Hebei-based Zhuoda 桌达 Group will build homes and social infrastructure in Yakutsk, capital of the Sakha Republic aka Yakutia in the Russian Far East, with a planned investment above $500m over six years (凤凰, Дальневосточный капитал). The announcement comes after more than a year of contacts between the Chinese developer and company and government officials from Yakutia.
Yakutsk daily Ekho stolitsy exultantly asserts that “more than eight thousand residents of the capital will be able to have not just an improvement, but a cardinal change in their living conditions”. Yakutsk mayor Aysen Nikolaev Айсен Николаев adds that Zhuoda’s development will help certain local developers “sober up” and decelerate real estate price growth.
This will be the first time Zhuoda is building on permafrost, a challenge highlighted by pretty much all the Chinese and Russian sources linked to above. Yakutsk is a few hundred kilometres south of the Arctic circle, but it honorarily belongs inside, with January daily averages below -38°C. The most talked-about Zhuoda development abroad is in a milder climate: they were the first Chinese developer to enter Iskandar, a special economic zone being built in Johor state, Malaysia, facing Singapore and expected to be linked to it by rail at some point. Other developers followed Zhuoda into Iskandar and now some suspect they might already built a bit too much. (‘Iskandar’ makes you think of Alexander the Great and that’s sort of right: the area is named after a sultan of Johor of that name, which is a Persian-mediated form of Alexander.)
London and Toronto-listed Anglo Pacific, who collect royalties from mining projects in Australia and other locations, announced yesterday that they still have the right to a 1% royalty on gross revenue for the Isua iron mine in Greenland, even after its transfer to General Nice (俊安集团).
They also say they “intend to waive” their right to claim the $30m they paid London Mining for the royalty back in 2011. The royalty agreement stipulated that Anglo Pacific could have their money back in certain circumstances, such as London Mining not getting an exploitation license for the mine by the end of 2013. London Mining did get their permit on time and it’s not clear if any other circumstances triggering a money-back clause have come about. London Mining has gone into administration anyway, so you’d guess those repayment rights were becoming abstract enough for Anglo Pacific to magnanimously give up on them.
If we are to believe the consensus among Chinese analysts and industry voices channeled by business media, the Isua mine is not terribly likely to produce a revenue to get royalties from, at least in the short term. Those views, summarised in my ‘silly-melon‘ post from nine days ago, suggest that General Nice is more likely to sit on the Isua license waiting for it to become worth more, rather than develop it any soon.
‘Silly melon’ is a literal translation of shagua 傻瓜, a Chinese way of saying ‘silly’, often affectionately. The quote in the title (‘we haven’t got gourds for heads’), which employs the same metaphor as the Chinese word, is from Apuleius (Metamorphoseon I.15) and sounds like what General Nice could conceivably if you asked them if they want to invest $2.5bn in developing the Isua mine given current iron ore prices.
Ola O.K. Giæver jr., the Norwegian pilot and businessman who closed a deal last May to sell 100 hectares of land in Lyngen, northern Norway, to Huang Nubo 黄怒波, tells local news site nord24 that the sale is not over. He doesn’t go into much detail about the reasons, but he makes clear this is none of Huang’s fault: “I only know that the Chinese aren’t making any investments until relations between Norway and China are in order.”
It’s been almost two weeks since the announcement that General Nice (俊安集团) has acquired rights to the Isua iron project in Greenland, and Chinese business media’s reporting on it starts to show a pattern of mild skepticism about the likelihood of the new license owner actually developing the mine any soon.
Writing for Caixin (财新网), Zhang Boling 张伯玲 quotes someone involved in the transfer of Isua to General Nice to the effect that it was a real bargain: the price is lower than you’d imagine, and “not all of it in cash.” The source stopped short of disclosing any numbers though. Zhang’s piece also channels skepticism from industry sources that General Nice can get investors attracted to a project given the lack of infrastructure and development and transportation costs given the current state of the iron ore market.
Zhang Guodong 张国栋 from Yicai 一财 contacted General Nice but was unable to elicit much comment other than that there will be public statements when the time comes. Industry sources recall that, a few years ago, when the iron market was looking better, many international majors including a large Chinese steelmaker were looking at Greenland with interest, where deposits are large, reserves abundant and you tend to bump into high-grade magnetite. Since numbers don’t add up at the moment, General Nice might be thinking strategically, in terms of NSR shipping becoming feasible at some point. Zhang Lin 张琳, an analyst with LGMI (兰格钢铁网), enumerates the hurdles: a short window for extraction each year, high shipment costs, lack of basic infrastructure, leaving “not much room for profit”. An unidentified industry source also reminisces the days when Isua was in everyone’s eyes, while now, they add, “with even the three largest miners being unable to sell their iron ore, only a fool would develop an iron ore mine in Greenland.” Or literally a ‘silly melon’ (shagua 傻瓜).
The suggestion is that the deal is rather speculative: by throwing around the idea that they’ve got resource assets, General Nice (who have HKEX and SGX-listed subsidiaries) might be able to get their share prices a bit up.
A piece by Zhang Han 张涵 for the 21st Century Business Herald (21世纪经济报道) reports doubts about whether General Nice will be able to deal with the financial and political issues that got the project stalled the previous times. The $2.35bn figure quoted as the investment required by the project is still a “variable” taking on a different value now as conditions might have changed from London Mining’s days.
Gunnlaugur Jónsson from Eykon, CNOOC’s (中海油) local partner for their license in the Icelandic sector of the Jan Mayen area, tells TV station Stöð 2 that they’re undeterred by falling oil prices. Actually, says Gunnlaugur, the current price level makes the 2d measurements they plan to carry out this year even cheaper. If they find large enough deposits, he adds, they might be able to make a profit with oil as cheap as $60 per barrel (Vísir).
Such optimism about Arctic oil is not terribly common these days. CNOOC’s neighbour offshore Iceland, Faroe petroleum, relinquished their license last December after preliminary studies yielded disappointing results.
The license for much talked about Isua iron project in western Greenland has now gone to Jun’an aka General Nice Group (俊安集团), who acquired London Mining Greenland through its Jersey parent last December, the Greenlandic gov’t informed yesterday (that link also provides a profile of General Nice). The previous parent, London Mining, went into administration last year after Ebola hit Sierra Leone, the country where their main asset, the Marampa iron mine, is located. London Mining, a British company, had considerable Chinese contacts, some of which I referred to in my April 2013 article on the Isua issue.