A Chinese mining company is taking over a planned $2bn iron ore mine in Greenland, making it the first Arctic resources project to come under the full ownership of China.
General Nice, one of China’s largest coal and iron ore importers, will now run the Isua mine project, following a move to put its previous owner, London Mining, into administration, according to the Greenland government.
However, the involvement of a Chinese investor – even a private company – could raise alarms across the Arctic and in the US, which remains wary of China’s Arctic ambitions. Plans by a Chinese property developer to buy a large but remote tract of land in Iceland several years ago prompted great unease among Arctic diplomats.
Chinese groups are already active in the Arctic. Some are helping to fund and build Russia’s Yamal liquefied natural gas project – a venture in which oil company CNPC has a minority stake. Cnooc, another Chinese oil company, has a licence with a local partner to explore for oil off the coast of Iceland.
Rising temperatures have made parts of the Arctic more accessible, raising China’s interest in oil and mineral projects there – and the possibility of a sea route to Europe over the top of Russia. In 2013, China also became a permanent observer at the Arctic Council, the decision-making body for the region.
For Greenland and its government, the Isua project is an important part of a plan to exploit mineral wealth and secure full independence from Denmark. But there are still doubts over the viability of the project.
London Mining estimated last year that operating costs would be $45 per tonne while shipping to China would cost an extra $37 per tonne. Iron ore prices are now only $70 per tonne, however, having halved last year as miners ramped up output and demand from China fell.
Even at higher prices, the Isua project is ambitious, with construction set to take more than three years. Although the iron ore reserves there are “beautiful” according to one executive familiar with the deposit, extracting them will be challenging, as they lie under a thick layer of ice. London Mining had planned to pipe slurry out of the mine, which is made more difficult by the cold.
Executives at General Nice’s operations at the Chinese port of Tianjin could not be immediately reached for comment at the weekend. An executive at its Hong Kong-listed unit said he was not aware of details of the project.
The company already owns iron ore mines in Russia and South Africa, and a copper mine in Australia.
London Mining fell into administration in October after the tumbling price of iron ore increased the financial pressure on the indebted miner. Operations at its sole mine, in Sierra Leone, were also made more complex by the Ebola virus in the west African country and that mine has now been sold.
Source: FT