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Eyes on Greenland as US backing of zinc-lead project piques investor interest

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Eyes on Greenland as US backing of zinc-lead project piques investor interest

Confidence is building that Ironbark Zinc Ltd. can secure the $514 million it needs to finance its Citronen zinc-lead project. This could pave the way for a renaissance in Greenland's minerals sector, which is at the center of an Arctic tussle between political superpowers.

The Western Australia-based company reported Nov. 2 that it secured a nonbinding letter of interest from the U.S. government's export credit agency, considering financing of up to $216.1 million for the Citronen development with a term of up to 8.5 years.

Ironbark is seeking similar agreements with other export credit agencies and commercial lenders. Jonathan Bell, technical executive director of private Greenland-focused Greenfields Exploration Ltd., believes that the effort will be aided by the U.S. government's potential support for the project in the autonomous Danish territory.

Challenging year ahead

Yet Claus Stoltenborg, CEO of private Danish group Greenland Anorthosite Mining ApS, told S&P Global Market Intelligence that 2021 is "still filled with challenges" for Greenland. His company completed a preliminary economic assessment on its property in Fiskenæsset on Greenland's west coast in June. Anorthosite is an igneous rock that is widely used in industrial applications.

The COVID-19 health crisis has created uncertainty around when authorities "can and will allow people to get to work in Greenland," Stoltenborg said, though he hopes that the travel situation will open up before the summer operating period. There is also still a "large dependency" on foreign experts for many processes the nascent sector needs in Greenland, he added.

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Given the time needed for permitting, construction and other physical works, Stoltenborg said he believes that the industry will gradually develop into a "positive spiral" over the next few years.

Greenland Anorthosite Mining recently announced an investment by local pension fund SISA Pension following investments by Danish national investment fund Vækstfonden and Greenland state investment company Greenland Venture A/S.

Both Greenfields Exploration's Bell and Thomas Abraham-James, joint CEO of Western Australia-based Conico Ltd., said Citronen going ahead would be a "game changer" for broader investment in Greenland's mineral sector.

Abraham-James said Citronen's success will "prove to the world that Greenland's known large mineral resources can be extracted profitably from what is a remote location." Conico's Mestersvig property hosts east Greenland's only mining operation, the historical Blyklippen zinc-lead mine south of Citronen.

Jørgen Hammeken-Holm, permanent secretary at Greenland's Department of Mineral Resources, said in Ironbark's Nov. 2 statement that Citronen is one of the country's "flagship" resource projects, and is a "unique near-term opportunity to diversify Greenland's economic base and attract significant inbound foreign investment."

SNL Image

Donald Trump's 2019 attempt for the U.S. to buy Greenland was
rejected, but triggered increased investment interest in the
resource-rich island.
Source: The White House

Geopolitical posturing

Abraham-James said there has been renewed interest in Greenland from the broader investment community since the U.S. tried unsuccessfully to buy the country in 2019.

The Trump administration said in April that it would provide a $12 million aid package to Greenland for economic development, which ABC News in the U.S. said was "raising eyebrows" in Denmark, which has sovereignty over the island.

The renewed interest has also been aided by the establishment of a U.S. consulate in Nuuk, Greenland's capital, and a mid-2019 visit by the U.S. ambassador to Greenland Minerals Ltd.'s preproduction-stage Kvanefjeld rare earths and uranium project following a collaborative research program with the U.S. Geological Survey. The company reduced the capital cost estimate for the Kvanefjeld project by 40% to $505 million in July 2019.

Washington-based security research group The Arctic Institute has also observed a considerable increase in Arctic engagement by China in the past decade. Major Chinese rare earths company Shenghe Resources Holding Co. Ltd. has a 9.45% interest in Greenland Minerals and has a director on the junior's board.

The Arctic is also important for Russia, which needs to ensure it can access the North Atlantic Ocean between Greenland and Iceland, Stockholm International Peace Research Institute researcher Ekaterina Klimenko was quoted as saying in May by German broadcaster Deutsche Welle.

Western countries are calling for ex-China supply sources of critical minerals, with the U.S. funding processing facilities on its own soil while talking to companies with projects outside China and collaborating with Australia and Canada to help develop supply lines independent of the Asian country.

Bell said it feels like the minerals sector is turning a corner in Greenland, which hosts companies from around the globe including Australia and Canada. Bell's company, Greenfields Exploration, attracted the interest of midtier Australian miner IGO Ltd. in 2018 to fund exploration at its Frontier base metals project.

Greenland's government granted an exploitation license for Citronen earlier in December and opened public consultation for the environmental and social impact assessments for both Kvanefjeld and Canadian group AEX Gold Inc.'s Nalunaq gold project.

The government also extended the relaxation of exploration obligations and terms for all mineral exploration licenses into 2021.

London-based Bluejay Mining PLC also recently received an exploitation license for its Dundas ilmenite project and signed an agreement with an Asian conglomerate for the sale of up to 340,000 tonnes of ilmenite per year, representing 75% of the mine's expected annual output and a 70% increase from the original memorandum of understanding.