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TheStreet Open House

Greenland Resource Sector Confirms No Favoritism

Deep-water fjords cut into the country's coastal fringes, meaning that the areas most suitable for exploration are close to potential deep-water port facilities.

The Chinese question

Interest in the country has exploded, and a number of western firms are already beginning to display signs of anxiety about China's future role in Greenland's mining sector. Some fear that China may attempt to exploit the territory in the battle for strategic control over Arctic resources and shipping routes.

Greenland's government is backing a $2.35-billion iron mine project led by London Mining (LSE:LOND); it will be worth more than the island's annual GDP and could attract as many as 5,000 Chinese workers (a third of the population of Nuuk, the country's capital city) if it goes ahead. Greenland's local government's move last year to exempt projects of this scale from Denmark's strict labor laws has also added to investor concerns. The project, which aims to lock down financing from China, would eventually result in the shipment of approximately 15 million metric tons of iron ore annually from fjords near Nuuk to China.

Speculation over the eastern giant's intentions in the far north gained momentum last year when Chinese Premier Wen Jiabao visited Iceland and reached new heights when Chinese President Hu Jintao embarked on a visit to Denmark only two months later — the first state visit since the countries established diplomatic ties 62 years ago.

Martin Breum, the author of a book on Denmark's role in the Arctic and Greenland's oil possibilities, told Reuters that the iron ore project is not what has western governments, industries and intelligence agencies worried.

"Potential Chinese control of the rare earth elements in Greenland is scary to a lot of governments in the Western world," said Breum, adding that China's monopoly on REEs is “intolerable” to the west in the long term.

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