After years when political, social and environmental issues meant few mining licences were granted, Greenland is emerging as a highly prospective destination for oil, gas and mineral exploration.
An autonomous country within the Kingdom of Denmark, Greenland is the world’s largest island and the thirteenth largest country with one of the smallest populations - just 57,000 people. While recognising the Queen of Denmark as its sovereign, Greenland has been granted home rule in every sector, other than foreign affairs and monetary policy, each controlled by Denmark. It is currently supported by fishing and an annual subsidy of DKK 3.4 billion ($600 million) from Denmark.
The country is 85% covered by the world’s largest ice cap. The settled areas are in the southwest, outside the ice cap, in a coastal strip about 30 km wide, with all year navigable waters. One issue is the lack of roads connecting main towns. However, the southwest coast is ice free with year round shipping and, otherwise, being in the narrow coastal belt, there is generally easy access to mining sites and to deep water facilities for the export of product. The far north landmass is also ice free, due to the cold. The cold climate means optimum mining exploration activity is in May to September. However, drilling can be carried out year round with proper preparations and where topography permits. The country is well served by aviation and helicopter services. Therefore, the mining environment is very similar to Canadian Arctic conditions, but with an ice-free zone and easier logistics (by ship) and, on the west coast, fewer problems of pack ice in the summer.
In addition to potentially having 13% of the world’s undiscovered oil, 30% of its natural gas and 20% of global liquid gas reserves, according to a recent US geological survey study, Greenland is considered to have large reserves of iron ore, copper, zinc, gold, gemstones and rare earths. The latter, thought to be enough for 25% of the world’s requirements, are becoming the focus of considerable exploration activity following the raising of the moratorium on uranium prospecting and mining in 2013 and the signing of a partnership agreement with the European Union.
While Greenland is not a member of the EU and EU laws do not generally apply except for certain trade laws, the country has a stable democratic government; transparent system of mining licences, laws and regulations; reasonable licence fees and realistic terms and conditions; generally beneficial tax regime; no history of corruption and a generally positive public attitude to mining.
In February 2014 the Government published "Greenland’s oil and mineral strategy 2014-2018", which is available on its natural resource website (http://www.govmin.gl). It includes a detailed analysis of strategy on licence applications, fiscal plans (including a comprehensive comparison with other countries’ regimes; environmental requirements; infrastructure requirements (including PPPs) particularly as regards ports, airports and power generation; an analysis of its work force deficiencies and training and development requirements; social sector issues; and the requirements for Impact and Benefit Agreements (IBAs).
The strategy document identifies a requirement to license three to five mines (exploitation licences) over the next five years which may include an iron project, a ruby project, rare earths projects, a zinc project and an anorthosite project:
An analysis of recent licence awards and Government announcements indicates that the following are likely to be the elements to be taken account of in any award of licences:
- Support for a graduate trainee programme and for graduates to attend business school internationally.
- Support for the placement of Greenland residents in geological and engineering schools to study arctic mining.
- Training Greenland nationals in maintenance and operations.
- Licencees to support the early payment of fiscal benefits including ground rent per sq. km of each area subject to an exploitation licence; and royalty payable from the start of production.
- Licencees to comply with all applicable Greenland environmental laws and practices including those developed from time to time by the Arctic Council. A particular focus will be on waste water treatment and toxic chemical disposal.
- Licencees to put in place international standards and policies concerning all elements of CSR.
- Licencees will avoid “social dumping” by respecting the wage structures and working practices applicable in Greenland and not recruiting foreign workers where a resident has the correct skill sets.
For its part the Greenland government will agree:
- to exempt mined substances, whether or not processed, from export duties and tax.
- to grant work permits and visas for expatriate personnel and to exempt their personal effects from all import and export duties and tariffs.
- that ring fencing will not apply to licencees’ mining operations, which may be consolidated.
- disputes to be subject to international arbitration under the rules of the International Centre for the Settlement of Investment Disputes.
Greenland appears to be poised to be a major hydrocarbon and mineral province. In 2012, it reacted frostily to an EU request (reputed to be backed with an offer of “hundreds of millions” of Euros for REE development) to limit China’s access to its rare earths by saying that it was open to all without favour. It is becoming a centre for international investment and has provided attractive political, legal, fiscal and operating regimes to help develop its potentially immense mineral resources.