissions relative to other major miners.

Empowering Botswana's SMEs

A new cycle driven by energy transition and decarbonization has just begun, which could potentially redefine the dominant players in the metals market. One country seeing rising interest is Botswana. For instance, The OPEC Fund has sealed a deal with Access Bank Botswana, entailing a $20 million loan aimed at extending financial support to micro, small, and medium-sized businesses in the country.

Meanwhile, in the ever-evolving landscape of global technology and innovation, Botswana is carving out a significant position for itself, both regionally and internationally. This comes to the fore as the country features prominently in the VivaTech showcase, France's biggest technology trade show.

One company dedicated to uncovering world-class base and precious metal deposits in Botswana is OTC and London-listed Kavango Resources (OTC: KVGOF) (LON: KAV).

Kavango's portfolio is diversified and includes three ambitious projects. The Kalahari Suture Zone Project (KSZ) explores an under-investigated structural zone with similarities to the massive Ni-Cu-PGE Norilsk deposits in Russia. 

Equally impressive is the Kalahari Copper Belt Project (KCB), where Kavango boasts one of the most extensive prospecting license holdings within the burgeoning Kalahari Copper Belt.

Finally, the Ditau Camp Project (DITAU) underscores Kavango's commitment to innovation and diversity. This project is located in an area known for carbonatites, a primary source for several critical metals including rare-earth elements, niobium-tantalum, thorium, uranium, vanadium, and copper.

Kavango Resources, with its strategic focus and diversified portfolio, presents an exciting investment opportunity in an emerging market.

The reign of China as the predominant influencer in this sector may be diminishing, making way for new players while creating a myriad of opportunities. Companies such as Vale SA, BHP Group, and Kavango Resources, operating in diverse locations around the world, could potentially benefit from this new cycle. Furthermore, emerging markets, such as Botswana, hold promise, with initiatives underway to boost SMEs and strategic projects to tap into underutilized resources. These dynamics signal the advent of a new era in the global metals market.

Important Notice And Disclaimer

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.