investment

January 24, 2018

Lysekina: SOE, PLA-linked United Frontling want a deep-sea port in Sweden [UPDATED]

[UPDATE (Jan 31): It won’t happen. Through their ‘consultants’, the investors have informed they’re calling it off because of the public criticism the project attracted since it was leaked to the press. (InBeijing, Bohusläningen, Dagens Nyheter)]

Backed by state-owned China Communications and Construction (CCCC, 中交建), a well-known Hong Kong-based United Front figure is lobbying a small Swedish municipality to let him build a large deep-sea port. Using a tactic seen elsewhere, state-linked investors leveraged Sweden’s decentralisation, which leaves decisions on foreign investment to local administrations, to avoid the public scrutiny that comes with interactions at a national level.

 

The Michelin-spangled harbour

Last November, Lysekil municipality officials, overseeing the local affairs of a population of 14,000, were Powerpoint-presented with an investment plan that includes the new port, expanding the existing one, a logistic centre, a bridge, roads, a health resort “with Michelin Star restaurants” and other desirable items. They were reportedly given ten days to respond.

lysekina0

The presentation, authored by three Swedish consultants. The languages used (English and simplified Chinese, for a Swedish audience) and word choice (“中国香港” ‘China’s Hong Kong’) suggest it’s not entirely their own work. Indeed, its ‘appendix’ largely translates the prospective investor’s website. Source: Jojje Olsson on Scribd.

And respond they did:

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Lysekil municipality’s answer. Source: Olsson via Scribd.

Quite on time (or close enough for government work), the municipality commissioned a feasibility study, deeming the proposal “interesting”. The study was requested from the same consultants who had brought the contact with the investors in the first place, and authored the impressive presentation (which, as seen above, borrows rather extensively from the investor’s website). It should be ready this or next month.

The tactic of lobbying local officials and trying to get a fait accompli before the feared “China threat theory” (中国威胁论) can kick in has been seen elsewhere; a remarkable example covered on this blog is the satellite ground station project in Greenland, “officially started” without the government’s knowledge after cultivating a local scientist. Unfortunately for the investors and consultants, the news leaked, leading to national-media coverage and increased opposition. Critics question the port’s environmental impact and the security implications of having Chinese state-linked entities build and operate a major piece of infrastructure. The project has become known as ‘Lysekina’, a pun on the name of the town and the Swedish word for China. Jojje Olsson, who has been covering the case on his website and Swedish media, wrote a summary in English for the Taiwan Sentinel. For another English-language account, here’s Ola Wong talking to Lene Winther on Danish radio station Radio24syv.

 

Evaluate a Frontling, dispatch him

The main investor is Sunbase (新恒基), owned by Gunter Gao (Gao Jingde 高敬德). Gao is a prominent figure in Hong Kong United Front organisations. (The CCP’s United Front Work Department is charged with handling and controlling various external groups at home and abroad, using tactics that go back to the Comintern in the 1920s. A renewed focus on them is a feature of Xi Jinping’s administration, recently leading to unusual international exposure and a growing backlash in some countries. Cf. my ‘United Frontlings always win‘.) He was, in particular, the founding chairman of the Hong Kong Association for the Promotion of the Peaceful Reunification of China (中国和平统一促进会). ‘Reunification of China’ is of course a euphemism for the annexation of Taiwan. The APPRC’s Australian chapter is perhaps its most famous, thanks to its leadership‘s donations to the country’s major political parties.

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Chairman Gao, representing Hong Kong at the 8th meeting of the Reunifier association. Beijing, 2009. Source: 中国统促会.

His seniority within United Front structures is illustrated by his participation in meetings with high officials. For an old example, here‘s a Xinhua story describing a visit to Beijing in 2009, where Gao met, among others, Du Qinglin 杜青林, then head of the Central United Front Work Department. He has been a member of the Chinese People’s Political Consultative Conference (CPPCC, 政协会) for five consecutive terms. In Hong Kong, besides his membership in multiple CCP-linked organisations, he openly supports the pro-Beijing Democratic Alliance for the Betterment and Progress of Hong Kong (DAB)— to the point of obsequiousness. At a DAB fundraiser in 2016, he offered HK$18.8m for a specimen of calligraphy by Zhang Xiaoming 张晓明, then the central government’s representative in Hong Kong.

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The HK$18.8m specimen. Source: HK01.

Zhang’s calligraphy reads: 度德而处 ”measure one’s virtue and manage [the situation]’, a Zuozhuan 左传 quote (隐公十一年) which, together with the following phrase (‘estimate one’s forces and proceed’), is alluded to in the idiom 度德量力 (‘measure one’s virtue and estimate one’s force’). In the Zuo locus classicus, Duke Zhuang 庄 of Zheng 郑 pacifies the ‘lawless’ (无刑) state of Xu 许 but, instead of simply annexing it, rules it through envoys from his court. Despite ruling the conquered state as a sort of protectorate, Zhuang refrains from imposing his country’s rites on it: past turmoil in his own state of Zheng, that pitted him against his mother and brother, shows his merits don’t entitle him to a claim to the vanquished state (he ‘measures his virtue’); and making the defeated Xu a friendly neighbour can be convenient (he ‘assesses his forces’). All in all, quite like the PRC’s rule of Hong Kong through envoys like Zhang Xiaoming, while letting it maintain a semblance of autonomy (‘two systems’) if it behaves, and ruling it through an envoy in its “west” (使公孙获许西偏) just like Beijing’s Liaison Office in HK occupies a skyscraper called ‘The Westpoint’ (西港中心); but of course he didn’t mean the allegory to apply wholesale. At the pro-Beijing fundraiser, he provided his own interpretation of the Zuo quote, in which it means “to proceed according to moral standards”, “reforming others with one’s own virtue”, and added the ‘assess your force’ second half of the quote could be a gift for the losing candidate at the next HK chief executive ‘election’. (Said election is in fact a staged, non-competitive event involving CCP-selected individuals. As of press time, it’s unclear if the official who played the ‘loser’ at the latest instantiation, John Tsang (曾俊华), received any consolation calligraphy.)

Gao Jingde’s $18.8m investment and shoeshining prowess has proved clever in retrospect: the virtuous calligrapher has since been promoted to the State Council’s Hong Kong and Macau Affairs Office (港澳办) in Beijing. He surely remembers fondly the purchase, and might keep it in a prominent place, perhaps pondering if the 德 dé ‘virtue’ in the phrase couldn’t be read as the one in his given name 敬德 Jìngdé: 度德而处 ‘evaluate Jingde and deploy him’.

Also in 2016, his company was found to share an address with eight groups entitled to vote for ‘functional constituency’ representatives (the non-democratically elected part of Hong Kong’s legislature, whose function is to limit the possibility of an opposition majority).

 

Promoting a glorious, civilising, superior Army

Most striking are Gao’s links to the military. As his company’s website puts it, he has “generously supported the publication” of various “valuable books with the intent of promoting the glorious image of the People’s Liberation Army (PLA) as a civilizing and a powerful force and of spreading the superior tradition and revolutionary spirit of the PLA”. The volumes, seemingly published by the pro-Beijing paper Wen Wei Po 文汇报’s publishing house, aren’t widely available and, as of press time, I haven’t been able to secure a copy. One of them, however, did apparently reach former president Jiang Zemin.

Such adulation has been remunerated. One of Gao’s companies, a Sunbase subsidiary called Sunbase International Properties Management Ltd (新恆基國際物業管理有限公司), has been managing all 18 plots used in Hong Kong by the PLA since the 1997 handover. Its website lists the PLA garrison, Beijing’s Liaison Office and Xinhua news agency among its main customers. The company changed its name from ‘Sunbase International Hotel Management’ in late 1996, reflecting its new focus on servicing the Party’s Army and state.

sunbasepla

If Gunter Gao’s political and economic links to the Army and state might not be universally known, little needs to be said about CCCC, a state-owned company with an important role in China’s global port building and acquisition activities, part of the drive to build a ‘maritime power’ (海洋大国). CCCC is indeed involved in projects in Chinese ports in Gwadar, Pakistan and Colombo, Sri Lanka.

In short, the consortium seeking to build Scandinavia’s top Michelin-star port-cum-resort, though superficially a private endeavour, has links to the state and Army deep enough for it to serve as a potential instrument of national policy.

The project’s very existence is indeed consistent with regional and global policy goals. The Lysekil plans should indeed be read in the context of China’s general interest in securing port assets worldwide. In the North, in particular, there has been talk for years about Chinese involvement in deep-sea ports, in Iceland and Norway. The international connection has being noticed in Sweden. In a recent article, journalist Ola Wong advises Sweden to “study” the controversial 99-year lease of the Australian port of Darwin to Chinese company Landbridge.

Before it can reach its Michelin-studded glory, the Lysekina project will need to navigate all this unexpected scrutiny. Most importantly, Chairman Gao or his attendant consultants would need to convince the port’s prospective landowner, the refinery owned by Preem, who now categorically deny any intention to sell or lease.

Sweden isn’t often discussed on this blog; a somewhat relevant post discussed another port purchase, this time by Lau Ming-wai 刘鸣炜, the HK ‘government adviser’ who prematurely inherited a business empire from his convicted father.

January 2, 2017

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.]

December 27, 2016

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.]

November 14, 2016

Shenghe’s Greenland U+REE investment gets FIRB approval

Australia’s Foreign Investment Review Board has approved Shenghe 盛和 Resources’ purchase of one eighth of GME, the ASX-listed owner of the license for the Kvanefjeld uranium-rare earth project in Greenland. Other approvals should be coming these days, as everyone concerned in Australia and China should be happy with the deal.

Meanwhile in Greenland, things aren’t looking so simple. As explained in my previous post, Greenland is ruled at the moment by a Große Koalition of parties that agree on everything, except uranium mining. GME should be applying for a production permit before the end of the year, and that application could be handled by Múte Bourup Egede, a new minister who has already said he’s ‘against’ uranium mining, in so many words. Conflict within the ruling coalition is already showing. On the one hand, Jens-Erik Kirkegaard (long-time readers will remember his ’13 Jiangxi Copper visit) from majority partner Siumut thinks that GME have earned themselves a right (retskrav) to get their permit as long as they comply with environmental and other regulations, and the new anti-uranium minister “can’t just take a political decision.” On the other hand, Sara Olsvig, chair of coalition partner IA (long-time readers will remember her Tibet visit and meeting with the Tibetan gov’t in exile), says GME’s application could be rejected not only on environmental, but on “political” grounds (Weekendavisen via Sermitsiaq). Egede, the new minister, who’s from Olsvig’s party, has said he’ll decide based on the application’s merits as well as ‘listen to the people.’

October 4, 2016

more on Shenghe’s Greenland deal

A couple of weeks ago, I noticed that Shenghe Resources’ agreement to buy into the Kvanefjeld (Kuannersuit) uranium and rare-earth project in Greenland from ASX-listed GME includes an option to eventually acquire a controlling stake. That simple observation, based on just reading Shenghe’s Shanghai Stock Exchange disclosure, generated some attention after being picked up by Danish daily Politiken and later reflected in Greenlandic media. While rather unremarkable, the 60% option snowballed into something of a controversy after GME started denying its existence, which even prompted Greenland’s resource minister to say they were “investigating” the matter. The fact that GME’s own announcements and press comments didn’t say a word on Shenghe’s further plans for over a week led sources to speculate on the reasons they’d want to keep quiet about what would seem to be rather good news. Yesterday, after letting all this speculation brew for more than a week, GME published an announcement to ‘further clarify’ the issue, now in terms entirely consistent with Shenghe’s announcement. GME also wrote to Greenland’s state broadcaster KNR, admitting for the first time that Shenghe “can be interested in a direct share of the project on a level of up to 60%” (my back-translation from the Danish). Any misunterstandings are blamed on ‘translations’. (Translator-scapegoating is a time-honoured custom in the Chinese business world; cf. this old post of mine, that includes quotes from the Sino-Arctic Bard.)

At any rate, whatever discord ‘translators’ (or the media) might have sown, GME’s current official stance doesn’t contradict Shenghe’s official announcements. We can therefore continue to consider the SSE announcement authoritative.

I don’t normally publish translations of extended passages here, since that feels like doing other people’s homework, but in the interest of readers from Greenland, who are surely entitled to know the details about a project of such importance, I’m going to provide the relevant parts of Shenghe’s SSE disclosure together with a quick-and-dirty (rather literal) translation (original text here).

Page 2, under “Overview of the transaction”.

在科瓦内湾项目取得采矿证且技术优化完成后，基于双方届时洽谈的商业条款，盛和资源可选择收购不超过60%项目权益。

After the Kvanefjeld project has obtained an exploitation permit and completed technical optimisation, on the basis of commercial terms that will be negotiated between the two sides, Shenghe Resources may choose to acquire an interest in the project not exceeding 60%.

Page 9, under “Future cooperation in the project”.

在目标公司就科瓦内湾项目的采矿权申请取得相关格陵兰政府批准且技术合作项目的进展得到各方的满意后，认购方可以书面方式通知公司：其希望取得项目60%的权益。公司收到该通知后，各方将友好协商并购交易的条款，包括收购的交易对价、项目的融资情况，以及成立合资实体（不论是公司还是非公司形式）以开发项目。该并购将受限于所有必要的政府许可。

After the Target Company [GME] has obtained the approval of the Greenlandic authorities regarding the application for an exploitation permit for the Kvanefjeld project and technical cooperation has progressed to the satisfaction of both sides, the Subscriber [Shenghe Leshan] may formally notify the Company [GME] in writing of its intention to obtain a 60% interest in the project. After receiving said notification, both sides shall amicably negotiate the terms for a merger or acquisition transaction, including the value of the transaction, the project’s financial situation, and establish a joint entity (be it of company or non-company type) in order to develop the project. Said merger or acquisition shall be subject to all the necessary government approvals.

Thus spake Shenghe. As anyone who’s been involved in business negotiations with Chinese partners knows, the language tends to be less explicit in Chinese than in English documents. In particular, it could be argued that the Chinese document is ambiguous on whether GME has an obligation to consider Shenghe’s eventual intention. In practice, however, this ambiguity is of little practical consequence, since, as I noted in my previous post, the language implies that there’s no obligation to sell (that’s the ‘amicable’ part).

For completeness, here are the relevant parts of GME’s latest ASX announcement:

As part of the broader strategic relationship and subject to the Company receiving a mining (exploitation) licence for the Kvanefjeld Project and the successful completion of technical cooperation to enhance the Project, Shenghe may notify the Company of their intention to negotiate terms to acquire a direct interest in the Project, in association with project development.

Should this occur, the parties would enter into commercial negotiations in good faith. Any such project level investment and associated agreement would be subject to regulatory and commercial considerations, as well as relevant approvals. There is no contractual obligation on either party to reach such an agreement.

This is consistent with Shenghe’s announcement, except it doesn’t say ‘60%’ and adds an explicit statement that the option is non-binding.

To sum up, a Chinese state-linked company has a non-binding option to buy a majority stake in a major uranium and rare-earth project in Greenland, as I was the first to report in two blog posts. This is important news, but entirely unsurprising, as it has long been known that the main Greenland mining projects are actively seeking to involve Chinese players.

Kvanefjeld is the most important mining project with short and medium-term real prospects in Greenland, and is of global significance as a major REE deposit. The agreement (and especially the 60% option) is very good news for GME, whose shares rose sharply during the weeks leading to the signature of the deal, and are expected to keep climbing as more information emerges on the project’s technical progress. Greenland ministers also welcome the deal, which is also unsurprising given they’ve been actively looking for Chinese investors (with mixed success) for a long time.

On the other hand, the project is not free from controversy. Opposition to the project is known to exist in both Greenland and Denmark. Such opposition mainly comes from two angles: concerns, strongest in Greenland, about environmental issues (both about mining in general and uranium mining in particular) and qualms, mainly operative in Denmark, about China’s influence in the region. Greenland is a democratic society, meaning that engaging the public on these issues is an essential part of developing a mining deal. Chinese companies (and Shenghe specifically) tend to be poorly prepared to deal with that aspect of mining investment, which is one of the reasons partnerships with Western companies are sought. GME have been active in Greenland for quite some time and can be expected to interact with the public in a reasonably smooth way, even if their handling of the 60% storm-in-a-teacup wasn’t that slick. Kvanefjeld, Chinese investment and Chinese labour are also enough of a known quantity in Greenlandic public discourse by now, meaning that the brouhaha that surrounded the Isua project isn’t likely to come back, at least not in the same form.

To my great delight, the online edition of Greenland paper Sermitsiaq, which I frequently read, has reported in Danish on my account of Shenghe’s state links.

September 28, 2016

the 60% saga: update on Shenghe in Greenland

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.

September 23, 2016

new Chinese investor in Greenland uranium+rare earth project

Chinese rare earth miner Shenghe Resources (盛和资源) has agreed to buy a 12.51% stake in ASX-traded Greenland Minerals and Energy (GME), the company behind the Kvanefjeld (Kuannersuit) uranium+REE project in Greenland. That will already make Shenghe Resources, through a subsidiary, the largest individual shareholder in GME. The agreement gives Shenghe the option to increase its participation up to a 60% stake once the project enters the development stage, Shanghai Stock Exchange disclosures show. The deal is subject to the approval of GME shareholders, Australia’s Foreign Investment Review Board and Chinese authorities, with a late-November deadline. Shenghe’s stake will be owned by it subsidiary Leshan Shenghe 乐山盛和.

At A$.037, the price agreed is less than the A$.06 GME shares closed at when they suspended trading two days ago, but an improvement over the A$.02 it hit last December, when talks with Shenghe reportedly started. Indeed, GME’s recent rise might be what triggered Shenghe to close the deal, rather than wait for the Kvanefjeld project to get a production permit from the Greenlandic authorities.

Chengdu-based Shenghe (listed in Shanghai) is a major consolidated rare earths company. More than a quarter of its shares are owned by state institutions. Its biggest shareholder (~20%) is the Chengdu Institute of Multipurpose Utilisation of Mineral Resources (中国地调局成都综合所, IMUMR), a geological research institution ultimately subordinated to the Ministry of Land and Resources. State ownership also occurs at the provincial level, through the Sichuan Geological and Mineral Resources Company (四川省地质矿产公司), who have conducted exploration activities in Laos and Mozambique. But the name to remember is IMUMR, the central-government majority shareholder. Shenghe’s current identity goes back to a reverse takeover in 2013; its predecessor (i.e. what was reversely taken over) is precisely Leshan Shenghe, established in December 2001 (the IMUMR stake goes back to at least ’02, the Sichuan gov’t company’s to ’04).

Shenghe’s biggest private shareholder is Wang Quangen 王全根, but he isn’t unconnected to the IMUMR. He worked at the Institute for 26 years, the last nine of which overlapped with functions at Shenghe. That is, while he worked as an engineer at a state research institution, he went on to own, together with his wife, a significant share in a large Shanghai-listed company closely connected to the Institute. How he became so rich is, says a Xinhua report, an “enigma“. Another non-state shareholder in Shenghe is Sichuan Giant Star Group (四川巨星集团). Shenghe is chaired by Hu Zesong 胡泽松, vice Party secretary at the Institute.

The latest arrival to Greenland’s mining ecosystem is thus a company intimately connected to a Sichuan-based geological research institution controlled by the central government.

Shenghe has been looking for rare earth resources abroad recently, including a purchasing agreement with Tantalus for its Madagascar production and plans to buy 90% of Vietnam Rare Earths.

December 9, 2015

Greenland airports: possible Chinese investment?

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).

December 7, 2015

update on mining in Greenland

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.