mining

June 14, 2017

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.

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.]

December 27, 2016

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.

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.’

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 25, 2015

update on General Nice and Burkina Faso

The transitional government of Burkina Faso has authorised Frank Timiș’ Pan African Burkina to resume manganese exports from their Tambao mine. Their export license had been suspended in March over the company’s alleged failure to invest in road and railway infrastructure (Jeune Afrique).

The reason this appears in an ostensibly Northern-looking blog is that the Tambao mine used to belong to a subsidiary of General Nice Group (俊安集团), the current owner of the (dormant) Isua iron mine in Greenland. General Nice conducted exploration activities at Tambao through 2012, and, at least according to their interpretation of the license agreement, had exclusive rights to take the mine to the production stage. The government of Blaise Campaoré (who had been president since 1987) begged to differ, and instead resold the mine to Timiș, a Romanian-Australian miner.

It probably speaks in General Nice’s favour that Campaoré had done more or less the same thing before: rights to explore the mine had first been sold to UAE-based Wadi Al Rawda before the Campaoré administration decided to sell them again to General Nice. The Emiratis sued at an arbitration tribunal, a dispute settled in 2013. General Nice also sued when they were in turn deprived of their permit. Quite unusually in the context of Chinese companies in Africa, a rather strong-worded campaign was launched on Facebook and local media defending General Nice’s position and accusing Campaoré and his entourage of corruption, as described in my background article on General Nice.

Compaoré was ousted in 2014 and fled to Côte d’Ivoire. The transitional government announced it would revise mining contracts signed by the previous administration, such as the award of the Tambao permit to Timiș’ company. With their nemesis Compaoré in exile (and just issued an arrest warrant) and Timiș prevented from exporting, things were starting to look better for General Nice. Talks to reach a settlement (GN are claiming $50m in compensation) started again, and as of last July the country’s Council of Ministers was voicing its will to “continue negotiations” with GN “in order to reach a definitive settlement of the dispute”.

A new president, Roch Marc Chistian Kaboré, has just been elected and will be sworn in next week.

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.