How to Break China's Minerals Dominance, One Smelter at a Time

The global rush for critical minerals—from lithium to cobalt—has made China the undisputed kingpin of processing. It controls 85% of rare-earth element refining, 65% of Chilean copper exports, and dominates lithium brine extraction in South America's “Lithium Triangle.” But a quiet revolution is underway. Investors are pouring capital into smelting projects in Africa and South America, betting that diversifying supply chains can weaken China's stranglehold and create geopolitical leverage. This is the decoupling play of the decade. Here's how to profit.

Africa: The Next Smelting Frontier

The Democratic Republic of Congo (DRC) sits atop the world's largest cobalt reserves and 40% of global copper reserves. Yet, until recently, its minerals were shipped raw to China. That's changing. In 2022, local cobalt processing nearly tripled its export value from $167 million to $6 billion—a stark illustration of the value-added potential of onshore smelting.

Key Play: The DRC's Tenke Fungurume Mine, operated by China Molybdenum, is expanding its copper-cobalt smelter. While tied to a Chinese firm, the project's local processing boost aligns with the DRC's push to retain mineral value. A better bet? Zambia's Mopani Copper Mines, now under Ivanhoe Mines, which is building a $2.6 billion smelter to reduce reliance on Chinese refining.

Risk Alert: Regulatory hurdles loom. The DRC's 2023 mining code hike (mineral royalty taxes rose to 10%) and corruption could delay projects. However, firms with ESG frameworks—like Ivanhoe's partnerships with local communities—gain a competitive edge.

South America: Lithium and Copper Powerhouses

Chile and Argentina's “Lithium Triangle” holds 56–68% of global lithium reserves, yet 60% of its output flows to Chinese refineries. Breaking this cycle requires local processing hubs.

Key Play: Chile's Codelco, the world's largest copper producer, has partnered with Sociedad Química y Minera (SQM) to develop lithium refining in the Salar de Atacama. This $2 billion project aims to process 150,000 tons of lithium annually by 2027, reducing reliance on Chinese facilities.

In Brazil, TechMet Limited (TML.TO) is advancing the Piauí rare-earth project, backed by $815 million in government grants. Its partnership with the National Development Bank (BNDES) fast-tracks permits—a model for other ESG-focused firms.

Risk Alert: Environmental activism and Indigenous land disputes (45% of Latin America's mineral deposits lie on Indigenous lands) threaten timelines. Chile's 2024 lithium law, requiring 30% state ownership in projects, adds complexity. Investors must prioritize firms with transparent ESG reporting, like SQM's water management in Atacama.

Geopolitical Realignment: The Decoupling Playbook

The U.S. is weaponizing capital to accelerate this shift. The Minerals Security Partnership (MSP), backed by $3 billion in U.S. funding, is funding smelters in Peru, Colombia, and Brazil. Canada's First Quantum Minerals (FM.TO) is expanding a $2.3 billion copper smelter in Zambia, supported by the DFC.

Investment Strategy:
1. Target firms with government fast-tracking: TechMet's Piauí project benefits from Brazil's “high-priority mining” list, slashing permitting time by 40%.
2. Prioritize ESG compliance: SQM's water recycling in Atacama and Ivanhoe's community royalties in Zambia reduce social risks.
3. Look for smelters near deposits: The DRC's Tenke Fungurume smelter cuts transport costs, a key advantage over distant Chinese refineries.

The Long Game: Rewards Outweigh Risks

While regulatory and environmental risks are real, the payoff is immense. By 2030, lithium demand for EVs could exceed production by 50%. Smelters in Africa and South America will be critical to filling that gap.

Final Call:
- Buy TechMet Limited (TML.TO) for rare-earth exposure in Brazil.
- Add SQM (SQM) for lithium dominance in Chile.
- Consider Ivanhoe Mines (IVN.TO) for copper-cobalt plays in Zambia.

The era of China's mineral hegemony is ending. The next decade belongs to those who bet on smelters—and the geopolitical realignment they enable.