China is one of the countries with the most complete variety and abundant resources of non-metallic minerals. Virtually all mineral species discovered worldwide can be found in China, with some resources occupying a uniquely prominent position and others endowed with natural advantages. Currently, about 89 types of non-metallic minerals have been identified with proven reserves, and there are more than 5,000 known mining sites.

1 Characteristics of Non-Metallic Mineral Investment

(1) The investment scale is relatively small, and the enterprise's output value is also relatively small. The investment scale for non-metallic minerals is much smaller compared to that for metallic minerals, rare-metal minerals, and energy minerals. Currently, China has approximately 80,000 non-metallic mineral enterprises, accounting for about 75% of the country's total mining enterprises; among these, 90% are small- and medium-sized enterprises. According to statistics from the Ministry of Natural Resources, in 2011 the total output value of non-metallic minerals (including metallurgical auxiliary materials and chemical raw materials) reached 384.8 billion yuan, representing 6.6% of the total output value of the mining industry. The output value of large non-metallic mineral enterprises is only slightly over 100 million yuan at most, and even the largest among them does not exceed 1 billion yuan.

(2) The investment payback period is long and highly sensitive to fluctuations in the economic cycle. Foreign banks and securities markets have stringent requirements for the economic feasibility of mining projects. For large-scale metal mines, the investment payback period should not exceed 5 to 7 years; if it exceeds 10 years, it becomes extremely difficult to secure bank loans or gain investor approval. Moreover, loan repayment periods rarely extend beyond 10 years. In China, the investment payback period for coal projects generally should not exceed 10 years, though for large-scale mines, this limit can be relaxed to a maximum of 15 years—only then do such projects stand a chance of receiving bank support. Compared with metallic and energy minerals, non-metallic minerals have lower added value. From mineral resource exploration and project feasibility studies through scheme design, preliminary design, construction, and finally production commencement, their investment payback periods typically take more than 5 years. At the same time, investments in non-metallic minerals are also affected by economic cycles. When economic growth is rapid and demand for non-mineral products is strong, investors may rush into building new mines. However, by the time these mines are completed and begin operations, the economy might already be entering a downturn, causing mineral prices to fall and reducing expected returns.

(3) There are many types of minerals, with diverse application fields and significant differences in mining, beneficiation, and processing technologies. There are many types of non-metallic minerals, and within each mineral species, there are multiple genetic types of ore deposits and diverse ore types. Moreover, mineral products derived from the same mineral species have a wide range of applications, yet their quality requirements vary considerably. Consequently, the mining, beneficiation, and processing technologies differ significantly among these minerals. For example, the beneficiation processes for kaolin ores include natural sluice settling in mines, hydrocyclone separation, strong magnetic separation for iron removal, room-temperature flotation for sulfur removal, selective flocculation for alunite removal, and ultrafine flotation. Depending on their different genetic origins, kaolin ores may require different beneficiation processes tailored to specific product objectives. Given the diversity of non-metallic mineral species, many mineral products can serve as substitutes for one another. Although each mineral has its own unique characteristics, they can also be interchanged under certain conditions. For instance, dozens of minerals—including marble, limestone, talc, pyrophyllite, tremolite, diopside, wollastonite, kaolin, bentonite, and sepiolite—can be used as fillers; while more than ten minerals—such as silica sand, diatomaceous earth, perlite, volcanic ash, glauconite, zeolites, vermiculite, and garnet—can serve as filtering materials.

2 Main Risks in Non-Metallic Mineral Investment Decisions

2.1 Geological exploration risks

China is one of the countries with the most complete variety and abundant resources of non-metallic minerals. Virtually all mineral species discovered worldwide can be found in China, with some resources occupying a uniquely prominent position and others endowed with natural advantages. Currently, about 89 types of non-metallic minerals have been confirmed to have proven reserves, with more than 5,000 identified mining sites. Among these, gypsum, limestone, barite, graphite, talc, magnesite, and bentonite rank first in the world; pyrophyllite, wollastonite, fluorite, and mirabilite rank second; and asbestos, perlite, zeolite, and borax rank third. Other notable minerals include kaolin, bauxite, attapulgite, sepiolite, diatomaceous earth, kyanite, illite, and celestine. The country also boasts abundant resources of granite and marble, characterized by excellent quality and beautiful colors, offering tremendous potential for their development and utilization.

In general, China has relatively few large deposits of non-metallic minerals and a greater number of small- and medium-sized deposits. Among the mineral species with abundant resources, there are more low-grade ores and fewer high-grade ores. According to statistics on 165 non-metallic mineral deposits that have been explored nationwide, there are 27 large deposits, 23 medium-sized deposits, and 115 small deposits. Among the 15 major asbestos mines that have been identified nationwide, only 3 have an average grade above 4%, 4 have grades between 3% and 4%, and 8 have grades below 3%. Of the 14 major flake graphite mines nationwide, only 3 have an average grade above 10%, 4 have grades between 5% and 9%, and 7 have grades below 5%.

Since mining investments target mineral resources buried deep underground—resources that are complex and highly variable in composition—the process of exploration, identification, and ultimately exploitation is inevitably accompanied by continuous exploration and research, and always involves risks to varying degrees. Even after extensive geological surveys, unforeseen geological factors may still arise. Consequently, some mining projects initially forecasted to be highly profitable can still face the risk of losses due to the emergence of unexpected geological risks. Moreover, different deposit types within the same mineral species yield products with varying uses and prices once processed; sometimes the differences can be quite significant. For instance, many kaolin deposits, owing to their inherent geological characteristics, cannot produce kaolin of coating-grade quality suitable for papermaking.

2.2 Mining Technology Condition Risk

Non-metallic mines primarily rely on surface mining, while underground mining mostly employs methods such as backfilling, stoping with ore left in place, room-and-pillar mining, and sublevel caving. The processing of non-metallic minerals mainly involves ore dressing and purification, ultrafine grinding, and surface modification. The primary ore-dressing techniques include gravity separation, flotation, and magnetic separation. In the extraction of non-metallic minerals, the following aspects should be given full consideration.

(1) The structure and its variations in non-metallic mineral deposits. This includes the structural characteristics of the deposit, the morphology of ore bodies, their anisotropic extent—length, thickness, and degree of variation—spacing between ore bodies and thickness of interlayers; the nature and thickness of overburden in open-pit mines or the stability of surrounding rock in underground mines; the quality of ore and its processing performance, as well as any changes therein; coexisting and associated minerals that can be comprehensively utilized; hydrogeological conditions and mining technical parameters—all these factors, any one of which undergoing change can significantly impact production costs, even leading to sluggish sales of the final product. Even within the same type of non-metallic mine, differences among them can be substantial.

(2) The sales radius of non-metallic mineral products. Most non-metallic mineral products are inexpensive, and the proportion of transportation costs in the product price determines their market sales radius. Given the large volumes of non-metallic mineral products and the availability of low-cost transportation methods, investment projects can enhance their market competitiveness and expand their market reach.

(3) Energy security and other mining conditions. Some non-metallic mines are highly energy-intensive, so the degree of energy security is also a prerequisite for investment. In addition, the proximity of auxiliary raw materials, water and drainage conditions, and the impact of climate on open-pit mining operations can all significantly affect a company’s costs and operational performance. External conditions at a mine site sometimes serve as decisive factors in investment decisions—this represents yet another key difference between investments in non-metallic mining and those in metallic and energy mining industries.

2.3 Ecological and environmental protection risks

The extraction of any mineral resource inevitably causes certain damage to the environment and ecosystems, significantly impacting the production and livelihoods of local communities and thereby driving up the costs of ecological and environmental restoration. For instance, open-pit mines not only harm mountain slopes and water bodies but also occupy vast tracts of land for waste rock disposal, severely disrupting natural landscapes. During the production and processing stages, extensive ground subsidence, discharge of mine water, and wastewater from ore-processing plants all have adverse effects on environmental protection. Moreover, the large volumes of tailings generated by ore-processing plants require substantial land for constructing tailings ponds, which can contaminate water systems. Additionally, the tailings dams themselves pose significant safety risks to downstream industrial and agricultural activities as well as to the lives and property of local residents. Ecological and environmental remediation and restoration efforts are both costly and highly challenging. As national environmental laws and regulations become increasingly stringent, mining companies may face even higher environmental standards, leading to increased investment and operational costs and ultimately reducing project profitability.

2.4 Security risk

Another characteristic of mining activities is their susceptibility to various types of safety accidents. Most mines require blasting operations, involving large quantities of explosives and detonating equipment. In particular, underground mining operations pose significant safety risks, such as roof collapses, mud surges, cave-ins, and runaway mine cars. With China’s rapid economic development, the rising standard of living among the population, and the new government’s implementation of a people-centered governance philosophy, the state will undoubtedly enact stricter safety laws and regulations. These regulations will mandate that mining enterprises equip themselves with advanced safety monitoring devices and facilities and rigorously enforce safety measures, thereby prompting mining companies to increase their financial investments in safety.

2.5 Extended Replacement Investment Risk

Once the basic construction of a typical industrial enterprise is completed, it can procure raw materials externally and engage in continuous production, requiring only working capital to sustain its reproduction. As long as the enterprise does not expand its production capacity, there is no need for further basic construction. However, mines are different: after completing the initial investment and starting production, their operational sites continually evolve during the mining process. As the prepared reserves diminish and the exploitable ore bodies are exhausted, mines must constantly expand outward or extend deeper underground—whether by widening and stripping open-pit mines or by developing and extending underground mine shafts and tunnels. New operational sites must be continuously opened up to compensate for the depletion of existing reserves, thereby ensuring the mine’s continued normal production. When all the mineable reserves of a particular mine have been fully extracted, in order to maintain the balance between supply and demand for mineral products, the mine must undertake new infrastructure construction, extend its existing capacity, or take over from the previous operator. Therefore, basic construction in mining enterprises must run throughout the entire mining production process at a certain proportion, and corresponding infrastructure investments must be continuously guaranteed. This is a special rule that distinguishes mining enterprises from ordinary industrial enterprises. Consequently, investing in mining development projects requires continuous and sustained capital input to support the enterprise’s simple reproduction. Although the capital invested in maintenance and improvement works also forms fixed assets, these assets are primarily used for stripping waste rock in open-pit mines, developing new mining levels, and excavating underground tunnels and shafts. Once the reserves in a particular mining section have been completely exhausted, such assets almost lose all residual value and must be rapidly renewed. This significantly reduces the project’s profitability.

3 Non-Metallic Mining Investment Risk Mitigation Strategies

(1) Attach great importance to geological exploration work and guard against resource risks. Before investing in non-metallic minerals, it is essential to conduct geological exploration to determine whether the mineral species targeted for investment can, under the inherent natural conditions of the deposit type or ore quality, reliably yield the expected products. For example: diatomaceous earth filter aids are in high demand, yet some diatomaceous earth deposits in China are actually diatomaceous clays; moreover, certain diatom species used in these deposits are of poor quality. If a filter aid plant were established relying on such mines, the inherent deficiencies would inevitably lead to serious difficulties. Another example: in some of China’s bentonite deposits, the montmorillonite content is relatively low, making it difficult to compete effectively when attempting to produce high-end bentonite products. Furthermore, bentonites come in calcium-based and sodium-based varieties; the latter have far broader applications and significantly higher prices than the former. As for gypsum deposits, some are dominated by dihydrate gypsum, while others are dominated by anhydrite. The former have much wider applications and greater value than the latter.

These factors must be clearly understood when making investment decisions. Generally, it is advisable to engage qualified professional geological institutions to conduct geological surveys. At the same time, enterprises themselves should also equip themselves with appropriate geological personnel to carry out preliminary assessments of the resources they intend to invest in and provide expert geological evaluation recommendations. Mineral exploration typically involves four stages: pre-exploration, general survey, detailed survey, and exploration. At each stage of work, technical and economic evaluations must be conducted to determine whether to proceed to the next stage of exploration. Once a mineral deposit is found to lack economic potential, the subsequent stage of work should be promptly abandoned, thereby minimizing unnecessary expenditures and costs.

(2) Carry out application trials, process research, and select appropriate processing equipment to mitigate technological and market risks. It is essential to gain a comprehensive understanding of the mining, ore-dressing, and mineral-processing technologies, equipment, required capital investment, and production costs associated with the mineral types you are considering investing in. For the same mineral type, there often exist several different mining, ore-dressing, and mineral-processing technologies and equipment options. These options vary in terms of technological sophistication, suitability for different types of ore deposits, quality and applications of the resulting products, as well as investment amounts, production costs, and profitability. Different ore deposits with varying genetic origins, different product targets, and different investors may lead to different choices. If the wrong choice is made, it could ultimately result in investment failure. Therefore, a thorough understanding of the non-metallic mineral deposits under consideration is crucial, and directly impacts the success or failure of your investment decision.

(3) Maximize the mechanization and automation of production to achieve large-scale operations. In developed countries, more than 80% of non-metallic mines employ open-pit mining methods, utilizing modern processes and equipment. Mechanized continuous mining techniques and increasing levels of production automation have significantly boosted mining capacity and labor productivity. The application of information technology is becoming ever more widespread, and the industry is moving toward the development of smart mines. For example, gypsum enterprises in countries such as the United States and Canada integrate mining, ore dressing, and product processing into a single operation. Westrock Industries in Canada operates three gypsum mines with a combined production capacity of 1.5 million tons per year, and its annual gypsum board production capacity reaches 95 million square meters. In the UK, ECC Company has a kaolin production capacity of 3 million tons per year, accounting for over 80% of the country’s total output. The Omya Group’s plant in Norway produces 3 million tons per year, making it the world’s largest heavy calcium carbonate production facility.

(4) Strengthen research in the application industries of non-metallic minerals, leverage their resource characteristics, and develop high-value-added products from non-metallic minerals. The non-metallic minerals and their deep-processing industries are strategic emerging industries that the state actively supports for development—particularly non-metallic mineral materials and their deep-processed products, which are widely used in fields such as aerospace, aviation, military industry, energy conservation, and environmental protection. Therefore, it is essential to strengthen research on these industries and gain a deeper understanding of the demands from downstream sectors, using these demands to drive technological advancement. According to the "Outline for the Development of Emerging Industries in China's Building Materials Industry," priority should be given to developing high-performance thermal insulation and heat-insulating materials as well as inorganic fire-resistant insulation materials for energy conservation and environmental protection; various insulating materials, conductive coatings, optical waveguide materials, and semiconductor materials for the electronics industry; purification, refining, and cracking materials, sealing materials, molecular sieves, and catalysts for the petrochemical industry; high-grade refractory materials and fluxing agents for the metallurgical industry; high-performance friction and sealing materials for the automotive and transportation sectors; and ultrafine, active, specialized functional fillers, mineral-based feed additives, and other functional materials for the light industry sector.