For those following the Rare Earths stories this year, the plans to develop a resource identified at Kvanefjeld in Greenland will not be a complete surprise but a Reuters report this week that the Australian miner Greenland Minerals and Energy who are looking to develop the resource, is planning a London listing did come as a surprise in view of Greenland’s long running objections to the mine.
For twenty years, the socialist governments of Greenland and Denmark (Denmark owned all oil, gas and mineral resources in Greenland prior to a change in the law this year), have been implacably opposed to resource extraction that involved any radioactive materials. But just recently a majority in parliament agreed to support the extraction of uranium as a by-product from mines where other minerals are the primary target. We wonder if the former premier of Greenland, Lars-Emil Johansen joining as the new chairman of Greenland Minerals has anything to do with the change of heart in Nuuk?
The Kvanefjeld deposit is rich in uranium as well as rare earths and zinc. Indeed it is hard to discern which is the greater prize. Of course Greenland Minerals are saying to the regulatory authorities in Greenland that the uranium is merely a by-product but they are saying to the investment community here that the uranium is what covers the costs of the mine and infrastructure, and the rare earths and zinc are merely a source of additional revenue. Anyone familiar with the RE field will understand this position. There is a steady and relatively predictable market for uranium. The RE’s are going through something of a bubble of investment activity at the moment from which comparatively few viable mines will emerge. This is not because there isn’t demand for RE (although probably not to the level of hype we have been hearing this year) but because there is a long way between a mine and delivering refined oxides and salts to manufacturing consumers. The refining process is highly capital intensive, technologically challenging and largely undeveloped in North America or Europe; so Greenland Minerals may some day dig it out of the ground but unless they develop downstream refining they will have to sell it to the Chinese it refine.
There are still hurdles to overcome, significant objections remain in Greenland, not least from the native Inuit community. Greenland Minerals also needs to resolve a dispute over ownership with their joint venture partners Westrip Holdings Ltd who appear to be seeking to transfer their 39% holding in Kvanefjeld into a South African entity owned by one of the Westrip directors. Last year, the Greenland government down-scaled its aspirations to make much of southern Greenland into a World Heritage Site based on its one thousand years of agriculture but when this clashed with the country’s desire to exploit energy and mining resources they had to rethink and heritage took back stage to economic development.
Greenland Minerals and Energy’s proposed float may seem fraught with obstacles and the date may yet be put back but the reality is pragmatism will probably rule in the end: the Kvanefjeld Project looks like it will go ahead. However, how long it will be before we see refined rare earth oxides delivered to industrial consumers is another matter altogether.