The largest cooperation project for mining between China and Burma has been agreed, and will see a Chinese metals giant mine northern Burma for nickel.

Taiyuan Iron and Steel (Group) Company, the largest steel manufacturer in the world, will operate the project with China Nonferrous Metal Mining (Group) Company (CNMC) in Tagaung Taung, Sagaing division. Taiyuan consumes 100,000 tonnes of nickel for steel production each year, and will be desperate to secure cheap and reliable supplies for the foreseeable future.

Estimates puts the quantity of high-grade nickel in the Tagaung Taung site at around 30 million tonnes, and operations are due to commence next year with an expected lifespan of two decades.

It is the second major mining contract to be agreed between Burma and China in the space of a month: Chinese weapons manufacturer Norinco last month secured a deal to mine for copper in Monywa, also in Sagaing division, but reports followed that the deal was sweetened by the sale of heavy artillery to Burma weeks prior.

Taiyuan and CNMC meanwhile look set to sink around US$800 million into the project, which will generate some 85,000 tonnes of nickel-iron, containing 22,000 tons of nickel, each year. Smelting and “service” facilities are already under construction, according to Chinese press.

Nickel is one of the most vital and costly components for making stainless steel, and is also used in the batteries of new ‘hybrid’ cars, as well as coinage.

China, whose economy is growing at around 10 percent year-on-year, is acutely vulnerable to haemorrhaged supply chains of the commodity due to its remarkable demand for steel. It is the world’s biggest producer and consumer of steel, and a surge in the value of nickel in 2007/08 will have hit China’s steel and construction industries hard.

Concerns about the environmental impact of the Sagaing mine, likely open-cast, will plague the project. The refining and cleaning of mined metals often utilises noxious chemicals that can be hazardous to local communities if not properly disposed of.

It remains unclear where the energy to smelt large quantities of metal will come from, although northern Burma is fast filling up with Chinese-backed hydropower projects which could facilitate where the domestic electricity supply cannot.

China is rapidly becoming one of the Burmese junta’s key trading partners, and has a particular eye on Burma’s vast capacity for hydropower and gas supply.