Greenland’s boom still more talk than action

By Alistair Scrutton, Reuters

NUUK, Greenland — The promise of a resources boom has Greenland’s locals both eager and anxious, while the European Union sees it as a battleground with China, but the island is still a long way from producing anything. Retreating ice is exposing huge deposits of iron ore, rare earths and hydrocarbons, but it has yet to launch a single major mining project, and oil and gas production is a decade away at best. Greenland may award one of its biggest mining exploitation licenses this summer, a US$2.3 billion project by UK-based London Mining Plc that will supply China with around 15 million tons of iron ore a year. It is a high-profile project that has awoken concerns about Chinese geopolitical influence from the likes of the EU. Last summer China’s outgoing President, Hu Jintao, paid a three-day visit to Denmark, and top of his agenda were the mineral riches of Greenland, a self-governing nation of just 57,000 people within the Danish kingdom. EU officials, fearing losing out, flew to Nuuk just days before the Chinese visit to sign a letter of cooperation on accessing its “strong potential” of “critical” materials, including rare earths at competitive prices. In 2011, U.S. Secretary of State Hillary Clinton also paid a visit to signal her country’s interest in rare earths, a group of elements needed in most electrical devices from mobile phones to televisions. But while Greenland has approved about 140 exploration licenses, not one mining project, including London Mining, has secured financing. There have been no major finds of oil or gas, and if there were discoveries, production would not begin for at least a decade. When asked about how much Greenland could make in revenues from oil, Greenland’s mining and petroleum minister Ove Karl Berthelsen replied, “Oil? We have to find it first.” “People say mining has almost started,” Finance Minister Maliina Abelsen told Reuters. “It is a lot more difficult than that. This is not the best investment climate for finance. I worry expectations may be too high.” Indeed, the mining world is in upheaval as the price of basic materials such as iron ore and coal tumbled last year on Europe’s economic malaise and slowing growth in China. Brazil’s Vale, the world’s biggest iron ore miner, posted its first quarterly loss in 10 years last quarter, while giants BHP Billiton and Rio Tinto both replaced their bosses and put key projects on ice as they slash costs. And Tuesday’s election win by Greenland’s social democratic Siumut party, which campaigned on greater control and heavier taxation of foreign mining, could further complicate matters.

While most in Greenland accept that foreign investment is needed to wean it off an annual grant from Denmark, environmental concerns and unease at the cultural impact of a mining invasion — about 2,000 Chinese workers may be flown in for the construction of the London Mining project alone — featured strongly in the election. Mining in the Pipeline Construction on the London Mining project could start in 2014, if all goes well, while three other mining projects could get exploitation permits in the next year, the government said. That includes Tanbreez, a roughly US$185 million rare earths project by Australian-based company Rimbal and a US$500 million project in the remote north by Australia’s Ironbark, which could be one of the world’s 10 biggest zinc mines. Under four years of Prime Minister Kuupik Kleist, whose party came second in Tuesday’s vote, Greenland opened up to investors, with its mining exploration policy ranking 14th out of 96 jurisdictions in a 2012-2013 survey of mining companies by the Fraser Institute, ahead of Alaska and Western Australia.