Greenland is making a robust effort to forge a sound extractive industry by actively marketing itself as an attractive destination for FDI in this sector. In 2015 alone, several marketing campaigns aimed at enticing foreign companies to set up shop in the world’s largest island took place.

Greenland’s potential was showcased at the Mines and Money event in London, Fennoscandian Exploration and Mining in Levi, Finland, and Greenland Day in Perth, Australia. A delegation from the island will also be present at September's China Mining congress in Tianjin. Those present at these events will tell how Greenland is abundant in oil and gas, metals and gems.

Reaching potential

Myth has it that Erik the Red, whose fiery temper had led to his exile from Iceland as punishment for his violent crimes, ‘discovered’ Greenland. He set about enthusiastically spreading the word about ‘the green land’ whose fjords and lush, green valleys belied its contemporary reputation as a stark, bleak, icy and desolate place. But, in reality, below Greenland’s surface lies a cache of resources ready for extraction. 

Reports about potential oil reserves in Greenland were first made half a century ago. "Interest in Greenland’s oil and gas potential has experienced many ups and downs over the past 50 years," says a paper published by research body Arctic Institute. However, in recent years Greenland has taken a more decisive stance on the matter.

The last boom period between 2003 and 2013, was a remarkably productive time for Greenland and its profile as an emerging resource country grew immensely, according to Dr John Mair, managing director of exploration company Greenland Minerals and Energy, which has been active in the country for nearly a decade. “This [period] saw a great increase in companies coming in to explore for quality projects, with numerous projects identified and advanced,” he says.

Independence streak

A key reason for this more forceful push towards developing extractive industries by Greenland could be down to its newly acquired self-governing status. A province of Denmark, Greenland remained a colony for more than two centuries. The Danish government granted Greenlanders home rule in 1979 and loosened its colonial grip on the island even more in 2009.

“This brought about the opportunity for Greenland to develop its natural resources sector as a cornerstone to its future economy. Importantly, it brings political will for [the government] to work closely with [foreign] companies to bring this to fruition. Part of the challenge is that there hasn’t been a lot of precedent in developing mining projects in Greenland and, from an investment perspective, money follows precedent,” says Mr Mair.

Greenland’s economy is heavily reliant on fishing – mainly the export of shrimp and halibut – which brings in about 90% of the island's revenue. It also continues to receive a generous grant from the Danish government. The most recent figures issued by Statistics Greenland show that the island received grants of $532m and $535m from the Danish government for 2013 and 2014, respectively. Its GDP for 2013 was $1.65bn.

Dr Henrik Stendal, the chief geologist at Greenland's Ministry for Industry and Mineral Resources, acknowledges that the island needs to diversify away from fishing. Tourism is one sector that Greenland is looking to expand, but it is the extractive industry that is potentially more lucrative.

“The Greenland government is trying to get income from other sources. We want to get more income from minerals and oil and gas in the coming years. We’ve been promoting the minerals sector for the past 15 years to companies in Canada, Australia and China,” says Mr Stendal.

Environmental concerns

In readiness for foreign company participation and investment in its economy, Greenland has been busy drafting, amending and passing legislation aimed at ensuring that not only companies are attracted to invest, but also that future investment is conducted within clearly defined parameters. Consultation with the public by way of civil society and environment protection groups has been part of the process of setting out a code of practice for foreign companies participating in Greenland’s economy. Feasibility studies carried out by companies and any subsequent exploration and exploitation by them are expected to factor in both the social and environmental impact on what is still a largely unspoilt space.

This is important for Greenland, with its small population of just over 56,000 inhabitants, whose culture and identity are very closely tied to the environment in which they live, according to Naaja Nathanielsen, an opposition politician in Greenland’s parliament (the Inatsisartut), who also sits on both its finance and tax and mineral resources committees.

“We have made different legislative steps that are supposed to clarify how we could open larger scale mining projects. A key clarification were the rules and terms of the workforce coming into Greenland, by making it as attractive as possible for bigger companies to move in while making sure that all conventions and agreements are respected regarding workers’ rights and wages,” says Ms Nathanielsen.

A triumvirate of the Ministry of Mineral Resources, the Mineral Licence and Safety Authority and the Environment Agency for Mineral Resources Activities oversees the development of Greenland’s fledgling extractive industries. An updated and extensive list of mining and petroleum licences issued for prospecting, exploration and exploitation purposes has recently been published. These licences are valid from between two and five years up to 30 years and, in the case of exploitation licences, foreign companies would be required to be domiciled in Greenland.

Unique opportunities

Greenland Minerals and Energy, while domiciled in Australia, has been operating in Greenland since 2007, and Mr Mair says: “It was clear from early on that our key project, Kvanefjeld, was globally unique. We always look for projects that have clear potential to operate in the lowest quartile and be internationally competitive.” He believes this polymetallic project has an advantageous multiple revenue stream as a low-cost producer of rare earth metals that generates a range of by-products including uranium oxide, zinc and fluorspar. Other companies to have shown an interest in investing in Greenland include London Mining, Rare Earth Minerals and Cairn Energy.

So, what projections are there with respect to the amount of revenue Greenland can expect to raise from its new extractive industries? A research paper by the Brookings Institution think tank, says: "Most projects that are now under development and seeking investment were in fact discovered in earlier exploration booms [and]… are closest to production. [They] will require major investments, in the order of hundreds of millions or billions of dollars, to become operating mines. The mining world is currently at a low point for financing international projects.”

China and its demand for raw materials makes Greenland a potentially successful destination for FDI. However, Ms Nathanielsen is keen to stress the importance of managing expectations, and she downplays the hope of an imminent cashing-in of revenue for Greenland.

“[In terms of revenue], we have lowered expectations in the past couple of years. Oil exploration has stopped due to the difficult and harsh environment and [the current low oil prices]. There is not a lot going on at the moment. We had one gold mine which has been shut down and another [True North Gems] will open this year. Other projects are moving forward as well, but most still need to finish prospecting and find investors before moving into exploration,” she says. The rush is on: time and judgement will tell what this new light being cast on Greenland’s economic landscape will reveal.