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Thursday, Jul 25, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Gold

Chinese companies get thirteen mining concessions in Nicaragua

Presence of Chinese businessmen in Nicaragua’s mining sector is part of the dictatorship’s strategy to evade U.S. sanctions

Chinese companies get thirteen mining concessions in Nicaragua
Miners carry sacks with rocks to be crushed, in order to extract gold some 10 km from the town of Rosita in the North Caribbean Coast Autonomous Region in northeast Nicaragua. Photo by Inti Ocon via AFP.

China has been approved to take over large areas of metal mining in Nicaragua with the direct assent of President Daniel Ortega and Vice-President Rosario Murillo.

Three Chinese companies received thirteen mining concessions between October 2023 and April 2024. These amounted to approximately 13 lots with an equivalent of 11.66 per cent of the total hectares granted for metals mining in Nicaragua, according to to data from the Ministry of Energy and Mines (MEM).

The three companies—Zhong Fu Development S.A., Thomas Metal S.A., and Nicaragua XinXin Linze Minera Group S.A.—control the thirteen metallic mining lots in Nicaragua granted to China. Each concession is valid for 25 years, giving these companies exclusive rights to explore, exploit, and establish beneficiation plants to process mining materials.

Zhong Fu Development S.A. holds the most metallic mining concessions in Nicaragua among Chinese companies. On February 28, 2023, the company requested eight lots in the North Caribbean and the departments of Chinandega and Jinotega from the Ministry of Energy and Mines.

Eight of these lots are in the North Caribbean Coast Autonomous Region (RACCN) and part of a municipality in Jinotega. Four more are located in the department of Chinandega, and one is in the Autonomous Region of the South Caribbean Coast (RACCS). Additionally, three applications are pending. These include two in the North Caribbean and one in the department of Estelí.

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Concessions bump Chinese company into top 5

The ministry approved the Santo Tomás concession on October 10. The concession is located between the municipalities of Cinco Pinos and Santo Tomás del Norte in Chinandega. Twenty-one days later, on October 31, the ministry authorized six more of the eight requested concessions, including Columbus I, Kuikuinita I, Mulukukú, Puerto Cabezas, Siuna, and Waslala.

In total, seven of the eight concessions received approval in less than eight months. Additionally, Zhong Fu Development, S.A. distinguished itself by acquiring a concession transfer from Compañía Minera Internacional, S.A. (Comintsa) less than a month before the U.S. Treasury Department sanctioned Comintsa.

The U.S. Treasury Department sanctioned Comintsa due to regulatory and compliance issues. Consequently, the sanction had a detrimental effect on its operations and the company unloaded some of its concessions to other companies before enforcement action.

“Gold is Nicaragua’s main commodity export, and this action (the sanction) is intended to degrade the Ortega-Murillo regime’s ability to manipulate the sector and benefit from Comintsa’s corrupt operations,” said the Treasury Department.

Within a year, Zhong Fu Development pulled in the most mining concessions among Chinese companies in Nicaragua. It’s since developed into one of the five largest mining companies in the country. It ranks behind Calibre Mining (TSX: CXB) (OTCQX: CXBMF), Desarrollo Minero, Colombian company, Hemco, and the British company, Condor Gold (AIM: CNR) (TSX: COG).

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Company must make concessions for artisanal miners

On September 27, 2023, Thomas Metal S.A. entered the Nicaraguan mining business by applying for the Wonderful Gold concession in Villanueva, Chinandega. The company is represented by Chinese citizen Xiangming Gu.

The Ministry of Energy and Mines approved the concession less than two months later. Subsequently, on December 1 and 20, Thomas Metal applied for two more concessions, Carambola and Dragón Rojo, also in Chinandega.

These were granted on March 15 and March 20, respectively. The Carambola concession excluded 0.32 hectares within the buffer zone of the Estero Real Delta Natural Reserve. Thomas Metal’s three concessions total 10,308 hectares in Villanueva. The company must allow existing artisanal miners to continue their work within the concession area. Villanueva’s villagers have engaged in artisanal mining for decades, and it remains to be seen how they will coexist with Thomas Metal.

Nicaragua Xinxin Linze Mining Group, S.A has received over 37,000 hectares for exploration and mining.

The company applied for the Chinotega and Caribe lots in October of 2023. The ministry granted the 651-hectare Chinoteg concessions in March of 2024. The company had previously applied for the 36,610 hectare Nuevo Bijagual lot in November of 2023, and received it in February. These concessions total 37,261 hectares.

In Nicaragua, mining industry exports, primarily gold, are on the rise. Between 2019 and 2023, gold exports increased by more than 226.5 per cent, according to official data from the Central Bank.

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Part of the dictatorship’s strategy to avoid U.S. sanctions

In China, the demand for gold is also growing rapidly.

Beijing is using gold to diversify its reserve funds. The People’s Bank of China being the largest official sector buyer in 2023, purchasing 7.23 million ounces, according to the World Gold Council.

This trend continues to rise, as the bank added 60,000 troy ounces to its reserves in April 2024. This marked its eighteenth consecutive month of leading gold purchases. This high demand is driving the price of gold above its all-time highs. The cost of each troy ounce has already broken the record at USD$2,330 this year.

The environmentalist and president of mining critic Fundación del Río, Amaru Ruiz, asserts that the management of mining concessions in Nicaragua has been “quite discretional.” He claims that many environmental studies are unknown and affected communities have not been consulted.

Amaru Ruiz has been in exile since the end of 2018 after receiving threats, attacks on his home and facing the risk of arrest in retaliation for his work defending human rights.

Ruiz also warns that the companies obtaining concessions are not always the ones extracting the metals, leading to an “under-registration” of Chinese mining companies in Nicaragua. He notes that Asian intermediaries are buying gold in concessions granted to other companies, creating a “nebula” in the concession process.

Ruiz believes that the presence of Chinese businessmen in Nicaragua’s mining sector does not yet signify a market transformation but is part of the dictatorship’s strategy to evade U.S. sanctions.

 

Calibre Mining is a sponsor of Mugglehead news coverage

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