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2021
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09
Guinea: China's most important source of aluminum and iron
On September 5, news of a military coup came from Guinea. The 83-year-old president was detained by the army and was filmed sitting on a sofa in a delirious video.
What is the impact of the Guinean coup on Chinese companies?
Wen | Zhou Xueling
On September 5, news of a military coup came from Guinea. The 83-year-old president was detained by the army and was filmed sitting on a sofa in a delirious video.
Where is Guinea? Why is the world concerned about this coup? What is the impact of this coup on us? This article will answer these questions once and for all.
01 Where is Guinea?
Most people may not know where Guinea is when they hear the Guinean coup, while a small number of people who know something about international news or world geography will ask, which Guinea is it?
Indeed, there are three Guineas in Africa alone-the Republic of Guinea, Guinea-Bissau, and Equatorial Guinea; and one in Southeast Asia, Papua New Guinea.
There is still an unpainted PNG in Southeast Asia.
Guinea means "West Africa" in Portuguese. As for why there is Guinea in Southeast Asia, when Portuguese colonists arrived in Southeast Asia, they found that the aborigines on some islands looked similar to West Africans, so they simply called Guinea.
Guinea
The coup took place in the Republic of Guinea in West Africa, so it is generally referred to as Guinea.
What is the structure of Guinea's economy?
Aluminum, iron, uranium, gold and diamond resources are very rich, of which bauxite reserves are estimated to reach 40 billion tons, accounting for 1/4 of the world's total reserves. Since 2017, Guinea has replaced Australia as the world's largest bauxite exporter, supplying 55% of China's bauxite imports.
There is a huge bauxite mine in the Bok (Boké) area in western Guinea, with an estimated reserve of 23 billion tons, accounting for 57% of the country's aluminum resources, and the grade is as high as 45%; the Simandou iron ore mine in the southern Simandou mountain vein is currently the world's largest iron ore to be mined, with reserves of about 2.4 billion tons, of which the grade of No. 1 and No. 2 mines is as high as high as high as 65%, even more than Australia and Brazil.
In addition to the mining sector, in fact, for people's livelihood, the first industry is the most important.
Although the latitude of Guinea is located near the equator, it is rich in water resources and soil fertility. The development of agriculture has natural advantages. Not only can it be self-sufficient in food, but it also once created a large amount of foreign exchange. Among them, bananas, pineapples, mangoes, coffee, etc. are all important export agricultural products. According to data from the World Bank, agriculture is the main source of employment in Guinea, accounting for 52% of the employed population and the source of income for 57% of rural households.
However, since the development of the mining industry in Guinea, the pace of the mining and non-mining sectors has been extremely uneven.
From 2016 to 2017, Guinea's mining GDP growth rate was as high as 50%, while the non-mining growth rate was only about 5%. During the epidemic last year, Guinea's real GDP grew by 5.2 per cent, down only slightly from 5.6 per cent in 2019; it looks pretty good, but in fact it is only because of strong demand for aluminium in 2020, with mining activity in Guinea growing by 18.4 per cent, while the non-mining sector grew by only 2.5 per cent, and the level of inflation endured by the population is as high as 10 per cent.
In 2019, Guinea's exports have been dominated by minerals and gold.
03 Why a coup?
Simply put, the money earned from selling mines is not properly distributed, the non-mining sector is growing slowly, the gap between rich and poor is wide, and the epidemic is adding fuel to the fire, so it can't be stretched.
04Which Chinese companies have a layout in Guinea?
In the Bok area mentioned earlier, Chinalco invested more than US $0.5 billion in the southern part of this mining area. It took two years to finally complete China's largest bauxite project in Guinea, the Bofa (Boffa) project, with an annual production capacity. 12 million tons.
Guinea's share of China's bauxite imports rises
The Simandou iron ore project was also taken by Chinese enterprises. In June last year, Guinea's cabinet approved the "Agreement on Basic Mining in Simandou Iron Mine No.1 and No.2 Mining Areas" and completed the cooperation negotiations with Win Alliance Group. Prior to this, the Chinese consortium headed by Chinalco and China Baowu already held 39.95 shares in mining areas 3 and 4, with Rio Tinto (45.05 per cent) and the Guinean government (15 per cent) holding the remaining shares. The Simandou project will be expected to replace Australia's important iron ore supply in the future.
As a supporting facility, China Railway Construction has undertaken several railways to open up transportation from bauxite and iron ore mines, industrial parks to ports. In July this year, China Railway Construction announced the completion of the construction of the railway line from Bofa to Bok, opening up the transportation from the mine to the port, which will play a huge role in the export of Guinean aluminum resources in the future.
At the end of the Simandou Railway, Win Alliance Group plans to invest in a deep-water port to address the last leg of iron ore exports.
In addition, China Road and Bridge undertook the construction of the Guinea CMD road project, which starts from the capital and is an important part of Guinea's National Highway No. 1.
05 What's the latest news?
On Monday, Chalco said in a statement that all of its projects in Guinea were operating normally.
Coup leader Mamadi Doumbuya said Monday he wanted the mining industry to "continue to produce" and abide by existing mining agreements; a government spokesman said the land and air borders were reopened the same day.
So far, no disruptions have been reported at the port of Kamsar in Guinea, but crew replacements at all ports have been temporarily suspended, according to Gard, a specialist maritime media outlet. The security threat in Guinea remains high.
Although the news of the coup in Guinea sent aluminum prices soaring to all-time highs for a while, prices then fell back. On Monday, Chalco said in a statement that all of its projects in Guinea were operating normally.
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