COPENHAGEN (Reuters) - With melting ice expanding access to the Arctic, investors from China to Canada are watching Greenland’s election next week for signs of the political will to get a flagging mining programme on the island back on track.
Greenland is hoping rising commodity prices can help attract foreign investment and get its fragile economy up to speed to realise a long-term goal of independence from Denmark.
Hype about a possible mining boom in Greenland after it achieved self-rule from Denmark in 2009 faded in a morass of red tape and a commodity price slump around five years ago. It left the economy reliant on fishing and grants from Denmark.
But with the country’s sole producing mine starting up last year - a ruby pink sapphire mine operated by Norway’s LNS Group - and Canada’s Hudson Resource’s anorthosite project due to begin operations this year, locals are again hoping more investments will follow.
Improved access to and from the Arctic island as the ice melts, and a more favourable investment climate, would go some way to alleviate the barriers to business of perpetual winter darkness and temperatures reaching as low as minus 50 Celsius.
With that in mind, a central theme for the new government elected on Tuesday will be to decide whether it wants to shift focus away from Denmark and strengthen economic and diplomatic ties with other countries, including China.
Chinese interest in Greenland comes after Beijing laid out its ambitions to form a “Polar Silk Road” by developing shipping lanes opened up by global warming and encouraging enterprises to build infrastructure in the Arctic.
The main contenders to lead the next government are Prime Minister Kim Kielsen of the social-democratic Siumut party and Sara Olsvig of the left-wing Inuit Ataqatigiit party (IA).
The most recent poll shows that the two parties are likely to continue working together in a coalition.
“A new government led by Kielsen and Siumut but without IA will create more openness towards attracting investments, including from China,” said Rasmus Leander Nielsen, assistant professor at the University of Greenland in Nuuk.
“IA is more sceptical. They want mining activity, but have more emphasis on the environment,” Nielsen said.
Demokraterne, Greenland’s third biggest party, and the new Nunatta Qitornai party are also pro-mining.
Greenland, whose capital Nuuk is closer to New York than the Danish capital Copenhagen, is more than three times larger than the U.S. state of Texas. But with a population of just 56,000, it is the most sparsely populated nation on earth.
It has shortlisted a Chinese consortium to expand three airports, causing concern in Denmark which has given its ally the United States wide military access - just one of many sources of friction as independence rhetoric sharpens.
China’s Shenghe Resources is also already partnering with Greenland Minerals and Energy to develop a rare earth and uranium project. Ironbark Zinc has asked state-owned China Nonferrous Metal Mining Group to help it finance and develop a zinc and lead project.
But development in the mining sector has so far been slowed by a lack of infrastructure and by heavy red tape, observers say. Assistant professor Nielsen said he would consider the uranium project dead if IA formed a government without Siumut.
The previous licence holder to the new ruby mine went bankrupt in 2016, as investors turned its back on the project that for years failed to secure the necessary approvals.
“I think the politicians are keen to get things moving. But it often drowns in bureaucracy,” said Bolette Maqe Nielsen, chairman of Australia’s Tanbreez Mining, which for more than six years has been negotiating with Greenland for a rare earth mining project.
The island lacks simple infrastructure, but is betting that the expansion of the three airports by 2022 will help kick-start a wave of economic activity.
“The commodity business cycle is pointing upwards. But Greenland must be alert and ready to act when prices go up, otherwise they might miss the chance once again,” said Brian Buus Pedersen, head of the Greenland Business Association.
For now, mostly smaller and mid-sized mining companies such as North American Nickel and Bluejay Mining are actively pursuing projects there, while larger Western industry players stay on the sidelines.
Prime Minister Kielsen and his cabinet travelled to Beijing last year, where he openly courted Chinese investors and officials. The government is also considering opening a representation office in Beijing, following one in Washington in 2014 and the opening of another in Iceland this year.
“To get really large scale projects to happen, it looks like they need Chinese investments,” said Ulrik Pram Gad, an associate professor at Aalborg University and a former official in Greenland’s government.
Reporting by Jacob Gronholt-Pedersen; Additional reporting by Simon Jessop; Editing by Alison Williams