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.

Baosteel subsidiary files liquidation petition against General Nice HK company, GN to sue back

Ningbo Steel (宁波钢铁), a subsidiary of state-owned Baosteel (宝钢), filed a petition earlier this month at the Hong Kong’s High Court earlier to wind up General Nice Resources (Hong Kong) Ltd. (俊安資源(香港)有限公司), claiming unpaid debts related to iron ore transactions dating back to last year. Although General Nice acknowledge the debt, they have now countersued, alleging that the winding-up petition seeks to hurt their reputation, and are asking for $100m in compensation, equivalent to some 80 times the debt owed and over three quarters of Ningbo Steel’s 2014 net profit (東網, Quamnet).

Ningbo’s case against General Nice will be heard in mid June.

Ningbo Steel started as a private company, led by (now .85-billionaire) Zhang Zhixiang 张志祥, but was later bought by Baosteel Group, a central SOE and one of the world’s largest steelmakers. Executives at Ningbo Steel must have more pressing concerns than all that suing and countersuing in Hong Kong, such as wondering if they won’t get arrested as a corruption crackdown spreads through state-owned Big Steel. The campaign has claimed several heads at Baogang, the most senior of which so far has been deputy GM Cui Jian 崔健. Mr Cui spent part of his career at Ningbo Steel, after its acquisition by Baosteel, and his “discipline violations” (a euphemism for corruption) are rumoured to have taken place during his stint at Ningbo.

General Nice Resources HK is owned by Mainland-based General Nice Group companies, partly through General Nice Development, the Hong Kong company that owns the Isua iron mine in Greenland through a Jersey entity. That is, the owner of the Greenland license is not being directly targeted by the lawsuit in Hong Kong.

In media statements reacting to Ningbo Steel’s filing, General Nice say that, far from being insolvent, they’re a major ore trader with a large turnover and stakes in several listed companies. The figures the company brandishes when describing itself indeed make it hard to imagine it would have any trouble mustering the meagre debt claimed by Ningbo Steel. On the other hand, while profit figures for the whole group aren’t available, there are multiple signs that it isn’t going through its best times. The Group is moving away from its historical core coal business, and these aren’t good days for iron trading in China. Current iron prices mean that Group assets like the Greenland mine, unlikely to be developed any soon, or the Cockatoo Island project in Australia (owned by a troubled company I might be writing about soon) aren’t precisely profit sources. Loudong General Nice, the Group’s HK-listed company, posted losses in both 2013 and 2014.

I discussed General Nice’s various investments and their interesting history in a long-ish article last month.

In the latest news about General Nice’s changing strategy, General Nice Resources CEO Jaffe Lau (柳宇) said yesterday in an interview that the group is looking to increase cooperation or even mergers with Chinese state owned companies, since as private players they find it hard to compete with SOEs for funding from state-owned banks. Although General Nice’s political contacts have arguably been key to the group’s growth in the past, a merger with a state entity would surely give them access to cheaper funding. Assuming a scenario where the Isua mine is eventually developed, having a SOE around would move it closer to getting the billions in investment it’s been estimated to require.

To finish on a bright note, shares of Loudong General Nice, the group’s loss-making HK-listed company, have been doing very well of late and suddenly jumped in the last few days.

cucurbitae caput non habemus: Anglo Pacific keep Isua 1% royalty, condone London Mining $30m money-back rights

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.

Chinese mission to Greenland to discuss investment in mining, fisheries

A visit to Greenland by a group Chinese potential investors is scheduled to take all of this week and meet with local officials, including the premier and ministers. According to the organiser, Beijing law firm Rainmaker/Yuren (雨仁律师事务所), the delegation will visit companies with rights over iron, zinc, lead, gold, oil and gas deposits, as well as seafood processors.

China, Sierra Leone: visits to and fro

While Sierra Leone’s foreign minister Samura Kamara was in Beijing on an official visit earlier this month, a “high-powered” delegation from the Chinese Communist Party visited Sierra Leone. High-level exchanges between the two countries have increased of late. Chinese investment in Sierra Leone includes the Tonkolili iron-ore mine, of which Shandong Steel (山东钢铁) owns 25% since 2011 while another 16.5% was agreed to be bought by Tewoo (天津物产) in September. Another iron site in Sierra Leone is the Marampa mine, exploited by London Mining, the company just awarded a license for the Isua project in Greenland.

Sierra Leone NGO to Greenland: careful what you sign with London Mining

Aminata Kelly-Lamin from the Network Movement for Justice and Development, a Sierra Leonean NGO, to Politiken: “My advice to Greenland would be that they should be very careful with what they write in their agreements with London Mining.” London’s Mining alleged failure to live up to its promises on local recruitment and environmental protection, as well as rather generous tax exemptions it benefited from, have led to criticism from local and international NGOs and protests at its Marampa iron ore mine. Some unrest earlier this month led the company to halt operations at the mine for a few hours.

unrest at London Mining site in Sierra Leone

As London Mining’s hiring and environmental practices at the Marampa iron ore mine in Sierra Leone attracted criticism from a local NGO and a Parliament committee, nearly a hundred youth from nearby villages entered the site and caused the company to halt operations for a few hours, a London Mining statement informs. Although the cause of the unrest is unclear, the wording of government agency responses as reported by newspaper Awoko suggests local discontent against the company might be the motivation. One salient grievance would seem to be the flooding that affected Manonkoh village last year and is blamed on London Mining. The company has since donated food and supplies to Manonkoh villagers. Protests at the Marampa site have taken place in the past.

London Mining has recently received an exploitation license for the Isua mine in Greenland, a rather large project expected to require the import of Chinese labour. There’s more about it in my article on the topic from a few months ago, and a few more recent posts.