Greenland And Mongolia: The Challenges Of Resource Development
Business Monitor International (BMI) has just published two articles on the challenges of resource development in Greenland and Mongolia, both of which are attracting considerable interest from international mining companies.
Regarding Greenland, our article discusses the following points:
- Global climate change is making Greenland’s natural resources more accessible.
- Greenland has extensive resources of oil and gas, base metals, rare earth metals, fish stocks, and freshwater. All these are in general high demand.
- Mining for rare earths and uranium is banned under Danish law, but the parliament appears to be softening its stance.
- The thinning of Arctic ice is also raising hopes of a permanent, rather than seasonal, Arctic shipping route between Europe and Asia – although this is far from assured).
- Due to the Arctic’s growing importance, the USA, Canada, Norway, and Russia have become more assertive in promoting their territorial claims in the region.
- China, Japan, South Korea, and India are seeking permanent observer status at the eight-member Arctic Council, which consists of Canada, Denmark, Finland, Iceland, Norway, Sweden, Russia, and the USA.
- Greenlanders are divided over how much new investment the country should look for, and how quickly. The main benefits would be increased revenues and infrastructure upgrades. The main risks would be pollution, a major influx of foreign workers (which could prevent Greenlanders getting jobs), and socioeconomic change.
- These issues are likely to be hotly debated in the run-up to the general election scheduled for March 12.
As for Mongolia, mining giant Rio Tinto has hit back at the government’s threat to renegotiate terms of the Oyu Tolgoi (OT) agreement. The government wants to raise its stake from 34% to 50% and receive greater royalties. However, we believe both parties have too much to lose from a prolonged suspension of the project. For Rio Tinto, the commercial viability of the OT asset has never been better and, as such, it would make little sense to back out at this stage. Meanwhile, it is more important than ever for the Mongolian authorities to maintain the confidence of international investors, given the precarious health of the country’s public finances. In our featured article, we examine the origins of the mining dispute and map out the most likely scenario over the coming months.
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