China’s search for rare earths is turning the Greenland government upside down

The election is a blow to a large-scale project that Beijing watched as part of its efforts to increase its grip on the world’s rare earths – the raw materials needed to make the batteries and magnets that power everything from cell phones and electric cars to wind turbines. Global demand for rare earths is expected to increase as countries strive to meet their commitments under the Paris climate accord, which President Biden has decided to rejoin.

China mines more than 70% of the world’s rare earths and is responsible for 90% of the complex process of turning them into magnets, according to Adamas Intelligence, which researches minerals and metals. The mining project in Kvanefjeld, a mountainous region along Greenland’s jagged southern coast, would produce 10% of the world’s rare earths, according to Greenland Minerals. Ltd.

, an Australia-based company that holds the exploratory license to the project.

In 2016, China’s Shenghe Resources Holding Co., one of the world’s largest rare earth producers, acquired a 12.5% ​​stake in Greenland Minerals, making it the company’s largest shareholder. Since then, Shenghe’s stake has been diluted to 9%, but Greenland Minerals is confident that the Chinese company will process all the materials it sources from Greenland, a technically challenging step that is essential to the viability of the project.

Aaja Chemnitz Larsen, a member of the Inuit Ataqatigiit, said the elections gave her party a strong mandate to oppose the mine. The concession includes uranium deposits, which locals fear could be released into the area’s pristine natural landscape and farms. The project is also expected to increase Greenland’s C02 emissions by 45%.

“It would be devastating for Greenland,” said Mrs. Larsen

Miles Guy, Greenland Minerals’ chief financial officer, said the company was on the verge of getting approval from Greenland’s previous government to proceed with the mine as controversy surrounding the project sparked the quick elections. The company has already invested 130 million Australian dollars, equivalent to $ 99.6 million, in the project.

“In our opinion, it would be an extreme act of bad faith to suddenly reverse all that,” said Mr Guy.

The US, China and the European Union have circled Greenland in recent years as they seek influence in a region undergoing a transformation due to climate change. Global warming and melting ice have opened up the potential for new shipping routes in the Arctic Ocean and for resource extraction.

A decades-old defense treaty between Denmark and the US gives the US military virtually unlimited rights in Greenland at America’s northernmost base, Thule Air Base, which houses part of a US ballistic missile early-warning system. In 2019, the Journal reported that then President Donald Trump had asked private advisers if the US could buy Greenland, showing an interest in its abundant resources and its geopolitical importance.

At stake is Greenland’s path to independence. The island is still a territory of Denmark, which manages the country’s defense and foreign affairs portfolio in exchange for an annual block grant of approximately DKK 3.9 billion, equivalent to $ 575 million, to fund basic services . To declare complete independence from Denmark, Greenland’s predominantly Inuit population of 56,000 would have to find another source of income to make up for the loss of that subsidy.

Mr. Guy said the Kvanefjeld project is expected to generate $ 200 million in annual tax revenue for the Greenlandic government, as well as hundreds of local jobs.

Residents of Narsaq, a nearby town of about 1,300 residents, feared the environmental damage the project could cause. Uranium mining is a highly polarizing problem in Greenland, where the 1988 ban on the extraction of radioactive material was not lifted until 2014 with a single vote in parliament.

Debates within the ruling party also forced Prime Minister Kim Kielsen to step down from a position as party chairman last year.

The election does not completely rule out the possibility of rare earth mining in Greenland.

The IA party would be open to a referendum on the project, if any of its potential coalition partners insisted on it as a condition of joining the government, Ms Larsen said: “A referendum is something that could be one. “

And the party is not against the development of a second, more remote, rare earth deposit in southern Greenland.

“It would be something we can certainly look at,” said Mrs. Larsen. “I think we would be much more open to the other project.”

Write to Drew Hinshaw at [email protected] and Stacy Meichtry at [email protected]