The Greenlanders' future based on minerals, including uranium, and hydrocarbons

October 28, 2013 | 00:00

The Greenlanders’ future based on minerals, including uranium, and hydrocarbons

Normally, Greenland is not known for being a supplier of media headlines. The last few months, however, have been different, because of the announcement of major changes in the tax system concerning mining and offshore activities. At the same time large investments are necessary, but foreign investors are still hesitating, also because of the high costs. It is getting hot in Greenland.

Greenland Minerals & Energy drilling for rare earth metals in Kvanefjeld Southgreenland
(c) GME / greenlandtoday.com
The largest island on earth with a population of just under 57,000, got its first female Prime Minister, Aleqa Hammond. This alone did not result in long newspaper articles around the world, and neither did her call for independence from Denmark.

But Ms Hammond also said that her government will make major changes in the tax system for the mining and offshore industry, moving away from taxes alone to royalty plus tax; that the coalition intends to grant further offshore permits only “reluctantly”; that it will limit migrant labour “to an absolute minimum”; and adjust the recently adopted Large Scale law for major mining projects. It was, however, the decision that “the zero-tolerance policy for minerals containing uranium will be abolished” which caught the most attention. This cannot be done without the consent of the Danish parliament. This coalition programme caused some anxiety among Danish politicians as well as – or perhaps even more – among the international mining and offshore industry, which over the last few years had enthusiastically been following the former Greenland government’s call for investments in the island’s supposedly “gigantic” mineral resources. Now it is rumoured that companies could contemplate the withdrawal from Greenland or - which was described as the least harsh scenario – freeze their investments. The incoming government was shocked by this hostile reaction and issued calming statements, saying mining companies in future will not to have to pay more tax than they do today. But there will be changes, according to Jens Erik Kirkegaard, the new Minister of Industry and Minerals. Other circumstances too have lead to a relaxation of the earlier tensions: The international interest in Greenland’s mineral and hydrocarbon resources has cooled down because of the drop in commodity prices, the failure of the first serious attempt to find hydrocarbons offshore, and the success of shale gas production in the USA. However, the Greenlanders can be assured, in a longer term their island will catch the interest of not only many companies but also governments and organisations. Especially minerals could play an important strategic role in the future. Because Greenland harbours a treasure.

For almost centuries, Greenland’s richness in often rare and valuable minerals has been known. However, climate, technical obstacles, costs, lack of infrastructure and the constitutional and social structure of the island made the search for and exploitation of minerals over a long period of time unattractive and even undesirable. Greenland, Kalaallit Nunaart in Greenlandic, is with its 2.13 million square kilometres a third of the size of Australia, and has only just under 57,000 inhabitants, 16,500 of them living in the capital Nuuk. With 0.026 people per square kilometre, Greenland is one of the least populated territories in the world. About 80% of the island’s surface is covered by ice up to 3,000 metres thick. The north-south extension of the island: 2,670 kilometres, the extension of the road network (2011) 369,999 kilometres, 74,060 of which in Nuuk. There is no direct road connection between towns or villages.

In 1814, Greenland became a solely Danish colony which was almost totally isolated and on a rather low level self-sufficient until the end of the Second World War. In 1953, Greenland became part of the Danish Realm, and in 1973 – through Denmark – member of the EU. In 1979, home rule was introduced and in 1985 Greenland became the first and up to now only territory to leave the EU. In June 2009, self-government was introduced. Only foreign affairs and national defence are still in the hands of the Danish government.

Now it is rumoured that companies could contemplate the withdrawal from Greenland or - which was described as the least harsh scenario - freeze their investments
The Self-Government Act stipulates: “The legislative power shall lie with Inatsisartut (Greenland Parliament), the executive power with Naalakkersuisut (Greenland Government) and the judicial power with the courts of law.” At the same time, Denmark continues to support Greenland financially with DKK 3,439.6 million (€ 461 million) a year. Furthermore, the Act determines: “Revenue from mineral resource activities in Greenland shall accrue to the Greenland Self-Government authorities.” In the Danish Parliament (Folketing) a big majority voted in favour of the Act, just one party opposed it. From now on, according to the Act, the subsidy will be reduced by half the revenue exceeding DKK 75 million (€ 10.1 million) per year. And should the subsidy be reduced to zero, negotiations will start between the Governments “regarding the future economic relations”.

Over the decades, quite a few mines have been opened – and closed. Along the coast of Greenland, there is rarely a longer stretch of land without any minerals. Up to now, the most successful mine was the Black Angel in Maarmorilik, central West Greenland, about 500 kilometres north of the Arctic Circle. The zinc and lead mine, situated about 700 metres above sea level and only accessible by two aerial tramways, opened in 1973 and delivered with the exception of 1973 and 1985 until its closure in 1990 net profits of DKK 1,154 million in total. For a long time, Black Angel was regarded as the best zinc mine in Europe. The intention of the new owner, Black Angel Mining Ltd., which acquired the mine in 2003, was the reopening and extension of the mine. However, the parent company, the British Angel Mining Plc, is currently under administration and the prospects of future operations are at least under the present owner very bleak. The same applies to Angel Mining (Gold) A/S, another subsidiary of Angel Mining. In 2009, the company acquired the Nanulaq gold mine on the south coast of Greenland with the intention of an annual output of 24,000 ounces of gold. However, because of the downturn of the gold price and the administration issues of the parent company, Nanulaq will – in the best case scenario – survive with a new owner. More likely is the closure of the mine. Another success story was the cryolite mine at Ivittuut in south west Greenland, the only one in the world. Between 1854 and 1987, the year it became uneconomical, it delivered 3.7 million tonnes of ore.

However, the Greenlanders, whose export revenues today originate to about 90% from shrimps and fish and to less than 10% from mineral resources, see their future precisely in the minerals and offshore industry. Over the last decade, Naalakkersuisut has tried to attract foreign investments. It found most interest from Canada and Australia. However, Per Kalvig, Head of the Centre for Minerals and Raw Materials (MiMa) at the Geological Survey of Denmark and Greenland (Geus), is convinced: “Most of the projects will fail.” For 125 years, Geus has systematically surveyed and mapped the island’s mineral resources. The result is impressive. Along the almost 6,000 kilometres long coastline the experts discovered mostly along the northern coast deposits of zinc and lead, and spread along the west, east and south coast deposits of copper, iron, nickel, gold, diamonds, platinum, titanium and many more.

Furthermore 72 exploration licences have been issued
And perhaps most important: the map shows eight deposits of Rare Earth Elements (REE) of which two, according to Geus, “may well be among the 10 largest REE deposits in the world”. Despite the fact that on principle Geus never provides commercial assessments of the finds, Per Kalvig describes the Ilimanssaq geological complex in the south of Greenland as a “super giant REE deposit”. This complex comprises Kvanefjeld and Kringlerne. Both fields are accessible around the year and close to an airport. Kvanefjeld, a multi-element deposit, offers an additional attraction: the deposit contains uranium. However, Denmark is since the mid-eighties a signatory of the International Atomic Energy Agency international non-distribution agreement for uranium and insisted, up to now, that it stay this way. In Copenhagen there are signs of irritation, since Ms Hammond announced the intention of her government to abolish the zero-tolerance rule. Around Greenland Geus has found at least five uranium deposits. But Kvanefjeld is special: For geological reasons, without uranium production no production of REEs. The deposit is owned by the Australian company GMEL, and Kringlerne, also a multi-element deposit, by the likewise Australian company Tanbreez. According to Geus, Greenland “has the possibility to become a major exporter of rare earth elements”.

There is another find which the economic geologist Par Kalvig describes as “having potential”. It is situated in the far north, in the Citrone Fjord. This zinc deposit is similar in structure to two Canadian mines, and the Australian company Ironbark has been awarded an exploration licence. The best way to transport the metal: Shipping through the North-East Passage.

Right now, Greenland’s Bureau of Minerals and Petroleum (BMP) have awarded four exploitation licences for minerals and only one mine is in production. Furthermore 72 exploration licences have been issued. In about 10 years time, Per Kalvig sees five projects – “with a little bit of luck” - at an advanced stage. One of the major problems to be solved: financing.

After sporadic drillings back in the 1970s, in 2007 the Greenlanders seriously started their oil and gas adventure. But they are still waiting for the big hit. Despite awarding of 18 prospecting licenses for offshore activities, the companies are still very hesitant to start drilling. With the exception of Cairn Energy. The Scottish company wanted to be the first under any circumstances.

However, exploration and exploitation costs will be tremendous
The result of the eight holes, drilled 2010 and 2011 along the west coast: some traces of hydrocarbons, but no commercial discovery. Whilst all the major international and national players, with the exception of BP, have registered their interest and were even awarded some exploration licences, for the next few years no one has yet announced any plans for the drilling of new wells. Again, with the exception of Cairn Energy. The company announced in its Half-Yearly Report of August 2013: “Joint Venture decision in H2 2013 on an operated exploration well offshore Greenland (H2, 2014)”. It has yet to be seen whether Cairn finds a partner.

Another obstacle Cairn and all the other interested parties are facing is the new government-coalition’s decision to – at least for the time being – stop the awarding of new licences. Prime Minister Aleqa Hammond argues that today, “the rescue services in Greenland are not as good as we wish them to be”. Furthermore, she will give today’s licence holders enough time to carry out their mandate. And finally: “We should also listen to the opinion of the industry, the people and the NGOs.”

However, one project will go ahead undisturbed. In the beginning of the 1990s, Exxon/Mobil, BP, Japan National Oil Company, Shell, Statoil, Chevron/Texaco and Nunoil established the Kanumas Consortium for collecting seismic data from Greenland’s far north. Now, the group is concentrating its efforts on the Greenland Sea and is applying exclusively for 11 blocks as a share of a total of 19 blocks covering an area of 50,000 square kilometres. The BMP received applications from three bidding groups. A decision is expected soon. In January 2014, the Government will announce the successful bidders for the rest of the area, which is also open to none Kanumas-companies.

Looking at a map of Greenland and reading the U.S. Geological Survey’s (USGS) Circum-Arctic Resource Appraisal of undiscovered Oil and Gas North of the Arctic Circle it does not come as a surprise that the island attracts a lot of interest from the petroleum industry. According to USGS, alone the sea along the East Greenland coast harbours more than 31 billion barrels of oil equivalents and the mean estimate for the whole of the island lies above 50 billion. USGS includes Greenland into the five most attractive Arctic provinces where “more than 70% of the mean undiscovered oil resources are estimated to occur”. However, exploration and exploitation costs will be tremendous. And – first of all – nature will even in the future not be friendly to the industry. Some experts are making the point that in the future it will perhaps be easier and less expensive to produce oil and gas in the by then for a relatively long time of the year open Arctic waters than around Greenland, and here especially the east coast.

The second part of this article, ‘Greenland’s aspirations: a challenge to Denmark’, was published 31 october 2013

 

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