Two separate sources say Greenland Minerals and Energy, the Australian company that has agreed to sell a stake in a Greenland uranium and rare earth project to Shenghe 盛和 Resources, now denies the agreement includes an option for Shenghe to increase its interest to a controlling one once the project enters the development stage.
An option to acquire a controlling stake (up to 60%) in the Kvanefjeld (Kuannersuit in Greenlandic) project is discussed in clear terms in a Shenghe Shanghai Stock Exchange disclosure, as I was seemingly the first English-language source to report. The language suggests GME is not bound to sell Shenghe such a large share, should they ask for it.
The purchase option should be good news for GME, so it’s hard to see why they would deny it.
It’s been known for ever that some sort of more or less Chinese state-connected involvement would eventually begin in Kvanefjeld. GME had long had a non-binding agreement with a unit of China Nonferrous (中色); as explained in some detail in my post from last week, Shenghe’s main shareholders are also mostly state organs.
This information has now reached the mainstream media. Various experts quoted by Politiken draw (geo)political implications of the deal. Rear Admiral (kontreadmiral) Nils Wang, an Arctic expert with the Danish Defence College, expects the deal to attract attention in the US: “It’s very easy to interpret this not just as the classic Chinese-style long-term thinking, but also as two [the other one being General Nice (俊安集团) purchase of Isua] of China’s slowly creating for themselves in Greenland the same kind of soft-power influence they already have in Iceland”. In Greenland, Aaja Chemnitz Larsen of the opposition party Inuit Ataqatigiit (IA), talks of “a need to know how big an influence China can get over the project”, on which she intends to query the Greenlandic and Danish governments. So that’s already a Greenlandic politician and a Danish kontreadmiral for whom the 60% number and Shenghe’s state connections could be interesting data points.
All three parties in Greenland’s ruling coalition, Siumut, the Democrats and Atassut, have signed a “historic” agreement on infrastructure development that envisages expanding two existing airports and building three new ones as well as building a container port in Nuuk and new hydroelectric power plants. The guidelines sketched so far favour building several of these projects through public-private partnerships.
Infrastructure projects, and specifically airports, have been discussed in talks between Greenlandic authorities and potential Chinese investors. Such talks received a good deal of media attention in 2012, but didn’t stop there. During a visit to China last October, Vittus Qujaukitsoq, a minister whose portfolio included finance and trade, explained Greenland’s development plans to representatives from Sinohydro (中国水电), China State Construction Engineering (CSCEC, 中建) and China Harbour Engineering (CHEC, 中国港湾) among other companies. Besides airports, Vittus talked about hydraulic and mining infrastructure projects. The meeting, which appears to have gone unreported in Danish or English-language media, is a sign of continued Chinese interest in investing in Greenland. The coalition partners’ proposal, unveiled just over a month after Vittus returned from China, will surely make a lot more sense if backed by a degree of serious interest from Chinese SOEs.
Prospective Chinese investors might be less happy to learn about the controversy some aspects of the airport plans could generate in Greenland.
At any rate, the first Chinese investor in Greenland could be integrated miner China Nonferrous (中色), if metal prices keep the momentum behind the Citronen fjord and Kvanefjeld mines. Having one Chinese company there could help generate enough confidence for others to follow (and indeed China Nonferrous’ chairman has recently talked of the company playing such a pioneering role in Iceland).
Chinese interest in mining in Greenland hasn’t received a lot of media attention this year, after General Nice (俊安) bought the Isua iron mine, which probably no one would think of developing at the moment (‘cucurbitae caput non habemus‘). That doesn’t mean Greenlandic officials have stopped promoting the island’s ores to Chinese potential investors (there have been meetings in October), or that Chinese interest no longer exists; quite the contrary. As two projects China Nonferrous is expected to help finance and build approach the production stage, Chinese investment in Greenland could become a reality pretty soon.
My latest piece for the China Policy Institute blog discusses these developments.
China’s ambassador to Iceland Zhang Weidong 张卫东 was at China Nonferrous (中色) headquarters in Beijing last week, where he discussed the company’s aluminium smelter project in Iceland with chairman Zhang Keli 张克利 and Wang Hongqian 王宏前, second in charge at Nonferrous’ listed arm NFC. The ambassador highlighted the importance of the project, whose success could set the ground for more Chinese companies to take part in similar endeavours in the future. Chairman Zhang talked of China Nonferrous’ responsibility as a central SOE whose projects abroad, besides their economic significance, are important for the country’s image and foreign relations.
China Nonferrous’ formal commitment to the project so far has the form of what I understand is a non-binding agreement between NFC (中色股份) and local company Klappir Development, signed last July. The Chinese embassy has been involved all along, declaring their support for the project as early as 2013. The Chinese ambassador was present at the signature of the agreement in July, and a few days later toured the site of the projected plant and met with municipal government representatives.
In September, an Icelandic delegation paid NFC a visit in China. They were taken on a tour that included Jinjiang 锦江 Group’s aluminium smelter in Holingol (Chinese 霍林郭勒 Huolinguole, Mongolian Qoolin gool* Хоолингол) in Inner Mongolia, and two Shenyang-based companies controlled by China Nonferrous: NFC Metallurgical Machinery (中色沈阳冶金机械有限公司) and Northeastern University Engineering and Research Institute (NEUI, 东北大学设计研究院). The Icelanders are reported to have praised Chinese aluminium smelting technology and its high environmental standards.
Meanwhile in Iceland, Klappir are expecting to announce the start of the project next spring. NFC’ Wang talks of the Chinese and Icelandic sides both working for construction to start soon.
China Nonferrous are also active in Greenland. With the important proviso that their agreements there are also non-binding, they look poised to become the world’s northernmost miner at the Citronen fjord Zn+Pb project, in partnership with Ironbark, as well as GME’s partner at the Kvanefjeld U+REE mine. Both projects are advancing towards the production stage.
(Hat tip to Hjálmar Friðriksson.)
*This blog will implement Mongolian script toponyms as soon as I figure out the font and display issues. So far I’m going with the usual transcription. Here’s the name in Balk-Janhunen Romanisation, which I think deserves more publicity as a true transliteration system: Quuliv qhuul.
Vittus Qujaukitsoq, a Greenlandic minister (naalakkersuisoq) whose portfolio now includes natural resources, has expressed optimism that Ironbark’s zinc and lead project in Citronen Fjord is likely to succeed in attracting financing and start production as planned. The mine is located in the island’s far North (KNR). The statement came during a public meeting on the project in Nuuk, a step in the approval process for an exploitation license. Meetings planned in other Greenlandic towns have been suspended due to bad weather.
At least part of the financing for the Citronen mine is likely to come from China. Ironbark has signed (non-binding) agreements with China Nonferrous (中色) according to which the Chinese SOE could help finance and build the mine, as well as eventually own a stake in it. China Nonferrous is also expected to be involved in the Kvanefjeld U+REE mine in the south of the island. Another Arctic project of them is a plan to build Iceland’s fourth aluminium smelter in Hafursstaðir.
Although Chinese SOEs have been involved in exploration in Greenland since 2009 (and their interest in the island’s ores goes back to four years earlier), China Nonferrous seems likely to be the first Chinese company to actually take part in the extraction of Greenlandic minerals.
If it goes ahead, the project will require a couple hundred (mostly foreign) workers.
Citronen Fjord is above 80°N, probably the world’s northernmost mine. The second northernmost mine with Chinese involvement could well be in Russia: as I mentioned in my latest post on Yakutia, Heilongjiang province companies are considering investing in the Tirekhtyakh Тирехтях lead deposit, at around 69°N.
ASX-listed Ironbark have just applied for an exploitation permit for the Citronen Fjord zinc and lead project in Greenland’s far north, where they have been exploring for several years now. A series of public consultation meetings on the project will take place until next January. China Nonferrous (中色) is expected to become a partner in the financing and construction of the project.
The project is expected to employ a couple hundred people during its construction and exploitation phases. Ironbark documents submitted to the Greenlandic gov’t (and available online) explain that around 80% of these will be foreigners at first, but that they will be later “progressively replaced” with local staff. The mine’s remote location means that foreign staff will be flown in from abroad, meaning it will hardly be seen in Greenlandic towns. Although the main local trade union have aired some worries about immigrant workers and their employment conditions, the scale and location of the project likely mean it won’t create the sort of controversy that once surrounded the Isua iron project.
State-owned integrated miner China Nonferrous, through their main listed arm NFC (中色股份), signed non-binding agreements with Ironbark in 2013 and 2014 that envisage the Chinese SOE’s involvement in financing and building the mine and eventually owning a stake in it.
Nonfezza, also through NFC, are also involved in the Kvanefjeld rare-earth mine in the south of the island, a project that has already started trial production. They’ve also signed a preliminary agreement to build an aluminium smelter in Iceland.
Here’s an overview of Chinese involvement in Greenland mining.
Soon after visiting the NFC-built aluminium smelter in Pavlodar, Kazakhstan, Wang Hongqian 王宏前, the company’s GM, flew to Iceland to sign an agreement with local company Klappir Development about plans to build a new aluminium smelter in Hafursstaðir, between the villages of Skagaströnd and Blönduós (some 100 km west of Akureyri). Actually, Wang visited the Kazakh smelter a month before going to Iceland, but I just wanted to juxtapose the projects. The Hafursstaðir plant has a planned capacity of 120 tonnes per year, but in a second stage it might eventually reach twice as much, just a bit below that of Pavlodar smelter. PM Sigmundur Davíð Gunnlaugsson and Chinese ambassador Zhang Weidong 张卫东 were present at the signature. NFC (有色股份) is the largest listed subsidiary of state-owned integrated miner China Nonferrous.
The agreement is being called a letter (‘statement’) of intent (viljayfirlýsing) by Icelandic media and an MOU (谅解备忘录) by the Chinese embassy. Whichever the case, we might assume the agreement is non-binding, given that the project’s feasibility depends on securing electricity from nearby power plants, for which it must compete with other, more advanced projects. Icelandic reports talk of a turnkey deal for which NFC would help muster 70% of the financing from ‘Chinese and other’ banks. The Chinese embassy simply says NFC will conduct a feasibility study and then talk again.
Landvernd, an environmental NGO, are firmly against the idea. Nearby municipalities are OK with it, likely looking forward to the 240 permanent jobs the smelter would create.
Klappir has been trying to get NFC involved in building an Al smelter in Iceland for more than two years. Ma ‘Blubbermouth’ Jisheng 马继生, the previous Chinese ambassador and apparetly a Japanese spy, had welcomed the negotiations during a 2013 meeting with Klappir’s owner Ingvar Unnsteinn Skúlason.
There are already three aluminium smelters in Iceland. In 2013, the aluminium industry accounted for 35% of the country’s exports of goods and more than two thirds of its electricity consumption.
China Nonferrous is also involved in mining in Greenland, through agreements with Ironbark for the Citronenfjord zinc project and with Greenland Minerals and Energy for the Kvanefjeld uranium and rare-earth mine, where a pilot plant has already yielded some concentrate.