Greenland gov’t allowed to review uranium project agreement; confirms Shenghe “intent” to buy controlling stake

Greenland’s department of natural resources has had a third-party legal firm go over the contract giving Shenghe 盛和 a stake in the Kuannersuit (Kvanefjeld) uranium and rare-earth project in the island’s south. The review was meant to establish whether the agreement gave a Shenghe a right to increase its stake to a controlling one, a possibility I first mentioned almost eight months ago. According to a Greenland government press release, the review has concluded that “the contract does not give [Shenghe subsidiary] Leshan [乐山] Shenghe the right to overtake a controlling share” of GME, the Australian firm that owns the licence. Although the press release doesn’t mention it, the department’s head also confirmed to Sermitsiaq that the agreement includes “non-binding statements of intent” regarding Shenghe eventually increasing that stake. This is consistent with those earlier reports, according to which Shenghe would like to have up to a 60% stake in the project if things go well once it enters production.

This ‘60% saga’ began when I noticed that a Shanghai stock exchange press release by Shenghe said the agreement, that involved the sale of one eighth of GME, contemplated eventually increasing the stake to 60% once the project enters the production phase. (I gave the exact phrasing in Chinese, with translation, in a later post.) The news subsequently spread to Danish and Greenlandic media, generating a little brouhaha in which GME denied, then admitted the reports, and Greenlandic officials promised to “investigate” the matter, since an eventual takeover of the project would need their approval. Such an investigation was complicated by GME’s refusal to show the Greenlanders the contract, plainly stating that they didn’t trust “the government’s ability to maintain and protect the confidentiality of documents which, under Australian law, must remain private and confidential between GME and Shenghe” (my back-translation). The government then reportedly said they wouldn’t let the project go ahead if they didn’t know the text of the agreement.

This raises the question of why anyone felt a need to have a third party review the agreement. It has already been reviewed by Australia’s Foreign Investment Review Board, which approved it in November. Shenghe is, in practice, controlled by the Chinese ministry of land and resources, which has circulated information praising the Greenland operation as partially “implementing a vision on mining cooperation” reached by Jiang Daming 姜大明 and Greenland officials in 2015; this makes it clear that relevant Chinese state organs are well acquainted with the details of the agreement. As a non-expert in Greenlandic law, I found the fact that the Greenlandic government could be left out of this knowledge rather counter-intuitive. The purchase would have been blocked if GME had refused to ‘trust’ the ability of Chinese and Australian authorities not to leak the document.

I reached out to Jørgen Hammeken-Holm, the deputy minister (departementschef) enquiries are directed to in the government’s press release, to confirm that his department was given access to the agreement, as opposed to GME just showing it to the (unnamed) third-party legal firm. If he replies, I will update this post in the space below:

[UPDATE: Hammeken-Holm replied, confirming that a member of the legal staff at Greenland’s department of natural resources was given access to and read the agreement.]

The entire 60%-saga is little more than a PR hiccup. As I’ve noted before, most people involved (GME management and shareholders, Chinese and Greenlandic officials) would likely see the eventual controlling stake as good news. The only explanation I can muster for the early refusal to disclose the news to the non-Chinese public is a fear talk of a ‘Chinese takeover’ would generate negative comments from the Danish and global geopolitical commentariat. (Such comments did indeed arise.)

Unlike other mining projects, the Kvanefjeld uranium mine is highly divisive in Greenland. Chinese involvement isn’t generally unwelcome, but environmental issues are a concern for many. These divisions are visible at the highest level of Greenlandic politics: the very minister for natural resources, Múte Bourup Egede, is openly “against uranium mining”. For a recent survey of views on Kvanefjeld among (a small sample of) local community members, see this ‘briefing note‘ by Rachael Lorna Johnstone and Anne Merrild Hansen.

I reviewed the current state of Chinese involvement in Greenland in a post for CPI Analysis a few months ago.

first Chinese workers arrive in Greenland

The first Chinese workers are coming to Greenland, to work at state-owned Royal Greenland’s fish processing plants on the island (Sermitsiaq). Of the 38 workers the company has employed, seven came to Maniitsoq two weeks ago, and the rest should be coming during June.

China is a big market for Royal Greenland, and the company has worked with Chinese partners for quite some time. A representative office they opened in Qingdao as early as ’98, was upgraded to a foreign-owned limited company two years ago under the name Royal Greenland Seafood (Qingdao) Co., Ltd (皇家格陵兰水产(青岛)有限公司).

The company struggles to recruit enough staff locally for the summer season, and had been trying to bring in Chinese workers for years. Three years ago, I wrote about how local authorities were blocking the company from bringing just 15 employees. The relevant municipalities have now finally got over this immigration conundrum, and everyone is reportedly happy.

According to a Royal Greenland factory head quoted on a company website quoted in the Sermitsiaq article, the Chinese workers are getting along perfectly well with their new colleagues, who “also speak Greenlandic to them, so they may learn the language faster”. Some “can already say a few short words in Greenlandic”, which is a remarkable feat, even if the longer words ccould pose more of a challenge. Greenlandic is massively polysynthetic, featuring (arguably) noun incorporation, a vast array of derivational affixes, and a jillion other interesting aspects.

More significant numbers of Chinese workers can be expected to come to Greenland in the medium term, once a few major mining projects enter production. The most important (and most controversial) such project, the Kuannersuit (Kvanefjeld in Danish) uranium and rare-earth deposit, is one-eighth owned by the state-controlled Shenghe 盛和, through an agreement that contemplates increasing that ownership to a majority stake. Another important project approaching production is the Citronen Fjord (no known Greenlandic name) zinc and lead deposit in the extreme north of the island. China Nonferrous (中色) is expected to help finance and build the mine, and during the construction stage most of the workers would be foreign, most likely Chinese. At 83°N, they would be come the inhabitants of the Earth’s northernmost mine, or settlement of any kind for that matter. An inflow of Chinese workers was once extremely controversial in Greenland, but things have calmed down since.

did a Greenland minister plan to visit Taiwan? [UPDATE: yes he did]

In a mystifying exchange at the regular Chinese foreign affairs ministry press conference, someone asked spokesman Geng Shuang 耿爽 if China had forced Greenland’s trade minister to cancel a visit to Taiwan last November. Here’s Geng’s answer, as published by the English-language MFA website (it matches the Chinese version just fine):

We stand firmly against any forms of official contact and interaction between Taiwan and countries that have diplomatic ties with us. The Chinese side appreciates Denmark’s adherence to the one China principle. As Denmark’s autonomous constituent country, Greenland should follow the foreign policy upheld by Denmark.

So, was a visit to Taiwan planned and then cancelled? A delegation including Vittus Qujaukitsoq, the Greenland minister (naalakkersuisoq) whose portfolio includes trade, certainly was all around China in late October and early November last year, as I reported at the time. They were in places as distant as Qingdao and Chongqing promoting different Greenlandic products, so it would have made perfect sense to go to Taiwan as well. Only without the minister, since taking an official to Taiwan would obviously generate a crisis with China.

As it happens, a Greenlandic trade delegation did visit Taiwan, only without the minister and while he was in China. In written comments to Sermitsiaq, the relevant Greenland government department denies there were any plans for the minister to go to Taiwan, a decision they took of their own accord rather than under Chinese pressure, even while they are “acquainted” with the One-China policy (i.e. the contention that Taiwan is a Chinese province).

It’s hard to imagine anyone in Greenland would have considered sending a minister to Taiwan, which makes Geng’s answer, without denying Chinese pressure to prevent a visit, only more mysterious.

[UPDATE, Jan 7: The mystery has been solved. Berlingske now says it was them who asked the question at the MFA press conference. Invitations had been sent for a ‘Greenland Day’ event in Taipei the minister would attend, but the he didn’t go, after China showed unease. The event proceeded without him.

And indeed, after reading the Berlingske story I went to the Facebook page of the Danish Trade Council in Taipei, where as late as October 19 a post linked to invitations to the event at the Taipei Regent, in English and Chinese, “on behalf of the Greenlandic delegation headed by the Ministry of Industry, Labour and Trade, and Foreign Affairs, Vittus Qujaukitsoq.” The minister was scheduled to open the event with a “welcome” at 9AM.

It’s quite remarkable the visit was organised thinking the Chinese wouldn’t notice or care, considering how much the Greenland gov’t care about cultivating relations with China. This has probably been Greenland’s first lesson on China’s ‘core interests’.]

General Nice’s Greenland subsidiary under compulsory dissolution [UPDATED: now back in GN’s hands]; accounting docs ‘disappeared’

After last week’s news about a HK subsidiary of General Nice (俊安集团) going into liquidation and a general picture of problems with creditors, it has now emerged that their Greenland subsidiary, London Mining Greenland A/S, is undergoing a compulsory dissolution process (tvangsopløsning). According to Sermitsiaq, a request to have the company dissolved was filed at the Court of Greenland in August 2016. The distressed Greenland subsidiary owns the mining license for the Isua iron mine.

Sermitsiaq also talks of accounting problems related to the transfer of London Mining Greenland from its previous owner to General Nice in late ’14. All accounting materials for that year appear to have disappeared: the location of “electronic data as well as physical documents” was unknown at the time of compiling the following annual report.

In other General Nice news: a North Sydney office building GN’s HK-listed arm North Sydney bought for $50m in ’13 to try and offset losses in their main business (mentioned in my General Nice backgrounder) is now part of an asset restructuring, and should end up being at least partially owned by Huarong, the asset manager that has also taken over management of the HK-listed subsidiary.

[UPDATE (Jan 3): Sermitsiaq reports today that two weeks ago the Court of Greenland allowed General Nice to retake the Greenland subsidiary, after four months under management by a liquidator. The reason for the dissolution order was that the company had failed to produce an annual report on time. Other than the report, a requirement to come out of dissolution was a capital injection, which apparently also happened. It remains unclear whether those missing documents related to the transfer to General Nice have materialised.

So the Isua mine in Greenland is back in General Nice’s hands for the time being. It remains to be seen whether the company’s dire situation in Hong Kong will affect the Greenland subsidiary.]

General Nice subsidiary forced into liquidation

A company part of General Nice Group (俊安集团), the Chinese coal and iron trader that owns Isua iron mine in Greenland, has been ordered into liquidation by Hong Kong’s High Court, after a petition by Australian creditors. The company, General Nice Resources (Hong Kong) Ltd (俊安资源(香港)有限公司), is not directly connected to the Greenland project, but there is an indirect link: Isua is owned (through a Jersey company) by another Hong Kong entity, General Nice Development (Hong Kong), which has a 40% stake in the company that has just fallen into liquidation. Thus, while the Greenland mine’s ownership and management remains unaffected, a subsidiary of its owner has just been ordered to wind up.

The liquidation petition was launched by KordaMentha, an Australian insolvency firm appointed by General Nice as receiver of Pluton Resources, the owner of an iron mine on Cockatoo Island, WA. KordaMentha are said to be owed several million AUD for expenses incurred during their time at Pluton, where General Nice have a controlling stake. Pluton has seen a good amount of drama in the last couple of years, with disputes between General Nice, a Chinese partner, a Chinese client and Australian contractors, including multiple, at one time simultaneous, receiverships, a police intervention, and litigation in Hong Kong and Australia, up to the Supreme Court. To the extent what I’ve read about Pluton can be summarised in any meaningful way, General Nice claim they’ve been pumping funds into Pluton to keep it alive despite low iron prices, while everybody else claims General Nice owe them money.

Last year, another creditor, Baosteel subsidiary Ningbo Steel (宁波钢铁), had asked for General Nice Resources HK to be wound up. General Nice acknowledged the debt, but sued back, arguing Ningbo Steel were trying to hurt their reputation. Ningbo eventually dropped the liquidation petition and apparently got paid, but GN’s case against Ningbo went on for some time. In a nutshell, GN say Ningbo’s petition was defamatory and frivolous as they were going to pay anyway, while Ningbo say the petition was justified since they got paid thanks to it.

But there’s more. General Nice Group, including the Greenland licence-holder, is ultimately largely owned by its chairman, Cai Suixin 蔡穗新, and his family. (I wrote an overview of the Group some time ago.) Another recent Hong Kong court order targeted Cai directly. In late October, a High Court judge forbade Cai from removing assets from Hong Kong (or to keep at least US$20m within HK). The order was requested by a Mainland bank.

And still more. Besides that Mainland-related injunction against Cai, two more banks are trying to claim debts, according to Oriental Daily News. A month ago, Société Générale filed bankruptcy petitions against Cai Suixin and his sister Cai Suirong 蔡穗榕, who’s also involved in various companies in the Group. And in yet another case, last week HSBC petitioned the High Court attempting to recover mortgaged property in the Le Cachet (嘉逸轩) development in Happy Valley (跑马地) from Cai Suirong.

General Nice’s Arctic foray is not easy to interpret. The takeover of the Isua mine, which has no development perspectives in the medium term, and the (thwarted) attempt to buy a derelict naval base in Greenland (something I’ll be writing about soon), don’t seem to make much sense as commercial investments for a company that could use some profits. Perhaps the value of these Arctic moves is favour with state entities (including SOEs) related to them, rather than directly generated profits.

[Update, Dec 30: General Nice Group chairman Cai Suixin 蔡穗新 and high executive Lau Yu 柳宇 are resigning from their posts at the Group’s Hong Kong-listed company, “for personal reasons and hoping to devote more time to other business.” Their replacements come from Huarong 华融 Asset Management, a large state-owned company specialised in distressed assets, that is said to be in the process of restructuring some other General Nice assets.

The Hong Kong-listed company is not related to the Isua mine in Greenland. The company gone into liquidation discussed in this post is a shareholder in it. I explained the (rather colourful) history of the listed arm here.

A story by Walter Turnowsky about the General Nice Resources liquidation, referencing this post, appeared today in the online edition of Greenland paper Sermitsiaq.]

Shenghe investment in uranium+rare-earth mine “implements vision reached during minister’s meeting with Greenlanders”

Shenghe 盛和 Resources’ investment in the Kvanefjeld project was made “in order to implement the vision” on mining cooperation “reached at the time of a meeting between minister of land and resources Jiang Daming 姜大明 and Greenland officials in 2015”, according to information published by the IMUMR, the state institution that controls Shenghe. The IMUMR is under Jiang’s ministry.

The acquisition, first announced in September and completed in the last few weeks, gives Shenghe one eigth of shares in Greenland Minerals and Energy (GME), the ASX-listed company running the Kvanefjeld project, as well as the right to appoint a non-executive director (Wenting Chen) to its board. This makes Shenghe the largest individual shareholder GME. Once the project receives an exploitation permit, Shengha could eventually increase its involvement to a 60% stake, a possibility whose presence in the September agreement GME took pains to deny and later confirm. GME’s initial unwillingness to acknowledge Shenghe’s stated intentions was perhaps due to a wish to avoid eliciting negative reactions in Denmark, where news about increasing Chinese presence in Greenland feed security worries.

The IMUMR’s explicit reference to the Kvanefjeld investment as part of a “vision” is another sign of the key role the Ministry of Land and Resources has in China’s moves in Greenland. GME’s talks with Shenghe did indeed start in 2015, possibly after those ministerial meetings. Until then, the Kvanefjeld project looked more likely to be developed with another state-owned company, China Nonferrous (中色), as envisaged by an earlier (non-binding) agreement.