As Greenland mineral vote looms, concerns abound

Island’s government is poised to make it easier for foreign companies to build mines and import foreign labour, but at what cost?

If you're heading across Funen, expect huge delays (photo: iStock)
November 23rd, 2012 3:48 pm| by admin
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A law allowing companies to use underpaid foreign labour when building mines and other processing plants in Greenland appears to have enough support to pass when it comes up for a vote in the country’s parliament at the end of this month.

Plans are already on the table for a 12 billion kroner iron ore mine that alone would increase the country’s population of 57,000 people by nearly four percent. If all goes according to plans, London Mining would use Chinese workers, paid at wages below what Greenlandic workers would earn, to establish the mine, as well as to build power plants, new roads and a port near Greenland’s capital, Nuuk.

Other infrastructure projects, such as construction of an aluminium smelter, would follow the same model.

Kuupik Kleist, the country’s highest elected official, is optimistic that the law will be approved.

“I think the law will pass because we will negotiate it through,” Kleist told Denmark’s Berlingske newspaper. “Once the projects get started, they will influence many aspects of life in Greenland along the way.”

It is that influence on life in Greenland that has opponents of the law deeply concerned.

With global industry eyeing not just Greenland’s iron, but also its rare earths, which are used to make high-tech equipment like smartphones and wind turbines, the country is faced with opportunities that offer rich rewards, but risk harming the environment and society.

Detractors argue that the proposed law has a number of problems, including a provision allowing companies to pay salaries much lower than those ordinarily paid in Greenland.

Lawyer Thomas Trier Hansen, the director of Transparency Greenland, told Danish trade union 3F that adopting the law will undermine Greenland’s credibility.

“Greenland will be known as a place where money talks and human rights are not something you necessarily have to take seriously,” he said.

Greenland, though, is far from financially self-sufficient and half of the Self-Rule administration’s revenue is derived from an annual 3.5 billion kroner block grant from Denmark. Authorities in Nuuk say that the island’s population is too small and does not have the skills required to establish and operate mines, and that if they don’t relax wage requirements, mining companies will not establish operations and the country will lose an opportunity to build up its economy.

China syndrome

Whether it is iron or rare earths, China is one of the countries with the biggest interests in Greenland’s minerals. China currently has the market cornered on rare earths, and Western countries have pointed out to Nuuk the possible threat of allowing China to obtain control of its reserves, which are estimated to be among the world’s largest.

Responding to those concerns, Kleist retorted the free market should decide who can invest his country.

“Could the EU do that?” he asked. “Of course not.”

Greenland’s Bureau of Minerals and Petroleum has so far awarded 150 licences for mineral exploration with around 600 million kroner spent by companies last year alone. Oil companies have spent more than 6 billion kroner searching for oil off Greenland’s coasts. Although Greenland has had active mines in the past, just ten years ago, there were almost no requests for mining licences.

Thus far, none of the operations are commercially viable, and the uncertainty concerning how such projects might be regulated in the future seems to be giving Western investors cold feet.

“It’s fair to say countries like China and South Korea are far more active than Americans and Europeans in showing their interest in investing,” said Kleist.

If the law passes, London Mining plans to start construction at the Isua iron ore deposit next year. The Chinese-backed project would send 15 million metric tons of iron ore annually to China to prop up the country’s on-going building boom.

But while Kleist has said he would not turn away Chinese investment, he said that did not mean Denmark was ruled out from investing in developing its mineral wealth. Kleist proposed that Denmark and Greenland establish a commission to examine ways for Denmark to increase its investment in Greenland, and to ensure that Denmark maintains its prominent position in the semi-autonomous Arctic territory.

The final reading and vote on the law will take place on November 27. 

For more articles about the development of Greenland’s oil and minerals industry, visit the news website Greenland Oil & Minerals.

 

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