| NUUK, March 13
NUUK, March 13 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
Greenland may award one of its biggest mining exploitation
licences this summer, a $2.3 billion project by UK-based London
Mining Plc that will supply China with around 15
million tonnes 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
But while Greenland has approved about 140 exploration
licences, 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 $185 million rare earths
project by Australian-based company Rimbal and a $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.
Greenland officials tout these projects as saviours for the
economy of the world's most thinly populated country, which is a
quarter the size of the United States.
London Mining's project could provide revenues equivalent to
between 10 and 20 percent of the annual grant from Denmark.
"We're a small economy. A small amount of money from a
global point of view has a huge influence," said Berthelsen.
But even its small number of projects could come unstuck.
A rare earth deposit being explored by Australian-owned
Greenland Minerals and Energy could be one of the
largest outside China, which accounts for more than 90 percent
of global production.
But rare earths are often intertwined with uranium, as is
the case with this project, thwarting efforts because of
Greenland's zero tolerance on mining radioactive materials, a
rule it inherited from Denmark.
"For the moment we have scaled down," said Ib Laursen,
operations manager at Greenland Minerals and Energy. "We are
waiting for some legislative clarity."
U.S. giant Alcoa Inc is considering building an
aluminium smelter on Greenland's west coast, strategically sited
between European and North American markets. It could entail the
import of thousands of workers, possibly from China.
The smelter would be fed from mines as far apart as Brazil
and Australia, supplying aluminium to the global market.
But Alcoa has not yet decided whether to go ahead with the
project as the sector struggles with overcapacity; firms are
still taking out capacity to curb losses.
"Financing for mining is very tight, and it will be more of
a problem in 2013 than in 2012. There is a shortage of
risk-taking capital at the moment," said a senior government
"I would be happy if only two of these projects started,
given the global financial situation."
OIL AND GAS
Government officials say Greenland's northeast offshore
fields could have 31 billion barrels of oil and gas, while the
west, including Canadian waters, could hold 17 billion barrels.
But drilling in the western offshore region in 2010 and 2011
failed to yield any discoveries despite a $1.2 billion campaign
led by British explorer Cairn Energy..
Cairn said by email that it might carry out more drilling in
2014 but only envisaged "limited operations" in 2013.
Operators, who also include Royal Dutch Shell, have
no firm plans for drilling this year as they hold plenty of less
difficult acreage elsewhere.
Drilling is very expensive as remote locations and tough
conditions require extra precautions, such as a back-up rig, or
extra search-and-rescue vessels.
"In terms of drilling, Greenland is still under-explored. It
is still early days, and a lot of works needs to be done on
interpreting and understanding the subsurface data," Lynn
Morris, analyst at Europe Upstream Research for Wood Mackenzie.
The government expects to announce within two months the
results of bidding on 11 blocks on the remote northeast.
"There are very high expectations with this area," said a
senior government official in Greenland who asked to remain
anonymous. "I would not expect to see any drilling wells for at
least 10 years or so."
"North Eastern offshore sites are more frontier than the
west, and the conditions are far more difficult - deeper water,
harsher climate. This area is geologically analogous to Mid
Norway and the Barents Sea," Wood Mackenzie's Morris said.
That said, Greenland's long-term promise remains alluring.
"In one way we get a little bit worried in the short term,
but in the longer view we are less concerned," Berthelsen said.
Damien Degeorges, founder of the Arctic Policy and Economic
Forum, say few countries could afford to be complacent.
"Greenland is a long-term strategy," Degeorges said. "Like
the Arctic, it will not be some 10-year fashion that will go
away. You cannot take the risk of not being there."
(Editing by Will Waterman)