Caixin
Dec 07, 2011 09:14 PM

Greenland Lures China's Miners with Cold Gold

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Greenland is a land of ice and snow, the Inuit people and polar bears. And soon, a few Chinese mining companies willing to take risks may find it's also a land of profits.

An iron ore deposit on the giant island has been targeted for what could be a future mine investment by the Sichuan Province government's Sichuan Xinye Mining Investment Co., Chairman Liu Rong recently told Caixin.

The site, said to be the largest iron ore reserve yet discovered in Greenland, is in the southwestern Isua region.

A report on the website of China's Ministry of Land and Resources says Sichuan Xinye has held preliminary discussions with the site's mineral rights owner London Mining Plc, in hopes of eventually taking over the entire site. The two sides have pledged to sign a framework agreement for cooperation in the near future, the report said, although neither an exact timetable nor financial terms have been announced.

Other Chinese companies digging for business in Greenland include Jiangxi Zhongrun Mining, which in 2009 joined Britain's Nordic Mining in a quest for copper and gold on the island's south. And Jiangxi Union Mining has explored for copper in central Greenland as the first Chinese mining concern with operations inside the Arctic Circle.

For now, the number of Chinese companies in Greenland is "very few, not more than five," Su Jingjing, a lawyer for the law firm Bech-Bruun in Copenhagen, told Caixin. "And all projects are in the early stages."

Su is the only Chinese national working as a lawyer in Denmark, which controlled Greenland before handing general autonomy to the island-nation's government in mid-2009. He's had experience with almost every Chinese mining company eyeing investments in Greenland in recent years. And like the miners, Su is aware that the independent Greenland government wants to build the economy by tapping the island's abundant reserves of iron, lead, zinc and rare earth minerals.

Ove Karl Berthelsen, Greenland's minister of Industry and Mineral Resources, confirmed mining's central role in the nation's economic development during a recent interview with Caixin. The economy currently relies on fishing, hunting and annual funding from the Danish government of about US$ 620 million.

Greenland would like to shake off its Danish dependency by developing mines.

"Our goal is to change Greenland into a land of mining resources," Berthelsen said on the sidelines of a conference in Tianjin. And although the process "will take a long time," he said, "we hope this will bring economic growth."

Door Knocking

Berthelsen led a delegation of Greenlanders to the China International Mining Conference in November in search of Chinese mining companies willing to invest. He told Caixin: "I hope we can build closer relations, cooperating in technology and resource fields."

Also while in China, Berthelsen met Vice Premier Li Keqiang and held talks with Land and Resources Deputy Minister Wang Min.

Berthelsen's second-in-command Jorn Skov Nielson, the deputy resources minister, said full-scale mining operations could begin in parts of the country in 2012. The government hopes to see five or six mature projects for extracting iron, zinc and rare earths under way within five years.

Rights to the Isua deposit, discovered in 1965, were controlled by the global mining giant Rio Tinto before being were sold to London Mining in 2005. The latest plan for the site calls for launching a US$ 2.2 billion project in September 2012, and reaching an ore production capacity of 15 million tons a year within three years.

An agreement for the Isua project was not signed at the Tianjin conference as planned, apparently because negotiations are continuing. Sichuan Xinye Board of Supervisors Chairman Tan Qizhong told Caixin that the project remains "in the preliminary contact stage."

Other projects are farther along. Greenland's Bureau of Minerals and Petroleum said it has so far awarded mineral exploration licenses to 36 foreign mining companies.

Offshore oil and gas fields have attracted international companies as well. As of September, the Greenland government said it had licensed 17 firms for west-coast energy exploration projects. Big names on the drilling list include Shell, ConocoPhillips, ExxonMobil, Chevron, Statoil, GDF Suez and Maersk Oil.

The U.S.-based aluminum concern Alcoa Inc. plans to launch a US$ 2 billion aluminum-smelting project in Greenland with an annual capacity of 360,000 tons as well as two hydroelectric power plants.

As they mull potential business contracts, Chinese companies are getting to know Greenland. But it's been a slow process, since in many areas, including business culture, the gap between China and Greenland is wide.

So far, Su said, no Chinese companies have made money in Greenland. "It's totally new territory."

"Chinese people are good, and companies are professional, but the cultural differences are very large," said Joannes Niclassen, an executive at the Danish mining concern MT Højgaard, which may hire Chinese workers at future facilities in Greenland.

Indeed, Greenland's push for mining and China's search for resources may close the cultural gap by introducing Chinese labor crews to this land of ice.

Labor Tide

Certainly, some of the 56,000 people who live in Greenland will get a chance to understand China's culture when Chinese labor crews arrive for the Alcoa project. The company plans to bring some 3,000 laborers from China to work at several construction sites, according to media reports.

"This is a very large project, and we are very excited about it," said Berthelsen. "We'll try to make it successful."

Su said that with Alcoa taking the lead "Chinese companies don't need to rush. They can first let Alcoa charge to the front" by introducing large-scale Chinese labor to Greenland.

"If it goes well, certainly all Chinese companies can benefit," Su said. "But if at this time Chinese companies jump forward as well, the Greenland government may think the pressure is too great."

The Greenland government has stressed that mining projects should provide jobs for the nation's workers. But the labor force in Greenland primarily consists of the Inuit, who mainly are hunters and fishers, and educated professionals. That makes it hard to find general laborers, Su said.

Greenland is no longer subject to European Union labor laws, Su said, and thus has become more open to Chinese workers. Currently, many of Greenland's imported mine workers are Canadians, working for Canadian mining companies.

Berthelsen said labor as well as infrastructure issues are among the formidable challenges to resource development in Greenland. "To get investment to start project development, we need a lot of foreign labor, as well as infrastructure."

Nielson said he would be applying to congress to allow the introduction of foreign workers. Mining companies are already waiting.

"There will be some new projects that will need several thousand strong construction workers," said Niclassen. "We don't have that many" laborers on staff, "so they either come from China or from other countries."

Chinese labor may also be tapped to improve Greenland's weak infrastructure, a condition connected to the harsh climate and tough geography. Construction work can be accomplished year-round in the south, but in the north projects come to a standstill for nine wintry months every year.

No highways link the island's towns, which forces travelers into boats and small planes. And mines need their own power plants and transportation facilities. Isua's developers, for example, would have to build a runway and a 150-megawatt power plant.

Berthelsen hopes Chinese companies can play a role in building infrastructure. "Based on the current mining project agreement," he said, "the owner needs to carry out the construction of associated supporting infrastructure. We are pleased to see that Chinese companies are interested in Greenland's infrastructure."

Another issue is environmental protection, since Arctic areas are extremely sensitive and the Greenland government has set stringent requirements for construction and mining projects. "If there is a sleeping polar bear where you want to do work," Su said, "you must, without waking him, move him to another location."

So far, Su said, Chinese companies are approaching Greenland cautiously.

Su was once asked by a Greenland government official whether the Chinese want to "buy all of Greenland." His response was that Canadian companies are currently heavily influential in Greenland, and that the Chinese would generate healthy competition.

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