Die Chinese het geruime tyd gelede meer as ‘n groenlig in Groenland gekry, veral met betrekking tot sekere skaars grondstowwe, minerale en spesifiek Uranium en skaars REE. Dis waarskynlik nie die enigste land wat al hul voortande sal gee vir REE nie – Suid-Afrika en Afrika het ook heelwat van die minerale en moenie verbaas wees dat “grondhervorming” iets hiermee te doen het nie. Artikel volg daaroor. Amerika is ook nie te gelukkig oor hoe sake hier ontwikkel nie.
There is also a debate on China’s growing interests in the Arctic that enriches the understanding of the various economic and political factors influencing Chinese investment decisions in the mineral sector.
More news on agreements
China – Greenland
China’s growing interests in the Arctic and emerging Arctic strategy have been the subject of several publications in recent years. Greenland has strategic value for China both as a source of important minerals and as a foothold for accessing the Arctic region.
Chinese state involvement in Greenland’s mineral sector has generated political controversy in Denmark and Greenland. In Denmark, apart from concerns that state-supported Chinese companies will seize control over Greenland’s vast mineral riches, there are fears that Chinese investments come with hidden political and military agendas. In 2016, the Danish government stepped in to prevent the Hong Kong-based mining company General Nice from taking over the
abandoned naval base Grønnedal. Recently, a bid by China Communications Construction Company, a Chinese state firm previously blacklisted by the World
Bank, to build airports in Greenland prompted the Danish government to secure half of the financing of the airports. The interpretation in Greenland and Denmark was that this was done to keep China out. It resulted in the party Partii Naleraq, strongly in favor fast Greenlandic independence, leaving the government in protest against accepting support from Denmark. In Nuuk, parts of the political elite regard a vibrant mining sector largely fueled by Chinese capital as one of the few feasible ways of achieving economic self-sufficiency. In addition, the article draws on data collected in interviews with stakeholders
in some of the mining projects. It focuses on two advanced mineral exploration projects in Greenland where Chinese companies are involved – the Citronen Fjord zinc project in Northern Greenland and the Kvanefjeld Rare Earth Elements (REE)3 and uranium project in Southern Greenland.
Until 2018, China operated under an unofficial Arctic policy.
With the publication of China’s white paper on the Arctic in January 2018, the gap between China’s domestic discourse and the message it transmits to foreign audiences appears to be shrinking. Although the white paper does not address China’s military interests in the Arctic, it now makes clear that China intends to explore and exploit Arctic resources, including mineral resources, while
stressing that it will be done in accordance with international law. It repeats China’s intention to incorporate the Arctic into BRI by establishing an “Ice Silk Road”, a term officially established in May 2017 when Chinese foreign minister Wang Yi referred to it in a discussion on China-Russia cooperation in developing the northern sea route (Xinhuanet.com).
Mineral resources will play an important role in Greenland’s future, especially REE, which the authors regard as “the most important strategic resource of the 21st century” and “one of Greenland’s most important strategic assets”.
Zinc is one of the most widely used non-ferrous metals.9 Galvanizing, mainly for the automotive sector, accounts for over 50% of total zinc usage worldwide. Hence, the lifetime of the Chinese zinc reserves has dropped from circa 11 to 8 years in the past decade. This is in contrast to the Rest of the World (ROW), where reserve lifetime has grown from 15 to 24 years. For this reason, China has to make alliances with zinc miners outside China to secure its future supply of zinc.
REE comprises 17 elements always occurring together of which 15 provide unique commercial properties that are essential raw materials for the production of emerging energy and communication technologies, such as wind-turbines, electrical vehicles, computers and smartphones. This has led to swiftly expanding markets for REE products, for which China has achieved a monopolistic role in all segments of the REE value chains. Growing demand outside China for REE raw materials stemming from the above market sectors amplifies concerns over the quasi-monopolistic supply situation, and consequently REE is considered a Critical Raw Material by the European Union (EU) and the United States (US). However, political strategies in the EU and other Western countries aimed for the development of REE supplies outside China have been unsuccessful.
China has a well-developed and clearly defined national strategy for REE, a resource it considers “strategic”. Whereas the EU and the US use the term “Critical Raw Materials” to refer to minerals that are crucial for the economy, China’s National Plan for Mineral Resources (2016-2020) uses the term “strategic minerals” (战略性矿产) to refer to minerals that are essential for “protecting
national economic security, defense security, and strategic emerging industries” (State Council, 2016: 14). The plan lists REE as one of 24 “strategic minerals,” whereas zinc is listed as one of 35 “key minerals” (重点矿种) (which also includes REE). Zinc, in other words, is not a “strategic” resource for China, but still important for its industry.
Both the REE and the non-ferrous sectors in China are controlled by companies partly or fully owned by different levels and/or sectors within the state. The goals set for the REE industry are, however, much tighter than in the non-ferrous sector.
In the non-ferrous sector, emphasis is on the BRI-countries in Asia and Eastern Europe, while the REE sector is encouraged to cooperate with countries with advanced mining industries. The fiveyear plan for REE states that “The initiation of a number of REE development projects and the first steps towards handling REE separation in countries with a generally strong resource sector such as the US, Australia, Russia, South Africa, Chile, and Brazil has relieved the pressure on
supplies from our country”.
Presently, about 31 REE projects outside China have reached advanced stage of development. Of these, six are situated in the Arctic: one in Alaska, three in Northern Canada, and two in Greenland.
Various articles about agreements and Greenland/China.
America is also concerned …
Chinese investments in the Arctic have been the subject of much interest and debate among experts and policy-makers, especially since the publication this year of China’s Arctic Policy. The question is sometimes framed as a dichotomy: does China have legitimate scientific and business interests in the Arctic region, or is it seeking geopolitical influence? The answer is probably both.
2016 was an eventful year for China’s intensifying engagement with Greenland: A blocked attempt to buy a derelict naval base; controversy over the size of a state-linked company’s share in a uranium project; progress towards establishing the world’s northernmost mine. A year ago, no actual Chinese investment existed. Now money has changed hands, permits are being awarded and China is becoming a major player in Greenland’s development. That involvement is also starting to be received differently in Nuuk and Copenhagen.
General Nice Group (俊安集团) is an iron trader controlled through a Hong Kong company. It has managed to reinvent itself several times, in constant attempts to diversify away from the Chinese coal and iron markets. Historically a private company that thrived in part thanks to Party connections, in recent years it has received increased state participation. I have written elsewhere about the company’s peculiar history, from its beginnings in the Shanxi coal rush to its fight for a manganese mine in Burkina Faso. General Nice arrived in Greenland in early 2015, buying the mortal remains of London Mining, the owner of the Isua iron mine near Nuuk.
One project with Chinese participation that is actually close to realisation is the Citronen Fjord zinc and lead deposit. Owned by Australia’s Ironbark and expected to involve an arm of China Nonferrous (中色), it has just received an exploitation permit. Although the partnership with China Nonferrous is based on a non-binding agreement, recent statements from Ironbark seem to indicate they rely on it for financing the project and starting construction in 2018. The agreement leaves construction and the bulk of the financing to the Chinese partner.
Arguably the most important development in Sino-Greenlandic affairs in 2016 came in September, when it emerged that a subsidiary of Shenghe Resources (盛和资源) was buying a stake in Greenland Minerals and Energy (GME), the Australian license-holder for the Kvanefjeld (Kuannersuit in Greenlandic) rare earth and uranium project in the south of the island. The purchase, completed in December, gives Shenghe a 12.5% stake in GME and allows it to appoint a non-executive director. Crucially, the agreement also mentions that Shenghe could increase its stake to 60% once the project obtains an exploitation permit. The 60% option, mentioned in a Chinese-language press release, spread from my blog to Danish and Greenlandic media, inducing a PR-hiccup when GME denied its existence. Greenland politicians protested, eventually leading to a GME clarification admitting a 60% non-binding purchase option was indeed there. That makes it two times this year that the Greenland government has learnt about a major development involving China through blogs and the media. GME even publically refused to provide the text of the agreement to the Greenlandic authorities, arguing they did not trust them not to leak it. Such an approach to privacy would hardly work with the Chinese government.
Kvanefjeld is one of the major rare-earth deposits outside China, and Shenghe’s (potentially controlling) stake fits into the company’s recent strategy of securing resources abroad. The project is also of crucial importance to Greenland, but it faces significant local opposition. The issue is not Chinese involvement, but uranium. Greenlandic opinion is divided on whether uranium mining should be allowed, and so is the current ruling coalition, a Große Koalition united by pro-independence views, yet paradoxically divided on the project with the biggest chance to help reduce dependence on Denmark. The current minister of natural resources, Múte Bourup Egede, is “against uranium mining”, in so many words. Which side of the uranium debate will eventually prevail remains hard to predict.
Shenghe’s largest shareholder is the Chengdu Institute for the Multipurpose Utilisation of Mineral Resources (中国地调局成都综合所, IMUMR), a geological research institution ultimately under the Ministry of Land and Resources. Other major shareholders are also state-linked, and state control of the company goes back to its beginnings in the early aughts. Shenghe’s actions in Greenland can be read as part of state-directed strategies concerning rare-earth assets abroad and Arctic resources. Specifically, information recently published by the IMUMR refers to the stake in Kvanefjeld as “implementing 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
Last December, Greenlandic authorities approved General Nice’s takeover of the Jersey-based company through which London Mining owned the holder of the license for the Isua iron mine, near Nuup Kangerlua (Godthåbsfjord) some 100 km away from Nuuk. The Isua project had created a good deal of controversy when plans to develop it started mentioning a large influx of foreign, most likely Chinese, workers, resulting in a political and media brouhaha likely to have helped scare away Chinese investors.
The Xiaonanshan mine has a peculiar history. Lu Benzhao 鲁本昭, a local businessman who was at the front of the company that controlled the mine since 1999 and continued to be involved in the project as a ’consultant’ after the takeover by Wits Basin and London Mining, was able to convince a provincial Bureau of Land and Resources official to facilitate permits and appraisals for the Xiaonanshan mine, in 2003 and again in 2008. Mr Lu reciprocated by showering the helpful official with gifts, both in cash and real estate. These amicable exchanges eventually landed the official, named Zhu Jie 朱杰, in trouble: last year he received a 12 year jail sentence for all that bribe-taking. Nothing indicates that Lu himself has been charged with any offence, or that Wits Basin or London Mining were directly involved in the gift-giving.
General Nice Group (俊安集团) comprises an array of companies controlled by the group’s chairman, Cai Suixin 蔡穗新, and his father, either directly or through a holding company, General Nice Group Holdings Limited (俊安集团控股有限公司). The Jersey company ultimately owning the Isua project was acquired by General Nice Development (俊安发展有限公司), registered in Hong Kong and mostly owned by the Cais and the holding company.
General Nice controls two Singapore-listed companies, Digiland, focused on selling IT products, and Abterra, a coal and iron trader with stakes in coal mines and plants in China. An important role in the group’s core coal business has been played by Loudong General Nice Resources (China) Holdings Limited (楼东俊安资源(中国)控股有限公司), incorporated in Bermuda and listed in Hong Kong. Loudong General Nice reports and disclosures provide a glimpse into the group’s situation. Although the HK-listed company is not involved in the Isua deal, a recent asset acquisition made by Loudong General Nice shows certain parallels with it and might be worth a look.
■ Denmark signs an agreement of cooperation with China on Greenland and Arctic issues, clearly stipulating the possibilities and limitations.
■ Greenland makes rules about transfer of licences, commercial feasibility studies and risk management about mining and infrastructure projects.
■ Denmark and Greenland try to clarify which kinds of projects fall into the area of defence and security as an attachment to Greenland’s Self-Government
Act of 2009.
Much has been said among observers and policymakers about China’s ‘hidden intentions’ in Greenland, but in fact, China’s intentions for the Arctic are anything but hidden. Explicitly, they include shipping and natural resources. Chinese companies, whether state-owned or private, regard Greenland as a new frontier for business, but they are also trying to align themselves with Chinese government policy.
Chinese activities in the Arctic have recently attracted wide attention among observers and policymakers. Anxieties abound about what hidden intentions China may have behind its mining, construction, shipping and research activities. China’s publication of its first white paper on its Arctic Policy in January 2018, identifying itself as a ‘Near-Arctic State’ and with a prominent goal of establishing a Polar Silk Road, has not dampened these worries: to some extent it has exacerbated them.
Laying speculation aside, this policy brief seeks to analyse Chinese government and corporate interests in Greenland, drawing on information about five projects with Chinese involvement.
All five projects were initiated by the Greenlandic government or Western companies. Greenland has generally been proactively trying to attract Chinese investors and contractors at trade fairs and meetings with Chinese officials and major companies in the mining, construction, hydropower, and harbour engineering sectors, etc. Chinese companies have joined the projects by buying licences, investing in the original company, or contracting for the projects. This has predominantly been for commercial reasons as they see Greenland as a strategic place to invest for the long term. It is notable that the projects have been directly initiated between the Greenlandic government or Western companies operating in Greenland and Chinese companies, without the intervention of the Chinese central government. However, the Chinese companies always try to align themselves with Chinese government policy, irrespective of whether they are state-owned or private. This is because, in the Chinese domestic sectors of mining, construction and shipping, it is difficult for companies to survive without good relations with the government, and when Chinese companies invest overseas, they hope to obtain financing from Chinese state banks.
Among the Chinese companies engaged in the five projects, NFC and CCCC are national state-owned enterprises (SOEs), Shenghe is a local SOE, while Jiangxi Zhongrun and General Nice are private companies. The two latter have both got closer to the government after they obtained licences in Greenland. Some Chinese commentators believe that there were political considerations at stake in General Nice’s 2015 investment in the Isua iron ore project: i.e. to pave way for more Chinese companies to enter Greenland. Plans to speed up China’s interests and organize funding for Chinese mining investments in Greenland have also been mentioned by the general’s staff. General Nice has profited from good relations with the Chinese government, and two local SOEs from Tianjin have increased their shares in the company.
In the case of Jiangxi Zhongrun, since its investment in the Wegener Halvø copper site, the company has transferred its ownership of the project to a joint venture between Nordic Mining and Jiangxi Union Mining, a company established by Zhongrun together with the provincial SOE, Jiangxi Copper, and a provincial state-owned ass
In the case of Kvanefjeld rare earth mine, Shenghe (a local SOE) originally invested because it was excluded from China’s domestic Rare Earth Industry Development Plan 2016-2020, which was overseen by the Chinese Ministry of Industry and Information Technology (MIIT) . However, Shenghe’s largest shareholder, Chengdu Institute for the Multipurpose Utilisation of Mineral Resources (a local research institute under the Ministry of Land and Resources), later said that the investment was implementing the country’s ‘going out’ strategy and was the fruit of the meeting between Chinese Minister of Land and Resources, Daming Jiang, and Greenlandic officials in 2015. In contrast, an official at MIIT has said that the government has quotas and controls over exploitation and refining of domestic rare earths, and Chinese companies’ involvement in overseas rare earth projects is company behaviour which the government neither supports nor opposes. However, the publication of China’s white paper on its Arctic Policy has made it clear that government agencies should support Chinese companies to invest in natural resources in the Arctic and to explore Arctic shipping routes.
The Chinese Ministry of Land and Resources has been active in bridging Chinese and Greenlandic interests, receiving Greenlandic delegations and leading Chinese delegations to visit Greenland. Other national government actors that appear prominently in the media are Chinese banks, in particular policy banks such as ExIm Bank and China Development Bank (CDB). ExIm Bank was a possible partner for the expansion of three airports in Greenland, and CDB has organised visits to Greenland by Chinese construction and mining companies to meet with Greenlandic officials and companies. In the case of the Citronen base metal project, the prospect of NFC obtaining debt financing from Chinese banks is an important element of its partnership with Ironbark.
China’s intentions for the Arctic are stated explicitly in the Arctic Policy white paper published in January 2018. It states that China is an important ‘stake-holder’ in Arctic affairs and envisages itself playing ‘a major role’ in expanding shipping routes and facilitating social-economic development of the coastal states. The white paper also argues that non-Arctic states have rights in navigation, overflight, scientific research, fishing and cable laying, and rights to resource exploration and exploitation in the area, pursuant to international law and treaties. For China, infrastructure projects in the Arctic and dialogue with Russia on Arctic issues since 2013 may lead to Arctic arrangements, which would help China prevent other countries from blocking shipping routes. The white paper says that China encourages its companies to participate in the infrastructure construction for Arctic shipping routes and conduct commercial trial voyages, as well as to participate in the exploitation of oil, gas and mineral resources in the Arctic, but it also emphasises risk assessment, local laws and sustainable development. Implicitly, China is not satisfied with the current arrangements, and thus calls for stronger international cooperation between Arctic and non-Arctic states and cooperation on infrastructure construction and operation of the Arctic sea routes.
Chinese companies’ interest in Greenland’s underground resources and infrastructure is therefore consistent with the government policy outlined in the white paper, and companies will receive even more diplomatic and financial support from Chinese government actors in the future thanks to the Arctic Policy. Many projects may start as company behaviour in search of commercial opportunities, and SOEs, private companies and Chinese banks have an interest in the economic feasibility of the projects. It is, however, possible that the companies will try to align th
Some Chinese scholars have commented on the geo-strategic importance of Greenland, and advocate for China to consider the possibility of Greenland’s independence within the next ten years, so that China makes the right economic and strategic investments in a potential new partner in the Arctic. In particular, Chinese analysts think that the Arctic Five have a basic position of excluding non-Arctic states from participating in Arctic affairs. This includes Russia, despite Russia being an important partner in China’s Arctic diplomacy. However, the Chinese government has been trying to avoid giving the impression of supporting Greenland independence, not least because it is against the independence of Xinjiang, Tibet and Taiwan. When similar issues of independence arise in other countries, China has held to the principle of non-interference in domestic affairs.
It is projected to be one of the largest producers globally of key magnet metals along with by‐production of uranium and zinc.
Greenland Minerals’ vision is to develop a stable, long-term source of materials for clean energy generation and energy efficient technologies.
Kvanefjeld is one of the world’s most advanced rare earth and uranium projects with defined JORC compliant resources of over 1 billion tonnes containing 11.1 million tonnes of rare earth oxide and 593 million pounds of uranium.
As per the April 2016 updated feasibility study, the net present value of the project is US$1.59 billion and the internal rate of return is 43.4%.
The Kvanefjeld project is forecast to be the largest producer of key rare earth elements for electric vehicles.
These include neodymium, praseodymium and dysprosium which are essential to high-powered permanent magnets used in the electric drive motors.
Prices of neodymium and praseodymium have been rising on the back of strong demand and tightening supply.
Countries including China, India, France, UK and Norway are moving to set timelines for their respective national transition to electric vehicles.
Kvanefjeld has the largest code‐compliant resource (JORC or CIM) of rare earth elements that are critical to the clean, green and smart revolution.
Greenland Minerals has a strategic partnership with major shareholder Shenghe Resources Holding Co Ltd (SHA:600392).
Shenghe is a multi-billion dollar integrated rare earth mining, beneficiation, separation and downstream processing business.
Mining rare earth metals is a nasty business, with a lot of chemical and radioactive byproducts. Properly disposing of that detritus is extremely costly, which makes mining rare earth metals for profit hard.
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. https://jichanglulu.wordpress.com/tag/shenghe/
Company Announcement, August 21st, 2018
The Memorandum of Understanding (MoU), which is non‐binding, establishes the
strategic frame work to enter future binding agreements covering the following areas:
Offtake of total output of alternative products provides flexibility
32,000tpa contained rare earth in chemical concentrate, or;
34,000tpa contained rare earth in mineral concentrate
Rare earth pricing on commercial terms with “Arm’s length” methodology incorporating
Asian Metal Chinese domestic prices
The parties agree to conclude a binding agreement on product offtake within 3 months from the mutual acceptance of the Kvanefjeld optimised flowsheet. The Kvanefjeld optimisation program is expected to be completed in Q1, 2019
Both parties to develop project finance strategy, inclusive of Shenghe taking an equity investment into the project as part of a joint venture
Development of project‐specific REE separation capacity outside China to directly supply growing international demand centres
Significant step toward the delivery of rare earth products to an international supply chain