Chinese interest in Greenland’s mineral wealth is reigniting the Arctic island’s campaign to sever ties with Denmark after almost 200 years of colonial rule.
The calls for independence follow Danish opposition to Greenland’s plan to import Chinese workers and capital to help with its mineral extraction. And as lawmakers in Denmark, which controls Greenland’s foreign policy, debate whether to allow the island full control over its resources, Greenland’s second- biggest party, Siumut, last week proposed breaking with the Scandinavian nation as islanders prepare for March 12 elections.
The world’s most scarcely populated nation is trying to attract offshore funds to help harness its energy and mineral wealth as global warming disrupts fishing patterns and threatens its main source of income. The nation of 58,000, which gets about half its exports from shrimp, is also propped up by about $600 million in subsidies from Denmark.
“The legal process has been put on hold until the Greenland election is done,” Danish Prime Minister Helle Thorning-Schmidt said in an interview last week. “My belief is that both Denmark and Greenland can become stronger because of the commonwealth, not despite of it.”
Yet Greenlanders are eager to prevent political delays from Denmark hampering their dream of tapping their mineral wealth. The island is struggling to get projects off the ground after the financial crisis curtailed investments. Oil and gas explorers have spent more than $1 billion on failed attempts to discover oil, further jeopardizing continued investor interest.
“There is still some way to go before one sees the first minerals being shipped out of Greenland,” Joergen Huno Rasmussen, chief executive officer at FLSmidth & Co. A/S, a Copenhagen-based company that makes machinery for the mining industry, said in an e-mailed response to questions. “I don’t expect any extraction to start for at least two to four years.”
Among companies that have oil exploration licenses off Greenland are Exxon Mobil Corp. (XOM:US), Royal Dutch Shell Plc (RDSA) and ConocoPhillips. Shell, ConocoPhillips and others last year carried out seismic studies to gauge where to drill. Edinburgh- based Cairn Energy Plc (CNE) drilled eight unsuccessful wells in 2009 to 2011.
There’s only one active mining project, a gold mine, and there have been no production licenses granted since 2008, according to Joergen T. Hammeken-Holm, head of the license Department at the Bureau of Minerals and Petroleum in Nuuk.
The government expects to hand out two exploration licenses this year, including one to London Mining Plc. (LOND) The company is looking for funding for its $2 billion Isua iron-ore project north of the capital, which local authorities estimate will create 700 permanent jobs.
“Greenland will need many more mines like the Isua project to gain economic independence, while it’ll only take one single major oil discovery,” Finance Minister Maliina Abelsen said in an e-mailed response to questions last month. “None of these scenarios seems likely in the short term.”
This year, the home rule government also hopes to grant a license for rare earth elements to Tanbreez Mining Greenland A/S, a unit of Australia’s Rimbal Pty Ltd.
The deposit has been estimated to contain more than 4 billion tons of ore, enough for “several hundred years of production,” according to a report last year from Greenland’s mineral agency.
While the U.S. Geological Survey estimates that waters around the island could hold 50 billion barrels of oil and gas, the area is also among the “highest-risk exploration regions in the world” and has a higher threshold for commercial finds because of the harsh environment, said analyst Nathan Piper at RBC Capital Markets, which has a sector-perform recommendation on the Cairn share.
Although explorers are turning to other basins than those where Cairn failed to make a commercial find, no drilling is planned before 2014, Piper said by phone from London.
“We’re very much at the very start of the exploration process in Greenland,” he said.
Local authorities target five to 10 active operating mines, including two so-called large-scale projects, according to a 2025 fiscal plan published last year. The plan calls for half of all workers in the natural resource industry to be Greenlanders and for local businesses to become subcontractors on all mining projects.
The Isua project, 150 kilometers north of Nuuk, will create jobs for 2,100 Greenlanders during its construction, according to government estimates.
As part their plan to lure investments, Prime Minister Kuupik Kleist and Business Minister Ove Karl Berthelsen met with China’s Land and Resources Minister Xu Shaoshi three times in 2011 and 2012. Berthelsen has also held talks with China Development Bank in Tanjing. Kleist last year met with then South Korean President Lee Myung-bak and that country’s foreign minister.
“Hopefully it isn’t the only option, but it’s a very big opportunity,” the Danish premier said of Greenland’s natural resources. “Obviously fishing is the biggest part of the Greenland economy, while there are only so many options to capitalize on fishing, and therefore the Greenlanders are looking for other options, and mining, including large scale projects, is what they’re trying to build the economy on going forward.”
Still, the home rule’s efforts to attract Chinese cash and labor have raised concern in Denmark, which still has power to block legislation.
In 2009, nine of 10 Danish parliamentarians backed giving natural resource rights to Greenland as the island achieved greater autonomy. The anti-immigration Danish People’s Party plans to vote against and the Liberal has said it may oppose new immigration laws that would allow companies to bring in foreign workers for as long as six months.
“It’s not an unimportant issue we have on our hands,” Claus Hjort-Frederiksen, the former Liberal Party finance minister, told parliament in Copenhagen on Jan. 23. “This may allow for 3,000-4,000 underpaid Chinese miners to arrive in Greenland. There are geopolitical concerns. Chinese interest in the Arctic is no minor matter.”
Denmark is also concerned about what will be mined. A poll by newspaper Berlingske showed that 64 percent of Danes agree, or mostly agree, that Denmark should stick to its zero-tolerance policy on Uranium mining within its territories.
Kleist said any exploration in Greenland must be done on commercial terms, without state funding and be open to all nations. His government refused to disqualify Chinese mining investments even after several European Parliament members asked for the home rule to ban Chinese mining companies, Kleist said.
Thorning-Schmidt told parliament last week she was “very reluctant” to invest Danish money in Greenland mining. For now, the island itself is playing down expectations that mining might uncover the next El Dorado.
“The sense that gold is abundant and Greenlanders are all wearing turbans and thousands of Chinese are on the streets of Nuuk simply isn’t true,” Kleist said. “All companies are welcome to join our efforts, no matter where they’re based, as long as they do it on commercial terms.”
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