Case study: Greenland’s budding mining industry

Greenland is turning to its natural resources to strengthen its economy as it aims for independence from Denmark. However, the government’s inexperience, a lack of trained labour and environmental concerns present major obstacles.

Background

In 2013, Greenland’s parliament voted 15-14 to lift the country’s ban on mining radioactive materials, ending a 25-year embargo on uranium mining. Since 2009, Greenland has had ‘self-rule’, or full control over most legislative areas, the result of a referendum in November 2008 on its status in relation to Denmark. The country now has complete control over the police force, coastguard, courts, and minerals and hydrocarbons.

The economy is highly dependent on fishing, which makes up 88 per cent of its exports, and central government support

Pro-autonomy campaigners made much of Greenland’s natural resources and the economic promise they held. The argument was powerful: unemployment is far higher in Greenland than in Denmark, at 10 per cent compared to 6.2 per cent. The economy is highly dependent on fishing, which makes up 88 per cent of its exports, and central government support. As Greenland moves closer to independence, however, its government is seeking to diversify. The territory is resource-rich, and climate change has resulted in ice caps melting, making it easier to establish mines. At present, there are 56 active licences to mine metals, minerals, and more recently, uranium.

Rare earth elements

One project in particular has attracted significant attention, both positive and negative. In 2007, an Australian firm, Greenland Minerals and Energy Limited (GME), began to explore Kvanefjeld, the site of a vast mineral deposit in southern Greenland, 8km from the village of Narsaq.

The rare earth elements market is currently monopolised by China

GME claims that Kvanefjeld is the world’s second-largest rare earths deposit and the sixth-largest uranium deposit. It is currently planning an open-pit mine there, where the firm would process 3 million tonnes of ore a year to extract rare earth elements and uranium – the main element used in nuclear reactors as well as being a component in nuclear weapons.

GME has discovered at least 15 of the 17 rare earth elements at Kvanefjeld. These materials are used in cars, electronic devices, radar systems, weapons and wind turbines. Global consumption of rare earth elements has reached around 155,000 tonnes per year, up from 45,000 tonnes in 1990. Demand will continue to grow at startling rates.

However, the market is currently monopolised by China, which is responsible for more than 90 per cent of the world’s production of the elements. Due to the strategic significance of the commodity, China reduced its exports by 40 per cent in 2010, raising hopes in Greenland that the country could become a key player. Supporters of GME’s project in Kvanefjeld believe that these elements could be key to unlocking Greenland’s wealth and bringing the country to independence.

However, in 2015, China ended its export quotas on rare earth elements after the World Trade Organization stepped in. This presents a major obstacle to the Greenlandic government’s hopes that major mining projects such as Kvanefjeld would be able to support an independent economy.

Uranium

Kvanefjeld is unpopular with anti-mining campaigners because, following the legislative change in 2013, GME now plans to extract uranium as well as rare earth elements.

The biggest concern among Greenlanders is that radioactive particles could fall on nearby settlements, affecting the health of the local population as well as their farmland. Worries about contamination have been exacerbated by the news that GME expects to use around 21,000 tonnes of chemicals in the extraction process every year. It would dispose of these chemicals in a lake near the mine, after building two dams, about 45 and 60 metres high, to contain the waste. One of the two biggest parties in Greenland, Inuit Ataqatigiit (I.A.) supports mining other materials, but opposes uranium mining because of the potential impact on the health of local people.

As long as Greenland remains part of Denmark, Denmark will regulate any future exports of uranium

The Danish government remains strongly opposed to uranium mining and maintains its zero-tolerance policy. The government in the Danish capital Copenhagen remains responsible for the foreign and security policy of the entire Kingdom of Denmark, including Greenland. It views uranium exports as a matter of national security, due to its potential to create hugely destructive weapons.

In January 2016, Greenland and Denmark signed an agreement on exporting uranium, ensuring that Greenland will not sell any uranium if it will be used to make weapons. As long as Greenland remains part of the Kingdom of Denmark – which seems likely at least for the next two decades – Denmark will regulate any future exports of the element.

There are other worries about national security. In September 2016, GME sold a 12.5 per cent stake to Shenghe Resources, a Chinese company. In the agreement, there is the possibility of Shenghe Resources increasing its stake in GME to 60 per cent. This was not well received by the Greenlandic government, which announced that it wanted to investigate the deal. Greenland, like much of Northern and Western Europe, views Chinese interest in strategic assets with suspicion, although in reality Chinese investments in Greenland have been minimal until now. GME has so far refused to show the contract to parliament, saying that it does not trust the government to keep the details of the arrangement private.

Political and regulatory uncertainty

GME is not alone in distrusting the government. Greenlandic politicians are still adjusting to the switch from home rule to self-rule. Regulations on mining are unclear. Mining companies are required to create Greenlandic subsidiaries, but this means that commercial disputes are covered by both the Greenlandic and the Danish jurisdictions.

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