The State Department has begun an initiative that would act as a middle point between resource-rich countries and American companies that would like to invest in resource-rich countries but are afraid to take the plunge.
During a recent visit to Cape Town, South Africa, for a mining conference, Under Secretary of State Jose Fernandez heard from several countries that would love foreign investment to help kickstart the mining of crucial EV minerals such as cobalt, manganese and lithium. However, mining companies that are keen on tapping into these mineral reserves revealed that they were hesitant to invest in these countries due to fears that bad governance and lack of transparency encourage the resource curse.
Resource curse refers to the risk of conflict, corruption and instability that is caused when natural resources such as cobalt, lithium, and gold are exploited.
Christened the Minerals Security Partnership, the new State Department initiative will bridge the gap between resource-rich countries and interested mining companies. With the United States looking to transition from fossil fuel to green energy, this initiative could help beef up the country’s supply of raw materials for solar panels and electric vehicle batteries.
At the moment, China is the most significant player in the battery metals market, processing, and refining more essential EV minerals such as lithium and cobalt than any other country. This initiative could help sever this dependence and build a supply chain that isn’t reliant on foreign countries, including China, and is immune to geopolitical issues. The initiative will include the European Commission, Canada, Australia, Germany, France, Finland, South Korea, Sweden, Japan and the United Kingdom.
In an interview, Fernandez stated that countries such as the Democratic Republic of Congo, Ghana and Zambia were hungry for foreign investment. For the initiative to be successful, he explained, it would have to connect these countries with companies and involve them in projects that are mutually beneficial, improving the livelihoods of the citizens and turning a profit for the companies.
According to Fernandez, the U.S. has already begun sharing information with countries that are looking for foreign investors to tap into their mining industries, allied governments, foreign financial institutions and mining companies that could initiate mining projects.
The Minerals Security Partnership is part of the government’s efforts to wean its supply chain off of China and other countries that it believes are abusing their geopolitical leverage.
The geopolitical effects caused by Russia’s invasion of Ukraine, such as the global food crisis and supply chain disruptions were a reminder that the U.S. has to ensure that key areas such as vaccines, minerals and batteries are immune to geopolitical shocks.
As the energy shortage rages, coal is back at the center of attention in a good way, and companies such as Peabody Energy Corporation (NYSE: BTU) are seeing spikes in recent orders.
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