41 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 WWW.LEGALBUSINESSONLINE.COM/CHINA MINING Long Yanmei, partner at Jingtian & Gongcheng, has been advising China’s state-owned enterprises (SOEs) and private enterprises in the mining industry since 2008, assisting them in their global expansion efforts. She noted that Chinese companies possess not only a significant number of advanced technologies but also substantial competitive advantages when establishing a presence overseas. “The advantages gained from early investment in overseas markets and securing upstream supply have already trickled down to the downstream sector. New energy has now become one of China’s prominent calling cards worldwide,” says Long. RESOURCES AND MARKETS According to Zhang, Huayou has undergone two waves of internationalization since its establishment in 2002. The first wave commenced in 2003 and involved the company exploring Africa and other regions in search of mineral resources. The second wave took place in the past two years. Zhang explains, “We not only need to explore resources from our upstream suppliers but also expand markets downstream to bolster supply chains overseas. In this recent global expansion, we have keenly felt policy pressure from foreign authorities.” For instance, when Huayou ventured to Indonesia to explore laterite nickel ore resources in 2018, the ore resources were primarily exploited through mining or preliminary processing in Indonesia before being shipped back to China for further processing. During that time, there were minimal policy and legal challenges concerning the exploitation of nickel resources in Indonesia. However, shortly after, “the Indonesian government recognized the global trend towards carbon peaking and carbon neutrality, realizing that the continued development of the EV industry was inevitable,” Zhang elaborates. Indonesia possesses some of the world’s largest reserves of laterite nickel ore, a critical component for ternary cathode materials, high-nickel power batteries, and the overall advancement of electric vehicles. The Indonesian government became aware that global mining companies were merely exploiting resources in Indonesia without extending the benefits downstream. Consequently, Indonesia’s domestic industry chain remained singular, contributing little to output value, tax revenue, and employment opportunities. To address this, the Indonesian government repositioned the nickel ore resource industry, completely banning the export of nickel raw ore in 2020 and mandating foreign companies to conduct deep processing and refining of nickel within Indonesia. This necessitated Chinese companies like Huayou to adjust their business development models in Indonesia. Zhang further shares that Huayou chose to respond to these policy changes through technological innovation, developing a unique technique using “high-pressure acid leaching” for wet smelting of laterite nickel ore. This process, consuming less power and utilizing a higher rate of low-grade nickel ore, facilitates low-carbon, green, and sustainable development of resources. Huayou’s innovative approach garnered attention, creating opportunities for the company to establish more business partnerships or equity deals in nickel development with local mining companies, international automobile manufacturers, and battery companies in Indonesia. Such collaborations enhanced supply chain security, creating an integrated industry chain from mining resource extraction to environmentally-friendly smelting, precursor manufacturing, and ultimately cathode material production. “The mine is like rice, while the smelting factory is like the pot. Without rice, you cannot cook a meal,” says Long. After Chinese companies made technical advancements in the downstream sector of the EV industry, they naturally progressed upstream. Despite the complexities arising from the pandemic, the Russia-Ukraine conflict, and geopolitical tensions between China and the United States in recent years, Chinese mining companies have remained quite active. This activity has propelled deal-making on the global stage for cobalt, nickel, lithium, and other mineral resources, even as traditional commodity markets such as iron ore have been relatively quiet. On the domestic front, mineral prospecting activities are steadily advancing with government support. Zhang notes that cobalt and nickel resources are highly scarce in China, while lithium resources are available in regions such as Qinghai and Jiangxi. Consequently, Huayou is actively searching for more lithium resources. However, domestic lithium ore is of lower grade and requires higher development costs. “Local governments and SOEs are actively leveraging lithium resources,” Zhang states. Hence, when collaborating with local governments, Huayou seeks not only cooperation in resource development but also aims to utilize resources to establish lithium battery factories. This initiative assists local governments in building a lithium battery material industry chain and fostering a robust industry ecosystem. This cooperative approach by Huayou promotes domestic mineral prospecting. HIGH RISK On the other hand, both Zhang and Long believe that, while Chinese companies possess advantages across the overall EV industry chain, they also face numerous challenges and risks. “Huayou entered Indonesia relatively late. By that time, most of the mining resources were already in the hands of internationally renowned mining companies and Indonesia’s state-owned enterprises. If we wish to collaborate with these companies, ESG and compliance pose as the two major challenges,” says Zhang. “Internationally renowned large Zhang Jiangbo, Legal Director, Zhejiang Huayou Cobalt Co., Ltd. 张江波，浙江华友钴业 股份有限公司法务总监 Long Yanmei, Partner, Jingtian & Gongcheng 龙艳梅，竞天公诚律师 事务所合伙人
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