Greenland is the sleeping giant of the Arctic with enough rare earth metals to become a major supplier of raw materials to the energy transition, but it is struggling to attract investment to exploit its deposits, according to industry participants.

Greenland's harsh environment and limited infrastructure have long kept it off the radar of major miners. However, rising metals demand is weighing against some of the challenges of working on the massive island, industry observers say. Greenland's government hopes to attract major foreign investment interested in mining its rare earths, which are within easy shipping distance of factories in Europe and North America. The country hosts 36.1 million metric tons of rare earth element resources, according to a May 26 estimate by the Geological Survey of Denmark and Greenland (GEUS).

Mines in Greenland have struggled to get started amid high operating costs, sustainability concerns and regulatory flip-flopping, along with the challenges of what can be a forbidding environment inside the Arctic Circle.

"There is a lot of interest in exploration currently in Greenland, particularly for commodities for the green transition," Jakob Kløve Keiding, chief advisor to the GEUS, told S&P Global Commodity Insights. "The reason we don't see as many mining projects in Greenland as other places is partly because there aren't that many open mines in Greenland, so people have been a bit reluctant to invest in mineral exploration because they don't see the same success rate."

Rare earth elements such as neodymium, dysprosium and terbium are vital to the production of permanent magnets used in wind turbines and electric vehicle motors. China controlled around 55% of global rare earths production capacity and 85% of refining output as of 2020, according to a 2022 paper by the International Renewable Energy Agency.

Greenland, a self-governing Danish territory, has appeared as an alternative, and with rare earths demand expected to grow at least threefold by 2040, according to forecasts by the International Energy Agency, the Greenlandic government is looking to grow the sector despite historical challenges.

On thin ice

Greenland currently only has two open mines: The Aappaluttoq ruby operation owned by Greenland Ruby A/S and the White Mountain anorthosite mine owned by Lumina Sustainable Materials A/S, in which Hudson Resources Inc. has a 31% interest. At least 20 mineral projects are in development, including by KoBold Metals Co., which is backed by Bill Gates and Jeff Bezos and is using artificial intelligence to search for minerals in the country.

The country has identified eight rare earth complexes and deposits, and Tanbreez Mining Greenland A/S has been the most successful developer. The company secured a rare earths exploitation license in 2020. Tanbreez Mining owner Greg Barnes reportedly held a meeting with former US President Donald Trump in July 2019, after which Trump declared the US wanted to buy the island nation, according to the Australian Financial Review.

The other major rare earth projects in Greenland have faced the same roadblocks that are driving away additional investment today.

Toronto-based Neo Performance Materials Inc. bought the mineral exploration rights for the Sarfartoq project from Hudson Resources, which was operating at a loss, in August 2022. In its financial statements, Hudson Resources cited extensive lead times to identify resources, obtain permits and build facilities in the remote locations that characterize the island.

"It is difficult and costly to operate in the Arctic," Jørgen Hammeken-Holm, deputy minister of Greenland's Ministry of Mineral Resources, told Commodity Insights.

"You cannot rely on public infrastructure because there's nothing, unless you are so lucky that your site is just beside a city, but that is normally not the case. You also need to be aware that you have a season [in winter] where it might not be possible to go in with a ship. Greenland cannot support investment to these big mining facilities because we simply cannot afford it," Hammeken-Holm said.

When uranium and rare earths mix

Australian-based Energy Transition Minerals Ltd.'s exploitation application for the Kvanefjeld rare earths project was denied on June 2, following controversy over the company's plan to dispose of uranium as tailings. Energy Transition Minerals' biggest shareholder is China-based Shenghe Resources Holding Co. Ltd. with a 9.2% interest, according to S&P Global Market Intelligence data.

The uranium issue polarized the Greenlandic population of 57,000 residents, who are largely members of the Indigenous group of Greenlandic Inuit. Locals and activist groups say the tailings, which would be stored in a lake above the town of Narsaq, could cause environmental damage and radiation.

"Simply passing an Environmental Impact Assessment is not sufficient. In other words, the Inuit will decide what is acceptable based on their local experience and knowledge," said Irene Henriques, professor of sustainability and economics at York University in Toronto.

The country's 2021 elections ushered in the democratic socialist Inuit Ataqatigiit party, which campaigned against allowing the project to continue and banned uranium mining seven months later.

"How the company's concerns are addressed by the government will have an effect on how the rest of the world looks at Greenland from a mining jurisdiction perspective," Daniel Mamadou, managing director of Energy Transition Minerals, told Commodity Insights.

Radical shifts in the government's approach to mining is not expected to attract additional investors.

Greenland's political divisions are creating "change in regulation every time there is an election," said Flemming Getreuer Christiansen, geoscience consultant and former vice director of the GEUS. "Investors want political stability," Christiansen said.

Looking for new investors

The Greenlandic government says the uranium conflicts are separate from the country's general mining policy. Under the general policy, standard mining licenses include provisions for a gross royalty of 2.5% to 5.5% depending on the commodity. Rare earths miners pay a 5% royalty.

"The more junior miners, the better chance there will be to have exploitation. That was the strategy, but after at least the last 10 or 15 years ... the small junior company has not succeeded. It is difficult for them to raise money," said Hammeken-Holm. "We are looking at the major companies and making a marketing effort there. We have been in Canada lately, in dialogue with some of the big companies, and we were well received."

Hammeken-Holm said Greenland is especially interested in companies that are already operating in the Artic, in parts of Canada and Alaska, as they already know how to operate in harsh climates. Whether such endeavors will be successful remains to be seen.

Interest from China-based investors has waned since Greenland reached out to China in the 2010s to attract mining investments, but the invitation sparked increased attention from the US and Denmark, according to Jesper Willaing Zeuthen, associate professor of Chinese area studies at the Aalborg University in Denmark.

"The Chinese mining community saw Greenland as interesting, and several state-owned and state-controlled enterprises showed an interest for both mines and infrastructure," Zeuthen said. "In recent years, however, China's reading of its activities in Greenland seem to be that engaging with Greenland is diplomatically too troublesome, so there are now very few Chinese activities in Greenland."

Mining was initially thought to be a key way for Greenland to gain economic independence from Denmark, but such hopes have fizzled out.

"We need very big mines to reach that level. But we know that it is not possible to have five or 10 large-scale mines set up in the next five years. We might be lucky to have one or two," said Hammeken-Holm.

Hope for Greenland's mining sector is not lost, and local populations who rely on an economy based around fishing and subsidies from Denmark are largely open to the idea of mining, according to industry participants. The sector is starting to bud and the country has large swaths of land that have yet to be explored.

Canada-based explorer Amaroq Minerals Ltd. owns the past-producing Nalunaq gold mine in Greenland and several claims to gold and critical mineral deposits. The company has enough cash on hand for three years worth of drilling on its critical mineral projects, Eldur Olafsson, company founder and CEO, told Commodity Insights.

"Greenland has a fantastic ecosystem, [and is a] safe jurisdiction to operate in. It has one of the best untouched exploration grounds, meaning that most of the world has been mined except Greenland, Afghanistan and maybe Colombia," Olafsson said. "Greenland's size is so vast and these deposits are still on surface. And then, last but not least, infrastructure is being built there in the past 15 years — there are airports, harbors, hydropower plants, which means that it's much more connected to Iceland, the US and Denmark [for example]."

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