` Study on EU Needs with Regard to Co-operation with Greenland

Final Report Contract No 30-CE-0604902/00-84 – SI2.666954

June 2015

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This study has been prepared by Milieu Ltd, the Geological Survey of Denmark and Greenland (GEUS) and Oeko-Institut e.V. under Contract No 30-CE-0604902/00-84 – SI2.666954.

The information and views set out in this study are those of the authors and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made of the information contained therein.

The authors of this report are: - Milieu: Niall Lawlor, Gijs Nolet, Guillermo Hernandez, Paola Banfi, Mark Mackintosh, Michael Wenborn - GEUS: Lars Lund Sørensen, Karen Hanghøj, Bo Møller Stensgaard, Per Kalvig - Oeko-Institut: Doris Schüler, Gerhard Schmidt, Matthias Buchert, Stefanie Degreif

Milieu Ltd (Belgium), Chaussee de Charleroi 112,2 B-1060 Brussels, tel.: +32 2 506 1000; e-mail: [email protected] web address: www.milieu.be. Study on EU Needs with Regard to Co-operation with Greenland

Table of Contents

Summary ...... 5 1 Introduction ...... 11 2 Assessing the potential for EU-Greenland co-operation to help the EU meet its raw materials supply needs ...... 14 2.1 Introduction ...... 14 2.2 Analysis of Greenland’s raw materials production potential and performance to date ...... 14 2.3 Important overarching contextual factors for any co-operation concept with Greenland ...... 28 2.4 Identification and assessment of specific risks for EU-Greenland co-operation on raw materials ...... 32 3 Possible benefits to the EU of greater co-operation with Greenland in the area of raw materials ...... 60 3.1 Introduction ...... 60 3.2 Assessing the needs of the EU’s industry with regard to Greenland’s raw material potential ...... 60 3.3 Other, non-commercial benefits for the EU of increasing co-operation with Greenland on raw materials ...... 67 3.4 Identification and analysis of possible high-level ‘safeguards’ to serve EU interests ...... 74 4 Identification and assessment of policy measures for EU engagement in the Greenland’s raw materials sector ...... 81 4.1 Introduction ...... 81 4.2 EU-Greenland Co-operation within the Context of EU Arctic and Raw Materials Policy ...... 81 4.3 Identification and Assessment of Possible Measures & Policy Options ...... 87 5 Towards an EU-Greenland Raw Materials Co-operation Concept...... 105 5.1 Introduction ...... 105 5.2 Improving Investment Conditions/Adequacy of Infrastructure ...... 106 5.3 Enhancing Geological Knowledge ...... 117 5.4 Increasing administrative capacity to allow for full participation in a raw materials co-operation arrangement...... 131 5.5 Helping tackle socio-economic and environmental risks associated with mining ...... 137 6 Conclusions ...... 142 Bibliography ...... 144

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List of Figures

Figure 1: Study tasks & methodological steps ...... 11 Figure 2: Greenland main geological areas with important known economic potential and giant ore deposits...... 15 Figure 3: Selected Greenland deposits/ constant contained metal plotted against other global deposits...... 16 Figure 4: Mineral criticality based on the evaluation carried out in 2013/14 by the European Commission ...... 17 Figure 5: Map of active mineral exploration and exploitation licences as of 9 January 2015 ...... 20 Figure 6: Evolution of the number of granted or under evaluation mineral licences in Greenland 1996-2015 ...... 21 Figure 7: Number of companies and partners conducting exploration and exploitation activities in Greenland, by country of origin ...... 21 Figure 8: Typical evolution of mineral exploration projects and required development costs ...... 23 Figure 9: Mining, separation, extraction and finishing stages and their potential locations ...... 25 Figure 10: Geological map with selected mineral occurrences ...... 27 Figure 11: Overview of ‘risk’ categories and specific possible risks ...... 33 Figure 12: Prices for rare earth elements over the past five years ...... 37 Figure 13: Development of transport routes to the Arctic ...... 42 Figure 14: Example of minerals value chain – Rare earth production ...... 64 Figure 15: Example of REE magnet supply international chain and country share (Oko-institut, 2011) ...... 76 Figure 16: Rare Earths Value Chain ...... 79 Figure 17: EU Policy/Programmes relevant to mining and potentially open to Greenland ...... 90 Figure 18: Project Ideas for EU co-operation with Greenland in the area of Raw Materials ...... 105

List of Tables

Table 1: EU critical raw materials (2010/14 list) - occurrences and potential in Greenland ...... 18 Table 2: Summary of estimates on copper, nickel and zinc ...... 19 Table 3: Number of exploration licences by target commodity (March 2015) ...... 22 Table 4: Common stages in mineral projects from exploration to production ...... 23 Table 5: Status for some of the most advanced mineral projects in Greenland ...... 26 Table 6: The most common elements of infrastructure that will be required in connection with mining in Greenland ...... 43 Table 7: Main benefits for selected sectors ...... 64 Table 8: EU expected metal requirements linked to decarbonisation technology, 2020 and 2030 ...... 68 Table 9: Examples of the use of critical raw materials in the EU defence sector ...... 70

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Summary

There is significant potential for mining of raw materials in Greenland. This potential is considerable both in terms of volume / value as well as in the breadth of minerals available. However, as only a small proportion of exploration projects reach the production stage, realising this potential will require that the challenges related to Greenland’s lack of large scale mining and processing activities in Greenland are overcome.

In 2012, the European Commissioners Vice President for Industry and Entrepreneurship Antonio Tajani and Development Co-operation Andris Piebalgs and the premier of Greenland Kuupik Kleist signed a Letter of Intent in which they agreed that EU-Greenland dialogue in the area of mineral resources could be mutually beneficial. The purpose of this paper therefore is to provide the European Commission with the information required to assess the needs of the European Union with regards to raw materials from Greenland and to provide the European Commission with information on policy options and the types of projects that could be supported in this regard.

To achieve this objective, the study provides an analysis of the contextual factors which would underlie any co-operation agreement, the possible risks posed to investors in investing in Greenland, the potential benefits of co-operation both in commercial and non-commercial terms as well as the safeguards which could be resorted to protect EU investments, the potential policy measures and instruments which could be explored and finally the types of projects which would be most beneficial.

While co-operation between the European Union and Greenland can potentially help to address such issues, there are a number of important contextual factors which should be taken into account to ensure that both Greenland and the EU are ‘ on the same page’ as to what such mutually beneficial co- operation can and should bring about.

Firstly, with regards to the coverage of areas for co-operation, given that the development of a sustainable long term mining sector is very important for Greenland’s future, and would have far reaching impacts on a number of different social, economic and environmental levels, the possible actions to be considered should ideally cover several of the four areas included in the letter of intent and not be focussed on just one area (e.g. investment).

In terms of the timing as well as raw materials coverage, it would be in the interest of both parties if Greenland became a major supplier of both critical raw materials and base metals, both in the short and long term. Therefore any co-operation concept could include actions which promote mining of a variety of materials, both in the short-term (e.g. through industry partnerships) and long term (e.g. improved geological knowledge).

A third element is the need to achieving a balance between safeguarding EU interests and promoting investment and trade in minerals. Given Greenland’s future probable reliance on this sector and the fact that for some materials one or two mines may meet a large proportion of world demand, Greenland and mining investors in Greenland may wish to diversify its/their trade partners to include companies present in several major economies, such as China, the US and elsewhere, in addition to supplying the EU. On the other hand, there is little point of the EU supporting production if the resulting minerals are shipped to a country in contravention of international trade norms on the export of minerals. Therefore any co-operation concept would need to safeguard EU interests without restricting Greenland’s need to diversify trade partners.

Such co-operation would also require the establishment of a clear co-operation framework. While the EU and Greenland has expressed their political will to work together in this area, the structures necessary to allow for co-operation in the area of raw materials are not yet in place. In addition, given the small size of Greenland’s administration and economy, any raw materials co-operation concept

5 would also need to operate within a simple framework, one that can be easily managed by the EU and in which Greenland has the means to participate.

Finally, the establishment of co-operation needs to take global market supply and demand conditions into consideration. From a mining industry/investor point of view, now may not be the optimal time to invest in mining in Greenland. However, given the highly cyclical nature of the sector and the likely demand growth leading up to 2030, it is possible that mining prices will recover sufficiently over the next 10 to 20 years (e.g. medium to long-term) to warrant investment in Greenland. That said, given the focus of the processing and downstream industry on the short-term, some form of incentives/ intervention from public actors may be required make this investment happen.

In terms of the potential risks posed to the European Union and to investors of investing in Greenland, overall, Greenland remains a relatively low risk destination compared to other resource rich countries. Indeed, it should be noted that if Greenland was the main supplier of a number of raw materials to the EU, these materials would not be defined as critical.

However, there remain a number of significant barriers to mining in Greenland, namely those relating to the real lack of infrastructure and to the potential, albeit unlikely, requirement for companies to process materials locally in a country without this infrastructure. While such risks are also present in other, similar regions of the world (Alaska, Northern Canada, Arctic Russia), these risks have been overcome in part due to greater existing and available expertise in these regions.

Beyond the important investment and infrastructure challenges mentioned above, there are a number of areas which would appear to pose ‘medium’ levels of risk. Risks related to the availability and/or quality of geological knowledge means that Greenland’s geological knowledge, which is good by international standards, can nonetheless be improved. Another important risk may concern access for companies to skilled staff.

Concerning possible risks in area of the environment, overall Greenland’s legal framework is strong and may be on par with or even exceed certain EU Member States mining rules. One area where there may be a gap is in the area of regional environmental planning – for instance, while mining project- specific risks are actually required in law to be assessed by developers, the government has not produced a broader strategic environmental assessment, or environmental baseline assessment, for the sector. Although Strategic Environmental Assessments (SEAs) are not typically conducted for the mining sector, the combination of a pristine environment and vulnerable eco-systems with government plans to develop five to 10 mines across the island over the next ten years may nonetheless warrant such an assessment.

Finally, other types of risks, which are often crucial elsewhere, are actually quite or very low in Greenland. These include those risks related to potential geopolitical factors (Greenland has a clear ‘open door’ investment policy), competition from other economic activities for land use (with its very low population density, and unlike the EU, there are rarely competing economic and social uses for land), national and local opposition to mining (to date mining remains popular), and finally, governance and transparency issues (Greenland has put in place a very open and well governed mining legal and regulatory framework).

While some of these risks would not have been as important five to 10 years ago when the market was booming, now that prices have slowed down and/or decreased, these challenges take on greater significance. Overall, however, rather than taking this as a cue to not further develop co-operation, given the expected growth in demand for raw materials for key and renewable technologies and given the cyclical nature of raw materials markets, it may make sense for Europe (and Greenland) to look at the long term and cooperate now so that both are better equipped to tackle these challenges when the market recovers.

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In terms of the benefits of co-operation, these may potentially arise in the form of both commercial and non-commercial benefits. With regards to the potential commercial benefits for companies, based on discussions with stakeholders, there is reluctance on the part of European industry to engage in the mining sector in Greenland. Part of this reluctance can be explained by current market conditions; another part is a result of the differences in perspective between downstream manufacturing industries and upstream mining and processing companies.

Compared with the mining industry where project lead times are long, the feedback received indicates that many European downstream manufacturing companies plan their material purchases on a relatively short-term basis (e.g. over a period of less than 10 or even five years). There, therefore, appears to be a discrepancy between the short term planning horizons of the downstream industry and the longer-term time horizons necessary for the development of mines, especially in a ‘frontier’ mining country such as Greenland. In short, given that any action taken now would not likely lead to concrete results for several years yet (e.g., 2018 and beyond), industry may prefer to either cooperate with other countries which already have more established mining sectors or alternatively to simply buy from the market/brokers.

As suggested above, this short-term focus on the part of downstream industry is exacerbated by the fact that for a range of materials there are currently more prospective mining projects seeking finance than there is demand. This is true for both critical raw materials such as Graphite and REEs as well as for basic metals.

Indeed, based on discussions with industry, although many companies are still dependent on a limited number of higher supply risk countries for their raw materials, it would appear that the risks posed are not sufficient to incentivise companies to individually move up the supply chain and investment in mining in Greenland and/or in related raw material processing facilities. There may be a number of reasons for this, including that the current supply risk posed is either manageable or is not sufficiently important, the incentives to invest in alternative mines on their own is too low, and/or finally that they expect demand to decrease or supply to increase over the coming years.

Another explanation for the relative indifference of industry towards Greenland is that companies may prefer to engage with other countries that have more established mining sectors. Indeed, while certain EU metal processing companies are looking at iron ore, REEs etc. deposits outside the EU, the focus – based albeit on limited evidence – appears to be on other countries such as Australia and Canada. Although the one exception to this – the German manufacturing industry – is cooperating with the German government to deepen relations with developing countries, it has chosen to limit these efforts to deepening already established co-operation with Peru, Kazakhstan and Mongolia.

In the longer term, e.g. within the next 20 years, growing global population and urbanisation levels, as well as increased needs for new technologies, may see demand for metals rebound and substantially increase. This would make sourcing minerals from Greenland a more attractive prospect. In addition, the processing industry in the EU would also have much to gain from importing raw materials from Greenland as much of the value in the sector is created in this part of the supply chain. This is, of course, one of the reasons that resource-rich countries also wish to see such ‘vertical’ integration of mining and processing. On the downside, however, such a strategy is risky where there is overinvestment in expensive processing facilities on a global scale.

Finally, while investment in infrastructure would benefit infrastructure/engineering companies (e.g. one of the main barriers to mining in Greenland is a lack of infrastructure), such investment, however, would not be as great as in other sectors such as metal processing. For example, there may be less need for very large investments than, say, in a hydroelectricity plant for example. Therefore, the upstream benefits for European providers of mining support activities may be limited.

As regards the potential non-commercial benefits for the EU, these include possible benefits in the areas of environment & climate, defence & security and development policy.

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In terms of environmental and climate benefits, a large proportion of the critical raw materials to be found in Greenland have applications in renewable and pollution abatement technologies manufactured and/or used in the European Union and elsewhere. Furthermore, while the extraction of these materials has certain negative environmental impacts, Greenland’s relatively good record in the area of mining sector governance, at least compared with alternative sources, may nonetheless mean that sourcing from Greenland also may be preferable from an environmental point of view. A crucial factor here is what renewables and related legislation is put in place globally over the coming years – if the world’s largest economies set more ambitious targets, this could mean a significant increase demand for these materials.

While the defence/security sectors are as dependent on many critical raw materials as other industrial sectors, the importance of such materials is of course greater in this sector. The question remains however as to whether such concerns would be best addressed through co-operation and sourcing from Greenland than in, say, using alternative instruments, such as defence industry stockpiling of such materials.

Finally, given the shortage of alternative economic activities available in Greenland – potential or actual, it would appear that one of the few ways in which Greenland can diversify and grow economically, at least in the medium term, is through the (sustainable) exploitation of natural resources. As such, European Union actions to foster the sustainable development of the sector should help Greenland’s economy grow. Equally where imports from Greenland help the European Union avoid importing materials from conflict regions, this should have a positive effect on European Union development goals, namely in avoiding sourcing from regions producing so-called conflict minerals.

Although the potential long term commercial benefits are large, and the non-commercial benefits in terms of EU environment and climate, and development, policy are considerable, a number of potential safeguards may need to be considered in order to protect the European Union’s interests. While there are a number of possible safeguards which could be considered, they are by their very nature all far-reaching and would entailing taking considerable policy trade-offs.

For example, one possible option to consider may be to encourage Greenland to deter investment in mining for investors coming from countries that do not abide by international trade norms. While such a measure would have a considerable effect, it would be politically difficult if not impossible, would be outside of the European Union’s competence and may not present significant advantages for the European Union.

Second, the European Union could take measures to develop raw materials processing value chains in the European Union and elsewhere in order to promote mining of certain materials, and to include Greenland in such an initiative. While this is a win-win solution, the costs of doing so may present a major hurdle. Provided that European Union competition law allows it, the European Union could promote co-operation of Rare Earth/Graphite users and perhaps investigate how the risks involved in building a materials supply chain can be mitigated using European Union funding, alone or in co- operation with other countries facing similar problems such as Canada and the US. This is an issue however that goes beyond the scope of this study.

Another possible safeguard is to provide that investments promoted by European Union institutions, such as the EIB, in mining and metal processing operations outside the EU actually directly benefit promote growth and jobs in Europe. Though logical, this may in practice mean tying financial assistance to trade with the European Union. This may require establishing funding outside the normal development policy funding envelopes, say, within a new own resources minerals lending envelope or financial vehicle.

A different type of safeguard may be to promote European sourcing of materials from countries with good environmental and social records, for instance through a form of certification, thereby

8 encouraging mining in these countries and discouraging sourcing from other countries with poor records in this regard. While the use of such a safeguard may increase costs and paperwork for companies, it would be particularly relevant for the sale of downstream environmental goods which use raw materials.

Of the above examples, as only one of the above safeguards is explicitly linked to Greenland – the first, and this option is perhaps the least feasible, the European Union could in theory apply these safeguards to any co-operation agreement it enters into with a mineral-rich third country. As such, these measures could/may need to be taken regardless of whether co-operation with Greenland is promoted.

Finally, other possible safeguards such as those related to diversifying supplies –stockpiling, recycling and substitution – have already been considered extensively elsewhere and hence do not need to be covered here.

Moving beyond the analysis of the potential risks and the benefits of co-operation, it is necessary to outline how such co-operation can be achieved within the current policy framework and market environment.

At the political and strategic level, the European Union institutions have in recent years issued a series of policy documents and legislative acts outlining the European Union’s commitment to develop a coherent and integrated Arctic Policy, one which includes, amongst other things, the promotion of raw material co-operation with Greenland and other states in the Arctic. Therefore, the political objectives with regards to the overall benefits of promoting sustainable minerals sourced from Greenland and from the region as a whole appear to be quite clear.

However, there are two main challenges – one political and one market-related – which need to be addressed in order to allow for the development of a coherent EU policy with regards to raw materials, Greenland and the Arctic.

In terms of market conditions, despite the availability of considerable mineral resources in Greenland and the Arctic, and in spite of the long term value of such potential for the EU, adverse short term market conditions for new projects make investing in mining in the region less attractive.

In terms of current efforts within the European Union’s institutions to address policy gaps, the Council has invited the European Commission and the High Representative to present proposals for the further development of an integrated and coherent Arctic Policy by December 2015. As part of this exercise, the Council also encourages the Commission to ensure effective synergies between the various European Union funding instruments in the Arctic region. In this light, the development of such an integrated and coherent Arctic Policy – to cover Greenland as well as the European and even Arctic spaces in North America with which the EU enjoys good trade relations – provides an opportunity to promote initiatives which are in line with objectives and priority areas presented in the Raw Materials Initiative, the EU-Greenland Council Decision and the 2012 Letter of Intent.

Finally, as regards what policy measures could be included in such a policy framework, based on the assessment of Greenland’s mineral potential and the abovementioned contextual factors, investment risks, commercial and non-commercial benefits for the European Union, the possibility of using safeguards and the political and market context, the table below provides a list of detailed suggestions by measure and detailed measure/project which could be included in an EU-Greenland co-operation concept.

Area Measure Detailed measure/project Improving Offer funding facilities and related Develop a needs assessment and feasibility studies for Investment incentives for infrastructure and establishing: Conditions/ investments  An Investment & Infrastructure Facility to cover Adequacy of Northern countries, including Greenland, possibly

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Infrastructure Provide incentives to EU industry to managed/funded by EIB in collaboration with NIB procure minerals from jurisdictions  A voluntary supply chain certification process for with good governance and minerals originating in Greenland. Examine the environmental arrangements in advantages/disadvantages of establishing a place, including Greenland voluntary sustainable mineral supply chain (e.g. certification processes) for minerals originating in Greenland and similar countries. Assistance for the improvement of Examine how EU-Greenland business to business access to horizontal local business support and coordination can be structured, possibly services using the COSME, through the possible establishment and funding of an EU-Arctic Business Mining Cluster. Enhancing Support for greater geological Examine the feasibility, and sourcing of funds to Geological knowledge in Greenland enhance geological knowledge in Greenland in the Knowledge following areas:  improved coverage of basic regional geological data  use of EU earth observation systems to support geological mapping in Greenland  development and construction of a central modern drill core storage facility  enhancing knowledge on the quality of existing deposits Enhancing Assistance to allow Greenland and In order to put in place any future raw materials co- Administrative other parties to participate operation between the EU and Greenland and Capacities effectively in and implement any operationalise the Letter of Intent and more specifically EU-Greenland co-operation the type of projects identified above, the EU could agreement on raw materials consider developing with Greenland a Joint Action Programme for discussion and implementation of concrete projects and initiatives agreed upon. Helping tackle Improving the information Support the undertaking of regional socio-economic necessary for regional and national environment/mining SEA-style baseline studies. and environment planning in the environmental minerals sector risks associated with mining

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1 Introduction

In June 2012, the premier of Greenland and the Industry and Development Co-operation Commissioners signed a letter of intent to co-operate in the area of raw materials in four areas - geological knowledge to support the availability of geological information; analysis of infrastructure and investment needs related to the exploitation of mineral resources; competence building; environmental issues related to mining and social impacts of mining.

The general aim of this study, therefore, is to provide the necessary information to allow the Commission to further assess the needs of the EU related to this co-operation – with a special focus on the needs of the downstream industry – and in doing so inform the EU on the policy options and the types of projects that can and should be supported. The Figure below presents the main tasks completed and the individual steps undertaken.

Figure 1: Study tasks & methodological steps

• Overview of the geology and known deposits of base and critical raw materials of Greenland • Description of exploration and exploitation activities in Greenland and future perspectives Mineral potential & activity

• Identification and desc ription of contextual aspects impacting on future EU-Greenland co-operation in the area of raw materials • Risks: • Identification and description of risks for EU and investors Contextual • Assessment of level of risk posed and probability, and implications for EU engagement factors & Risks • Short-listing and ranking of the most important risks

• Identification, description and assessment of potential: • Commercial benefits for the EU - needs of EU downstream & downstream industry • Non-commercial benefits in the areas of environment/climate, development and security/defence Benefits • Discussion of options for safeguarding EU interests

• Description of overall EU political context with regards to the Arctic, Greenland & Raw Materials • Identification and assessment of possible policy measures and instruments based on effectiveness and feasibility criteria • Recommendations on possible detailed measures/projects to be considered for inclusion in a EU-Greenland co-operation concept Policy options

• Outline of possible projects in detail including: • Policy changes required • Description of project & objectives/justification/expected results • Activities, resources & implementation schedule Possible projects • Sustainability, risks and possible partners

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The first task, covered in section 2.1 (“Analysis of Greenland’s raw material production potential and performance to date”), is aimed at ascertaining the geological potential of Greenland to help meet EU raw material needs, as well as to describe how mining projects are evolving on the ground. This is supplemented in Annex 1 with factsheets outlining containing updated information on the availability of a selection of the EU’s major critical and base metal resources and reserves in Greenland, by raw material or group.

The first part of the second task, presented in section 2.2 (“Important overarching contextual factors for any co-operation concept with Greenland”), is aimed at establishing the parameters of, or context for, any future co-operation agreement, including a description of the relative objectives of Greenland and the EU in this area.

Section 2.3 examines the specific potential risks posed to the EU and investors in co-operating in this area (“Identification and assessment of specific risks for EU-Greenland co-operation on raw materials”). The risks assessed include those related to geopolitical developments, international and Greenland-specific investment conditions, availability of adequate infrastructure, availability of geological information, administrative risks, challenges related to skills & sourcing, environmental risks and finally, social & political risks. These risk areas are classified based on the expected level of risk posed (e.g. high, medium, low) and how likely they are to occur (e.g. likely, unlikely).

The third task covers the commercial and non-commercial benefits which may accrue from such co- operation, for downstream and upstream EU industry, as well as for achieving EU policy goals in other areas such as environment/climate and development. These benefits are assessed in sections 3.2 (“Assessing the needs of EU industry with regards to Greenland’s raw material potential”) and 3.3 (“Other, non-commercial benefits for the EU of increased co-operation with Greenland on raw materials) respectively.

A core part of the process to identify EU needs has involved consulting and discussing potential EU- Greenland co-operation with EU geological surveys, industry associations and companies. This section provides a summary of results of the consultation with industry on the issue of industrial needs for raw materials and Greenland undertaken as part of the project. In addition, Annex 2 provides an overview of what raw materials which are found in Greenland are used by what EU industry.

Also included here, in section 3.4 (“Identification and analysis of possible high-level ‘safeguards’ to serve EU interests”), is an analysis of how EU interests in such a co-operation agreement can be protected or safeguarded.

The relative risks and benefits identified feed into the fourth task on policy measures and options which includes, in section 4.2 (“EU-Greenland Co-operation within the Context of EU Arctic and Raw Materials Policy”), an overview of the EU political context with regards to the Arctic in general and in terms of raw materials and Greenland in particular.

In section 4.3, an identification and assessment of possible measures is provided. This assessment involved identifying those measures which would (i) potentially help tackle the most relevant risks identified, (ii) help realise the benefits identified (in particular non-commercial benefits), (iii) help protect the interests of EU investments through safeguards which are available and which are based on (iv) types of EU instruments and measures which have been applied in other sectors/policy areas The output of this task is a list of possible project ideas covering the areas outlined in the Letter of Intent.

The fifth and final section (Section 5 - “Towards an EU-Greenland Raw Materials Co-operation Concept”) presents a draft suggested plan for each of the hypothetical co-operation project ideas. This includes an overview of the suggested project idea, possible changes to policy instruments which would probably be necessary, a full description of the draft project as well as its objectives, its justification and possible results. In addition, the anticipated activities, a rough estimate of the resources required (where possible) as well as a suggested implementation timetable is provided.

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Sustainability issues as well as possible risks are identified. Finally, possible partners and their expect roles are outlined in each case.

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2 Assessing the potential for EU-Greenland co-operation to help the EU meet its raw materials supply needs

2.1 Introduction

The aim of this section is to outline in depth Greenland’s mineral potential and identify and assess the contextual factors and risks that need to be assessed as part of any co-operation framework between Greenland and the EU in the area of raw materials.

First, section 2.2 provides an analysis of Greenland’s raw material production potential. This will include a description of Greenland’s geology, a detailed overview of potential and actual deposits of critical raw materials and base metals, as well as an outline if the planned and on-going mining projects in Greenland.

Section 2.2 then provides a background description of the main contextual factors – internal and external within the EU and Greenland – which may facilitate or thwart co-operation. Finally, in section 2.3 the various risks and barriers that may impact EU mining investment in Greenland are identified and assessed.

2.2 Analysis of Greenland’s raw materials production potential and performance to date

2.2.1 Geology of Greenland

Greenland has a more than four billion year geological history and hosts many different geological environments. The oldest rocks, the North Atlantic Craton (a central Archaean craton), is bounded by two later Proterozoic orogenies (foldbelts), the Nagssugtoqidian to the north and the Ketilidian to the south. Subsequently, subsidence created large sedimentary basins in North and East Greenland, and rifting and volcanism created igneous provinces including the Gardar Province, and the North Atlantic large igneous province. Limited kimberlitic volcanism and carbonatites are found locally in several regions.

Although Greenland is underexplored – mostly due to its remote location and limited infrastructure – its diverse geological record and an ice free area of about 440,000 km² means that it has the potential to become a producer of a wide variety of commodities. These include, for example:

 Iron, gold, chromium, and diamonds especially in the Achaean basement;  Base metals in sediments and metamorphosed sediments;  Platinum group elements (PGEs), and nickel in igneous Proterozoic rocks;  Rare earth elements (REEs), niobium, tantalum and other speciality metals in alkaline and peralkaline intrusions and in carbonatites.

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Figure 2: Greenland main geological areas with important known economic potential and giant ore deposits.

Source: GEUS

Greenland’s potential to play a role as a new producer of raw materials in the future, thus applies to minerals currently regarded as critical by the European Commission, such as Light and Heavy REEs, niobium, graphite, PGEs, and tungsten, in addition to the more conventional commodities such as iron, copper, zinc, and nickel.

This report gives an overview of the mineral potential for a variety of commodities in Greenland, presents an overview of the current exploration activities and lists some of the known deposits and their development status. More in-depth descriptions are provided in Annex 1 that contains fact sheets for selected commodities, which are especially interesting to the European Industry and for which the potential in Greenland is considered highly relevant.

2.2.2 Mineral Potential

Compared to countries with similar geological conditions (e.g. Canada, Sweden, Finland) Greenland can be regarded as underexplored and, as most other countries in the Arctic region have significantly greater exploration activity and all have active mining, although to different degrees. Nevertheless, the potential for the following is considered especially high in Greenland: zinc (North and West Greenland), copper (East Greenland; Northeast Greenland), rare earth elements (South and West Greenland), uranium (several regions), nickel (West Greenland), and iron (North and West Greenland). Furthermore there is good potential for a number of speciality metals; antimony, chromium, graphite, niobium, tantalum, tungsten and the platinum group elements (PGEs). Attesting to the significant potential, known Greenlandic deposits hold resources which are comparable to the larger deposits known elsewhere in the world, so that they can be considered world-class deposits (Figure 2).

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Figure 3: Selected Greenland deposits/ constant contained metal plotted against other global deposits1.

Source: GEUS

1 Data sourced from http://pubs.usgs.gov/of/1993/ofr-93-0280/of93-0280.pdf

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2.2.2.1 Deposits of Critical Minerals in Greenland

Minerals are considered critical when they are both important to society's needs and there is a significant risk to their supply. The evaluation of criticality varies as industrial and societal needs, and resource endowment and indigenous production capacities vary between countries or trade blocks. Therefore, there is a difference between what is critical for countries/regions like China, Japan, USA and Europe. As a result, quantitative methods and tools to evaluate critically and resulting assessments have been developed both globally, at the European Union scale (European Commission, 2010; 2014), and nationally e.g. USA (US Research Council, 2008), UK (British Geological Survey, 2013)). Additionally, the importance of industry specific commodities has been evaluated using similar tools (e.g. the automotive industry in Germany, the electricity supply in USA).

The first criticality analysis for raw materials was published in 2010 by the European Commission. Fourteen critical raw materials were identified from a candidate list of forty-one non-energy, non- agricultural materials2.

In the 2013 exercise fifty-four non-energy, non-agricultural materials were analysed. The same quantitative methodology as in the previous 2010 exercise applies two criteria – the economic importance and the supply risk of the selected raw materials. The overall results of the 2013 criticality assessment are shown below; the critical raw materials are highlighted in the red shaded criticality zone of the graph. In this study, a raw material is considered critical when there is a supply uncertainty and the material is so important for certain industries that a severe impact on the EU economy is predicted if availability is limited. In the analysis, the supply uncertainty is broken down in political and economic stability of the main producing country and environmentally related issues. The study also addresses opportunities for substitution and recycling of raw materials.

Figure 4: Mineral criticality based on the evaluation carried out in 2013/14 by the European Commission2

Source: European Commission

Table 1 lists critical minerals along with their known occurrences and discovery potential in Greenland as evaluated by GEUS. The table includes 12 critical minerals on the European Commission's list from

2 From http://ec.europa.eu/enterprise/policies/raw-materials/files/docs/crm-report-on-critical-raw-materials_en.pdf

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2014 including tantalum from the 2010 list. This table shows that the discovery potential for the critical minerals niobium, graphite, PGE and REEs is especially high in Greenland.

Table 1: EU critical raw materials (2010/14 list) - occurrences and potential in Greenland

EU critical raw Known Region Potential Exploration Comments material occurrence status Antimony (Sb) North Central East Moderate No active Margeries Dal Greenland exploration on Ymer Ø Beryllium (Be) Ilimaussaq and South and High No active Not part of the Kvanefjeld pegmatites West (Kvanefjeld) exploration project e.g. Storø Greenland

Cobalt (Co) Disko Bay area West and Low to No active Only by-product Thule district North moderate exploration potential. Best potential (placer) Greenland targeting Co with Ni deposits Fluorspar (F) Kap Simpson, East and Moderate No active By-product potential to Hudson Land, South exploration REE from Kvanefjeld Ivittuut, Greenland Part of REE Kvanefjeld exploration Gallium (Ga) Illimaussaq South and Moderate No active Only by-product Skaergaard East exploration potential intrusion Greenland Germanium None Low No active Only by-product (Ge) exploration potential. Ge is low in the Citronen Fjord Zn deposit Graphite (C)* Amitsoq/ South, West Moderate - Two Several deposits are Eqalussuit and East high exploration known and several have /Langø Greenland licenses active been exploited during the past century Indium (In) None Low No active Only by-product exploration potential. In is low in the Citronen Fjord Zn deposit Niobium (Nb)* Motzfeldt Sø South and High Active By-product potential from Kringlerne West exploration several REE projects Sarfartoq Greenland Tikiussaq Platinum Group Skaergaard East and West Moderate - Active Advanced stage Elements (PGE)* Fiskenæsset Greenland high exploration exploration at Maniitsoq Skaergaard and Norite Belt Maniitsoq Rare Earth Gardar area South, West High Active Several advanced stages Elements* Sarfartoq and East exploration exploration projects (REE) Qeqertaasaq Greenland Tikiussaaq Karrat REE Milne Land Tantalum (Ta)* See Nb See Nb High Active By-product potential from exploration several REE projects Tungsten (W)* Ymer Ø East and West Moderate No active Only Ymer Ø is currently Ivisaartoq Greenland exploration being explored

Source: GEUS. For minerals marked with an asterix there is a factsheet with further details at the end of the section

2.2.2.2 Deposits of base metals and other raw materials in Greenland

Greenland represents a region with an excellent potential for base metal mineralisation. Since 2008, GEUS and the Greenlandic Government have jointly conducted annual mineral resource assessment workshops on selected mineral resources. From these discussions it has been concluded that many areas in Greenland have a large potential for undiscovered deposits of copper, nickel, and zinc. The estimates for each deposit model and different geological regions are summarised in Table 2 below. The underexplored sedimentary successions of East, North-East Greenland and North Greenland are of

18 particular interest. This is also confirmed by the many known copper and zinc occurrences known from these regions.

Table 2: Summary of estimates on copper, nickel and zinc

Commodity Region Known resources Mean estimate of (Metric tons) undiscovered resources (Metric tons) Zinc North Greenland 5,400,000 18,490,000

Rest of Greenland 1,661,000 6,347,000 Nickel Norite Belt 490,000

Disko 460,000

Rest of Greenland 1,016,400 Copper East Greenland 3,478,000 Rest of Greenland 160,300 Source: GEUS

Greenland also has considerable deposits of gold, iron ore, molybdenum, uranium and other minerals.

2.2.3 Overview of Exploration and Project Evolution

This subsection provides a description of the current exploration and licensing activity in Greenland’s mining sector as well as an overview of how, and why, the most advanced projects have advanced (or stalled) in recent years.

2.2.3.1 Licensing and Current Exploration Activities

According to Greenland’s Ministry of Mineral Resources (MMR), the area covered by mineral licences has gone up from 6,000 (year 2002) to 48,000 km2 in 2013, reflecting the gradual increase of the number of mineral licences (Figure 5). Therefore the area covered in 2013 equalled approximately 10 per cent of the total ice- free land in Greenland. However, as of March 2015 the total area covered by exclusive licences has fallen to 23,500 km2 although the number of licences only has made a small drop. While uninhabited land in Greenland is ‘crown land’, and mineral exploration activities are permitted, more stringent rules apply in certain areas (such as in the very large National Park covering an area from central East Greenland to North Greenland).

This upward exploration trend until 2013 is consistent with the general global increase in interest in mineral resources. The last couple of year’s major drop in licence area reflects the slowdown in the world economy and thus new investments. Large licence areas in Greenland are very expensive to keep for the exploration companies, as the annual work commitment on the licences are defined by the size, so the companies reduce the areas to a minimum. As of mid-January 2015, 106 mineral licences (78 exclusive exploration licences, 23 non-exclusive prospecting licences and 5 exploitation (mining) licences3) were granted or were under application. The distribution of these licences, as well as their holders, is illustrated in Figure 4.

3 A company with an exploration licence has exclusive rights in a given areas while prospecting licence are not exclusive. An exploitation licence provides both exclusive rights and a right to mine.

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Figure 5: Map of active mineral exploration and exploitation licences as of 9 January 2015

Source: Government of Greenland

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Figure 6: Evolution of the number of granted or under evaluation mineral licences in Greenland 1996-2015

120 Exploitation Licences

100 Exploration Licences Prospecting Licences

80

60

40

20

0

Source: Government of Greenland (2015)

As can be seen from the figure above, the number of exploitation licences applied for and granted is considerably smaller than the number of exploration and prospecting licences. This is an industry characteristic that is not unique to Greenland. Likewise, even when an exploitation license is granted there is still no guarantee that this will result in a mine being opened. In reality a smaller number of prospecting and exploration projects are ultimately successful. The nationality, or ‘home’ country, of the companies currently conducting exploration activities in Greenland is outlined below.

Figure 7: Number of companies and partners conducting exploration and exploitation activities in Greenland, by country of origin

8 7 7 6 5

2 1 1 1

Source: Government of Greenland (2014). Only two of the 8 registered Greenlandic companies are exploration companies. The rest are companies associated with exploitation licenses.

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Care should be taken however when looking at the nationality of mining companies. For example, as mineral exploration in Greenland is typically structured similarly to what generally happens in the mining sector worldwide, namely that junior companies carry out the initial exploration and start-up activities and, subsequently, the projects are sold to (or joint ventured with) major companies with greater financial strength and technical capacity who can carry the project forward to a feasibility study. Therefore the ‘nationality’ may change as projects come to fruition.

The feasibility study4 together with environmental impact assessment and social impact assessment studies (EIA and SIA respectively) constitutes the basis on which an exploitation license is granted and is also essential for getting financing for the project. For speciality metals (i.e. Rare Earth Elements) there will be relatively few companies who are willing and able to enter projects in their final stages because the exploitation of these deposits is technologically and commercially challenging.

Most exploration companies active in Greenland are listed at various stock exchanges e.g., TSX, ASX, LSE, but there are also a few privately owned companies e.g., Avannaa Resources Ltd, Rimbal Pty Ltd. and Hunter Minerals Pty Ltd. In 2013 two “majors” (Boliden and Anglo American) entered into joint venture partnerships with partnership with Avannaa Resources Ltd, a mineral exploration company registered in the UK with offices in Copenhagen, in two different licence areas.

When applying for and awarded an exploration licence the companies are not required to state for which commodity they are exploring and, in several cases, companies explore for several minerals in the same licence area, concurrently or sequentially depending on the markets. Table 3 below gives an overview over some of the most frequently explored minerals (e.g. REEs, Zinc, Gold, Copper, Nickel, PGE and Uranium). The overview does not necessarily reflect the international industries general interests, and also it cannot be deduced to which extent the Greenlandic geological potential is sufficiently explored. It is relatively difficult to evaluate what determines the exploration strategies of junior companies, and specific measures to significantly increase exploration in Greenland, other than improved markets and increased investments, cannot be identified.

Table 3: Number of exploration licences by target commodity (March 2015)

License – focus Number of licences Rare Earth Elements (including Nb, Ta) 18 Zinc (all/ main product) 18/ 11 Gold (all/ main product) 17/ 105 Copper (all/ main product) 10/4 Nickel (all/ main product) 7/6 PGE (all/ main product) 10/2 Uranium (by-product) 4 Source: GEUS

In terms of exploitation licences four out of 6 projects have held this type of licence for some time but are not in production. These are the (i) Nalunaq gold mine (exploited), (ii) the Black Angel lead-zinc mine (under construction for re-opening but on stand-by due to lack of funding), (iii) the Seqi olivine mine (closed), and (iv) Malmbjerg molybdenum deposit (lack of funding/market downturn).

2.2.3.2 Expected Project Evolution & Impacting Factors

Mineral projects generally have long maturation periods - it typically takes 10-15 years from a mineral deposit discovery to actual production. The development of a mineral project from exploration to

4 The feasibility study is paid for by the company but is conducted by a third "impartial" party with skills and "license" to provide these things. This approach is the industry standard in other countries. 5 The first number (1713) is the total amount of licences with gold reported as main focus or where gold is reported as by- product in the deposit; the second number (10) is licences that exclusively explores for gold.

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production, goes through a set of stages and only a very small number of exploration projects will actually lead to producing mines (<<1%). Many projects are abandoned somewhere along the way, until new market conditions and/or new technology might make them attractive again.

Table 4: Common stages in mineral projects from exploration to production

Phase Company Duration Strategy Method 1. Initial exploration Junior company A 1-4 yrs. Investigation of Regional geophysics / (green field) large area geochemistry 2. Follow-up Junior company A 1-4 yrs. Selected areas Local geophysics/ geochemistry exploration 3. Follow-up Junior company A 1-4 yrs. Selected areas Drilling. Local geophysics/ exploration (Alternatively B or geochemistry A+B) 4. Detailed Company B (or 1-4 yrs. Constraining size Drilling/Metallurgical tests Resource investigation A+B or B+C) and quality of calculations ore body 5. Technical and Company C (or 1-2 yrs. Feasibility study, External consultants financial C+D+E) EIA, SIA evaluation 6. Construction Company D (or 1-3 yrs. Establishing Building facilities C+D or C+D+E) Infrastructure 7. Production Company D (or >10 yrs. Production, Production of mineral C+D or C+D+E) grade control, concentrate expanding reserve Source: GEUS

Figure 8: Typical evolution of mineral exploration projects and required development costs

Source: Avannaa Resources (Copyright)

The described maturation period also applies to Greenland, where several currently advanced projects correspond to deposits found decades ago. For instance, Kvanefjeld (REE/U) was found in the 1950s, Malmbjerg (Molybdenum) in the 1950s, Isua (iron) in the 1960’s, Skaergaard (Gold and PGE) in the 1980s and Citronen Fjord (Zinc) in the 1990’s. The logistical constraints or bottlenecks of Greenland (discussed in section 2.3) make it more complex to evaluate maturation periods. As such, it is therefore difficult to predict where and when future mining activities in Greenland will start, but some of the most advanced and mature projects are given in Table 5 and shown on the map in Figure 9. Recent developments of some of the most advanced projects (i.e. those which have reached the investigation or evaluation stage) are highlighted below:

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 Isua iron ore project: By far the largest mining project by expected capital expenditure (€2 billion). Situated 150 km northeast of the capital Nuuk. Although an exploitation license was granted in 2013, in October the parent company London Mining went into administration. However, on 8 January 2015, the Government of Greenland approved the indirect transfer of the Greenlandic arm of London Mining - London Mining Greenland A/S – to ‘General Nice Development Limited’, a Hong Kong-based with the main operational centre in Tianjin City in mainland China. As the project still has to secure funding6 – and given that it is difficult to finance this type of project – the future of this development is uncertain;  Fiskenæsset ruby project in southern west Greenland. Exploitation license granted in 2014 and the final concept plans, IBA and royalty agreement has been negotiated and completed between the company, the Government of Greenland and the Sermersooq Municipality7. The project owner, Canadian True North Gems has signed an option and related agreements with Norwegian LNS to fund development of the project and construction work is currently in progress;  Kringlerne REE-Zr-Nb-Ta project in south Greenland. An application for exploitation has been submitted during the summer of 2013, and the Government of Greenland and Tanbreez are in the process of negotiating an exploitation license, including royalty provisions with the company8;  Kvanefjeld REE-uranium-zinc project: After the recent lifting of the zero-tolerance policy, an application for exploitation licence is expected in third quarter of 2015. In March 2013 Greenland Minerals and Energy (GME) signed a non-binding Memorandum of Understanding (MoU) with China Non-Ferrous Metal Industry's Foreign Engineering and Construction Co. Ltd. (NFC). The MoU sets out a framework for both parties to cooperate in aligning the rare earth concentrates from GME's Kvanefjeld Project, with NFC's substantial rare earth separation experience and capacity. In addition, both parties intend to increase the technical co-operation to assist in the completion of feasibility studies on Kvanefjeld, and finalise a mining license application;  Citronen Fjord Zn-Pb project in north Greenland. In April 2014 Ironbark Zinc has secured greater clarity on support and development of the Citronen Project after entering into a new non-binding MoU with China Non-Ferrous Metal Industry’s Foreign Engineering and Construction. An application for exploitation licence was submitted to the Greenland Government in October 2014 and it is expected that the application will be sent in public hearing in spring 2015;  White Mountain anorthosite project in central west Greenland. An application for exploitation licence was submitted to the Greenland Government in May 2014 and it is expected that the application will be sent to a public hearing in spring 2015.

In addition to the feasibility of mining a specific mineral deposit, investors also need to, of course, consider what will happen to the minerals after the mining stage. For example, ore needs to be processed into the raw materials that are used in manufacturing (e.g. pure metals, oxides or carbonates). This can be done either in situ near the mine/ in the country, or alternatively the minerals may be sent to processing facilities elsewhere. Figure 8 below shows the different stages from ore mining to marketable products. Beneficiation involves sorting ore material that is not usable for the later stages (e.g. because its content of raw material is too small). The next stage, separation, involves mechanical methods to separate materials rich in certain elements from other ore constituents. This

6 In London Mining’s own words, it is difficult to find funding for this type of project. Found at: http://www.londonmining.com/media/corporate-press-releases/2013/10/24/30-year-exploitation-licence-awarded-for-isua- project-in-greenland/ 7 While this small and less than 50 people will be employed, it carries the potential to develop an important value chain – and hence important for Greenland 8 Following the outlines in the Mining Act on processing mineral, the Government of Greenland has expressed the wish that Tanbreez makes further environmental (EIA) and social (SIA) studies. This does not mean that the application has been rejected, but merely emphasizes that the Government of Greenland would like these issues specified into more detail. Found at: http://naalakkersuisut.gl/en/Naalakkersuisut/Press-Statements/2014/01/tanbreez

24 step uses material properties such as magnetism, density, colour or hardness to divert the enriched ore to specific material streams (S1 to S4 in the Figure 8) to later apply specific extraction methods. Product finishing involves all steps that bring materials into a form which is marketable. Examples include the aim of achieving certain purity classifications, controlling the water content or grinding the oxide or carbonate to a certain particle size.

Depending on the local circumstances, certain steps can be placed away from the mining location, with a material transportation step in between. For example, the beneficiation requires space and opportunities to dispose of the mine wastes, the extraction requires large amounts of mass chemicals (such as acids or extraction chemicals) and space/opportunities to dispose of the tailings waste, or the finishing stage requires very specific facilities to produce a certain marketable product to a specific product quality (e.g. purity). Additional stages might be added that convert the marketable raw product (such as neodymium/praseodymium oxide) to a specific product (e.g. to magnets, these to electric motors) and for the final product to be used (e.g. electric vehicles). The more these steps require specialised expertise and equipment, the more likely they will take place outside Greenland.

Overall, the complete set of stages from mining to usable products is called the value chain. In practice, different combinations are established where the chain ends at the mining location and is maintained elsewhere, depending on local conditions and the need for specialised equipment and facilities.

Figure 9: Mining, separation, extraction and finishing stages and their potential locations

Chemicals T T T r r r a a a n n n s s s p p p o o o r r r t t t Mining Beneficiation Ore Mechanical Separation Extraction Product finishing Ore S1 Separation of Material segregation (Acid digestion, etc.) Open pit Underground low grade material 2 3 4 S S S

Mine Specific further Tailings waste treatment stages waste

In situ Abroad

In situ Abroad

In situ Abroad

In situ Source: Oko-Institut

Regarding processing in Greenland, it is the wish of the Greenlandic Government to be part of this downstream processing because it creates value addition opportunities, which may help secure local jobs and competence-building. This is important for the abovementioned ruby project; it is also the reason why Greenland is asking Tanbreez (Kringlerne) to devise a business model where certain processing activities are undertaken in Greenland. Overall, the location of processing plants for treatment of ore and mineral concentrate is hence typically included in the Greenlandic Government negotiations with the companies regarding exploitation licenses. As part of the mining licence application, the exploration company, has to make extensive social and environmental impact assessments – partly as the interaction between the mine and the local community is essential in order to increase the positive effects and reduce the negative effects of mining activities and partly to document and mitigate possible environmental issues connected to the mining operation and a local onsite processing plant9.

9 Extensive guidelines for preparing EIAs and SIAs are available on the Greenland Government website: http://govmin.gl/index.php/minerals/terms-rules-laws-guidelines

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Finally, the feasibility of the above prospective mining projects, and related processing facilities, will be affected by the fact that Greenland’s climatic conditions, its landscape, its available infrastructure and its small or missing industrial background do not readily facilitate projects that have complex needs. For example, chemicals, spare parts, technical skills, etc. are very often completely missing and have to be build up from scratch or require long transportation by ship, helicopter or airplane.

Table 5: Status for some of the most advanced mineral projects in Greenland

Company Project Commodity Exploitation Infrastructure Jobs in Comments license status need production/ Share of local workforce (Former) Isua Iron Granted Large 700-800/ Large Scale. London 20-55% Project sold to Mining Chinese investor Greenland in January 2015. A/S True North Fiskenæsse Ruby/ Granted Small - medium 50 - 80/ Joint venture Gems Inc. t sapphire 75% agreement with Norwegian LNS Greenland Kvanefjeld REE Expected Large, but 400-600/ Uranium is by- Minerals & uranium application close to ~60% product from Energy Ltd. zinc 2014 or early existing REE. fluor 2015 infrastructure MoU with China NFC

Ironbark Zinc Citronen Zinc Possible Large 200-300/ Low MoU with China Limited Fjord application due to NFC 2014 remote location Tanbreez Kringlerne REE Applied 2013 Medium 100/ Seeking tantalum Under 75% financing niobium negotiation zirconium

Angel Mining Black Zinc/ Granted Medium Seeking Angel lead 2009 financing Hudson White Anorthosite Possible Small-medium 50-100/100% Seeking Resources Mountain application financing 2014 Hudson Sarfartoq REE unknown Large 200-300 Resources uranium niobium

KGHM Int. Malmbjerg Molyb Granted Large 200-300 Not in -denum 2008 production due to market West Melville Isortoq iron – unknown Medium -large 100-200 Seeking Metals vanadium financing titanium Source: GEUS

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Figure 10: Geological map with selected mineral occurrences

Source: GEUS

This section outlined Greenland’s mineral potential and current mining projects activity. However in order to assess the factors which are likely to affect the realisation of mining in Greenland, it is necessary to first outline the main contextual factors which are driving mining in Greenland and secondly to assess the specific risks which EU and international investors face. The contextual factors are outlined in section 2.3 below while the specific risks are presented and assessed in section 2.4.

Summary: Analysis of Greenland’s raw materials potential

 There is significant potential for mining in Greenland. This potential is considerable both in terms of volume / value as well as in the breadth of minerals available.  However, as only a small proportion of exploration projects reach the final production stage, realising this potential will require that the challenges related to Greenland’s lack of large scale mining and processing activities in Greenland are overcome.

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2.3 Important overarching contextual factors for any co-operation concept with Greenland

There are many factors that could impact on EU-Greenland co-operation in this field that are related to, but go beyond, Greenland’s raw materials sector and the EU’s material needs.

These factors include:  on the one hand, internal political developments in Greenland with regards to its desire for further autonomy, its historical relations with the EU as well as its desire to diversify its economy and trade partners;  And on the other, external factors such as how co-operation may be affected by trends in global manufacturing and raw materials markets.

2.3.1 Contextual factors internal/specific to Greenland

The first main contextual driver of the development of the minerals sector in Greenland is its ongoing aspirations for economic autonomy, and in particular the role which mining will play its feasibility. While this is primarily an issue for Greenland, and for Denmark, it could also have an impact on any future EU-Greenland co-operation.

According to a number of authors10, it appears unlikely that full economic autonomy will be achieved on the basis of the mining sector alone. If this view is true, and in the absence of an expanded fisheries sector, growth would have to come from other sectors such as tourism and services. This appears unlikely in the short term. Nevertheless, the fact that greater autonomy may be unlikely in the coming decades may not change Greenland’s determination (as agreed by the two main political parties) to develop the sector. The only risk here is that the EU and Greenland may have different interests with regards to timing and that while the EU may need certain materials in the short-term (e.g. next 10 years), the aims of the Greenlandic government may concern gradually reducing dependence on the block grant received from Denmark in the medium-to-long term11.

However, two factors may encourage Greenland to develop its sector in the short-term. Firstly, it is extremely dependent on fisheries exports, in particular prawns. As the preferential access to the EU market which Greenland currently enjoys in the area of fisheries may be eroded somewhat by the EU- Canada ‘CETA’ FTA which may see greater competition resulting from reduced import tariffs on fish from Canada. As a result, Greenland may in the short term need to diversify its sources of export income away from fisheries. Secondly, as the block grant was frozen in 2009, and its fiscal situation is forecast to decline in line with its ageing demographic profile, Greenland has to expand its tax base just to pay for these increased liabilities. In short, given the above contextual fiscal and economic challenges, any co-operation concept may have to include short, as well as long term structural, measures.

The Danish-Greenland Block Grant

While the yearly block grant that Denmark provides to Greenland constitutes over 40 percent of GDP, its level has been frozen at 2009 levels following the Self-government Act of 2009. This effectively means that the economic growth will rely on growth in GDP in the future. Given Greenland’s aging population and relatively slow GDP growth rate, this will be challenging. According to Rosing (2014), a balance economy will require a significant improvement in the public sector budget, which will be an average of DKK 800 (circa million (€120 million) over the next 25 years, or 6% of Greenland’s GDP.

10 See Rosing et al, To the Benefit of Greenland, 2014, and Danish Central Bank, Kvartalsoverisgt 2. Kvartal, 2014. 11 For the purpose of this study, the term ‘short term’ is used to refer to a period of up to 10 years. Medium and long term refer to periods of between 10 and 20 years and greater than 20 years respectively.

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Another important aspect of the agreement to freeze the block grant is that any on-year extraordinary increase in income for Greenland that would reduce the level of the grant to zero would in effect terminate the grant.

Second, there is of course a considerable difference in the relative importance of developing Greenland’s mining sector for Greenland and for the EU. For the EU, and as outlined in the Raw Materials Initiative Communications of 2008 and 2011, EU industry needs a more diversified and stable supply of certain materials. While Greenland is an important potential source for such materials, the EU can still look to other sources if the sector does not develop in Greenland. For Greenland, however, there is much more at stake, namely its political and economic status as a country. The flip side of this large imbalance is that while Greenland fully recognises that the "business-as-usual" situation cannot continue in the long-term, and hence development of its mineral industry is seen as necessary or strongly desirable, it is less clear if EU industry sees the development of Greenland mineral sector as being as crucial to its future material supply security.

Linked to this assertion is the view that while EU industry may take a more short-term, commercial view of the need for certain critical materials (e.g. increasing availability of REEs in the next 10 years or so), Greenland on the other hand may be keen on developing a long-term, sustainable sector covering a broad range of materials such as gold, rubies, copper, and not just rare earths), one which will thrive for many decades until other sources of economic growth can be developed. For EU industry, however, it is hard to tell what rare/critical materials it will need in the next 10 years and beyond (Erecon, 2014).

In spite of this, it is in the interest of EU industry as a whole to consider long term security as well as short term commercial issues. Indeed, the EU’s Raw Material Initiative is a broad and long term strategy based in that it covers base metals and other minerals and not just ‘critical raw materials’, and focuses as much on long term factors such as security of supply and innovation as it does on shorter term factors such as trade restrictions and prices. Indeed, the EU’s RMI recognises that if global economic growth and urbanisation in the emerging world continues, it is likely that the availability of base metals will continue to be, and may even increase in, importance for the EU. Therefore, co- operation should be promoted to cover a range of metals over a long time horizon and not just be focussed on responding to short term fluctuations in prices and availability of REEs.

A third contextual issue relates to the dynamics of any co-operation agreement between a country of 56,000 people dispersed across a large area on the one hand, and a regional trading block of 500 million people on the other. Given its potential future dependence on one or two sectors, namely mining and fisheries, it would appear reasonable that Greenland and mining companies operating in Greenland would want to diversify its/their export partners. However, it may not make sense to a mine developer to sell simply to one region. For example, if the two REEs mines in Greenland opened, it is possible that they would supply up to 20% of the world’s needs according to certain estimates (Erecon, 2014). This exceeds the EU’s 10% market demand share for REEs. If these two mines were tied to selling to the EU, they would not receive enough financing to commence operations. Given that

29 there are up to 10 REE projects worldwide which are in the advanced stage of planning, any REE mine developer would want to sell on the worldwide market or at least to a number of regions. That said, it is also reasonable to assume that it may not be in the interests of the EU to directly or indirectly support mining activities in Greenland without at least providing that minerals resulting from such assistance end-up in Europe, or at the very least are not shipped to countries which do not abide by international trade norms12.

A fourth contextual issue or driver is the lack of a clear existing framework for relations between the EU and Greenland in the area of raw materials. When it entered the EEC in 1973 with Denmark, Greenland was considered as an EU region and was eligible for EU programme funding in the same manner as any other Member State. Upon its exit in 1986, Greenland assumed the status of OCT which meant that while it maintained certain advantages in trade terms and continued to enjoy access to EU programme funding it lost access to the EU’s structural funds which have in the intervening years provided considerable support to promoting economic development in Europe’s peripheral regions.

Greenland’s exit from the EEC in 1986, also led to a new agreement in the area of fisheries where the EEC agreed to pay Greenland an annual sum in exchange for providing the EEC with certain fishing rights in Greenlandic waters. In 2006, this relationship changed again with the approval of the Council Decision 2006/526/EC where a number of areas for co-operation with the EU were foreseen and funding was made available for the period 2007-2013. During this period, the focal sector chosen by the Government of Greenland for financial co-operation was education. While these arrangements on fisheries and education will continue for the current 2014-20 EU budget timeline13, the EU has moved to broaden relations. This includes 2014 resolutions from the European Parliament proposing that the EU develop strong relations with geo-strategically-important Greenland and that the new EEAS, as well as the Commission, explore how the “EU and EU-based actors from science, technology and business can contribute to and assist in the sustainable development of Greenland so that both environmental concerns and the need for economic development are taken into account14. Indeed the Council Decision 2014/137/EU on the new EU-Greenland Partnership for 2014-2020 also includes co- operation in the area of raw materials as a priority.

However, in spite of an endorsement of this and other positions from the Council15, there is limited evidence of relations with Greenland being deepened either by the EU or by downstream EU industry. In institutional terms, despite the above mentioned Decision on the EU-Greenland Partnership for 2014-2020 there are no concrete arrangements in place to implement the non-education co-operation areas which were agreed upon. Despite discussion of strategic mutually beneficial relations in a range of areas and despite the fact that Greenland is eligible for participation or inclusion in a range of EU policies, relations remain very much rooted in EU development policy in general (in that the focus is on development of Greenland16), in general and in educational assistance and fisheries co-operation more specifically. There may be a number of reasons for this, one of which could relate to the fact that from a Greenland perspective, a country of 56,000 people may face challenges in fully participating in any co-operation agreement from an administrative perspective. On the ground in terms of investment

12 See DG Trade’s website for more information on the EU’s approach to trade in the area of raw materials. Found at: http://trade.ec.europa.eu/wtodispute/show.cfm?id=457&code=1 13 A Council Decision on relations between the European Union on the one hand, and Greenland and the Kingdom of Denmark on the other [Council Decision 2014/137/EU] was approved on 14/03/2014. It foresees an amount of €217.8 million as indicative amount for the period 2014-2020. Following extensive consultations between Greenland, Denmark and the European Commission, Education was chosen as the focal sector for financial co-operation during the period 2014-2020. However, this choice does not preclude co-operation between the parties in the areas mentioned in Article 3.2 of the said Council Decision which includes "natural resources, including raw materials". 14 European Parliament, European Parliament resolution on the EU strategy for the Arctic, March 2014. 15 Council of the European Union, Council conclusions on developing a European Union Policy towards the Arctic Region, May 2014. 16 It should be noted hwoever that there has been a change in emphasis away from pure development assistance towards co- operation and policy dialogue on issues of common interest (see Article 2.2 of Council Decision 2014/137).

30 in mining, most interest is coming from European, Australian and Canadian mining companies and from downstream Chinese-based metal companies.

2.3.2 Important external contextual factors

Co-operation may be affected by factors or trends in global manufacturing and raw materials markets. For example, an important factor is the current state of world raw materials markets. While prices remain relatively high compared to historical long-term trends, they are down from peak levels seen only a few years ago. This has, in part, led to a decrease in global investment in mining exploration and exploitation across the world and not just in Greenland.

This situation has not been helped by certain supply challenges for certain materials. For example, on the one hand, there are well over 50 developed REE projects17 worldwide seeking support, while on the other, there are supply bottlenecks in terms of intermediate REE separation plants. This situation is discussed further in Section 3. In summary, however, there would appear to be ‘too many’ REE mining projects and ‘too few’ separation plants. A similar situation is believed to be in play with regards to other ‘high tech’ minerals such as graphite, while there are also concerns over global overcapacity in base metal mining processing, in particular in iron mining and steel manufacture. Although each material is different, the current situation is characterised by the presence of bottlenecks at certain parts of the value chain and potential oversupply on other parts.

On the demand side, while prices have fallen in recent years, the long term demand prospects for metal mining projects are most likely to be positive – the UNEP18 for example estimates that future demand could see up to a tenfold increase on current levels. Despite this, the short-term trends upon which investment decisions are made are not so clear. Another, more long term uncertainty is that demand depends very much on demand for individual metals – for instance, a breakthrough in electric car technology or a change in large developing countries’ renewable energy goals could have a very large impact.

While many of these issues are beyond the remit of this study, it does mean that even the reduction of risks of investing in Greenland may not automatically lead to investment in the short to medium term. It also means that the EU – as a net importer of metals – may have more choice of suppliers at lower prices, at least in the short to medium term. This would appear to be confirmed by the conclusions of the second critical raw materials report where global supply-demand differences for many critical raw materials will have been resolved by 2020. This issue is further discussed in Section 3.

In summary, and based on the above context, it is assumed that any co-operation concept would need to take into account the above considerations summarised in the box below.

Summary: Important overarching contextual factors for any co-operation concept with Greenland

 Coverage of areas for co-operation: Given that the development of a sustainable long term mining sector is very important for Greenland’s future, and would have far reaching impacts on a number of different social, economic and environmental levels, the possible actions to be considered should ideally cover all of the four areas included in the EU Greenland Letter of Intent and therefore should not be focussed solely on just one area (e.g. investment);  Timing and raw materials coverage: It would be in the interest of both the EU and Greenland if Greenland became a major supplier of both critical raw materials and base metals, both in the short and long term. Therefore, any co-operation concept should ideally include actions which promote mining of a variety of materials, both in the short-term (e.g. through industry partnerships) and long term (e.g. improved geological knowledge);

17 Information found at http://www.techmetalsresearch.com/metrics-indices/tmr-advanced-rare-earth-projects-index/ 18 UNEP, Soaring Demand for Metals Calls for Rethink of Recycling Practices Says International Resource Panel, Press Release, April, 2013. Found at: http://www.unep.org/newscentre/Default.aspx?DocumentID=2713&ArticleID=9484&l=en

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 Achieving a balance between safeguarding EU interests and promoting investment and trade in minerals in Greenland: Given Greenland’s future probable reliance on this sector, and the fact that for some materials one or two mines may meet a large proportion of world demand, Greenland and mining investors in Greenland may wish to diversify its/their trade partners to include companies operating in several major economies, such as China, the US and elsewhere (in addition to supplying the EU). On the other hand, there is little point of the EU supporting production in Greenland if the resulting minerals are shipped to a country which is in contravention of international trade norms on the export of minerals. Therefore any co-operation concept would need to safeguard EU interests without restricting Greenland’s need to diversify trade partners;  Need for a clear co-operation framework19: While the EU and Greenland has expressed their political will to work together in this area, the structures necessary to allow for this co-operation to be implemented in the area of raw materials may need to be reinforced. Any co-operation concept would also need to operate within a simple framework, one that can be easily managed by the EU and in which Greenland has the means to participate.  Taking global market supply and demand conditions into consideration: From a mining industry/investor point of view, now may not be the optimal time to invest. However, given the highly cyclical nature of the sector and the likely demand growth leading up to 2030, it is possible that mining prices will recover sufficiently over the next 10 to 20 years (e.g. medium to long-term) to warrant promoting investment in Greenland. However, given the focus of the processing and downstream industry on the short-term, some form of incentives/intervention from public actors may be needed.

2.4 Identification and assessment of specific risks for EU-Greenland co- operation on raw materials

The first part of this section, Section 2.2, concerned the potential minerals available in Greenland as well as the success of recent efforts to develop mining projects; the second section, Section 2.3, presented a number of important contextual factors that need to be taken into consideration before establishing co-operation with Greenland.

This subsection, builds on this analysis by examining the individual categories of risk that need to be assessed and, where significant, the actions needed to mitigate these risks. Specifically, the remainder of this subsection seeks to:

1. Identify the specific possible risks of investing in Greenland. This includes a description of the main risks, how and why they may manifest. The risks are founded on the text of the letter of intent and are broad-based in that they cover social, environmental as well as economic risks for investors, the EU and Greenland. Indeed, the risks covered roughly reflect those issues that the World Economic Council20 state should be covered in any mining project.

2. Assess the level of risk posed. This includes estimates of the likelihood of the risk (e.g. possible impact) as well as its probability (e.g. level of certainty). While the focus of the analysis on the risks posed to potential EU investors, in reality any risk which mining poses

19 The EU-Greenland Programming Document (For the Sustainable Development of Greenland 2014-2020’) does note that “it is the intention of the Commission, Greenland and Denmark, independently of the choice of a focal sector(s) for financial co-operation, (e.g. education and training) to engage in policy dialogue at the appropriate political and technical levels in the areas for co-operation foreseen in Council Decision. This policy dialogue will take place when relevant as a parallel event to the biannual workshops on the implementation of the financial support”. 20 Specific, the World Economic Forum notes that mining developers should base their projects on seven dimensions that drive value creation for all stakeholders: fiscal (tax, royalties, etc.) and legal/regulatory environment, employment and skills, environment and biodiversity implications, social cohesion, cultural and socio-economic implications, Procurement and local supply chain, Beneficiation and downstream industry; and Infrastructure. See: World Economic Forum/Boston Consulting, Responsible Mineral Development Initiative, Mineral Value Management – A Multidimensional View of Value Creation from Mining, 2013.

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for Greenland may have knock-on effects on the mining sector; therefore the analysis will consider the implications of risks for both Greenland and EU investors.

It should be noted that the risks identified are not of the same granularity – for example, while there may be four different types of social risks and one type of infrastructure risk identified, this does not mean that social risks are four times more important.

3. Provide a shortlist of the most relevant risks to be assessed in section 4 on measures and policy options.

This shortlist will then allow for an initial identification of possible effects on EU-Greenland co- operation. In terms of the risks to be assessed, the section below covers those which are outlined in the terms of reference to this study. These concern the following categories of risks outlined in the figure below.

Figure 11: Overview of ‘risk’ categories and specific possible risks

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•EU companies may be locked-out of Greenland due to too many Geopolitical Developments projects being commenced by other investors.

•Investors may not be able to access financing for investments in the Arctic Circle (e.g. in extreme environments). Investment Conditions •It may be more expensive to invest in Greenland than elsewhere due to regulatory uncertainty. •Investors may be faced with competition for land use.

•Investors are deterred by a lack of physical infrastructure to support Infrastructure mining.

•Low or insufficient levels of geological knowledge may deter Geological Information investment.

•Greenland’s low levels of administrative capacity may make it difficult to properly monitor mining projects and lead to certain reputational Administrative Capacity risks for investors. •Investment conditions may be compromised by non-transparent rules on the use of mining revenues and governance of the sector.

•Investors may be deterred by the lack of available staff or by local/ national staffing requirements. •Investors may be deterred by requirements to source business locally/ nationally and/or process. Skills & Sourcing •Investors may be deterred by requirements to process material nationally. •Investors may be deterred by having to offer certain public services (such as health).

•EU investors may be deterred by the reputational risks associated with Environmental factors a lack of necessary environmental safeguards in Greenland.

•Investors may be wary of the social impacts (e.g. on wages) which their investment may have on the local population. Political & Social issues •Investors may be deterred by local opposition to mining. •Investors may be deterred by ongoing discussions on uranium mining between Greenland and Denmark.

In terms of the approach taken, for each group of risks (e.g. investment), the specific risk (of which there are eighteen) is assessed based on available data and literature and affirmed or complemented by expert and stakeholder interviews/feedback where necessary. While the different risks are not strictly comparable and affect different groups in different ways, in order to provide focus for the assessment of policy measures and options in Section 4, the risks are ranked according to whether they are deemed to be high, medium, or low in likely magnitude. As described above, this risk metric in turn is based on (i) the possible impact of the risk on investors on the one hand and (ii) the likelihood of that ‘risk’ occurring on the other.

2.4.1.1 Risks related to geopolitical developments

In terms of risks related to geopolitical developments, one of the main aims for the EU may be to avoid a situation of EU companies being ‘shut out’ of Greenland by international competition.

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However, this does not appear to be an issue for several reasons. Firstly, to date, Greenland has an ‘open door’ policy for mining where investors have been treated equally and no restrictions have been placed on the number of mines that can be opened. Indeed, there are a large number of ‘junior’ mining companies involved in exploration and project development from countries such as Canada and Australia, with which the EU enjoys open trade relations, as well as from the EU.

However, as many junior companies specialise in exploration rather than exploitation, they may sell their investments to larger mining companies from countries that have less favourable trade relations21. In addition, while many of these companies have yet to identify significant sources of funding, the more developed projects have obtained financing from other non-EU investors. If this turns out to be true, the opportunity to help EU companies diversify their imports of certain raw materials may be missed. The main problem with this view is that the problem relates less to third countries’ interest in funding mining in Greenland and more to the apparent reluctance or unwillingness of EU mining and other firms to do so, even in the area of REEs which is one of the EU’s main critical raw materials.

That said, certain EU’s processing and downstream materials using firms have engaged with Australian and Canadian mining and processing companies (albeit not with the same companies which are active in Greenland). For example, in 2011 Siemens entered a joint venture with Australian REE mining and processing company Lynas22. Another EU company is actively involved in supporting a REE/Niobium project in Quebec, Canada23. Finally, an EU REE-processing firm, Rhodia (Solvay), has recently agreed a deal with Avalon resources regarding its REE mining project at Thor Lake in North- west Canada (Avalon, 2014).

For REEs, despite at least five years of reports of shortages for certain key sectors of the economy24, there is little sign of investment by EU industry in REEs mining in Greenland. While the underlying drivers of this are unclear, it is understood that it may in part relate to the inherent risks for downstream manufacturers investing in mining and processing facilities, which is reflected in the fact that there are so few worldwide, in spite of China’s monopoly. That said, even if EU processing and manufacturing companies currently have a number of options with regards to light REEs, there are few deposits which match the size and heavy REE content of Greenland’s main two deposits. Therefore, outside of Canada, EU firms using these HREEs may not have many alternatives to investing in/procuring from mining in Greenland or continue to buy from the current near monopoly supplier China.

Overall, with regard to the hypothetical risk of EU firms being ‘squeezed out’ of the Greenland minerals sector, this appears highly unlikely for the time being. Indeed, while there is anything from five to 10 mines under active discussion, none of these have yet opened, and the number of active mines is actually shrinking rather than expanding. Therefore, based on past performance, one could argue that Greenland may see too few mines in the next 10 or 20 years, rather than too many. Despite the availability of certain high quality material deposits in Greenland, based on progress to date, it would appear more likely that EU rare earth processing firms and downstream users may continue to look towards mining and processing companies present in Canada and Australia. In such a scenario, Greenland’s export sector (e.g. resident mining companies) would have to look to other export

21 The reason for that is predominantly that converting an exploration project to production very often requires large investments, for which large companies have simpler access and abilities. The Greenland mining regulator has confirmed that. It was also confirmed by TANBREEZ that larger mining companies approached them, but their offers seemed to be unattractive. 22 Found at: http://www.siemens.com/press/en/pressrelease/?press=/en/pressrelease/2011/industry/i20110742.htm 23Found at: http://rareearthinvestingnews.com/19470-geomega-resources-rare-earth-niobium-tsxv-gma.html and at http://ressourcesgeomega.ca/breakthrough-in-physical-separation-ree/ 24 Despite the fact that China most likely does not possess the world’s largest resources and reserves of the rare earths – which may actually be located in Greenland or Canada, China still produces 95% of the world’s rare-earths supply and China, as of this writing, still consumes more than 75% of the world’s rare earth supply. Found at http://www.techmetalsresearch.com/2013/08/counterpoint-supply-and-demand-in-the-rare-earths-market-2015- 2020/#comments

35 partners, such as China, and perhaps Japan and Korea. Here, it is not inconceivable that Greenland’s exporting sector could be strongly dependent on one country (e.g. China) and on resident mining firms who supply China25. Overall, to date, the interest of Chinese firms in mineral deposits26 in Greenland is mixed. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU and Driver Possible Impact Probability Overall potential EU investor Rank Comment Rank Comment

EU companies A limit on the Medium If all of the main Low The reality is that, at Low may perceive number of well-developed present, there is too little that they will licences non-EU projects investment taking place be ‘locked- granted may are locked into in Greenland, not too out’ of occur if agreements with much. Downstream EU Greenland due Greenland non-EU firms, this firms either have other to too many has limited may reduce the options at hand or are projects being capacity to attractiveness for not willing to invest for commenced oversee a the EU of other reasons. In any by other large supporting case, the law as it is investors. number of mining in written at present is very projects at Greenland. open to new mining the same projects, regardless of time. the source. It is therefore extremely unlikely that EU firms will be ‘locked- out of Greenland.

Overall, there is little risk of EU mining and industrial firms being ‘squeezed out’ of the Greenland. Therefore geopolitical risks do not appear to be a major problem.

2.4.1.2 International and Greenland-specific investment conditions

Possible risks in this area may concern the general risks of doing business related to such factors as access to capital, ownership rights/threat of expropriation, and investor certainty with regards to changes in legislation and taxation. These are in part due to: (i) the state of the international market which is beyond the scope of this study and to investment conditions in Greenland; as well as (ii) how Greenland reacts to international conditions, which is within scope.

(i) Impact of international investment conditions

As noted above in section 2.3, risks related to ‘access-to-capital’ are a global rather than a Greenland- specific problem. Indeed, the recent decline in certain minerals’ prices seen since 2010 has had a major, obvious influence on investment decisions with mining companies worldwide now finding it

25 In 2014, while the owners of the two most advanced large mining projects in Greenland, Isua and Kvanefjeld, were being developed by companies from junior mining companies from the UK and Australia respectively, they were understood to be fully or partially backed by, or seeking financing from, Chinese firms. In the case of Isua, and as noted above, the bankruptcy of London Mining in late 2014 suggests that such finance was not obtained. However, on 8 January 2015, and despite the Isua project being declared ‘worthless’ by the Anglo Pacific Group, one of the London Mining’s investors, the Government of Greenland approved the indirect transfer of the Greenlandic arm of London Mining – London Mining Greenland A/S – to ‘General Nice Development Limited’, a Hong Kong-based with the main operational centre in Tianjin City in mainland China. With respect to the Kvanefjeld mine, while the ability of the project’s promoters, GME, to receive possible financing from Chinese or non-Chinese sources is unclear at this stage, they have entered into a MOU with a Chinese non-ferrous metal processing company. 26 The Brookings Institute, The Greenland Gold Rush: Promise and Pitfalls of Greenland's Energy and Mineral Resources, 2014.

36 harder to access capital, despite the potential willingness of some investors – e.g. pension funds27 – to invest in high-interest long term projects to compensate for low bond yields.

The impact of falling prices, however, should be put in context. While the prices of certain minerals have fallen in recent years, many still remain above their historical long-term average. Seen from this perspective, the international investment climate should not present a problem for purely price reasons. For example, as can be seen from Figure 11 below, while prices for rare earth elements increased dramatically in 2011 and then subsequently fell, they still remain above 2009 levels. So, for mining projects initiated between 2008 and 2010, such as the Lynas project, market prices are still favourable. This applies for both light REEs such as neodymium and for heavy REEs such as dysprosium. A similar picture can be seen for other metals – for example while iron ore prices have fallen substantially since 2010, they still remain above 2008 levels.

Figure 12: Prices for rare earth elements over the past five years

3.000 Prices of rare earthes

2.500 (FOB China Average Price, Oxide) 2009 2010

2.000 $/kg $/kg Oxide)

- 2011 2012

1.500 2013-Q1 2013-Q2 2013-Q3 1.000 2013-Q4

2014-Q1 FOB FOB ChinaAverage Price(US 500 2014-Q2

0 Lanthan Cer Neodym Praseodym Samarium Dysprosium Europium Terbium

Source: Lynas Corp.

That said, the boom in raw materials, which has resulted in a glut of projects internationally has led to more of a buyers’ market. In addition, other challenges to creating a raw materials chain from mine to processed material – such as those raised for REE in the ERECON study (Erecon, 2014)– mean that investment conditions in the mining sector have dis-improved in recent years. In addition, it is also of course unclear if prices will continue to fall or will alternatively level out.

All-in-all, it is clear that investment risks are not fully within the control of the Greenlandic government or of the EU. Despite this, the investment framework put in place in Greenland can have a substantial impact, as outlined below.

(ii) Greenland-specific Investment Conditions

27 Against a background of low market returns, the pensions industry in Denmark has expressed its possible interest in investing in mining related projects in Greenland. Indeed, one of the main mine developers, GME, is understood to have approached the sector for funding. See: http://www.mineweb.com/mineweb/content/en/mineweb-fast- news?oid=211398&sn=Detail.

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There are a number of specific investment risks may arise, including risks relating to investment in the Arctic, investing in countries which lack a long track record of large scale mining and those relating to better investment incentives and facilities available in other mineral rich countries.

Firstly, Greenland’s geographical position in the Arctic, and its related climate and population density, may present a disincentive to investment. However, the fact that some of the world’s largest mines are located in neighbouring Arctic regions (Russia, Canada, and Alaska) (Emerson, 2012) would suggest that this is not a determining factor.

Beyond location, perhaps a more relevant factor may relate to the fact that Greenland does not actually have a long track record of large scale mining, despite having a diverse geology resembling parts of the eastern Canada and the Scandinavian shield. As such, it does not actually have a track record of managing the operations, and proceeds, of a large mining industry. This inexperience may possibly be reflected by the greater involvement of larger mining companies in neighbouring countries (e.g. northern Canada) with a similar climate.

Third, from a Greenland point-of-view, the prospect of volatile minerals revenues may also make the government more reluctant to invest in physical and/or social infrastructure. For example, Greenland may not have the budget to invest in long life capital intensive, infrastructure facilities. In such a situation, the mining company may have to invest, which could increase project costs. From a company point of view, in the current context where there is often a large number of global projects competing for limited funds, where recent mining investments are struggling to make a return28 and where the high upfront costs for developing a mine are very high (e.g. a REEs mining operation can cost anything from €100 million to €2.5 billion29), the need for developers to invest in such infrastructure may make – otherwise-viable – Greenland projects less attractive.

While potential projects in comparable mineral-rich sparsely-populated countries like Australia and Canada almost always face similar infrastructure and other problems related to remote and/or harsh climate of the location, many projects in these countries are supported by existing or new publically- funded infrastructure or by other means, such as tax breaks for investing in certain regions30. So although mining companies in Greenland can deduct investments made in mining operations and infrastructure from taxable income, Greenland does not offer the publically funded infrastructure or other investment incentives that may be available elsewhere.

On a positive note, many commentators – including the abovementioned Fraser Institute – believe that the mining investment framework (excluding infrastructure) in Greenland actually remains relatively strong. Indeed, it could be said that the conditions for companies has actually improved somewhat with the overturning of the de facto ban on uranium exploration mining (important for certain REE deposits) and the relaxation on rules for the use of outside labour in large mining projects, at least during the mine construction phase. Despite the recent change in government in late 2014, it is expected that these changes will remain in place.

That said, although Greenland remained one the world’s top 25 mining locations in 2013 (Fraser Institute, 2014)31, some commentators believed that worsening international markets mean that a high

28 For example, the Brookings Institute notes that recent investment in iron ore mines in Western Australia by Chinese investors have struggled to reach expected returns. 29 Canadian Parliament Standing Committee on Natural Resources, The Rare Earth Elements Industry in Canada – Summary of Evidence, June 2014. 30 According to the Australia Institute, the mining industry in Western Australia has benefitted from access to purpose-built publically funded infrastructure. In addition, the Canadian government provides tax advantages to those investing in its northern provinces. Sources: Australia Institute, Mining the Age of Entitlement: State Government Assistance to the Minerals & Fossil Fuel Sector, June 2014; 31 Greenland subsequently dropped to 41st place in the new 2014 Fraser report. While the exact reason for this drop is not entirely clear, it may be due to the increased focus on mining royalties and possible uranium ban discussions of the new Greenlandic government which came into office late 2014.

38 ranking in this index may not be enough to ensure investment32. In terms of future initiatives to promote investment in this context, the Greenlandic government’s most recent Minerals Strategy for 2014 to 2018 sends mixed signals (Greenland, 2014). For example, in certain sections of this document it discusses the possibilities of greater exemptions for smaller mining companies and the use of less distorting profit royalties while in other parts it refers to the potential scope to increase taxes earlier and an ability to impose royalties, which are generally seen to be less investor-friendly than revenues recouped from taxes. However, it must be noted that the same discussions on mining taxes etc. are often held in a number of stable mining countries such as Australia and South Africa. It also should be noted that the needs of investors need to be balanced with other broader, social-economic needs of the native population. Overall, the fact that Greenland has a clear mining strategy and transparent regulatory framework would appear to be a significant advantage in terms of investor certainty, not only in comparison with many resource countries in the developing world but also in comparison with EU Member States engaged in mining.

Other positive factors include solid property rights, investor protection from expropriation which are not always present in other mineral rich countries as well as low/non-existent land-use competition, which is an issue in the EU. With regards to the latter, it is understood that Greenland’s government has issued exploration licences for approximately 5 percent of Greenland’s ice-free territory, thereby leaving the majority of the remaining 95 percent free for other activities. The only concern here concerns limits on investment in the most northern parts of Greenland.

In summary, the risks for investors seem to stem more from global market uncertainty or from the availability of better investment incentives elsewhere, than from the investment climate in place in Greenland. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU Driver Possible Impact Probability Overall and potential EU Rank Comment Rank Comment investor

Funds may Investors may High As access to funds Low Some of world’s largest Medium not be be put off is fundamental for mines are situated within available for investing in capital intensive the arctic circle so investments difficult mining, any location should not be a in the arctic environments investor aversion problem per se. That region such as to funding mining said, as infrastructure/ Greenland. in Arctic would be start-up costs are higher, a problem this is still an issue.

Other mining Investors may High The availability of Medium On the one hand, High jurisdictions get a better better conditions – Greenland has one of may offer deal elsewhere or enticements – the world’s most stable more elsewhere is also investment frameworks attractive important, which is for mining. On the other conditions or in part driven by hand, Greenland’s It may be competition and mining tax regime and more by Greenland’s lack of incentives for expensive to own rules for the investment (such as invest in sector. government funded Greenland infrastructure, discussed than in the next section on elsewhere infrastructure) that may due to be available elsewhere. regulatory uncertainty

Investors Mining might Mediu Land use Low As most of Greenland is Low may be have to m competition is a uninhabited, faced with compete with major problem in competition – at least competition alternative developed regions from other economic

32 Found at: http://arcticjournal.com/oil-minerals/517/thrill-wrong accessed on 9th May 2014.

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Risk for EU Driver Possible Impact Probability Overall and potential EU Rank Comment Rank Comment investor for land use land uses. such as Europe. sectors – is minimal. That said, mining may have to fit with other non- economic uses (see environmental risks below).

In short, despite its political and legal stability, investment may be hampered by:  the availability of better incentives available in competing mineral rich countries; and  higher-than-average infrastructure costs which need to be covered by project developers.

These issues are further discussed below. Overall, in the current global market where there a large number of projects are chasing after a limited amount of funding, these issues may be crucial.

2.4.1.3 Availability of adequate infrastructure (and related framework conditions)

The term ‘infrastructure’ can be interpreted to include a range of factors such as available workforce, supporting institutions etc. Here it is discussed in the narrow sense to cover:  physical, transport-related infrastructure in the form of rail/road, seaports, airports, pipelines, as well as  the availability of energy (waste infrastructure is discussed under environmental risks below).

As noted above, despite the obvious challenges, the Arctic region contains some of the world’s largest existing and prospective mines. This includes the Red Dog zinc mine in northwest Alaska – one of the world’s largest, the Norilsk Nickel mine in Northern Russia and the prospective Mary River iron ore mine in Nunavut, Canada. Therefore while infrastructure risk is considerable, it is common to large number projects and is not limited to Greenland. This view is reflected in the Fraser report that reports infrastructure as either a mild or strong deterrent to investment (actually, Greenland’s infrastructure challenges may be seen as slightly less severe than in certain other regions outside the Arctic).

That said, one of the main challenges is that while in most countries investment in infrastructure benefits both the mine and the local population, in Greenland all but a few of the mines being proposed are situated far away from towns and villages. As it is the policy of the Greenlandic government not to finance infrastructure that will not directly benefit to the population, companies will have to fund this themselves (but can, of course, offset the costs against tax).

The Greenlandic government recognises this challenge its new minerals strategy for 2014-18 where it examines the use elsewhere of a number of instruments such as public private partnerships (PPPs) which have been used for mines in Alaska for example. It is unclear from the strategy, however, whether similar interventions will be proposed for Greenlandic mining projects over the coming years.

Other Arctic regions tackle these challenges in different ways. For example, one of the apparent selling points of the combined prospective REE mine and accompanying hydrometallurgical plant at Thor Lake in the Northwest territories in Canada is proximity to an all-season highway, as well as availability of power (both discussed below) and the possibility of federal and state ‘incentives’, all of which combine to counter the additional costs of transporting ‘reagents’ so far north (Avalon, 2011).

With specific regards to transport in Greenland, as most of Greenland’s population is located on the ice-free coastal areas, maritime and air transportation predominates. Hence, there are no roads or railways linking the major towns. This does not appear to be a large problem for the majority of existing or prospective mines that are located on, or near, the coast. The Isua mine – the site for a large iron mine proposed to open in the next five years – is an exception and is situated approximately 100

40 km inland. Here, however, the developer has proposed to transport the iron ore via a pipeline to a (to be built) port, and to transport workers by air. Another exception is the Malmbjerget project in eastern Greenland and the developer’s plans to contract an 80 km road (Hansen, 2012).

One potential problem concerns the need for ports near mines to allow for the transport of materials and workers and the existence of airports for workers. Large mines typically require quite deep, long ports with accompanying warehouse space – the lack of port facilities at the Qullissat coal mine was one of the many reported reasons for its closure in 1972 (ARTEK, 2013).As regards shipping, the Royal Artic Line (RAL) has a monopoly on all sea transport of cargo to, from, and within Greenland. However, when it comes to mining operations, companies are not bound by the RAL monopoly and can freely enter into agreements with worldwide shipping companies. At present the majority of cargo (mostly in the form of fisheries products) from Greenland is processed through the port of Aalborg in Northern Denmark. This would most likely change if new mines open, with cargo being redirected to other parts of Europe, North America and Asia. With the gradual opening of the Northwest Passage to shipping to Asia, Greenland is actually well-placed to avail of opportunities offered by the global maritime shipping market (Figure 12).

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Figure 13: Development of transport routes to the Arctic

Source: Nordregio at www.nordregio.se

Putting the above ‘port investment cost’ challenge into perspective, most mines around the world – especially existing and future REEs mines – are not on the coast and therefore often require dedicated railway and roads. In addition, as most mines are not near industrial areas where processing takes place, many companies would have to construct (or purchase) both roads/rail and port facilities. Greenland’s coastal mining deposits appear to have an advantage in this regard. Finally, maritime transport depends on ice-free waters. Here the risks are much greater in the north than in the south. Even here however, climate change is opening up previously inaccessible waters.

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In terms of the permitting of transport and mining infrastructure, Greenland, like other sparsely populated remote countries and regions of Canada, USA (Alaska), Russia, benefits from a lack of competing land uses. Therefore this issue –which is a challenge elsewhere – does not appear to be a problem.

Energy production and electricity network capacity is also vital for mining. On the one hand Greenland has huge potential for additional hydro-electric power. Despite this, total existing installed hydro-electric power generation capacity only amounts to approximately 91 MW. Taking the estimated energy needs of the largest planned project (Isua – 135 MW) and adding four other hypothetical mid-sized mines (at least 100 MW based on 25 MW each), this would add 235 MW to existing capacity. Therefore, significant new investment is required.

One of the most challenging aspects of harnessing hydroelectricity is that such plants are typically 40- year investments, which often exceed mine lifespans. Also, as mining companies often wish to make a return after 5 to 10 years of operation, such investments are not attractive. Another factor concerns the transmission of this electricity from the plant to the mine that may require significant investment in networks. A further challenge is the fact that such hydroelectricity would only, in the short-term be available in western and south-western Greenland33.

In this light, and although on-site, diesel generation is more expensive on a megawatt hour (MWh) basis than hydroelectricity, the avoided capital and network costs may make it the more of economic option. Even in western/south western Greenland, and as above, the fact that hydroelectricity investments have a long multi-decade pay-off while mining companies’ investors typically require a shorter (e.g. 5-year) return, such investments are not attractive for mining companies. Indeed, for many mines it is understood that the energy cost premium posed by on-site diesel generation (of the range of 25 to 40 MW) is not large enough to act as an investment disincentive. In addition, from a carbon emissions point of view, while a large mine may contribute considerably to Greenland’s emissions of greenhouse gases (Hansen, 2012) the emissions savings from hydroelectricity as a renewable source of power does not appear to be relevant as Greenland (which comes under Denmark’s national quota) is currently exempted from having to purchase EUAs. Therefore any action to promote hydroelectricity may not be worthwhile.

The table below summarises the estimated infrastructure needs for current Greenlandic projects.

Table 6: The most common elements of infrastructure that will be required in connection with mining in Greenland

Transport Port Most projects require port facilities for shipment of mineral concentrate and for bringing in facilities consumables e.g., fuel, food etc. In addition, loading/unloading equipment; service boats and tugs etc. is required. For the Citronen Fjord project it is estimated that 250,000 tons of concentrate should be shipped during a window of only 6 weeks a year. The Isua project expects to ship 500,000 tons of concentrate per week year round.

Airstrip / Most projects will need a heliport. The large and more remote projects will require Heliport construction of an airstrip (typically at least 1500 m).

Roads All projects will need to establish local transport routes between the mine and ore processing plant, from the ore processing plant to the shipment area as well as accommodation and storage/workshop areas. In some cases, the roads could be connected to the existing road network. (Kringlerne, Fiskenæsset ruby project and Kvanefjeld).

Energy/ Power plant Typically, conventional diesel generators. Citronen Fjord, Kvanefjeld and Isua are likely to have significant energy needs. Hydro power plants have been considered on several projects, but is currently only in the concept phase for the planned Alcoa aluminium smelter.

33 While there is potential for hydroelectricity in east Greenland, to date this potential has only been assessed in limited areas.

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As noted above, waste-related infrastructure is considered below under environmental risks. Finally, an additional aspect to consider will be the different demands placed on infrastructure and services during the construction phase and operations phase of a mining project. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU Driver Possible Impact Probability Overall and potential EU investor Rank Comment Rank Comment

Investors are Greenland’s High Mining companies – High While investment High deterred by a size, low which typically seek Medium conditions are seen as lack of population to make a return good, they may not be physical and relative within five years of sufficient to compete infrastructure inexperience commencing with other equally-stable to support in mining. operations – may countries which provide mining. not be willing to public funding or other fund the addition incentives for mining costs of large related infrastructure. infrastructure projects in Greenland.

In summary, given the low population density and the siting of mining developments away from existing towns, one of the main challenges here is to pay for infrastructure where the only beneficiary is the mine.

While many jurisdictions face the same challenges, many of the neighbouring or similar countries such as the USA, Canada and Russia may have deeper pockets with which to finance infrastructure, not to mention peripheral regions in Norway, Sweden and Finland that may have access to EU regional funding in addition to national and private funds. The availability of infrastructure also appears to facilitate mineral processing.

On the other hand, the positioning of many of the Greenlandic deposits on the coast should reduce infrastructure needs; at least with regards to mining if not processing, does represent a potential advantage over harder to access inland sites in other countries. Likewise, many of the potential investors appear to be willing to fund infrastructure themselves (though it remains to be seen if this happens).

Overall, despite the fact that infrastructure needs are almost universal and not an insurmountable barrier per se, where two like-for-like deposits compete for investment, the availability of infrastructure or related investment incentives at one of the deposits may represent the difference, thereby appearing to put Greenland at a real disadvantage. Therefore the lack of infrastructure in Greenland – or rather the lack of a level playing with other competing mineral rich jurisdictions – may be a major issue.

2.4.1.4 Availability of geological information

Another factor that undoubtedly affects investment relates to the fact that Greenland is relatively unexplored from a geological-knowledge point of view (especially in the east and north) that can increase uncertainty for investors. Indeed, deepening geological knowledge was identified in 2012 by Greenlandic government as the main area where it would like to benefit from EU support. The question is how much knowledge is necessary and how would further efforts in this area lead to greater investment in the coming years. As improving geological knowledge is a long-term and

44 relatively expensive process, action here requires significant investment34. Therefore, it is important to carefully ascertain the business case for extra knowledge.

On the one hand, and despite extensive past efforts, significant areas of Greenland are underexplored. Contrary to problems which exist in poorer resource rich jurisdictions (namely in Africa) where geological records and systems have not available always been available or in place (AEGOS, 2010), the problem in Greenland appears to relate to the size of the territory to be covered and the extent of work already done, rather than how existing knowledge is held and organised. Nevertheless, the problem remains the same – investment is thwarted by a lack of geological knowledge. Indeed, several authors35 have outlined the very important role which geological knowledge plays in reducing risk for investors.

On the other hand, given the fact that many of the deposits being developed now were discovered many decades ago36, it is unclear how much of an issue geological knowledge (or the lack of) is for mining companies in the short to medium term. In short, the devotion of greater resources to improving geological knowledge may not automatically lead to increased mineral production, at least not necessarily in the short term.

An exception to this might be where uncertainty over the quality of an existing deposit may be preventing investment, in which case any short-term action would relate to increasing Greenland’s ability to independently verify such claims. This role, however, typically falls to exploration companies and not to public geological institutes. Another exception is where deposits can be developed relatively ‘fast’ e.g. over the next 10 to 20 years.

Overall, despite the fact that high quality geological knowledge is essential, improving geological knowledge in Greenland may be more of medium and long-term than a short-term interest for the EU. This view may be reinforced by the Fraser Institute’s 2013 survey’s findings37 that geological knowledge, or lack of, is an important though not crucial deterrent to investment in the case of Greenland, as it is in say many developing countries. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for the Driver Possible Impact Probability Overall EU and potential EU Rank Comment Rank Comment investor

Low/ Greenland’s High The availability of Medium Despite extensive Medium Insufficient large size good quality geological work over many levels of and nascent geological data decades, given its size, geological status as a is a prerequisite. Greenland’s geology is not knowledge mining as well explored as other may deter location countries. That said, this has investors. mean that not deterred mining large parts of exploration companies who the country are currently licensed to are under survey 10% of Greenland’s -explored. ice-free land mass. Overall, the level of geological information available could be enhanced.

34 For example, improving geological knowledge availability was one of the main reasons for the World Bank support for capacity building of the mining sector between 2000 and 2010. 35 Kreuzer, Risk and Uncertainty in Mineral Exploration: Implications For Valuing Mineral Exploration Properties, 2010. 36 Existing geological information is available to both jurisdictions. 37 Only 20 percent of respective respondees to the Frasers Survey 2013/14 viewed geological knowledge (quality of the ‘geological database’) as a deterrent to investment in Greenland, and none of these considered it a strong deterrent. Interestingly, this was in contrast to views on the Bulgarian, Romanian and Greek databases that are viewed as more of an investment deterrent.

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It should be noted here that any co-operation in this area would most likely bring about changes in the medium-term and long-term, which may make co-operation in this area less attractive for downstream EU investors who need certain materials in the short-term.

Overall, though greater geological knowledge provides benefits and could be seen as a no regret option, care needs to be taken to focus efforts in this area. For example, some short-term actions which could be taken here, for example, could be firstly to determine how much extra geological knowledge is necessary, how it could be self-financed and how it will increase investment, and secondly to examine if there is any need to further improve the ability of Greenland to verify the quality of known deposits so as to increase the likelihood of production. For example, with regards to the latter, at present, the supply of certain important metals like REE to the EU comes from countries that have the ability to control their mining sector. For instance, when supplies fall, mechanisms are put in place to discourage exports. For the EU greater investment in improving the quality of known deposits may help to reduce the time it would take for such deposits to be production ready, and hence facilitate alternative supplies where monopoly suppliers put in place trade restrictions.

2.4.1.5 Administrative risks

Administrative risks in mining can theoretically relate a number of challenges. These include risks related to:  The capacity of manage, monitor and enforce mining rules and contracts, due to a lack of trained staff and/or to a lack of capacity; or  The governance of the sector, namely in terms of transparency and accountability to citizens and investors.

With regards to administrative capacity, in the context of Greenland’s ‘open-door’ policy where all potential projects will in theory be considered, this risk may be primarily driven by a possible lack of staff with the right skills and a possible reluctance to outsource these tasks or bring in staff from outside rather than on a lack of willingness of the Greenlandic government to see more mines open. However, and as noted above in Section 2.2 on possible geopolitical risks, given recent history, there may actually be a risk of too few mines rather than too many, in which case it would be questionable if administrative processes will be overworked.

Another possible manifestation of administrative constraints may occur when an administration has difficulties in monitoring and enforcing its mining laws. In Greenland, in spite of the considerable legislation and guidance put in place concerning the need for environmental and other types of impact assessment, public consultation and so on, the actual monitoring and enforcement of these rules may conceivably require more technical knowledge and administrative capacity than the administration possesses. However, following consultation with regulatory bodies and stakeholders in Greenland, it appears that such fears would not be well founded given Greenland’s strong recent track record in overseeing the development of its extractive sector.

Secondly, potential administrative capacity challenges may also relate to other very important ‘governance’ issues which are very important for the success of mining in other countries, notably in the developing world where for example revenues from mining can, in absence of strong rules and institutions be used be misused. Indeed, the absence of good governance and clear and well applied mining rules has been identified as one of the main reasons for underdevelopment vis-à-vis ‘resource poor’ developing countries, a phenomenon otherwise known as the ‘resource curse’.

Such risks can be managed in a number of ways, for instance by having structures in place to ensure transparency of contracts (e.g. contracts are published in a number of jurisdictions), transparency of

46 date on the monies paid to governments by companies (e.g. EITI38-type measures), transparency in discussions between government and industry (such as through lobbying registers/declarations of interest and through robust public participation processes (e.g. under various international conventions or similar to EIA processes in the EU and elsewhere).

While Greenland has committed significant resources to putting in place a robust, transparent and stable regulatory framework, experience from other resource-rich jurisdictions – which have much higher populations – shows that regulating large multinational, and indeed junior, mining companies in the areas of taxation etc. is not straightforward and requires significant expertise. Also, while Greenland is a country with a strong record of good government, there is the risk that given its low administrative capacity, it’s possible dependence on a few large firms and highly-dispersed, small population (located for the most part away in small communities away from central government) that mining authorities may conceivably be overwhelmed by private interests. In terms of risks for the EU, though fiscal issues and financial accountability laws are principally the concern of Greenland’s government and its people, poor governance can pose potential long term reputational risks for EU for mining companies, the minerals purchasing industry and their investors.

Overall, however, while the risk of misuse of funds is present in any mineral rich country, this is less likely in Greenland given the existence of clear rules on mining in Greenland and its commitment to financial transparency in the sector (Greenland, 2014; Fraser Institute, 2014). Therefore, it is already at a considerable advantage compared with resource-rich developing countries where mining codes/rules change sporadically or are often ignored in practice. Despite the actual size of Greenland’s administration may pose challenges. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU and Driver Possible Impact Probability Overall potential EU investor Rank Comment Rank Comment

Greenland’s low Greenland’s High Like geological Medium/ Despite having clear Medium levels of large size, knowledge, Low rules and administrative small good and clear arrangements in capacity (due to population rules – and there place for the mining its population and status as enforcement - sector, it is not entirely size) may make a ‘frontier’ for the mining clear how unclear it difficult to mining sector are a how these rules will be properly monitor location. prerequisite. enforced if and when mining projects, a large mining project which may in commences. Overall, turn lead to administrative certain capacities which reputational risks appear to be robust for investors. given the same size of the administration, they could of course be enhanced.

Investment The High Transparency Low Greenland has Low conditions are extractive and good extensive robust rules compromised by sector governance in in place in the area of non-transparent globally has the extractive mining. In particular it rules on the use been linked, sector is seen by is an enthusiastic of mining in the past, the EU and advocate of financial revenues and to poor others as a and physical governance of governance prerequisite for transparency in the the sector. and mining. sector. corruption.

38 The Extractive Industries Transparency Initiative (EITI) is a global coalition of governments, companies and civil society working together to improve openness and accountable management of revenues from natural resources. See www.eiti.org for more information.

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To conclude, given its strong track record in the area of transparency and good governance, Greenland offers much greater stability compared with certain other mining jurisdictions. In terms of general administrative capacity, for example, Greenland has, for the most part, put in place state-of-the-art transparent permitting rules. Overall, administrative capacity (or a potential lack of) represents a medium to low risk for the EU and investors.

2.4.1.6 Skills & sourcing

Beyond physical infrastructure, any mining investor may face business-sourcing risks related to (i) the availability of skills as well as (ii) the availability of, or requirements to procure, local services.

(i) Availability of mining skills

Risks related to mining skills include possible shortages of both staff with general skills – ranging from construction work to catering services – and staff with specific skills – which cover more technical skills covering geology and mining taxation. For both types, shortages may occur in Greenland due to the both the very low population level, the low number of suitable staff (which is in turn due to the lack of students who finish schooling) as well as due to the limited number of workers who have actual experience of working in Greenland’s small mining sector. Despite the short-term need for outside staff, resorting to traditional methods to address shortages – such as immigration – is a sensitive issue in a country where certain sectors have, in the past, been dominated by foreign workers.

With regards to specific skills such as engineering etc., many of these are not at present available in Greenland. In addition, many Greenlanders who travel abroad to acquire such skills do not come back to work in Greenland. There are also shortages of workers with general skills.

While these same problems occur in other sparsely-populated mining regions and are not in any way unique to Greenland, Greenland’s specific location and the ease at which Greenlanders can migrate to the EU (i.e. Greenlandic citizens can also become EU citizens through Denmark) means that finding workers with the right skills may be difficult. While there are many solutions to this problem (e.g. relaxed immigration etc.), issues related to residence are ultimately for the Greenlandic government to decide upon, and are not a matter for investors and/or the EU.

Greenland already allows for the migration of labour from other Nordic countries. As the Nordic countries are active mining countries, this should mean the availability of a significant pool of skilled staff. In addition, as of 2014, a new Greenlandic worker immigration law has allowed for immigration of less specialised staff for certain projects. However, as there are concerns that mining companies may seek to bring in temporary workers from lower income countries which could possibly undercut wages for Greenlanders, and thereby lead to a decline in the social acceptance of the population for mining, such immigration is generally limited to the construction phase of large mining projects when staffing needs are most acute. While this may give some certainty to projects of a certain size, it would appear that companies below a certain size may need to depend on local workers at least during the operations phase. The government’s desire that more than 50 percent of the workforce in the extraction industry is local would appear to confirm this (Kierkegaard, 2012).

One solution which can be used for government and investors to agree, through so-called ‘Impact Benefit Agreement’ or IBAs, on numbers of locals and immigrants to be employed. Such agreements are negotiated on a project-by-project basis depending on location, skills required and other factors. While Greenland has included the use of such agreements in its mining framework, the only IBAs agreed to date have been in the oil sector.

Looking forward the challenge is to match available skills with investor needs. On the one hand, finding staff that have finished school will be a challenge in a country where over 60 percent of the

48 population have not obtained a second school diploma. The government is spending significantly to reduce this figure. On the other hand, it is understand that the main staffing needs of future mining projects will be in the area of vocational skills (e.g. over 70 percent of positions are expected to be construction related) while less than 10 percent of positions will require higher, third-level education. This infers that while many of general skills will have to be provided by Greenlandic employees, much of the more technical, specialised staff may come from outside Greenland (Kierkegaard, 2012).

In short, while mining has been carried out in Greenland, it has been carried out at such a small scale that the skilled labour needed for large-scale mining projects is not currently available. As the acquisition of these skills is likely to take several years, which can probably only be overcome with on-going mining over a significant period of time and with further training, it is likely that a certain number of immigrant workers would have to be brought into Greenland for the foreseeable future, in particular during the construction and initial operating phase of the first large mines opened. With regards to investor needs for high-skilled staff, given Greenland’s limited population, it is likely that Greenland will continue to depend on immigration into the long term. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU and Driver Possible Impact Probability Overall potential EU investor Rank Comment Rank Comment

Investors may The lack High Despite the fact that Medium While the large Medium be deterred by of mining does not employ projects law allows the lack of available as many people as other for imported available staff skilled industries (e.g. metal labour to work on or by local/ staff. processing), the large mines (in national availability of general particular at the staffing staff – during the construction requirements. construction phase – phase), it is not and specialised staff, entirely clear how would be an issue. other specialised staff /skills and services would be provided.

On the one hand, the issue of staffing and relates to immigration and social and employment policy, it is very much issue for Greenland to resolve.

Nonetheless, it is an issue that can have an important effect on risk for investors, both in terms of availability of skills and the costs of bringing in external expertise. Furthermore, this staffing issue would increase in importance if mining operators were required to undertake processing in Greenland (which is further discussed below). Overall, it is our view that this represents a medium level risk for investors.

(ii) Access to adequate business support services and public services/local processing and sourcing requirements

Beyond skills and staff availability, investors may also face a limited availability of local ‘horizontal’ business services as well as to local upstream (e.g. local equipment sourcing) and downstream activities (e.g. processing). Alternatively, they may be contractually bound to procure or process locally. As with skills and staffing, these challenges are often resolved through Impact Benefit Agreements (IBAs)39 between mining companies and the Greenlandic government and local communities.

39 An impact and benefit agreement is a formal contract outlining the impacts of a mining project, the commitments and responsibilities of both parties, and in particular how the community will share in benefits of the operation through employment and economic development. http://www.miningfacts.org/Communities/What-are-Impact-and-Benefit- Agreements-%28IBAs%29/

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Given the fact that other mining countries and similar regions – such as the northern Canadian regions – have managed these challenges, there is no reason why Greenland cannot also do so. Despite this, the negotiations for IBAs can, however, be lengthy and can delay the opening of a mine. As established mining countries such as Canada have experience with IBAs, they may have an advantage in this area over Greenland which is relatively new to large-scale mining. That said, the overall positive view of mining held by the general population should be an advantage for Greenland in terms of helping gain local agreement for IBAs.

Concerning downstream activities – which may also be covered by an IBA – the Greenlandic government requires that a certain level of mineral processing takes place in Greenland. It is currently negotiating with the Tanbreez mine developers on this issue, and has asked them to make further environmental (EIA) and social (SIA) studies to this effect. Kvanefjeld’s owners, GME, have indicated that while zinc minerals will be processed in Greenland, uranium and REEs will be processed elsewhere (GME, 2013). The EIA and SIA for Kvanefjeld are expected to be made available in 2015. Finally, by 2014 the Greenlandic government had begun negotiating an IBA with the (former) developers of the Isua project, London Mining.

Finally, there is the risk for any company of the cost of having to pay for certain public services, which may include social services and health needs of mining communities. Where a fly-in fly-out (FIFO)40 mining model would reduce any indirect social cost, health and other services would still have to provided, often in areas where such services were unavailable beforehand. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for EU and Driver Possible Impact Probability Overall potential EU investor Rank Comment Rank Comment

Investors may A potential Medium While it is unclear as to Low Companies have Low be deterred by lack of what level of local overcome similar requirements to choice/ sourcing would be challenges in other source business expertise required, any similar regions (e.g. locally/ amongst requirements could in Nunavut, nationally. local push costs up. Canada). suppliers.

Investors may The lack of High This risk, which Low While the political Medium be deterred by experience of depends on political situation on this requirements to Greenland in decisions on specific issue is unclear, it process the area of projects, could deter does not appear material processing. mining investors. likely that nationally. Greenland will oblige companies to invest in substantial processing facilities.

Investors may Lack of local High A lack of local public Low This is a factor for Low be deterred by facilities. facilities may increase many FIFO mines having to offer costs for developers used successfully in certain public many mining services (such jurisdictions. as health services).

There is a certain conundrum here with regards to local processing. On the one hand, if processing takes place within Greenland, the local economy would benefit. On the other hand, the lack of

40 Fly-in fly-out (FIFO) is a method of employing people in remote areas by flying them temporarily to the work site instead of relocating the employee and their family permanently.

50 experience or facilities available could increase costs for investors; likewise, the environmental impacts of certain processing facilities (e.g. REEs) would entail certain environmental risks, especially where there is little or no supporting infrastructure. All-in-all, as other jurisdictions have used IBAs successfully in a way which benefits investors and locals, there is no reason why a certain level of local procurement should present a significant risk. However, any obligation placed on mining companies to also process materials within Greenland could be an exception to this.

2.4.1.7 Risks related to managing environmental risks

The main and substantial environmental risks associated with mining projects, in Greenland and elsewhere, predominately concern the potential impact and costs arising from (i) local habitat disturbance and (ii) pollution. These potential impacts are presented in the table below.

Mining impacts  Emissions to air (mining operations, blasting (if applicable), transportation, dust from mining waste handling and storage, etc.)

 Impacts on groundwater (levelling, leachate, etc.)

 Noise (transportation, blasting), flora and fauna, landscape etc.

Operational  Emissions to air (acidic gases such as sulphuric acid or fluoric acid, sulphur dioxide, dust impacts particles, radon, etc.) (depending from associated  Emissions to surface water (wastewater, toxic ore constituents such as processing) As/Cd/Pb/Mo/Cr/Cu, REEs, Mg/Na/Ca salts from neutralisation, organics, etc.)  Emissions to groundwater (leachate from mine wastes and tailings wastes, accidental spills, etc.)

Post-operational  Leachate from mine wastes (acid mine drainage, depending on ore type and disposal impacts conditions)

 Leachate from mill tailings (salts, toxic constituents, etc.)

While such impacts are possible in any jurisdictions, they may pose a particular problem for Greenland for a number of possible reasons. Firstly, given the fragility and sensitivity of its eco- system, the Arctic environment is understood to be particular vulnerable to pollution (practically no acid/base buffers, practically no sorption properties, short distances to bio pathways, rapid movement of dissolved contaminants, high enrichment rates in marine animals). Secondly, Greenland is relatively inexperienced in large-scale mining and has limited in-country staff and resources available to monitor mining waste, as well as to help deal with any accident that could arise. A third factor is the special case of REEs mining where tailings/waste are/is often radioactive and therefore must be handled in a suitable way. A final factor is that Greenland’s possible dependence on mining may possibly lead it to prioritise mining projects over environmental protection goals.

However, the Greenlandic government has put in place a number of legal and regulatory measures to manage such challenges.

Firstly, the governance arrangements for independent environmental decision making in the area of mining appear to be in place. In 2013, Greenland established the Environmental Agency for the Mineral Resources Area (EAMRA), the administrative authority for environmental matters relating to mineral resources activities, including protection of the environment and nature, environmental liability and environmental impact assessments. This should lead to lower possible conflicts of interest between Greenland’s ambition to open mines and the need for it to protect its environment.

Secondly, all mining projects in Greenland will have to abide by national environmental regulations with regards to the handling and control (e.g. storage and disposal) of mining wastes. Thirdly, each project-specific environmental impact has to be minimised via the application of state-of-the-art

51 technology. In addition, the EIAs41 are independently assessed by the regulator - if deemed necessary and appropriate, the regulator engages external expertise for this purpose. These and other conditions and limitations are laid down in the mining license, which includes provisions that requirements that can be upgraded later on during operation whenever improved state-of-the-art technology becomes available and is deemed appropriate by the Regulatory body. If there is a shortcoming it is that Greenland lacks national or regional environmental plans (such as SEAs) for the sector. While one preliminary SEA covering hydrocarbons and mining has been developed for Jameson Land in eastern Greenland, and one in connection with the Alcoa project and the associated use of hydropower to our knowledge SEAs have not been produced for other regions. In terms of need, though while such SEAs are not typically required for mining, the fact that Greenland wants to establish a relatively large number of mines in a limited period of time may mean that one or more plans may be warranted. Finally, all projects require adequate monitoring along prior to construction, during construction and operation as well as during decommissioning and in the post-mining phase.

In terms of the appropriateness of the measures, meeting the first challenge mentioned above – safeguarding the fragility and sensitivity of its eco-system – means that extra safeguards have to be taken to reduce emissions and prevent accidents. The policy of the mining regulator in Greenland requiring state-of-the-art emission reduction technology is appropriate in this regard. The dynamic improvement that is required and applied in Greenland, whenever technical means for reductions are available, is a further improvement to cope with these conditions. For comparison, as such requirements are not commonly applied in other countries’ mining frameworks, Greenland is at the forefront of environmental regulation in this area.

In terms of measures taken to ensure compliance, in the view of the regulator, these requirements are communicated clearly from the early phase of a mining project so that permit applicants may fully understand and accept what is required of them. Even though this policy places a risk on market “competitiveness” vis-à-vis countries that apply less stringent or only static requirements, overall, it is viewed by the regulator as being advantageous. In addition, in the future, the application of state-of- the-art environmental protection technologies may result in commercial and reputational advantages for downstream buyers, in particular for downstream companies engaged in manufacturing high tech and ‘green’ goods.42.

With regards to management of mining and milling waste, as well as management of post-mining decommissioning and clean-up, the regulations in place in Greenland require the development of detailed mining waste management plans, to be developed during the application phase of the project, and which need to be, in turn, regularly updated during operation phase, similar to the provisions of Article 5 of the EU’s Mining Waste Directive. Based on these management plans, the required clean- up and disposal costs have to be borne by the developer early-on in the project phase. Specifically this means that costs are secured in a dedicated fund under the jurisdiction of the regulatory body, which is increased when additional requirements are introduced. Again, such provisions are similar to those in Article 14 of the Mining Waste Directive (and implementation may actually go beyond implementation of the Directive in parts of the EU). Beyond comparison with the EU, while such regulations have been under discussed in leading mining countries such as Canada and Australia, they have to date only been partly implemented. The ICMM, an organisation representing some of the largest world’s large mining companies, has recognised that43:

41 Bureau of Minerals and Petroleum (BMP): BMP guidelines – for preparing an Environmental Impact Assessment (EIA) Report for Mineral Exploitation in Greenland. – 2nd edition, Nuuk/Greenland, January 2011, 42 Even though sustainability in production currently is not attributed a market value in the raw material sector, this might well change in the future given the fact that leading large mining companies are making significant efforts to increase their sustainability profile (see http://www.icmm.org) and that REEs are more and more applied in so-called “Green technologies”, where the sustainability of the supply chain sure will get into the focus if those products increase their market share and get successful. 43 International Council on Metals and Mining (ICMM): Guidance Paper Financial Assurance for Mine Closure and Reclamation, London, March 2006.

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“Governments and communities have sent a clear message that they expect a level of future certainty such that they will not have to bear the costs of mine closure and reclamation.” and has committed itself to:

“… view the potential creation of abandoned sites as a risk to their reputations and to that of the mining industry generally. For this reason, we endorse the development of government policies that support responsible environmental mine closure and reclamation. Mine closure and reclamation should be an integral part of the mining life cycle. Preliminary closure and reclamation plans should ideally be prepared as part of project feasibility studies, and in all cases detailed plans should be completed well before the active life of the mine has ended. Such plans should be updated as required to reflect changes in environmental conditions and in mine operations. In addition, an acceptable level of assurance that closure will be funded should be provided through the use of appropriate financial instruments.”

Overall, given that Greenland’s regulations in the field of mining waste management are broadly in accordance with the provisions laid down in the EU’s Mining Waste Directive (and vice versa), as well as with the sustainability concept of the major players in the mining industry, arguments in favour of the EU helping Greenland improve practices and framework in this area are lacking. It could actually be argued that some EU Member States could learn from Greenland, at least in terms of the design of the legislation if not its implementation.

From an investor perspective, however, the mining waste legal provisions in place in Greenland might actually present a large hurdle for smaller, risk-capital based mining companies as their initial costs may be higher than elsewhere. As such smaller companies may possibly benefit from assistance in this area.

With regards to the third challenge – uranium separation in conjunction with REE mining – this is only relevant for the Kvanefjeld mining project. In addition, to date, most of the discussion has been on the application of uranium non-proliferation safeguards; there has been less focus on the environmental effects of such mining. While uranium production in Greenland would fall under IAEA safeguards jurisdiction, Denmark is under EURATOM’s safeguards monitoring regime. As the provisions of safeguards monitoring for natural (not enriched) uranium are – for historical reasons – slightly tighter under EURATOM’s safeguards regime than under the IAEA’s44, the Danish and Greenlandic governments are currently discussing how to apply the more stringent EURATOM safeguards standards. As Greenland is not a member of the EURATOM treaty, ways would have to be designed and implemented to formally achieve this goal. This process may take some time because of the formal problems to be resolved in accordance with such traditional treaties, with the large number of parties involved (Euratom, IAEA, the UN) and the potential impacts such a change can have with other parties of the IAEA. If the separation of uranium from the ore is to be performed in the same processing steps together with the REEs, this can potentially delay the start-up of this project. If the uranium would not be separated, no proliferation safeguards would apply, causing no delay.

In short, the main risk here for EU companies contracted to such mines (e.g. Kvanefjeld) may see deliveries delayed for several years, and may as a result decide to contract with a mining company elsewhere. The extent of this problem depends on the extent of the delay. However, as this delay is not expected to go beyond three years, it may not be material.

With regards to the possible environmental risks of managing uranium mining waste, as the handling of mining wastes and potentially any tailings (radioactive or otherwise) requires in almost all cases thorough and sustainable isolation from the environment because of their adverse by-product content, specific measures to control the radioactive by-product content and its adverse properties are not necessary. For example, specific issues such as direct radiation (from the thorium and uranium content

44 E.g. Euratom safeguards includes uranium ore, IAEA’s do not.

53 resp. their decay products) or radon generation (from the uranium content only) are resolved by the same cover material properties and thicknesses that are necessary to reduce any toxic leachate.

Beyond risks in Greenland, it should be kept in mind that there are certain differences in the basic environmental philosophy of long-term mine waste management between Greenland and the EU. For example, backfilling mine waste into open pits not only reducing risks for persons living on the edges of such openings; uncontrolled landslides (settling of the edges) that are to be expected in the long- term from steep slopes and from other associated hazards at abandoned mine sites can also be prevented. Finally, isolation of hazardous constituents of the waste can also better be performed with such backfilled waste. One of the provisions of Article 5 (Waste Management Plan) is to require member States to require backfilling, as presented below:

“Article 5 Waste management plan 1. Member States shall ensure that the operator draws up a waste management plan for the minimisation, treatment, recovery and disposal of extractive waste, taking account of the principle of sustainable development. 2. The objectives of the waste management plan shall be: (a) to prevent or reduce waste production and its harmfulness, in particular by considering: […] (iii) placing extractive waste back into the excavation void after extraction of the mineral, as far as is technically and economically feasible and environmentally sound in accordance with existing environmental standards at Community level and with the requirements of this Directive where relevant;”

Greenland’s regulations in this field, however, are basically different as it is sufficient that the leachate meets certain quality criteria, in which case enclosure is not required. As such, wastes can be deposited in natural lakes (so-called wet disposal) - as the disposed tailings remain in steady close contact with large amounts of water, contaminant dispersion is maintained and maximised. While this is primarily an issue for Greenland, this is important for any co-operation as the provision of any EU funding in this regard would be difficult if the funded operation does not meet EU norms, even if the operation is outside of the EU.

Another possible challenge relates to the level of processing which takes place in Greenland, especially of REEs, and by extension and as by-product, of uranium. The processing (e.g. chemical separation) of REEs involves large amounts of chemicals and can lead to substantial environmental risks (accidents, spills, etc.). As all chemicals would have to be transported by ship and as most of the chemicals are needed in a liquid form (acids, extraction liquids, etc.), this always involves a probability of severe transport accidents with a rapid spreading of contaminants to the sea. Indeed, this is not just an issue for Greenland; it is one of the main barriers to increased supplies of REEs worldwide. This processing issue is discussed in the next subsection below as well as in Section 3.

One of the main overarching problems may actually relate to the fact that the environmental safeguards in place in Greenland and EU can result in costs which exceed those borne in other large mining companies such as China. For example, according to certain estimates, current REE prices may not be sufficient to cover production (mining/processing), sound environmental emission standards, as well as sustainable waste disposal and post-mining clean-up costs. Given the fact that major competitors (China) produce under a different environmental regulatory system where, for example, provisions for post-closure clean-up are absent and where emission standards for liquid discharges from REE production have only recently been put in place and which have to be met by the industry in the coming years, the difference in economic conditions is evident. However, this is not necessarily a problem that is unique to Greenland. For example, the application of these rules may also prevent REE and other mines in other jurisdictions.

The table below presents a synopsis of the possible level of risk for investors in this area.

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Risk for EU and Driver Possible Impact Probability Overall potential EU rank investor Rank Comment Rank Comment

EU investors may Environmental High A lack of Low Greenland has put in Low to be deterred by rules and (willingness to place a Medium* the reputational assessments etc. put in place) comprehensive legal risks associated may not be environmental and regulatory with a lack of rigorous enough safeguards framework for limiting necessary to prevent would deter the environmental environmental emissions or investment impacts of mining. safeguards in where and would be While Greenland and Greenland. monitoring and a prerequisite the EU’s mining rules enforcement for co- differ somewhat, such activities, or operation. differences are not environmental considered to be a reporting rules worry. In terms of are inadequate. possible challenges, In addition, post- while Greenland has closure rules and put in place rules for funding may not ensuring that be adequate. developers provide EIAs, environmental planning for mining at a regional or national level could be enhanced. *The only risk here is that Greenland lacks a system for national and regional environmental planning.

Overall, while our findings suggest that environmental project risks are well addressed in the Greenland mining legal and regulatory framework45, environmental planning in the area of mining can be further enhanced.

2.4.1.8 Social & Political Risks

The final set of risks – social and political risks – can be expressed in terms of the issues which were most discussed during the election campaign in early 2013, namely that the public voted in the government to reduce poverty, improve education and use mining as an instrument for achieving these goals and pursing economic sovereignty in general.

With respect to poverty, while absolute poverty is low, relative poverty is high despite the ‘Nordic- style’ state welfare system in place: - though income inequality is not high by global standards, it is higher than the OECD average and is much higher than within Denmark. Regional differences are also important. In this light and given the experience of other resource countries with mining inequality, it is clear that any country that is relatively new to the sector, like Greenland, would be minded to put in place clear policies for how income inequality can be managed.

On a broader level, the issue of independence and economic sovereignty is a factor in each and every election with almost all political parties debating when, and not whether, independence should happen. As such, historically the main two political parties have been broadly in favour of using mining as a means to this end. Political differences arise rather with regards to specific aspects of mining, such as taxation and uranium issues. In addition, other possible differences related, say, to the immigration of workers vis-à-vis use of local workers have not arisen – for example, the 2012-2014 government did

45 Minik et al report that while historical mining operations at Maarmorilik and Mestersvig have caused ‘unacceptable’ pollution, the more recent mining activities at Seqi and Nalunaq were established in an environmentally sound manner and have not caused significant environmental impacts.

55 not revoked the so-called ‘large scale’ law46 which was passed by the previous government in an attempt to relax immigration of unskilled and semi-skilled mining workers for very large projects. With regards to the new government that was voted-in in late November 2014, while it is early days, it does not appear that it will substantially deviate from the policies of the previous government, at least not with regards to uranium (Minex, 2015).

As such, any opposition seems to be focussed on individual mining projects rather than on mining itself. This is in spite of the disruptive impact that mine closure has had in the past on local isolated towns where closure has meant the effective ‘closure’ of the town in certain cases. Conversely, mines can be viewed by some citizens as a way of breathing new life into towns with diminishing populations. This desire can often run counter to environmental concerns held by other citizens. For example, despite some opposition47, REEs and uranium mining at Kvanefjeld also has a certain level of support in neighbouring Narsaq. Indeed, one, perhaps surprising aspect of the Kvanefjeld project is the local community’s reported preference for the mine’s Fly-in Fly-out (FIFO) worker accommodation camp’’ to be located on the outskirts of Narsaq rather than far away from it (ARTEK, 2014). This reported preference may relate to the fact that Narsaq’s population has decreased somewhat in recent years and that the mine may be one way to promote employment, use existing unused accommodation, support local business and ultimately prevent migration and/or emigration.

Overall, given the political views of the two main parties, it would appear that mining is socially acceptable so long as environmental norms are respected, it does not lead to a deterioration of income inequality, a certain level of local employment and procurement is achieved and plans are in place to sustainably integrate mining employees in the local community. While that the track record of certain members of extractive industry on these issues has been less than exemplary, there are success stories – for example, companies and communities in northern regions of Canada (e.g. Nunavut, Northwest Territories) and in Alaska have shown that mines can, with varying results, go hand-in-hand with local development (ARTEK, 2013).

The next social issue – employment of Greenlanders in skilled positions in mining and related services – was already partly discussed above under mining skills risks. However, while the risks of having to employ from a limited pool of workers may fall on the company, the indirect side effects of such a policy may include a rise in wages across the entire work force or situation where mining attracts talent to the detriment of other sectors, leading to inflation and a decline in competitiveness, which can lead to social and political instability. Again, while this is an issue for the Greenlandic government and how it sets minimum wages and redistributes income, it may also become an important issue for companies.

Another issue which is more relevant for companies is the possibility of labour supply instability. While the abovementioned FIFO mining employment model may work in certain regions of the world, there are some doubts about its cultural fit in a country which values leisure time and time with family. The underlying risk here is that mining employment may be attractive for limited periods of time e.g. as a means to save for a house rather than as a permanent job. Given limits on immigration and the lack of alternatives to FIFO, this could present staff turnover problems for mining companies. That said, at present, the fisheries sector involves working for several weeks if not months at sea. Therefore, it is hard to see how mining would be any different. Likewise, with the exception of exceptional situations like Narsaq and Kvanefjeld, there does not appear to be an alternative to FIFO for many mining projects given the short length of the mines beginning developed – 10 to 15 years in the cases of Isua and Citronen – and the experience with the ‘closure’ of mining towns such as Qullissat in the 1970s.

46 In December 2012, Greenland passed legislation defining the size of what is determined by a large scale project and regulating minimum salary levels for foreign workers. To be eligible projects need to be over a certain size and workers need to be paid a minimum of 80.40 DKK. Of the projects listed, only Isua and Kvanefjeld qualify here. 47 See http://arcticjournal.com/oil-minerals/751/fear-and-confusion-narsaq

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Last-but-not-least, and as referred to the subsection on environmental risk above, Greenland and Denmark are currently discussing the issue of how to oversee the mining and exportation of uranium at the Kvanefjeld REE mine, which is as much a social and political issue as it is environmental. As outlined above however, it is understood that discussions are in play about how to put in place such safeguards, and that if such discussions go to plan, they would not significantly develop the development of the mine. The table below presents a synopsis of the possible level of risk for investors in this area.

Risk for the EU Driver Possible Impact Probability Overall and potential EU investor Rank Comment Rank Comment

Investors may be The large Medium If the right counter Medium In addition to Medium wary of the size of measures are not put each project socio-economic mining in place, mining can requiring an SIA, impacts (e.g. on projects have significant the direct impact wages) that their relative to negative social may be lessened investment may the local impacts. by the fact that have on the population. most proposed population. mining projects proposed are located away from population centres and should therefore have a minimal direct impact. However, given the size of the economy, they may still have an effect at a national level.

Investors may be Local Medium Given the need for Low However, as Low deterred by opposition local staff, any loss of mining enjoys opposition to to cultural social support could support across mining. disruption/fr be damaging. the political om spectrum, this is alternative unlikely to industries happen. (e.g. farming/ fishing)

Investors in REEs REEs/ Medium While it is not entirely Low The establishment Low may be deterred uranium clear how long it of such a by any delay to mining may might take framework is not put in place a require the Greenland/ Denmark expected to lead uranium mining establishme to establish a to significant framework. nt of a framework for delays for the special uranium mining, and mining of REEs. framework how this would affect to manage REEs mining, it is these expected that these materials. can be completed within three years.

The Greenlandic public’s support for mining appears to rest somewhat on the view that Greenland will benefit substantially from mining revenues and employment. Therefore it is assumed that the development of the sector will result in certain levels of local staffing and mining taxation. If this happens, and if environmental and other safeguards remain in place, political and social risks are likely to remain manageable.

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2.4.2 Summary of Potential Risks

Based on the above findings, the analysis of the main risk areas is presented in the table below. As can be seen, in many areas the level of risk involved for investors and the EU is medium or low. However, the attractiveness of Greenland vis-à-vis other mineral rich countries, as well the availability of infrastructure, remains a real challenge.

Risk Area Potential specific risk for EU and EU investor Overall

Risks related to EU companies may be locked-out of Greenland due to too many geopolitical projects being commenced by other investors. developments

Funds may not be available for investments in the arctic region

International and Other mining jurisdictions may offer more attractive conditions/ It may be Greenland-specific more expensive to invest in Greenland than elsewhere due to regulatory investment conditions uncertainty

Investors may be faced with competition for land use

Availability of adequate Investors may be deterred by a lack of physical infrastructure to support

infrastructure mining

Availability of Low/insufficient levels of geological knowledge may deter investors. geological information

Greenland’s low levels of administrative capacity (due to its population size) may make it difficult to properly monitor mining projects, which may Administrative risks in turn lead to certain reputational risks for investors. Investment conditions may be compromised by non-transparent rules on

the use of mining revenues and governance of the sector.

Investors may be deterred by the lack of available staff or by local/

national staffing requirements.

Investors may be deterred by requirements to source business locally/

Skills & sourcing nationally. Investors may be deterred by requirements to process material nationally.

Investors may be deterred by having to offer certain public services (such

as health services).

EU investors may be deterred by the reputational risks associated with a Environmental Risks lack of necessary environmental safeguards in Greenland*

Investors may be wary of the social impacts which their investment may

have on the population

Social & Political Risks Investors may be deterred by opposition to mining.

Investors in REEs may be deterred by any delay to put in place a uranium

mining framework. *Environmental risk, though generally very low, is marked as medium risk due to a lack of comprehensive national; environmental planning for the mining/extractives sector.

The risks highlighted red (two) and orange (seven) have been retained for further assessment in section 4.3.

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Summary: Risk Assessment

 As outlined above, Greenland remains a relatively low risk destination compared to other resource rich countries. For example, if Greenland was the main supplier of a number of raw materials to the EU, these materials would not be defined as critical.

 However, there remain a number of significant barriers to mining, namely those relating to the real lack of infrastructure and to the potential, albeit unlikely, requirement for companies to process materials locally in a country without this infrastructure. While such risks are also present in other, similar regions of the world (Alaska, Northern Canada, Arctic Russia), they have been overcome in part due to greater existing and available expertise and the ‘deeper’ pockets of national governments in these countries and regions.

 Beyond the important investment and infrastructure challenges mentioned above, there are a number of potentially important risks that appear to represent ‘medium’ levels of risk. o Risks related to the availability and/or quality of geological knowledge means that Greenland’s geological knowledge which is good by international standards can nonetheless be improved o Another important risk may concern access for companies to skilled staff.

 Concerning possible risks in area of the environment, overall Greenland’s legal and environmental framework is on par with or even exceeds the EU’s, even if there are some differences. One area where there may be a gap is in the area of regional environmental planning – for instance while project-specific risks are required in law to be assessed by developers, the government has not produced a broader strategic environmental assessment, or environmental baseline assessment, for the sector. Although SEAs are not often conducted for the mining sector, the combination of a pristine environment and vulnerable eco-systems with government plans to develop 5 to 10 mines across the island over the next ten years may warrant such an assessment.

 Finally, other types of risks, which are often crucial elsewhere, are actually quite or very low in Greenland. These include those related to: o Geopolitical factors: Greenland has an clear open door policy), o Competition from other economic activities for land use: given the population density, and unlike the EU, there are rarely competing economic and social uses for land o National and local opposition to mining: to date mining remains popular; o Governance and transparency issues: Greenland has put in place a very open and well governed mining legal and regulatory framework.

 Last-but-not-least, while some of these risks would not have been material five to 10 years ago when the market was booming, now that prices have slowed down and/or decreased, these challenges take on greater significance.

 However, rather than taking this as a cue to not further develop co-operation, given the expected growth in demand for raw materials for key and renewable technologies and given the cyclical nature of raw materials markets, it make sense for Europe (and Greenland) to look at the long term and cooperate now so that both are better equipped to tackle these challenges when the market recovers.

Building on these findings, Section 3 below discusses the relative commercial importance of Greenland’s future potential mineral sector for EU industry; it also discusses the most important and possible non-commercial benefits for the EU of a greater supply of raw materials from Greenland. In Section 4, policy options are identified for the most important or relevant risks outlined above.

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3 Possible benefits to the EU of greater co-operation with Greenland in the area of raw materials

3.1 Introduction

In addition to assessing the risks of greater co-operation for investors, the second main aim of this study is to gain a better understanding of the possible benefits of such co-operation.

In terms of what benefits may arise, beyond narrow commercial gains, there may also be benefits in terms of meeting broader economic, environmental and social goals. For example, co-operation in this area can also be seen as benefitting the EU in furthering environmental protection goals (e.g. for materials used in environmental goods), development policy goals (e.g. where co-operation can not only assist Greenland in its economic development but also help the EU source materials from conflict free and well-governed states) as well as its security goals (where co-operation can lead to a greater supply of materials which are essential for the EU’s defence sector).

Taking into account these considerations, section 3.2 below provides an assessment of the raw material needs of the EU’s downstream goods manufacturers as well as its upstream capital goods providers. This was informed by an assessment of the EU’s needs with regards to materials which could be sourced from Greenland (Annex 2) as well as by discussions with EU industry users. Section 3.3 then covers possible other, non-commercial benefits to the EU while section 3.4 discusses potential safeguards which the EU could consider to ensure that co-operation actually leads to benefits for the EU.

3.2 Assessing the needs of the EU’s industry with regard to Greenland’s raw material potential

The needs of EU industry for raw materials are well established. Two comprehensive ‘Critical raw Materials’ reviews undertaken by EU stakeholders and the European Commission within the space of five years has allowed for the development of a strong knowledge base on several dozen raw materials. Therefore the approach taken here to gauge EU industry’s needs has been to build on this analysis to ascertain EU companies desire to source from or invest in mining in Greenland. The approach taken and findings are presented below in subsections 3.2.1 and 3.2.2 below.

3.2.1 General approach to gathering industry positions/views

Industrial stakeholders from a selection of large EU upstream and downstream raw material using businesses and business associations were invited to a stakeholder workshop held in the European Commission on 17th June 2014 in Brussels together with upstream industry stakeholders. This workshop was complemented by a detailed bilateral stakeholder dialogue which took place by way of telephone interviews after the meeting. The purpose of this bilateral approach was to gain further detailed and confidential information on issues raised during the meeting as well as to discuss the same issues with experts who could not attend the workshop. The main results are summarised and anonymised in the subsections below.

As regards the workshop, invitations were sent to 44 processing companies and 11 industrial downstream associations, as well as to geological survey representatives, the Greenlandic government and other relevant stakeholders. From industry, Eurofer, Eurometaux, Orgalime, the German Rohstoffallianz and Imerys attended the workshop as representatives of the downstream industry. Further participants came from Arctic Consensus, Beryllium Science and Technology Association, BGR (German Federal Institute for Geosciences and Natural Resources), Danish Ministry of Business

60 and Growth, East & North Finland EU Office, European Investment Bank, Geological Survey of Sweden, Greenland Representation, Minor Metals Trade Association, North Denmark EU-Office, University of Leeds, VINNOVA (Swedish Governmental Agency for Innovation Systems) and upstream industries. The subsequent telephone interviews were conducted with three industry associations, one infrastructure supplier in Greenland and six representative processing companies in the fields of automotive, electronics, wind power and chemistry.

3.2.2 Potential benefits to downstream/manufacturing industry

3.2.2.1 Overview of downstream industry’s views on promoting co-operation with engagement in Greenland

The dialogue focused both on the merits of such co-operation as well as how it may be best achieved. Though it covered a range of raw materials, given their market importance, the focus of discussions was on REEs and to a lesser extent on iron and graphite. The main findings of the stakeholder workshop and the interviews cover four issues:

(i) European downstream industries focus strongly on their core businesses: Several stakeholders pointed out that their downstream industries pursue the strategy of focusing on their core business, i.e. the manufacturing at the higher end of the value chain. This implies that they are not interested in financial investment in mining projects, since mining and ore processing is very different to their business activities. Consequently, they have not indicated a great interest in raw material projects in Greenland.

Another issue is the missing know-how on mining and primary processing. Even if European downstream companies would invest in mining, they might not to be able to establish a successful mining and refining business due to lack of know-how. Furthermore, several stakeholders confirmed that shortages of minerals would not have any influence on their strategy of remaining with the core business. Finally, the companies involved in the stakeholder consultation who expressed a view prefer alternative raw material strategies such as recycling, substitution, material efficiency and international businesses offering access to raw materials.

(ii) Current raw material supply does not provide sufficient incentives to establish new raw material initiatives: The current favourable situation in the raw material sector with low prices and high availability of all minerals means that there is currently not a sufficiently large incentive for downstream companies to invest or engage in primary production. Some stakeholders stated that they are optimistic regarding the future supply conditions and see no reason for action.

(iii) German‘s raw material partnerships: Germany has developed two raw material partnerships with mineral producing countries – Kazakhstan and Mongolia. These have been in place for two years. A third partnership has just been agreed with Peru in 2014. The partnerships with Kazakhstan and Mongolia are on the way, though no concrete raw material projects have been agreed upon to date. Since raw material partnerships are long-term activities and require an intensive preparation process, BDI (Federation of German Industries) recommends that the existing partnerships are deepened before starting a fourth one. Main challenges are differences in the partners’ interests and needs. The raw material rich countries have a large interest in infrastructure development, financing of raw material projects and education, whereas German downstream industries that need raw materials provision are not specialized in infrastructure businesses. German industries are ready to conclude long-term contracts on raw material supply. But they are not interested in long-term investments in mining projects.

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In addition to the raw material partnerships, several German companies48 from different industrial sectors founded the Rohstoffallianz (Resource Alliance) with support from the BDI in 2012. The aim is the development of options for securing a long-term supply of raw materials ranging from mere supply agreements over collaborations with enterprises for the processing of raw materials to equity participation in mining projects. The Resource Alliance participated in the stakeholder workshop and discussed the option for an EU-Greenland co-operation on rare earths (see next sub- chapter).

(iv) EU industry and rare earths: The stakeholder and interview partners also discussed the challenges for the European rare earth industry. The main positions are summarised as follows.

First of all, stakeholders pointed-out that the past tight supply shortages have eased somewhat and that light rare earth prices have declined due to the production of light rare earths at Lynas and Molycorp. Demand for the important heavy rare earth, dysprosium, has flattened due to the development of resource-efficient magnets with dysprosium savings of 30-50%. Furthermore, the high prices seen over the last number of years has led to a more efficient or targeted use of dysprosium, which is for example no longer used in applications not requiring high-temperature stability. Consequently, the current market situation provides for reduced long-term industry engagement in primary rare earths production; that said, it can be assumed that prices will increase once more and that new shortages might occur in the long-term.

Another topic discussed with the interview partners was the European rare earth value chain. Europe has some rare earth processing industries (see fact sheet on neodymium and dysprosium in the annexes), but no capacities for the processing of low-grade rare earth concentrates. Solvay currently processes only secondary rare earths and high-grade concentrates without radioactivity from primary rare earths in its La Rochelle plant. One reason is that there are no adequate landfill capacities in France for the specific radioactive waste arising from the processing of rare earth ores containing radioactive by-products. A rare earth refining facility in Estonia, previously operated by an EU company, Silmet, is now owned by the American REEs mining and processing company Molycorp.

One stakeholder further stated that the European rare earth market is too small for a closed European value chain with larger European primary processing capacities. According to this stakeholder, the aim should be to obtain access to rare earths coming from reliable partners outside China. A European alternative rare earth supply option is the Tasman mining and processing project in Sweden, Norra Kärr, which is still in the pre-mining phase, but more advanced than the Greenlandic deposits.

Another important issue is global competition in mining. On the one hand, the two currently- developed Greenlandic deposits are huge with a high share of heavy rare earths; on the other hand, however, their rare earth concentration is relatively low and requirements for economically-viable and environmentally sustainable mining are challenging. While no detailed economic analysis has been conducted to date on these two deposits, it is not certain if the Greenlandic mining projects could compete with other global projects. The viability of these projects is also a question of timing. If another heavy rare earths mining project starts operating earlier, it might be very difficult to set up an economically-viable Greenlandic rare earth mining project given the small size of the current market.

Examples for the difficult market conditions in the rare earth market are Lynas and Molycorp which are currently facing financial problems with strong declines in stock prices due to lower

48 The ‘shareholders’ of the German Resource Alliance include Aurubis AG, BASF, Bayer AG, BMW AG, Bosch, Evonik Industries AG, Georgsmarienhütte Holding GmbH, Rockwood Lithium GmbH, SHS - Stahl-Holding-Saar GmbH & Co. KGaA, ThyssenKrupp AG, Volkswagen AG and Wacker Chemie AG

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rare earth prices. High price volatility and the near monopoly position of Chinese producers pose high risks for potential investors. That said, it is believed that prices are expected to increase in the long term due to the increased cost associated with the Chinese efforts for better environmental conditions in rare earth mining and processing. Thor Lake (Canada) and Norra Kärr are recent projects with a considerable fraction of rare earths. Both are more advanced than the Greenlandic projects. Furthermore, the developer of Thor Lake, Avalon, and Solvay, the operator of a REEs processing plant at La Rochelle in France agreed on a strategic partnership in early 2014.

Overall, one of the main serious obstacles to mining projects in general is the financing. One stakeholder pointed out that only a very small proportion of current mining projects will be realised and opened due to economic problems. Another potential barrier for an EU engagement in the Greenlandic Kvanefjeld rare earth project is the non-binding Memorandum of Understanding signed by Greenland Minerals and a Chinese consortium in early 2014.

3.2.3 Possible benefits to upstream businesses and related industries

This section briefly discusses potential benefits stemming from EU-Greenland co-operation for upstream businesses and related industry. This notably includes mining companies and providers of ancillary services.

3.2.3.1 Relevance of industrial sectors and overview on the value chain in mineral processing industry

Since the companies which are involved in the raw materials business undertake a wide range of activities, an important criterion for the relevance of the different sectors is their contribution to the whole value chain from mining and extraction to the manufacturing of end products. Generally, the added value in the mining sector is much lower than the added value in the processing industry. The added value of companies supplying equipment and services to the mining sector is, comparatively speaking, even lower.

Another important point is the fact that most European companies in the mining sector, including suppliers of mining equipment and services, operate globally. EU-Greenland Co-operation might to some extent support these companies but is not a pre-condition for their engagement in Greenland.

The figure below presents the different segments in the value chain of a mining company’s production in 2010.

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Figure 14: Example of minerals value chain – Rare earth production49

Source: Lynas (2010)

As can be seen, industrial processes, i.e. refining and processing, account for about two-thirds of value added, followed by ore concentration (about 20 percent).

Mining activities, in turn, account for less than five percent of value added. It is interesting to note know that the share of shipping in total value added is relatively low considering that, in this example50, rare earths travel over a fairly long distance: from the Australian mine to the production site in Malaysia. In Greenland, the transport might become a major challenge and must be analysed in detail when site-specific feasibility studies for concrete mining projects are carried out.

The downstream sector’s added value (production of semi-products, e.g. magnets, and end-use manufacturing, e.g. cars) heavily depends on the type of end products. However, as a general rule, this sector’s value added tends to be comparatively much higher. The table below box provides an overview on the potential benefits in the different sectors. These benefits are presented alongside a number of considerations regarding their relevance in the context of this project.

Table 7: Main benefits for selected sectors

Sector Sub-sector Relevance in relation to overall Potential benefits benefits of EU-Greenland co- operation Mining operation Low - Revenue - Job preservation - Gain of know-how Milling and concentrate Low - Revenue processing - Job preservation - Gain of know-how

Equipment and Buildings & Very low - Revenue infrastructure supply for structures - Gain of know-how mining companies Comments: Transportation - Part of the overall value

49 Lynas (2010): Lynas Corporation LTD: Rare Earths. JPMorgan. Australia Corporate Access Days. New York 27-28 September 2010 50 The example of the Lynas value chain represents one specific project. Although the value chain of other metal products and other mining projects might differ significantly, the overall orders of magnitude can be assumed to be comparable.

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Sector Sub-sector Relevance in relation to overall Potential benefits benefits of EU-Greenland co- operation

& Stacking chain is quite low Electrical

Equipment - The suppliers operate on the Crushing & international market and are

Conveying not strongly linked to Excavation & European mining

Loading companies. Drilling &

Blasting Services to mining Laboratory & Negligible - Revenue

companies Appliances - Gain of know-how Consulting Negligible - Revenue - Gain of know-how Ore transport Low (medium) - Revenue Highly site-specific - Eventually building up of new infrastructure which can be used for further activities Refining and processing High - Revenue, - Technological know-how - Competitive advantage End-use manufacturing High - Revenue - Technological know-how - Competitive advantage

Stakeholders from all sectors with “low” to “high” relevance as per the table above have been invited to the stakeholder consultation to take place in June Sectors with “very low” or “negligible” relevance will not be included in the stakeholder workshop. Instead, participating mining companies will be asked if there are particular issues that should be considered in the co-operation process with regards to those sectors; i.e. equipment and infrastructure supply for mining companies and service providers to mining companies.

3.2.3.2 Benefits for infrastructure providers

Greenland is a potentially growing market for European infrastructure businesses. The participants of the stakeholder workshop identified some key areas where infrastructure investments are necessary for successful Greenlandic mining projects: Power supply and road, air and sea transport. European companies might profit from developing this infrastructure. An interview partner from a European infrastructure provider located in Greenland pointed out that Greenlandic experts for all of these areas are scarce. For example, qualified electricians or plumbers are missing in Greenland. Therefore, most of the existing installations were set up by Icelandic or Danish companies. European companies would benefit from technology developments in the areas of arctic mining, arctic hydro-power and construction in arctic regions and could make use of Iceland’s expertise in these areas.

One key issue is the lack of power supply since mining requires high amounts of electricity. Currently, Greenland has only one small grid and several decentralised island power supply systems. In the long term, a grid based on hydro-power might supply towns as well as mining companies. Currently, the installed capacities are less than 100 MW. The power requirement of London mining is estimated at around 135-170 MW by the interview partner. These figures illustrate the urgent need for extension of the central power supply system. Failing this, mining companies would have to run their plants with diesel which is an import cost driver given the large amounts of electricity required for the mining activities. Greenland has a large potential for hydro power which could easily cover the current demand as well as the requirements for future energy intensive production sites and other projects, e.g. aluminium smelters, silicon production or large data storage facilities.

Transport modes were discussed during the stakeholder workshop since the logistic challenge and the development of the transport infrastructure (land, water, air) are a major issue, particularly the

65 transportation connection between the north and the south and the inland. An interview partner from Greenland assumed that sea transport will probably remain the dominating mode of transport for some time. Most of the fjords are quite deep and offer good opportunities for harbours, whereas the road construction is difficult due to geographical conditions.

All of the infrastructure projects mentioned would need to be analysed once the mining or processing companies consider a concrete engagement in Greenland. Furthermore, the demand for larger infrastructure projects is very site-specific and has to be dealt with in the context of all additional benefits beyond the raw material sector.

Summary: Potential benefits for EU industry

 Compared with the mining industry where project lead times are long, the feedback received indicates that many EU downstream manufacturing companies plan their material purchases on a relatively short-term basis (e.g. over a period of less than 10 or even five years). There, therefore, appears to be a discrepancy between the short term planning horizons of the downstream industry and the longer-term time horizons necessary for the development of mines, especially in a frontier mining country such as Greenland. In short, given that any action taken now would not be likely lead to concrete results for several years yet (e.g., 2018 and beyond), industry may prefer to either cooperate with other countries with more established mining sectors or to simply buy from the market/brokers.

This short-term focus is exacerbated by the fact that for a range of materials there are currently more prospective mining projects seeking finance than there is demand. This is true for both critical raw materials such as Graphite and REEs as well as for basic metals.

Indeed, based on from discussions with industry, although many companies are still dependent on a limited number of higher supply risk countries for their raw materials, it would appear that the risks posed are not sufficient to incentivise companies to individually move up the supply chain and investment in mining in Greenland and/or in related raw material processing facilities. There may be a number of reasons for this including that the supply risk is either manageable or is not sufficient important, the incentives to invest in alternative mines on their own is too low and/or that they expect demand to decrease or supply to increase over the coming years.

 Another explanation is that companies may prefer to engage with other countries that have more established mining sectors. Indeed, while certain EU metal processing companies are looking at iron ore, REEs etc. deposits outside the EU, the focus – at least from limited evidence – appears to be on other countries such as Australia and Canada. Although the one exception to this – the German manufacturing industry – is cooperating with the German government to deepen relations with developing countries, it has chosen to limit this to currently established co-operation with Peru, Kazakhstan and Mongolia.

 In the longer term, growing global population and urbanisation levels, as well as increased needs for new technologies, may see demand for metals rebound and substantially increase over the next 20 years. This would make sourcing minerals from Greenland a more attractive prospect.

 In addition, the processing industry in the EU would also have much to gain from importing raw materials from Greenland as much of the value in the sector is created in this part of the supply chain. This is, of course, one of the reasons that resource-rich countries also wish to see such downstream integration of mining and processing. On the downside, however, such a strategy is risky where there is overinvestment in processing facilities on a global scale.

 Finally, while investment in infrastructure would benefit infrastructure/engineering companies (e.g. one of the main barriers to mining in Greenland is a lack of infrastructure), such investment, however, would not be as great as in other sectors such as metal processing. For example, there may be less need for very large investments, say, in hydroelectricity plant for example.

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3.3 Other, non-commercial benefits for the EU of increasing co-operation with Greenland on raw materials

Mining and related downstream activities have a large number of environmental, social and non- commercial economic impacts. These factors, which can be both positive and negative, are most significant in the areas of: (i) environment and climate change policy; (ii) overseas development policy; and (iii) security/ defence policy.

3.3.1 Potential benefits related to EU’s environmental/climate change policy

3.3.1.1 Identification of main possible benefits

Many minerals are essential, not only for economic growth and modern living standards, but also for the production and sale of environmental goods and services which are required for green growth5152.

While recycling, substitution and other resource efficient measures can optimise the use of, and reduce the demand for, such minerals, the on-going growth in worldwide demand for raw materials means that there will be a continued need for mining in the years to come. Without this, and in the absence of a decrease in world energy and material consumption, the attainment of energy and climate goals will probably not be attainable.

Moreover, the use of certain metals helps to enhance and prolong the performance of the product in which it is used, which in turn increases its durability and sustainability. As such mining – in particular mining for critical raw materials necessary for environmental and high tech goods – is part of the broader Circular Economy debate.

In concrete terms, and as outlined in the reports on Critical Raw Materials (CRM), the benefits of metals have a recognised effect in the areas of magnet manufacture (e.g. to allow for the generation of wind power), batteries (e.g. to replace combustion engines in vehicles) and in lighting (e.g. to allow for energy efficient lighting).

Beyond resource use, raw materials also allow for the employment of certain technologies that help to reduce important non-carbon related environmental impacts, such as the use of platinum in catalytic converters to prevent pollution from vehicles.

In short, these materials are critical in environmental as well as economic terms. While the aim here however is not to repeat the findings of the second CRM report it does go without saying that EU policy makers would strive that these materials be available to EU manufacturers so as to ensure future EU jobs and growth in these growing sectors. Overall, a secure and competitive supply of certain base and critical raw materials is essential for the manufacture of environmental goods in Europe. Continued reliance on metals will result in higher EU import demand, and well as competition, for a range of minerals, which in turn may lead to higher levels of import dependency.

However, as many of these materials are available in Greenland, stronger EU-Greenland co-operation can help bring about greater security of supply, thus improving the long-term competitiveness of EU environmental goods industries.

51 Council conclusions on sustainable materials management and sustainable production and consumption: key contribution to a resource-efficient Europe. 3061st ENVIRONMENT Council meeting, Brussels, 20.12.2010. Accessible at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/envir/118642.pdf 52 European Commission (2013): Living well, within the limits of our planet. 7th EAP, the new general Union Environment Action Programme to 2020.

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3.3.1.2 Specific EU material needs in the area of environmental goods and services

In detail, a recent JRC study53 presents a range of projections for EU metals demand associated with so called ‘decarbonisation’ technologies and compares it to the expected evolution of global supply. In line with the second Critical Raw materials report, this JRC study identifies the Heavy REE, dysprosium, as being particularly critical. Dysprosium, for which there are no domestic sources of supply in the EU, is heavily used in magnet production for hybrid and electric vehicles as well as magnets for wind turbines (it essential to enable the use of magnets at high temperatures).54 It is considered critical due to growing demand for permanent magnets combined with supply constraints.55 Recent work by Oko-Institut56 also highlights the criticality of Dysprosium as well as Neodymium with regard to wind power development in Europe; although substitutes are being developed for Dysprosium in wind power technologies, it is likely to remain nearly irreplaceable for larger turbines (>5MW) used in offshore wind parks in the foreseeable future. For neodymium, supply bottlenecks could arise if uptake of hybrid and electric vehicles is higher or faster earlier than anticipated.57

The EU also presents high levels of import dependency for other raw materials that are required for the development of hybrid and electric vehicles (graphite, lithium, cobalt), fuel cells/vehicle pollution catalytic converters (PGM) and energy-efficient lighting (REEs, indium, terbium, europium and gallium). For some of these materials, Greenland may offer significant supply potential.

Among the materials covered in this study, the table below presents those with the highest relevance for selected decarbonisation technologies alongside projected levels of EU demand and the corresponding share in global supply. As per the JRC study, two milestones, 2020 and 2030 are considered.

Table 8: EU expected metal requirements linked to decarbonisation technology, 2020 and 203058

Annual EU Demand Annual EU Demand/ (tonnes) (JRC) World Supply (JRC) Technology Raw Materials 2020 2030 2020 2030 Wind power Heavy REEs (Dysprosium) 58 84 2.3% 2.2% Light REEs (Neodymium)59 845 1,222 1.3% 1.2% Solar PV Indium 145 121 7.6% 4.9% Nuclear Indium 3.6 4.5 0.2% 0.2% Fuel cells Platinum 5.5 28.9 1.6% 7.0% Lighting Terbium 32.3 22.1 6.3% 2.7% Germanium 4.6 11.0 1.4% 2.5% Gallium 5.9 14.3 1.3% 2.3% Europium 34.4 23.6 4.5% 2.0% Yttrium 484.8 333.3 3.1% 1.3% Road Dysprosium 566 980 22.7% 25.0% transport60 Graphite 60,464 189,471 5.1% 14.4% Nd-Pr 4,425 6,803 7.0% 6.9% Source: JRC (2013)

53 European Commission, Joint Research Centre, Institute for Energy and Transport (2013): Critical Metals in the Path towards the Decarbonisation of the EU Energy Sector. Assessing Rare Metals as Supply-Chain Bottlenecks in Low-Carbon Energy Technologies. 54 Oakdene Collins (2013, unpublished). 55 Oakdene Collins (2013, unpublished). 56 Oeko-Institut e.V.: Rare Earths – A bottleneck for future Wind Turbine Technologies? Workshop presentation, 29.8.2013. 57 Oakdene Collins (2013, unpublished). 58 Selection based on materials covered in this study. 59 In the JRC report, praseodymium and neodymium are treated together, as they are often not separated from each other (JRC, 2013, p. 76). 60 In the case of drive motors, requirements relate to dysprosium (25% of world supply is expected to be required by 2030) and neodymium-praseodymium (7%). With regard to batteries, the expected expansion of electric vehicle use and the growing use of Li-ion batteries suggests that the highest materials requirements will relate to lithium (19%), graphite (15%) and cobalt (2%) (JRC 2013, p. 74).

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Although there might be scope for mitigating material-related risks (e.g. by means of substitution, technological improvements, changes in the technology mix, etc.), in a context of growing global competition for mineral resources, bottleneck situations affecting key decarbonisation and pollution control technologies cannot be ruled out.

Availability and price of the abovementioned minerals may thus hamper associated technological development and, ultimately, hold back the implementation of the EU’s environmental and decarbonisation policies. Comparing projected raw material requirements in the EU with Greenland’s potential as source of raw material supply suggests that enhanced co-operation in the field of raw materials could help the EU to successfully undertake that challenge by increasing security of supply (i.e. reducing the risk of supply bottlenecks). This notably applies to wind power61 and road transport efficiency, as Greenland’s potential for dysprosium and, to a lesser extent, neodymium and graphite, appears to be significant. Greenland’s PGM endowments could also be relevant to help ensure security of supply for these metals (particularly Platinum, Palladium and Rhodium), which are used in auto catalysts enabling the functioning of catalytic converters to reduce emissions from petrol and diesel engines. PGM (platinum in particular) are also critical for fuel cell development. Moreover, the EU’s PGM requirements may also be expected to increase in coming years, as deployment emissions controls systems,62 (mobile and stationary applications) and super-alloys unfolds.63

3.3.1.3 Other environmental benefits

As noted in the introduction to this subsection, the world will, over the coming years, require substantially more base metals and critical raw materials from mines. Therefore, if the material does not come from Greenland it will have to come from somewhere else. In this case, in theory, provided that the environmental standards applied and the resulting impacts of mining in Greenland are lower than elsewhere, the overall environmental footprint of EU consumers should decrease. Using this argumentation for REEs and Graphite for example, this would mean beating average environmental best practice in China.

However, given criticism of existing REE mining and processing industry64, and despite the reliance of many EU based environmental goods manufacturers on this industry, EU policy makers may need to ensure that co-operation in this area leads to certain minimum standards being respected, and not simply to a situation where one mine/processing operation may be less unsustainable than another. Indeed, the delicate Arctic environment may actually increase risks in a like-for-like situation.

Other environmental issues concern imports from bio-diverse regions; for example in 2007, the EU imported respectively 7.7 percent and 3 percent of its graphite from Brazil and Madagascar, which are biodiversity hotspots.65 The factsheets in the annexes provide a breakdown of the main import sources for each of the materials considered in this study)

3.3.2 Potential benefits related to the EU’s security and defence sector

3.3.2.1 Identification of possible benefits

For the EU defence sector, access to raw materials (in terms of physical availability as well as price volatility) has deep implications regarding security and operational autonomy. Import dependency,

61 Although not featured in the table, Niobium (for which sizeable resources have been identified in Greenland) is also relevant in this regard. 62 Oakdene Collins (2013, unpublished). Copper is also relevant for fuel cells. 63 Oakdene Collins (2013, unpublished). 64 Information on the environmental effects of certain operations can be found here at: http://www.bloomberg.com/news/2011-01-05/china-rare-earths-leave-toxic-trail-to-toyota-prius-vestas-wind-turbines.html 65 ECDPM (2011).

69 and thus potential threats in that regard, particularly relates to ammunitions, electronic components and the defence aerospace sector. Beyond material needs, The EU’s Common Security and Defence Policy (CSDP) provides for the EU to take a leading role in strengthening of international security – this may also cover ensuring that uranium does not end up in the wrong hands.66

On a broader level, the geostrategic and military importance of the Arctic is poised to continue to grow in coming decades. While this is a separate issue to investment in mining, much of this importance, as reflected in continuous discussions over membership of the Arctic council, derives from the possibilities which the Arctic – including Greenland – presents in terms of minerals and maritime transport. 67

3.3.2.2 Specific EU material needs in the area of defence

Regardless of whether or not mineral-producing countries put in place export restrictions for commercial or political reasons, the EU’s defence and security sector is dependent on a number of raw materials imported from countries with low supply stability.

An example of external dependency with potential implications is palladium, a PGM element notably used in electronics and chemical applications in military hardware. More than half of the world’s supply of palladium is mined in Russia. The Russian government considers the country’s palladium stockpile a state secret and has used its control over palladium as a political tool in the past.68 Alternative supply sources are relatively scarce. South Africa is the world’s second-largest producer of Palladium and its close substitute Platinum. However, and as with Chromium, supply of PGMs from South Africa – though solid to date – may, in future, proof unreliable due to social unrest.69 In this context, in 2011 the European Commission examined the merits of stockpiling such materials. Such a measure, however, and if feasible would remain a national Member State competence. A similar supply situation is in play with regards to Tungsten.

The following table shows additional examples of defence- and security-relevant raw materials for which strong external dependency exists. Their main applications in the defence sector are also indicated.

Table 9: Examples of the use of critical raw materials in the EU defence sector

Element Technology/Capability Related equipment Context and estimated potential for Greenland Copper Ammunitions Thermal vapour See table above. compression systems Tungsten Material for ballast, Long duration motors, Undiscovered tungsten aircraft devices, weaponry corrosion- and high resources in Greenland and laser technology temperature-resistant are estimated at materials approximately 500 tonnes of W metal. REEs Ammunition Catalytic converters for engines Dysprosium Aerospace Permanent magnets See table above. Neodymium Lasers See table above. Niobium Jet engine components 1,250 million tonnes, Kringlerne (Tanbreez) only. Tantalum Capacitors, 125 million tonnes, ammunitions/penetrators Kringlerne only.

66 EEAS website > Security and Defence: http://www.defense.gov/pubs/2013_Arctic_Strategy.pdf 67 See, for example, the Arctic Strategy of the US Department of Defence (November 2013), available at: http://www.defense.gov/pubs/2013_Arctic_Strategy.pdf 68 “Russian Supply Fears Will Only Push Palladium Prices Higher”. Money News, 28.3.214. Accessible at:http://www.moneynews.com/Ed-Moy/Palladium-Russia-Sanctions-Supply/2014/03/27/id/562206#ixzz30AXSVrtx 69 South Africa is the world’s largest producer of platinum (almost two-thirds) and palladium (nearly 40%).

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Element Technology/Capability Related equipment Context and estimated potential for Greenland PGM Electronic devices South Africa is the world’s Catalytic converters main producer (2013). The Chemical applications EU gets about one-third of its PGMs imports from South Africa; 22% from the USA and 19% Russia. In Greenland, geological resource estimates of 36 mo. Oz PGE.

Chromium Aircraft components (jet Although South Africa is engines in particular) the world’s largest producer, Russia accounted for 63% of EU imports of chromium in 2012. China accounted for 14%. Source: “Raw materials and their criticality in the European defence sector” (unpublished EC brief)

Providing that sufficient safeguards are in place, enhanced EU-Greenland co-operation in the field of raw materials can help strengthen security of supply for security-relevant raw materials, thus helping ensure that the EU security and defence sector can live up to its challenges.

As discussed earlier in this chapter, deposits of REE including Dysprosium, Neodymium and Praseodymium seem to be of particular significance in Greenland and could be instrumental in this regard. All the more since the EU is highly dependent on imports from other military superpowers: China accounted for 41% of the EU’s REE imports in 2012, followed by Russia (35%) and the United States (17%).70 Natural graphite, of which the EU imports approximately 95% of its consumption (of this, more than half from China) is another crucial element for the defence sector. Although still uncertain, Greenland’s discovery potential for graphite could be high. Niobium, which is used in jet engines, and Tantalum, used in capacitors and nuclear technologies, are also of relevance in light of Greenland’s supply potential. EU-Greenland co-operation has thus the potential to contribute to ensuring defence-related functionality in the EU. An additional element worth mentioning in this context is tungsten, of which the EU imports approximately three-quarters of its needs.71 Tungsten is notably used in space travel and aircraft devices, armaments and laser technology, all of which are of relevance for the EU defence strategy.

3.3.2.3 Wider security- and stability-related benefits of co-operation

Global interest in the Arctic region has significantly increased in recent years, not the least due to its geostrategic and military importance. Thanks to rapid sea-ice reduction in the region, Arctic sea lanes are notably emerging as a promising alternative to traditional trade routes. They are up to 40 percent shorter and avoid conflict-prone passage points such as the Malacca Strait and the Suez Canal.72 As an example of this growing interest, four times more passage permits were issued by the Northern Sea route administrators in 2013 compared to 2012.

70 Eurostat-Comext Database, quoted in factsheets (2014). 71 Polinares working paper n. 14, European dependence on and concentration tendencies of the material production, March 2012, quoted in Oakdene Collins. 72 “The cold rush. Attraction of the North Pole. The World Today, August and September 2013, p. 16.

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As pointed out in a recent study, increasing maritime activity comes with greater needs to ensure security and surveillance, including the reassessment of requirements related to northern operations.73 Although a report74 carried out by Greenlandic and Danish universities suggests that, from a geopolitical perspective, Greenland’s natural resources are not, in and of themselves, a strategic concern, given Greenland’s overall strategic interest, closer EU-Greenland co-operation in the field of raw materials may contribute to strengthening the Union’s presence in the Arctic75, thus contributing to its security and defence goals.

A further security-related area where EU-Greenland co-operation can potentially yield security-related benefits is non-proliferation.76 Indeed, as previously discussed, mineral deposits in Greenland contain large quantities of uranium and thorium which have radioactive properties. Therefore, although energy raw materials are beyond the scope of the present study, the presence of radioactive elements raises a number of regional and foreign policy question that need to be carefully integrated into any co- operation concept on raw materials. Should this be the case, EU-Greenland co-operation can help affirm the non-proliferation role of the EU in the Arctic as well as in non-Arctic OCTs.77

3.3.3 Potential benefits related to EU’s development and co-operation policy

The EU’s development and co-operation policy encompasses a broad range of objectives and operational spheres. Within the context of this study, these concern the economic development of Greenland on the one hand, and the potential avoidance of sourcing of minerals from ‘conflict’ or poorly governed developing countries or regions on the other.

3.3.3.1 Development policy benefits with regards to mining and growth and jobs in Greenland

Within the context of raw materials and mining, EU development policy is supportive of economic activity – including mining – where it is conducted on transparent, sustainable manner in a way that benefits broad-based development. For example, the EU’s Agenda for Change78 highlights the need for the Union to support the sustainable and transparent management of natural resources including raw materials. In the same vein, the Policy Coherence for Development (PCD) agenda, which seeks to “enhance the impact of external assistance and to better tailor and weight the external effects of EU non-development policies”, refers to the importance of ensuring “transparent, fair and sustainable conditions for the production and trade of raw materials” to foster economic diversification and, ultimately, contribute to reach development objectives.79

With regards to Greenland, though it is not strictly a developing country in traditional terms, and cannot be called a least developed country, without a direct subsidy it would most likely be a middle income country with a strong overreliance on the public sector and one private primary industry, fishing. While OCTs like Greenland receive a relatively high level assistance with regards to their population level, this may be justified by the wish of the EU to address the long-term and structural

73 Id., p. 18. 74 The Committee for Greenlandic Mineral Resources to the Benefit of Society (2014): To the benefit of Greenland. 75 Although some EU Member States are permanent observers to the Arctic Council, the EU has provisional observer status. 76 For further details, please refer to the 2003 EU strategy against proliferation of Weapons of Mass Destruction, accessible at: http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2015708%202003%20INIT 77 Vestergaard, C. (2013): The European Union, its overseas territories and non-proliferation: the case of arctic yellowcake. EU Non-Proliferation Consortium, Non-Proliferation Papers, No. 25 January 2013, p. 5. 78 Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions. Increasing the impact of EU Development Policy: an Agenda for Change. 13.10.2011 COM(2011) 637 final. 79 Commission staff working paper: EU 2011 Report on Policy Coherence for Development. 15.12.2011 SEC(2011) 1627 final, p. 39.

72 challenges and threats faced by OCTs as well as to maintain close economic relations80 81. It is in this light, that as an OCT, EU development policy applies to Greenland. Since 2006, the EU has assisted Greenland in the area of education, and mostly in the areas of primary and secondary education given existing and relatively low literacy levels and school completion rates. Despite an agreement from both the EU and Greenland to allow for co-operation in other areas – including in the areas of raw materials, and related areas such as research – the decision to focus financial co-operation for the period 2007-2013 and for 2014-2020 on one sector (education) has meant there is a lack of funds available for other priority areas.

Therefore, in line with EU development policy, stronger co-operation between the EU and Greenland with regard to non-energy raw materials has the potential to contribute to the abovementioned development objectives by providing financial resources as well as know-how to support the development of an environmentally and socially sustainable mining sector. This could moreover help Greenland diversify its economy and move up the value chain, thus increasing the potential for mutually beneficial economic relations.

In reality, given the projects of leading experts, without a source of export income outside the stagnant fishing sector, Greenland’s fiscal situation is likely to deteriorate rather than improve. In the absence of industry which can employ school leavers, it is possible that many will emigrate, exacerbating current demographic problems. Mining and metal processing, and spin-off activities as well as ‘multiplier’ effects could possibly provide such opportunities.

3.3.3.2 Development policy benefits with regards to minerals and governance

In terms of other benefits to EU development policy, Greenland possesses deposits of niobium and tantalum, the latter of which is one of the so-called ‘conflict’ minerals. It also possesses tungsten, also a conflict mineral. Although the EU’s main export partners of these metals are non-conflict regions, the EU does import significant amounts of these materials originating in central Africa, either in raw form or contained in an electric device manufacturing using Congolese material in the Far East.

In March 2014, in recognition of the need to prevent international trade in minerals from intensifying or perpetuating conflict, the EU proposed an integrated EU approach to stop profits from trading minerals being used to fund armed conflicts the Congo (DRC).82 This proposal covers importers of raw materials, though not importers of the materials in intermediate or finished goods. In terms of the size of this trade, imports of tantalum from DRC and neighbouring Rwanda can account for 15 to 20% of EU imports.

Tungsten is actually an interesting case in hand as most imports come from China and Russia – so if Russian exports decrease, there will be some pressure on EU firms to find alternative sources as well as increased reliance on China. All-in-all, approximately 3 percent of the EU’s tungsten needs come from Central Africa.

However, these numbers mask a few facts. Firstly, a significant proportion of the EU’s consumption of these African-mined materials is embodied in processed imports from the Far East – these are not covered by the EU’s conflict mineral proposals. Additionally, small import percentages can nonetheless have large human impacts.

80 Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions. The future approach to EU budget support to third countries. 13.10.201, COM(2011) 638 final. 81 Council Decision 2013/755/EU on the Association of the OCTs with the European Union, 25.11. 2013. 82 European Commission: EU proposes responsible trading strategy for minerals from conflict zones. Press release, Brussels, 5 March 2014.

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Overall diversifying the supply sources of these EU minerals imports may actually contribute to reducing instability in conflict zones. Large business groups, such as Germany’s BDI, have taken note of the importance of this issue. Investments in Greenland in this sector may be another option worth investigating (Oeko-institut, 2013).

Summary: Potential non-commercial benefits for the EU

 Environment & Climate Policy: A large proportion of the critical raw materials to be found in Greenland have applications in renewable and pollution abatement technologies manufactured and used in the EU and elsewhere. Furthermore, while the extraction of these materials has certain environmental impacts, Greenland’s good record in this area compared with alternative sources, may mean that sourcing from Greenland may be preferable from an environmental point of view.

A crucial factor here is what renewables and related legislation is put in place globally over the coming years – if the world’s largest economies set more ambitious targets, this could mean a significant increase demand for these materials.

 Defence/Security Policy: While the defence/security sectors are as dependent on many critical raw materials as other industrial sectors, the importance of such materials is of course greater in this sector. The questions remains however as to whether such concerns would be best addressed through co-operation and sourcing from Greenland than in, say, defence industry stockpiling of such materials for example.

 Development Policy: As it appears that one of the few ways in which Greenland can grow economically, at least in the medium term, is through the (sustainable) exploitation of natural resources, EU actions to foster the sustainable development of the sector should help. Equally where imports from Greenland helps the EU avoid importing materials from conflict regions (and hence allow for economic growth and poverty eradication in such regions, this should have a positive, albeit indirect, effect on EU development goals.

3.4 Identification and analysis of possible high-level ‘safeguards’ to serve EU interests

The third purpose of this section is to assess the areas where the EU may wish to safeguard its interests so that any EU support – in political, financial terms etc. – provided for the development of the minerals sector in Greenland also leads to tangible direct and indirect benefits for EU society and industry.

To put this aim into context, it needs to be recognised that raw materials and metals markets, as well as the manufacturing value chains which they supply, are global in nature and cannot be controlled by any one country or region. This puts limits on the type of safeguards that can be put in place. This, however, does not mean that certain safeguards are not warranted. Indeed, as a major importer with a small mining footprint in Europe, one of the main concerns is that European actors should not have access to important raw materials on conditions which are inferior to other regions, due to say the imposition of export restrictions in exporting countries. In addition, beyond economic concerns, there may also be a need for safeguards to ensure that the involvement of the EU in supporting projects with potentially large environmental and social risks has been taken into account.

In terms of what safeguards could be considered in any co-operation concept, these include measures related to: (i) the inclusion of investment and trade conditions in any co-operation agreement; (ii) the promotion of investment in downstream metal processing facilities, especially for REEs, in the EU or elsewhere; (iii) ensuring that any minerals production that is assisted by the provision of EU support will benefit EU downstream industry; and

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(iv) encouraging downstream industry to source from mining countries with good environmental and social norms.

The issue of Greenland possibly imposing investment and trade restrictions on EU firms has already been raised and discounted in Section 2 – essentially the EU-Greenland Letter of Intent, the OAD agreement and Greenland’s ‘open door’ policy essentially ensures that such trade and investment restrictions will not be put in place. There is, however, the broader risk that mines developed with EU assistance – either directly through EU investment or indirectly – may be acquired or controlled by investors from non-EU countries that do not operate open trade and investment policies which are line with EU norms.

There are precedents in this area. For example, in 2009, Australia’s Foreign Investment Review Board blocked the purchase of Lynas REEs mining company by the Chinese state-owned China Non-Ferrous Metal Mining on the grounds that the acquisition may threaten reliable supplies to non-Chinese buyers. The exact grounds were that it could not permit the purchase that may result in a situation which was “inconsistent with the government’s policy of maintaining Australia’s position as a reliable supplier to all our trading partners and hence potentially contrary to national interest.83”

In terms of whether there are possible lessons to be learnt in Europe from this case, as this action was taken by an Australian state regulator concerning a company listed in Australia with operations in Australia and Malaysia, an equivalent hypothetical system in the EU would involve applying a similar rule to an EU-listed company operating in the EU. However, application of such a rule to a EU listed or owned firm operating in a non-EU third country Greenland would hardly be feasible and would probably be unacceptable to the third country.

In addition to whether this would be feasible or not, this type of intervention may not even be desirable from either an EU point-of-view. For example, such a condition may actually negatively affect the development of large mining projects in Greenland, and stop the development of the skills and infrastructure that would go with such projects, which would inhibit the development of other mines in Greenland which is not in the interest of the EU.

In the case of Lynas in Australia, it is impossible to say what would have happened if the Chinese deal had gone through. Overall, its performance has been mixed since the attempted purchase was scrapped. Initially, the firm raised AUS$450 million in a share sale in order to fund its A$550 million light REE mine in Australia, and to fund the investment of another A$1 billion ($930 million) in a rare earths processing plant in Malaysia. These projects were also facilitated by the signing of a supply contracts with a number of Japanese, US and EU companies. Despite this capital and these contracts, the ramp-up in production at these facilities has taken time, during which REE prices have fallen back somewhat from their peak due to a number of factors such as the recession and WTO ruling against China. For the year to mid-2014, according to Bloomberg84, Lynas’ net loss was forecast to amount to an estimated AUS$103 million85 in the 12 months to June 30th, from AUS$143.6 million in the same period a year earlier. As a result the firm’s share price has fallen back somewhat. Overall, it is difficult to say if Chinese ownership may have protected the firm from such falls.

Looking forward, while the company continues to make a loss, it is doing so at a lower level than recent years. In addition, REEs prices are on the increase again, perhaps on foot of expectations that China will soon introduce new taxes and regulations for rare earths that may drive prices higher, which may benefit the firm.

83 Information found at: http://www.bloomberg.com/news/2011-02-14/australia-blocked-china-rare-earth-takeover-on- concern-of-threat-to-supply.html 84 Information found at: http://www.bloomberg.com/news/2014-06-03/china-s-rare-earth-toxic-time-bomb-to-spur-12- billion-of-mines.html 85 Information found at: http://www.bloomberg.com/news/2014-05-05/lynas-to-sell-shares-defer-debt-payments-after-rare- earth-slump.html

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In any case, regardless of the possible impact which the Australian Foreign Investment Review Board had on the subsequent performance of Lynas, for Australia with its dozens of active metal mines, the materiality of this decision would be less than if an equivalent decision was to be made in Greenland.

Another, second safeguard may be needed to allow that minerals produced can be processed either in the EU or in a jurisdiction that shares the same trade and investment norms. Otherwise, promoting mining in Greenland may simply push the supply ‘bottleneck’ downstream to the processing stage. This lack of processing facilities is particularly acute for REE separating facilities where certain industry experts maintain that there may actually be only room for a limited number of operators beyond China. The diagram below shows that even if China’s monopoly on REEs mining was broken, the materials would still go to China to be processed, in this case for the use of Neodymium for magnet manufacture.

Figure 15: Example of REE magnet supply international chain and country share (Oko- institut, 2011)

Source: Oeko-institut

While this problem relates primarily to processing of REEs, it may also apply to other materials. In other words, the safeguard here is to further promote metal processing infrastructure and know-how of critical raw materials either in the EU or in a country like Canada and Australia with which the EU has good trade relations. In this context, certain mining companies, such as Quest Rare Minerals in Quebec/Labrador, Canada, have attempted to break this monopoly by seeking to integrate mining and processing within one country/region (QUEST, 2013). Established light REE mining company, Lynas, has an integrated structure with a REEs mine in Western Australia and separation plant in Malaysia. Without REE processing facilities either in Greenland or in the EU, there may be little interest from downstream EU companies in supporting REE mines in Greenland. As of 2014, in the absence of a downstream buyer, it may not be surprising that the developers of Kvanefjeld in Greenland have signed an MOU with a Chinese REE processor.

As a way to help EU companies diversify away from Chinese suppliers, some maintain that the EU should not only support research activities in this area (such as is being done within the EU-funded RARE project), but also support in other ways such as bringing potential buyers together. While such arrangements may not always sit well with competition state aid rules, the Commission has recently

76 outlined situations/circumstances – e.g. projects of common European interest (IPCEIs)86 – where state aid to groups of commercial entities working together may possibly be permitted to achieve a common European goal (such as develop an industrial rare earths value chain).

There are, however, some who claim that these fears might be overblown – namely that China is not such a threat – or that there are other reasons for Chinese firms signing MOUs with Greenland mining companies. Regarding the former, the Brookings Institute notes that China’s interest in external REE deposits stems from processors reacting to reduced supplies from within China. Concerning the latter, as China only dominates REE and Graphite mining, these arguments do not address why Chinese firms are interested in the large base metal Citronen zinc and lead mine in Northern Greenland, where the developers have signed an agreement with the same Chinese firm mentioned above. Equally they do not explain why Chinese firms have been relatively non-committal when it comes to Greenland.

In short, and as discussed in the context section above, the problem may relate more to the lack of facilities in Europe and North America and less to any real or perceived competition from Chinese processors.

In terms of building REE value chains, the materials industry in North America appears to be better integrated in this regard, at least from a supply chain perspective. For example, there are a number of examples of existing and prospective mines (Molycorp, USA; Thor Lake, NWT, Canada, Strange Lake, Quebec, Canada) where mining is located near or is somehow integrated into the mine’s business plan. Aside from the above mentioned research project, EURARE, European companies either do not appear to have a concrete plan for processing in Europe. Indeed they prefer to risk the free market (and China) than invest in expensive and risk REE processing facilities, or they may already be buying from or planning to buy from alternative mines in Australia and Canada (e.g. Solvay may become a customer of Thor Lake).

Here in the EU, the type of downstream industry, and its materials needs, is important. For example, there are ‘light’ REE alternatives available to, say, EU manufacturers of wind plant, while there are no alternatives – aside from substitution for users – such as the vehicles industry – of heavy REEs. That said, given the number of prospective REE projects coming on stream, industry may simply be playing a strategy of wait-and-see to see which country (e.g. Canada, US etc.) is the first to develop a REEs value chain. The same situation also applies for graphite. In the meantime, however, many EU industries appear to be set on continued dependence on REEs and graphite from China, at least in the short-term.

Against the abovementioned points, it may be also worthwhile exploring possibilities for working jointly with Canada, the US, Australia and Greenland. Indeed, given the EU industry’s apparent reluctance – to date – to develop a European REE supply chain, this may be the only alternative to continued reliance on China. This would be particularly relevant in the area of REEs where, of the 56 projects being developed, 19 are being developed in Canada, nine in Australia, five in the US, two – of course – in Greenland and one in the EU. Canada is particular relevant as it shares both similar geology and mining conditions with Greenland. However, Canada possesses several distinct advantages. Firstly, it has an extensive and diverse mining sector – 76 metal mines and 1,200 other mines, approximately 400,000 employees in the industry as a whole, 3,200 mining industry suppliers, 60% of the world’s public mining companies (by number of entity) listed on the Toronto Stock Exchange. Likewise it possesses the know-how across major parts of the value chain (exploration, finance, R&D, smelting etc.) (Mining Association of Canada, 2014). What it is lacking is a sizable production of a range of critical raw materials, including mining and processing of REEs.

86 European Commission, State aid: Commission facilitates support for important projects of common European interest, June 2014. See: http://europa.eu/rapid/press-release_MEMO-14-423_en.doc

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As Canada is trying to develop its own mines, it is unclear whether it would wish to promote mining in Greenland. However, investments by Canadian firms in Greenland and in Sweden (i.e. Norra Karr) would suggest that may be the case. An alternative of course would be to promote bilateral EU- Canada co-operation on rare earths. Finally, the branch of the federal government responsible for mining – Natural Resources Canada – has been active in promoting green sustainable mining in Canada and overseas (NRC, 2014).

A third safeguard may be needed to ensure that where EU public money is used or leveraged – in terms of finance provided/subsidised by the European Investment Bank for example – that the money benefits the EU as well as the recipient country. One possible example of such a ‘tying’/conditionality- type safeguard may require that the resulting mined materials ends up in Europe and/or in a country which respects international trade norms.

However, past practice has been for EIB lending to be untied. For example, the EIB, along with a number of other international financial institutions, is supporting the large Ambatovy nickel project in Madagascar. Despite the EIB’s involvement, most of the mined and processed nickel supplies downstream manufacturers in the Far East, namely in Japan and Korea. One of the gaps here is that the EIB is not encouraged/ required to favour projects that have EU downstream manufacturers as their clients. This may be due to the fact that lending for projects like Ambatovy relate to development policy goals where tying may be undesirable. Such a policy goal may not however relate to other lending which falls outside of EU development policy.

One of the main reasons for this avoidance of tying/conditionality is to avoid a situation where the loan/assistance is premised on the development of the country in which the mine is located and is not reliant on the existence of any off-take contract with an EU based company. This lack of ‘tying’ appears to be in line with the developmental policy nature of the grant or loan in question. However, with respect to Greenland and other such countries the same development policy constraints do not necessarily apply. For example, while lending to EDF/DCI countries is aimed fundamentally at poverty reduction lending to ENI countries is rather focused on promoting shared prosperity. Therefore, in theory, any lending for projects – say within a mining lending facility for the region – could include objectives linked to promoting ‘shared prosperity’.

Linked to the use of EU money is the need to mitigate the risks that the efforts made which go into establishing funding programmes/projects are not wasted if private investors do not come forward. For example, the EIB could spend time and money on the feasibility of, say, setting up an investment for Greenland; this would be wasted if – as was expressed by certain stakeholders during consultation process – investing in Greenland is not a priority. To avoid a situation like this, significant ground work would need to be done to ascertain interest; likewise, a ‘no/reduced regrets’ option could be to allow that any funding could be available to other Arctic mining and other developments, such as Scandinavia for example, across a range of activities.

A final possible safeguard option, which concerns as much to promoting environmental and social norms as it does to safeguarding economic interests, relates to how industry can proactively ensure that the materials it buys are sourced from the best available (e.g. least environmental and socially harmful) sources. Given modern Corporate Social Responsibility (CSR) examples/initiatives, metal processing and downstream industry can play a major part in this as they act as counterparts to mines.

For example, in the US, Tesla Motors plans to use only raw materials sourced in North America for its proposed $5 billion U.S. battery factory. The Silicon Valley electric car company will not look beyond North America for the graphite, cobalt and other materials needed for its so-called ‘Gigafactory,’ and will establish a supply chain that is ‘local’ and focused on minimising environmental impact87 To

87 Information found at: http://www.bloomberg.com/news/2014-03-28/tesla-to-use-north-american-material-amid-pollution- worry.html

78 make it work, analysts who follow the industry say that Tesla would need to turn to graphite mines in Canada that have yet to be built. While this remains to be seen, it is arguably a more active strategy than waiting for alternatives to Chinese mines to open up. In essence, it provides the developers of mines in Canada with a bit more certainty and it gives the consumer information on potential sourcing. In terms of how this can be applied, it does not necessarily have to be a public/regulated initiative such as that promoted by EU in the areas of organic agriculture and conflict minerals. Indeed, EU-based trade sustainability organisations, such as IDH which is sustainable certification network of private internationally active large Dutch firms supported in part by the Dutch government), provide an industry-led example of how this can be undertaken88.

The main drawback with any certification approach is that, in contrast to relatively short food-based commodity value chains, the value chains for many raw materials is long and complex, as can be seen from the diagram below which presents the REE value chain. However, as the vast majority of REEs are currently are sourced from China and are of such value, it should not be too hard to trace these materials back to the mine. Overall, and beyond ethical considerations, increased transparency in the supply chain would also provide a bit more insight into companies’ sourcing decisions and the level of risk they are prepared to take, in particular those companies investing in RES or benefiting from environmental goods and services related subsidies.

Figure 16: Rare Earths Value Chain89

Source: US Rare Earth Technology Alliance

There are a number of other generic safeguards that could be taken – and which have already been examined – by the EU, namely greater recycling, substitution and stockpiling of materials. However, many of these alternative options can be discounted, either because they have been rejected as inefficient (e.g. stockpiling), or that they will only a limited and uncertain impact for the foreseeable

88 See: http://www.idhsustainabletrade.com/mining-and-minerals 89 US Rare Earth Technology Alliance, The Economic Benefits of the North American Rare Earths Industry, 2013.

79 future (e.g. recycling of many critical raw material) and/or are already being examined within EU policies (e.g. projects to promote substitution of critical materials via EU innovation policy and funding).

Summary: Potential safeguards

 While there are a number of safeguards available, they are all, to different degrees, far-reaching and would entailing taking considerable policy trade-offs. These are as follows: i. Encourage Greenland to restrict investment in mining to investors from countries that abide by international trade norms: While such a measure would have a considerable effect, it would be politically difficult if not impossible, would be outside of the EU’s competence and may not present significant advantages for the EU. ii. Help develop raw materials processing value chains in the EU and elsewhere in order to promote mining of certain materials: While this is a win-win solution, the costs of doing so may present a major hurdle. Provided that EU competition law allows it, the EU could promote co-operation of Rare Earth/Graphite users and perhaps investigate how the risks involved can be mitigated using EU funding, alone or in co-operation with other countries facing similar problems such as Canada and the US. iii. Ensure that mining and metal processing operations invested in by the EIB directly benefits EU industry: Though logical, this may mean tying financial assistance to trade with the EU. This would require establishing funding outside the normal development policy funding envelopes, say, within a new own resources minerals lending envelope or financial vehicle. iv. Promote the certification of materials from countries with good environmental and social records, thereby encouraging mining in these countries and discouraging sourcing from other countries. While the use of this safeguard may increase costs and paperwork for companies, it would be particularly relevant for the sale of downstream environmental goods which use raw materials.

 Of the above, as only one of the above safeguards would involve Greenland (i), and this option is viewed as the least feasible, the EU could in theory apply these safeguards to any co-operation agreement it enters into with a mineral rich third country. As such, these measures could/may need to be taken regardless of whether co-operation with Greenland is promoted.

 Other safeguards related to diversifying supplies – such as stockpiling, recycling and substitution – have already been considered extensively elsewhere.

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4 Identification and assessment of policy measures for EU engagement in the Greenland’s raw materials sector

4.1 Introduction

The above sections 2 and 3 covered the risks of promoting mining in Greenland, for the EU, companies and for Greenland, as well as the potential benefits for companies as well as to EU environmental, developmental and security policy. The aim of this section is to build on this analysis by:  presenting the possible potential measures and policy options which are available to, or could conceivably be developed by, EU policy makers to promote co-operation in this area, as well as  assessing whether taking such measures would be worthwhile in terms of mitigating the risks and/or realising the possible benefits.

The potential measures presented are drawn from, or inspired by, a range of different sources, including from: (i) Ideas put forward in relevant studies on Greenland and mining; (ii) Materials published by the Greenlandic government; (iii) Policy ideas put forward for other commodities by the EU, as well for raw materials within the Commission’s RMI and within the EU 2020 Resource Efficiency Flagship; (iv) Other sources which cover development and mining issues in other continents (e.g. mining and development schemes in Canada); (v) World Bank and other IFI activities in developing countries; (vi) Measures suggested by stakeholders during the consultation process and measures put in place in other similar sectors.

This presentation of the possible measures is followed by the identification and assessment of related possible policy instrument options where such instruments exist. Here the policy options will be assessed according to a number of standard EU evaluation criteria such as the effectiveness of the option, its coherence with existing EU policies and so on. While this high-level assessment will focus on mitigating the risks presented in Section 2, this will also take into consideration the benefits and safeguards discussed in Section 3 above. Finally, as there is no purpose in presenting a measure which is clearly beyond the EU’s competence and ability to address, the measures and policy options aimed at tackling a particular risk (e.g. lack of infrastructure) will be presented in the same subsection.

The output of this section will be the identification of measures that the European Commission may wish to include in a future EU Greenland co-operation concept in the area of raw materials. How these possible measures may be put into effect will be outlined in Section 5.

The first subsection below, Section 5.2, outlines the policy and market context in which Greenland the EU operate in the areas of raw material as well as how they worked together in the past. Section 5.3 builds on this policy context to identify and assess the possible policy measures and instruments that could be taken and used.

4.2 EU-Greenland Co-operation within the Context of EU Arctic and Raw Materials Policy

The overall picture that emerges with regards to potential co-operation with Greenland in the area of mining is that while Greenland may have a number of world class deposits and while the EU

81 institutions may wish to promote co-operation, there are a number of political and market barriers to such co-operation.

4.2.1 European Union policy on Mining & the Arctic

The EU institutions – at least at political and strategic level – are very much in favour of the promotion of sustainable mining in the Arctic region provided that certain environmental and social conditions are met. The various policy documents and statements issued by the European Commission, the European Parliament and Council over the last five years all confirm their agreement with this goal. However there are two main challenges – one political and one market-related. Politically, aside from co-operation in the areas of fisheries and education, to date there are no operational structures in place to foster co-operation between the EU and Greenland in the area of raw materials In terms of market conditions, despite considerable resources, adverse market conditions for new projects make investing in mining in Greenland less attractive.

The remainder of this section outlines the EU’s policies towards Greenland and the Arctic in general and to mining in the region in particular.

4.2.1.1 The Raw Materials Initiative & Greenland

As part of the International Pillar I of the RMI launched in 2008, the Commission has been actively pursuing a ‘Raw Materials Diplomacy’ to secure access to raw materials, in particular the critical ones such as rare earth elements (REEs), through strategic partnerships and policy dialogues. Specifically, this Raw Materials Diplomacy involves strategic partnerships and policy dialogues with international partners to exchange information and join efforts to address the challenges on raw materials' markets.

This path has notably been pursued with Greenland90, Europe's closest resource-rich neighbour. Further co-operation has been prioritised by the Commission due, among other reasons, to Greenland’s large reserves of REEs and other critical raw materials91.

This priority was also reflected in the European Parliament’s 2011 resolution on the RMI when it called on the Commission, “in accordance with the precautionary principle, to assess the possibilities of environmentally sustainable exploitation of sensitive areas that might be valuable suppliers of essential raw materials, such as the Arctic, the Barents Region and Greenland and, if possible, extend existing partnership agreements with the countries in these regions”92.

In addition to this, the Letter of Intent signed in June 2012 between Greenland and the Commission acknowledged the importance of fair competition conditions and market access and proposed four areas for co-operation: geological knowledge, analysis of infrastructure and investment needs related to the exploitation of mineral resources, competence building, and environmental issues related to mining and social impacts of mining. This letter was followed by the Council Decision 2014/137/EU presented below in section 5.2.2.

4.2.1.2 Raw Materials in the context of the EU’s Arctic Policy93

In 2008, the European Commission published a Communication outlining its views on current and

90 Contacts with countries such as the United States, Japan, Russia, Argentina, Brazil, Colombia, Mexico, Uruguay, China and countries of the Union for the Mediterranean have also been established in the context of the EU’s Raw Materials Diplomacy. 91 Greenland also possesses of a range of important yet non-critical raw materials such as iron ore, copper and molybdenum. 92 European Parliament resolution of 13 September 2011 on an effective raw materials strategy for Europe (2011/2056(INI)), Paragraph 37, http://www.europarl.europa.eu/sides/getDoc.do?type=TA&language=EN&reference=P7-TA-2011-364 93 Found at: http://eeas.europa.eu/arctic_region/index_en.htm

82 future relations between “The European Union and the Arctic Region”94. This was the first, recent effort to identify the EU’s potential role in the Arctic and built on a great variety of policies and actions. The main overall aim was to open new co-operation perspectives with the Arctic states, including Greenland.

Four years later in 2012, the Commission/EEAS published the follow-up joint Communication entitled “Developing a European Union Policy towards the Arctic Region: progress since 2008 and next steps95”. This document confirmed earlier policy messages, in line with the policies of Arctic states, the most important of which was that the EU aims to step up its engagement in Arctic affairs. In detail, it was structured around the three policy objectives that were agreed by the Commission and Council in 2009:  Protecting and preserving the Arctic in unison with its population;  Promoting sustainable use of resources;  International co-operation.

In its second part, the 2012 Communication responded more specifically to the 2009 Council invitation to present a progress report, and summarised how EU Arctic-related activities had advanced since 200896. As climate change and economic development accelerate in the Arctic region, the European Union intended to step up its engagement with its Arctic partners to jointly meet the challenge of safeguarding the environment while ensuring the sustainable development of the Arctic region. The document also states that, being a major consumer, the EU has an interest in the resource policies of Arctic states.

In 2013, the Commission and High Representative proposed to focus further development of the EU’s policy towards the Arctic on three key areas97:  Supporting research and channel knowledge to address the challenges of environmental and climate changes in the Arctic;  Acting with responsibility to contribute to ensuring economic development in the Arctic is based on sustainable use of resources and environmental expertise;  Intensifying its constructive engagement and dialogue with Arctic States, indigenous peoples and other partners.

Here, knowledge referred to the EU contribution to Arctic affairs in areas such as technological know- how, developing Arctic monitoring from space and funding of Arctic-relevant research to address climate and environmental challenges.

On responsibility, the document argued that the Arctic offered challenges and opportunities that will affect the lives of Europeans for future generations. This, the Commission and High Representative argue, required a responsible EU contribution to the region, by funding regional programmes and promoting safe and sustainable management and use of resources.

Since its publication, the EU’s interest in strengthening EU-Arctic relations, including Greenland, has been recently renewed by activities by the European Parliament and the Council.

In March 2014, the European Parliament proposed a joint motion for a Resolution on the EU strategy for the Arctic98. Although it is not a binding document, the resolution is a strong signal and can be read as an evolution of the EU’s threefold strategy. With regard to Greenland, in its Article 56 the

94 Found at: http://eeas.europa.eu/arctic_region/docs/com_08_763_en.pdf 95 Found at: http://eeas.europa.eu/arctic_region/docs/join_2012_19.pdf 96 Set out in further detail in two accompanying staff working documents (Inventory of activities in the framework of developing an EU Arctic policy and Space and the Arctic). 97 Found at: http://europa.eu/rapid/press-release_SPEECH-13-329_en.htm 98 Found at: http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P7-TA-2014- 0236&language=EN&ring=P7-RC-2014-0229

83 resolution. “stresses the EU’s strong relations with Greenland and the geostrategic importance of that territory; takes note of the priorities of the Government of Greenland, with a renewed emphasis on economic development and the exploitation of raw materials; asks the Commission and the EEAS to explore how the EU and EU-based actors from science, technology and business can contribute to and assist in the sustainable development of Greenland so that both environmental concerns and the need for economic development are taken into account; expresses, in this connection, its concern regarding the limited results of the Letter of Intent signed by a Commission Vice-President with Greenland”.

Along similar lines, in their meeting in Brussels on May 12, 2014, the Foreign Affairs Council of the European Union adopted conclusions on developing a European Union policy towards the Arctic region99. The Council suggests in Article 11 that “the EU should pursue long-term partnerships and policy dialogues contributing to securing access to, and promoting safe and sustainable management of raw materials and renewable natural resources”. Furthermore, in Article 13, “the Council supports strengthening the partnership between the European Union on the one hand, and Greenland and the Kingdom of Denmark on the other which aims at promoting the sustainable development of Greenland and the diversification of the economy”. Finally, with regards to EU policy, Article 15 notes that “the Council furthermore requests the Commission and the High Representative to present proposals for the further development of an integrated and coherent Arctic Policy by December 2015. As part of this exercise, the Council encourages the Commission to ensure effective synergies between the various EU funding instruments in the Arctic region."

4.2.2 EU-Greenland Co-operation, including in the area of Raw Materials

4.2.2.1 Bilateral relations with Greenland

The EU’s development support includes assistance provided to OCT countries, which includes Greenland. Community financial assistance to Greenland (€42.8 million per year) has since its exit from the EEC in 1985 been focussed on fisheries100.

However, this changed in 2006 with the introduction of a new Partnership Agreement between the EU, Denmark and Greenland that, in addition to fisheries, addresses Greenland’s ‘structural development problems’101. It specifically covered six areas for co-operation: education and training, energy, tourism and culture, research, food safety and mineral resources. The EU provided Greenland with approximately €25 million per year from 2007 until 2013 (or €175 million)102. Greenland has in this respect developed a Greenland Programming Document103 setting up overall and specific objectives and indicators to reach within the period. The focal point (e.g. for all the funding) of the Partnership Agreement for the period 2007-2013 was education and training in order to develop this specific sector with regards to a sustainable human development in an era of globalisation.

A new Partnership covering the period 2014 to 2020 has been agreed by the European Commission and Greenland. While this new partnership is explicitly aimed at moving mineral resources up the policy co-operation agenda. One of the agreed provisions is that the Partnership “acknowledges the geostrategic position of Greenland in the Arctic Region, the issues of exploration and exploitation of natural resources, including raw materials, and ensures enhanced co-operation and policy dialogue on these issues”.

99 Found at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/142554.pdf 100 http://ec.europa.eu/europeaid/where/octs_and_greenland/ 101 http://ec.europa.eu/europeaid/how/finance/documents/prop_cd_greenland_en.pdf 102 This has been laid down in the "Programming Document for the Sustainable Development of Greenland", adopted by the Commission in June 2007. Specifically, this amount, which was financed annually from the general budget of the EU (and not from traditional development assistance funds such as the European Development Fund, the EDF) has been used for budget support to the "Greenland Education Programme", which involves a reform of the entire education and training sector in Greenland. 103 http://ec.europa.eu/europeaid/where/octs_and_greenland/documents/pdsd_and_annexes_greenland_en.pdf

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Specifically, the partnership text clearly spells out the rationale for stepping up co-operation with Greenland on different areas ranging from research, sustainable development over industry and education and training and on a long-term perspective. It notably highlights the increased geostrategic importance of Greenland as well as of the Arctic region for the EU, particularly in a context of climate-induced increased accessibility. At the same time, the EU acknowledges its potential to cooperate with Greenland to overcome the latter’s “structural weaknesses”. The agreement calls for a framework for policy dialogue on issues of common interest for either partner to be defined, with a view to mutually addressing “challenges emerging from global issues”. In particular, the proposal provides that existing area of “mineral resources” should be broadened to “natural resources, including raw materials”, and that the co-operation in the area of research should specifically include possible co-operation on raw materials.

However, and despite such goals, rather than dealing with all areas, the proposal noted that “the Union's financial support for the period 2014-2020, should be focused on one, or a maximum of two areas of co-operation, allowing for the partnership, to maximise the impact and further allow for economies of scale, synergy effects, greater effectiveness and visibility for the Union's action”. In late 2014 Greenland decided to include in the new Programming Document for the Sustainable Development of Greenland 2014-2020 a request for the Union’s financial assistance in the area of education and training104. Therefore, it is likely the vast majority of the seven year budget of €184 million over seven years will again be dedicated to this one area105.

Notwithstanding the earmarking of funds for education and training, the European Parliament has nonetheless106, stated that co-operation in the area of exploration, extraction and exploitation of Greenland’s natural resources should observe the highest levels of safety and strict environmental management criteria in order to guarantee a sustainable use of resources and preserve the valuable though fragile ecosystem of the Arctic. It also highlighted that broad co-operation and dialogue should be established in the area of biodiversity and the participation of the European Union as a permanent observer in the Arctic Council. The EP report strongly suggested that EU assistance to Greenland takes into account the need to strengthen capacity building in these new areas.

Read in conjunction with the partnership text and the political positions of the three abovementioned EU institutions, it is clear that while co-operation with Greenland should be promoted – both politically and financially – the means and funds to do so should be found from outside the Instrument for Greenland, namely from EU programmes which are open to OCTs and third countries.

4.2.2.2 Co-operation with Greenland as an OCT

The other areas of co-operation covered by the comprehensive partnership between the Community and Greenland are not completely neglected. As noted above the EU-Greenland Partnership is not the only instrument used for co-operation; indeed the programmes covered by the Overseas Association Decision (OAD) of OCTs can complement the Partnership.

Greenland is one of the EU OCTs. OCTs comprise the 25 countries and territories listed in Annex II to the EC Treaty. These are countries and territories that are not independent but linked to a Member State (France, United Kingdom, Netherlands or Denmark). The characteristics of the special status of OCTs as established in the EC Treaty and what it entails in terms of eligibility to Union programmes are described in the box below.

104 The Programming Document was approved by the Commission and signed by the parties in October 2014. Document available in following site: http://ec.europa.eu/europeaid/programming-document-sustainable-development-greenland-2014- 2020_en 105 http://europa.eu/rapid/press-release_MEMO-13-1134_en.htm#footnote-4 106 Found at: http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A7-2014- 0054+0+DOC+PDF+V0//EN

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The OCTs in the EC Treaty and the OAD

The OCT/EU Association rests on several legal bases. In Article 182 of the EC Treaty, Member States agree to associate with OCTs. The purpose of this association is to “promote the economic and social development of the countries and territories and to establish close economic relations between them and the Community as a whole. Association serves primarily to further the interests and prosperity of the inhabitants of these countries and territories in order to lead them to the economic, social and cultural development to which they aspire”.

Article 183 establishes that for investments financed by the Community, participation must be open on equal terms to all natural and legal persons who are nationals of a Member State or of one of the countries and territories.

Contrary to outermost regions, these countries and territories are not part of the European Union, even though they are part of their Member State of reference. Because of that, OCTs citizens are EU citizens. Not belonging to the Union, Community law does not apply to them.

OCTs are not ACP countries or third countries. As opposed to ACP countries or other third countries, OCTs are not independent. The Member State of reference remains responsible for sovereign affairs, such as defence, foreign affairs, justice, internal security, etc., even though the degree of autonomy of OCTs varies from one OCT or group of OCTs to another.

The detailed rules and procedures for the Association are provided for by the Council Decision 2013/755/EU on the Association of the OCTs with the European Union which was adopted on 25 November 2013107. Its objectives include:  The establishment of close economic relations between the EU and the OCTs as a whole, amongst others through an improvement of the trade arrangements;  The promotion of EU's values, standards and interests in the wider world via the OCTs;  The enhancement of OCTs' competitiveness;  The strengthening of OCTs' resilience and reduction of their vulnerability;  The establishment of a more reciprocal relationship between EU and OCTs based on mutual interests and shared values;  The promotion of co-operation of OCTs with third partners.

This Decision replaces the Council Decision 2001/822/EC108, which expired on 31 December 2013. It aims to modernise the relationship of the EU with its OCTs, moving beyond development co-operation and focusing on a reciprocal relationship based on mutual interests.

The OAD offers a modernised trade regime that focuses on three main areas: trade in goods, trade in services and co-operation on trade-related issues. This is expected to have a positive effect on the OCT trading environment. It will rank OCTs among the EU's most favoured trading partners, not only because of the OCTs' duty- and quota-free access to the EU market for goods, but also because the OCTs will automatically receive better terms of trade in services and establishment. In addition, by changing the conditions under which OCT goods and services access the EU market, it should become easier for OCTs to translate market openings into real export opportunities.

In line with the new OAD, Greenland has access to all horizontal EU programmes and will be treated with a most favoured nation clause in terms of trade with the Union. Under the Decision, Greenland is also allowed financing from the EIB.

Whilst OCTs are not covered by Articles 177 to 188 of the EC Treaty on development co-operation and are not ACP countries (and thus not covered by the Cotonou Agreement), the funds that are allocated to OCTs are financed by the European Development Fund (EDF), which is a development co-operation financing instrument.

Greenland participates actively in the EU-OCTs partnership and dialogue and has access – like all other OCTs – to a number of thematic budget lines and horizontal Community programmes. While the 2001 OCTs OAD included a non-exhaustive list of EU horizontal programmes to which OCTs could participate (Annex II F109), the 2013 OAD broadened the scope for their participation. Here it

107 Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and territories with the European Union (‘Overseas Association Decision’) (OJ L344, 19.12.2013) 108 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32001D0822&from=EN 109 Lifelong learning – education and training programmes (Leonardo da Vinci, Socrates, etc.); Competitiveness and Innovation Framework (CIP); Research, development and innovation programmes of the 7th Framework Programme; Cultural and audio-visual programmes etc.

86 established that OCTs are in principle eligible for funding from ‘the Union programmes and instruments provided for in the Union’s general budget’110.

The most important EU programmes and instruments relevant for the development of an EU- Greenland co-operation concept described in the following sections consist of mainly funding instruments that could be accessed via a competitive application. As a general rule, because OCTs are not considered as third countries, they are not mentioned in the legal basis of the EU programmes. This means that they do not have to sign an agreement with the DG responsible for the instrument. However, coordination with the EU programmes focal point established in the Member States they belong to may be necessary111.

Summary: Current Policy & Market Context

At the political and strategic level, the various institutions of EU have in recent years issued a series of policy documents and legislative acts outlining its commitment to develop a coherent and integrated Arctic Policy, one which includes the promotion of raw material co-operation with Greenland and other Arctic states.

There are however two main challenges – one political and one market-related – to the development of a coherent EU policy with regards to raw materials, Greenland and the Arctic:

 Politically, aside from co-operation in the areas of fisheries and education, there may not be the requisite structures in place, or funding available, to co-operate on raw materials.  In terms of market conditions, despite the availability of considerable mineral resources in Greenland the Arctic and the long term value of such potential for the EU, adverse short term market conditions for new projects make investing in mining in the region less attractive.

In terms of addressing these issues, the Council has requested the European Commission and the High Representative to present proposals for the further development of an integrated and coherent Arctic Policy by December 2015. As part of this exercise, the Council encourages the Commission to ensure effective synergies between the various EU funding instruments in the Arctic region.

4.3 Identification and Assessment of Possible Measures & Policy Options

This section builds on the risks and benefits analysis presented in Sections 2 and 3 above, as well as on the past and present relations between the EU and Greenland as outlined in section 4.2. This outlines a selection of possible measures to help investors manage/achieve these risks/benefits and policy instruments which the EU may or could have at its disposal to undertake such measures. The policy instruments considered are described in greater detail in the annexes to this report.

4.3.1 Recap & Overview of Contextual factors, Risks, Benefits & Safeguards

In terms of the contextual factors which need to be taken into account for the development and policies assessment, one of the main considerations is that, for the co-operation to be robust and sustainable, the possible cooperative actions to be considered should ideally cover all of the four areas included in the letter of intent and not be focussed on just one area (e.g. investment).

Likewise, given the importance of diversification of Greenland’s economy, the need for economic growth in the short term to fill a growing deficit as well as to be sustainable in the long term any co- operation concept should ideally include actions which promote mining of a variety of materials, both

110 Exclusion criteria with regard to OCTs should therefore been only explicitly established by each EU Programme Regulation. 111 Email correspondence with DG officials.

87 in the short-term (e.g. industry partnerships) and long-term (e.g. geological knowledge). However, given the recent fall in raw materials prices and decreased worldwide investment in the mining sector, coupled with the fact that investments in new projects does not appear to be priority at present for EU downstream industry, would indicate that any co-operation may only produce results in the medium to long term. Such a focus would also allow the EU and Greenland the time allow for the translation of political objectives into a structure which would allow Greenland and the EU to cooperate in practical terms.

The need for workable safeguards to protect EU investments as discussed in section 3.4 should also be considered, including measures to (i) promote the feasibility of processing certain materials in the EU and/or in countries with which the EU enjoys good trade and investment and trade relations such as Canada and Australia, as well as taking possible measures to (ii) incentivise industry to use materials that come from countries which have a good governance and environmental record.

Finally, it should be remembered that, on the one hand, Greenland contains some world class deposits which if they produced at levels proposed by their developers would exceed EU annual demand – this is the case for REEs, while on the other, the level of geological information on such potential could still be improved to attract investors.

In terms of comparing specific benefits and risks, this is not possible given the fact that many benefits are material-specific while the risks are country or location specific to Greenland.

4.3.2 Identification of possible risk mitigation measures

In terms of the possible risks retained from section 2, the most important challenges or barriers are those which relate to investment conditions and adequacy of infrastructure, with risks related to the levels of geological knowledge, use of regional/national environmental planning and possible local sourcing and processing requirements posing a medium level risk.

As outlined in Section 4.1 above, the first step has been identify appropriate measures which could be taken to reduce these risks in a way which results in benefits for both Greenland and the EU, as outlined in Section 3. The table below lists the main risks and presents a total of nine possible measures which could be considered for any co-operation concept. These measures are grouped in line with the four co-operation areas agreed in the 2012 letter of intent.

Target area Risk Potential measure

1. Improving Investment  Funds may not be available for (i) Offer funding facilities and related Conditions/ Adequacy of investments in the arctic region incentives for infrastructure and Infrastructure  Other mining jurisdictions may investments; offer more attractive investment (ii) Provide incentives to EU industry to conditions procure minerals from jurisdictions  Investors are deterred by a lack with good governance and of physical infrastructure to environmental arrangements in support mining place including Greenland;  Investors may be deterred by (iii) Assist in the improvement of access requirements to process material to horizontal local business services nationally

2. Enhancing Geological  Though levels of geological (iv) Support for greater geological Knowledge knowledge are good they could knowledge in Greenland be improved

3. Helping4.3.2.1 Socio-  Investors may be deterred by (v) Improved access to labour/mining tackle economic the lack of available staff or by related skills Socio- local/ national staffing (vi) Assistance to diversify the economy economic requirements into other sectors and  Investors may be wary of the environ- social impacts which their

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Target area Risk Potential measure

mental investment may have on the risks population

Environment  EU investors may be deterred by (vii) Promotion of undertaking of a the reputational risks associated national/ regional environmental with a lack of necessary planning for mining activities environmental safeguards in Greenland

4. Enhancing Administrative  Greenland’s low levels of (viii) Help to increase Greenland’s Capacities administrative capacity (due to capacity to regulate the mining its population size) may make it sector in general difficult to properly monitor (ix) Assist it to participate in and mining projects, which may in implement any EU-Greenland co- turn lead to certain reputational operation agreement on raw risks for investors. materials

The second step in this assessment has been to identify possible instruments (where available) which could be used In terms of possible instruments which could be considered.

Given that Greenland is not in the EU and not bound by internal market rules, most but not all of instruments available are programme based. The figure below presents the policy instruments assessed. These are broken down firstly by how Greenland is eligible (e.g. through external or internal policy) and by subject area. In addition, even though they do not appear below non-programme related EU lending activities as managed by the EIB are also available for Greenland.

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Figure 17: EU Policy/Programmes relevant to mining and potentially open to Greenland

Internal Policies open External Policy Internal EU open to to OCTs & Third Instruments OCTs Countries

Trade Policy Research Policy Regional Policy •FTA/ PCA-style •Horizon 2020 •Structural/ Cohesion agreements •Knowledge & Programmes (Interreg) •Certification rules Innovation Communities

Taxation & Financial Environment Policy Development Policy Governance Policy •LIFE •European •'Fiscalis' Programme Development Fund (EDF) Civil Protection Policy •EDF OCT •Civil Protection •EDF ACP Financial Instrument •EDF Thematic •Development Co- operation Spatial Policy Instrument (DCI) •Copernicus (GMES)/ •DCI Geographical Galileo •DCI Thematic •Instrument for Enterprise/Employ- Greenland ment & Education/ Health Policy Other External Policy •Competitiveness of Enterprises and SMEs •Partnership Instrument (COSME) •Instrument for Nuclear •Erasmus for all Cooperation •Health Programme

Finally, the third step taken was to assess which of the measures/instrument combinations would be the most appropriate given their potential:  Effectiveness/Relevance: the measure is needed and would likely help to promote sustainable mining in Greenland in a way which could benefit the EU in the long term; and  Feasibility: the measure can reasonably, or could possibly with certain changes, be taken by using or amending current policy/programming mechanisms/tools and can also be managed by the EU and Greenland authorities and stakeholders.

4.3.3 Assessment of Possible Policy Measures

4.3.3.1 Improving Investment Conditions/Adequacy of Infrastructure

As identified in section 2, this may be the most challenging area for investment in mining in Greenland. The main risk identified was that investors might find it more expensive to borrow or invest in Greenland than elsewhere. This, however, is not due to the policies put forward by Greenland’s government. Indeed, as noted in Section 2, despite recent changes in government policy

90 on royalties, this risk was ranked ‘low-medium’ due to Greenland’s stability and good reputation as a potential mining destination.

The two main challenges here are that Greenland’s reputation as a top mining investment location may be hampered by its lack of a substantial track record in large scale mining, and that other mining destinations may be have deeper pockets to take such measures as fund infrastructure investments, reduce taxes etc. and hence represent a more attractive investment for mining companies.

A number of the measures that could be taken here include examining: (i) Funding facilities and related incentives for infrastructure and investments; (ii) Providing incentives to EU industry to procure minerals from jurisdictions with good governance and environmental arrangements in place including Greenland; (iii) Assistance for the improvement of access to horizontal local business services.

(i) Offer funding facilities and related incentives for infrastructure and investments

In terms of the measures which could be taken to improve the investment climate, namely measures to address the infrastructure deficit, these could possibly range from providing limited funding for studies to actually providing Greenland finance for the infrastructure itself, through grants, loans or a combination of instruments.

In terms of instruments available, one way in which the EU promotes stable investment relations with third partner countries is through provisions or structures inserted in trade and investment instruments such as Free Trade Agreements (FTAs) and Partnership and Co-operation Agreements (PCAs). One example of how such a tool is relevant to relations with a mining country is the EU-PCA with mineral rich Mongolia where there are provisions promoting relations in the area of raw materials and relations with the EIB, the EU’s development investment bank. While Greenland – as an OCT – has full access to the EU in trade terms and does not per se ‘need’ a PCA/FTA, a similar specific reference could possibly help clarify the potential for EU lending to be used for mining in Greenland. As the Commission proposes areas where the EIB could focus its efforts, a clear policy statement on this would assist here112.

In terms of funds available under its external mandate, as Greenland is not a mainstream developing country, it currently falls within the OCT external envelope available to the EIB. Therefore any lending that could possibly be provided to investors in Greenland would mean extending of the current OCT ‘envelope’. This may not be feasible.

Another political ‘option’ which could be considered is an extension of regional structural and cohesion funds, which are the main EU ‘grant’ instruments used for the development of infrastructure in the EU, to Greenland. However, for Greenland to be eligible for most structural funding instruments it would in theory have to re-enter the EU (it left the then EEC in 1985) and or become a member of the broader EEA – to which Norway and Iceland are a party and are eligible for structural funding – it is not eligible. An alternative would be extending regional funding to OCTs. The reality on the ground is that through certain cross border ‘INTERREG’ sub-programmes such as Northern Periphery programme, Greenland already participates in regional policy programmes. Therefore the main challenge may relates to the amount of funding available to OCTs which are currently very low and definitely to low to allow for co-operation in the area of raw materials. As extending large amounts of regional funding to Greenland may result in less funding for EU-28 countries, in order to sell such a policy, there may be a need to clearly communicate the resulting benefits for the EU as a whole in terms of increased access to raw materials from Greenland.

112 With respect to relations with Africa, in the 2011 Communication on the RMI, the European Commission said that it “will assess (a) the feasibility of increasing lending (which may include grant-loan elements) to industry, including mining and refining projects and in particular post-extractive industries and (b) investigate the possibility of promoting financial instruments that reduce risk for operators on the basis of guarantees supported by EU.

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Beyond regional policy, the EU promotes investment in environment related within the stand-alone ‘Northern Dimension’ neighbourhood policy which is geared towards cross-border relations with other Arctic region neighbours such as Russia. While this is a good example of the type of structures which could be used for greater co-operation with Greenland in this area, again funding is very limited. Nevertheless, one interesting aspect of the Northern Dimension is that involves several EU and regional actors – such as the EIB and Nordic Investment Bank – working together on issues related to environment and transport, which are also central to any co-operation concept with Greenland.

On paper, a more viable option for assistance in the area of infrastructure would be to treat Greenland as any other ‘neighbourhood’ country within the ENI. For example, countries such as Georgia, and in the past Syria, have been eligible for funding for infrastructure projects while at the same time not being members of the EEA or even having an association agreement with the EU. However, designation as a neighbourhood country would require political agreement; likewise as Greenland is an OCT (albeit different from the other OCTs) and receives monies in this capacity, this may create problems.

This leaves the option of considering the use of EIB ‘own’ resources (which are not tied to external mandates) funds a policy lever for the EU in this area. Specifically, the EIB possesses its own resources which could possibly be earmarked to a sustainable minerals development fund, in particular after its mid-term lending review which will take place in 2017.

In a country as sparsely populated as Greenland, and with mines (perhaps deliberately) located away from towns, any funding for infrastructure would be project-specific and short-term in nature (e.g. in line with the expected timespan of the mine, namely 10 to 15 years) and would most likely not benefit the local population. This is in contrast to funding for infrastructure – such as within the EU-Africa Infrastructure Fund – in other countries where both the minerals development and the local population benefit in terms of improved energy supply, and improved transport connections. In Greenland there is therefore the greater risk of ’while elephant’ projects. Despite this, viable dedicated project-specific lending for mining projects has been successfully provided in the past by the EIB, for example for mining projects part-funded by the EIB in Madagascar (Ambitovy) and Mozambique (Kenmare).

In addition, as other international and regional FIs, such as the Nordic Investment Bank in Scandinavia and Finland, and the EBRD in Mongolia, have considerable experience in promoting mining in such environments. Therefore, another option would be to explore the potential for co-operation with other international financial and regional institutions such as the EBRD and the NIB (co-operation with the EBRD) would, of course, require incorporation of Greenland into its geographical remit. Co-operation with the NIB could build on previous experiences within the Northern Dimension. Another benefit of involving these banks is that they may help Greenland participate in such a fund. For example, Greenland already cooperates with the NIB and hence may find the administrative complexities of cooperating with the NIB to be lower. However, it is understood that EIB would be required – and hence the EU value added – as the funds available to the NIB are lower. In addition, in a speech to the Arctic Summit in London in March 2014, the then Greenland premier called for the creation of a cross border financing institution to address the lack of investment in the Artic. Here she advanced that such an institutions mandate “could be to finance projects around the Arctic region, including cross-border infrastructure investments. Such dedicated Arctic funds could help mobilise private equity in close co- operation with institutions such as the EBRD, the International Finance Corporation (World Bank) or the NIB”.

A final, related point is that if the EIB part financed infrastructure from own resources, it would need to take precautions to preserve its triple-A borrowing status. Therefore, any project would have to be fully commercially viable. While a minerals financing instrument which could cover or include Greenland could be quite effective – and would be coherent with EU policy – given the monies involved, the risk is that investments could be loss-making or that production from the funded projects could be exported to third countries.

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To help reduce the risk of poor financial performance, such a financing instrument could extend to covering any feasible project in the similar Arctic or stable mineral rich regions – for example, and in line with the Greenland premier’s comments above, it could cover possible projects in the Nordic countries and/or Canada which have similar mineral deposits of REEs, graphite, iron ore etc. Indeed, as highlighted in the draft ERECON study, these countries are all examining ways in which they can build a viable integrated supply chain business model for REEs. Therefore, such an instrument could be considered as part of efforts to build such a supply model for mining and related processing activities.

(ii) Providing incentives to EU industry to procure minerals from jurisdictions with good governance and environmental arrangements in place including Greenland

As highlighted in section 2, if the EU sourced many of its critical raw materials from Greenland and other jurisdictions with similar, strong records in the area of supply security and environmental performance, many of these materials would no longer be defined as critical. Similar arguments could be made for base metal supply, at least with regard to social and environmental indicators. However, the EU still depends on a number of high risk countries for its raw materials supplies. For example, main of the materials which are used in EU environmental goods and services are sourced from mines and processing plant which do not have strong environmental and social track records.

One option here would be to examine ‘demand-led’ policies to encourage industry to source its materials from the former, and hence encourage mining and processing in these countries. Such an option would appear to be line with the European Commission’s 2011 RMI Communication when it noted that it would “promote the application of EU standards by EU companies operating in the developing countries and the application of the Best Available Technique Reference document and by developing a code of conduct of EU companies operating in third countries”.

In terms of possible instruments, the EU and Greenland already co-operate very closely within the Kimberley process to ensure the sustainable sourcing of diamonds. One option to could be to examine the possibility of establishing a supply chain system which rewards or incentivises companies to but from mining projects and related processing facilities in the regions referred to in the subsection above e.g. from Greenland and Canada and from within the EU/EEA in the Nordic region.

Such an analysis could be based on an examination of legislative minerals-specific measures in place or being considered for Diamonds and Conflict Minerals legislation, or from an examination of similar schemes in place for timber within the FLEGT for example. While sector-specific legislation (e.g. Timber) could be considered, the horizontal powers which the EU possesses in the area of trade (e.g. Article 207 which is the basis for the draft Conflict Minerals legislation) and in the area of financial services (e.g. the financial internal market rules on company reporting covering transparency in the extractive sector) could be considered here. While there is a large number of barriers to such policies, the fact that Greenland already is already ‘part of the EU’s management structures’ for the Kimberley process may facilitate such co-operation. In addition, similar ‘process’ led requirements are already being considered by the EU with regards to oil products originating from Canada.

If a legislative option may not be politically attractive, the analysis could extend to covering voluntary CSR-type schemes in place for other commodities within for example the Sustainable Trade Initiative (IDH) led by Dutch Industry and partially funded by the Dutch government as a means to encourage more sustainable sourcing of commodities, including metals. While the focus of such initiatives has in past focussed on agricultural commodities with shorter supply paths, the example given in Section 3 of the Tesla’s car firm’s commitment to source its materials from sustainable sources in North America is an example of how this could work. In addition, other industry-driven Aluminium Stewardship Initiative, which includes downstream EU companies amongst others, is an example of how such goals are being initiated by EU companies as well.

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In terms of possible policy instruments which could be used for such a voluntary scheme, as the EU’s COSME programme provides for “Actions to improve the framework conditions for the competitiveness and sustainability of Union enterprises”, a call for proposals in this area could potentially consider ideas or projects for establishing such a scheme.

Finally, the two measures considered above – the ‘supply led’ sustainable minerals fund and the ‘demand led’ sustainable metal sourcing scheme – could conceivably be combined in a way where funding is prioritised for projects which would help reduce the EU’s exposure to supply disruption as well as the social and environmental impacts of sourcing of raw materials. Indeed, combining the two measures would help address some of the concerns which environmental and social NGOs have with regards to EIB funding of mining projects.

(iii) Assistance for the improvement of access to horizontal local business services

While the two measures considered above would potentially benefit the EU in terms of improved access to sustainable raw materials, they are not Greenland specific and could in theory be driven by relations within the EU/EEA with Nordic countries and with Canada. Therefore a supplementary measure may be needed to include Greenland. One way to do this would be launch such initiatives with Greenland and the Nordic countries and then expand to other countries later. Another would be to help Greenland improve its ability to provide supporting services to mining investments and infrastructure.

As noted in Section 2, measures to promote the development of local or national supply of goods and services, such as ‘buy/source local’ rules for certain services, are already employed successfully in other similar jurisdictions such as Alaska and Northern Canada. For example, in Alaska, the government requires extractive companies to pay compensation to ensure that business development takes place in the ‘affected’ area.

In terms of what would be sourced locally, based on existing practice, it appears that much of what might be needed relates less as much to horizontal services such as construction, catering and health care as it does to the availability of specialised mining services. This is important as one of the main challenges here may relate to the fact that Greenland has relatively few businesses, and all of these are SMEs.

Again, as elsewhere, co-operation, for example to share best practices etc., with countries with experience of mining could help social planning in this area. In this regard, peripheral EU regions such as Lapland, as well as partners such as Canada and Australia have extensive experience in operating remote services in mining regions so another measure here would be to support co-operation (sharing of best practices, services) between Greenland and such regions.

In terms of possible instruments available to the EU to assist in the area of sourcing, while such co- operation could be promoted under EU regional policy – through exchange of best practice for example - it is not clear whether enough funds would be available under existing programmes.

Therefore in the absence of available EU regional funding, the EU’s business promotion programme, the COSME, provides another potential source of funding for the type of co-operation which is currently in place for encouraging business co-operation between Denmark and Greenland within the ‘Arctic Cluster of Raw Materials’ for example. Similar, broader co-operation structures between the EU as a whole and Greenland could potentially be established with the help of the COSME. A source of inspiration for what could be done here could be the technical assistance activities of the World Bank’s Extractive Industries for Local Content Development initiative (EILCD) (World Bank, 2015).

Measure/ Effectiveness/Relevance Feasibility Overall Criteria

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Measure/ Effectiveness/Relevance Feasibility Overall Criteria

(i) Offer funding Yes, if it leads to a level field This depends on the ability of the EU Yes facilities and related between Greenland and similar to establish, and devote significant incentives for countries on the one hand, and resources to, a funding facility for infrastructure and other resource rich countries, on sourcing of sourcing mineral rich from investments the other. In addition, EIB Greenland and similar countries. assistance for investments and infrastructure has already effectively used in mining projects in other countries.

(ii) Provide incentives to Yes. While there would be an The main challenge here is assess Yes EU industry to increase in short-term costs which how such incentives may be procure minerals could be cancelled out by implemented in a way which from jurisdictions with supply security, social and minimises administrative burden and good governance environmental benefits As such a hence increases political and environmental scheme would most likely be acceptance to upstream and arrangements in voluntary, its success would downstream industry in the EU, place including depend on industry take up/ Greenland and relevant other Greenland customer demand partners.

(iii) Assist in the Yes, if it on the one hand Given the absence of any additional Yes improvement of improves access to necessary OCT funding for Greenland beyond access to horizontal supply services for EU investors education, such funding would have local business and on the other provides to come from COSME or through services ‘horizontal’ growth and jobs expanding funding and the scope of opportunities for Greenland. regional policy programmes involving Greenland.

Based on the above assessment, a number of example projects have been proposed. These are listed below and are further elaborated on in Section 6.

Possible projects

 Develop a needs assessment and feasibility studies for establishing: o an Investment & Infrastructure Facility to cover Arctic countries, including Greenland, possibly managed/funded by EIB in collaboration with NIB o a voluntary supply chain certification process for minerals originating in Greenland. Examine the advantages/disadvantages of establishing a voluntary ‘CSR-style’ sustainable mineral supply chain (e.g. certification processes) for minerals originating in Greenland and similar countries.  Examine how EU-Greenland business to business support and coordination can be structured, possibly using the COSME, through the possible establishment and funding of an EU-Arctic Business Mining Cluster.

4.3.3.2 Enhancing Geological Knowledge

The second main area for possible co-operation included in the Letter of Intent of 2012 was to enhance geological knowledge in Greenland. As outlined in Section 2, while the level of geological knowledge available for Greenland is better than for many mineral-rich countries, and hence may be less of a problem for investors than say infrastructure, the size of the country and the lack of a developed mining sector mean that knowledge (and capacities to enhance this knowledge) is not at the same level as competing jurisdictions, which is a challenge given current world raw material market conditions. Therefore, the inclusion of measures to examine how geological knowledge can be enhanced should be considered as part of any co-operation concept.

In 2012, Greenland requested significant financial support to the tune of €10 to 15 million a year from the EU for ‘geological’ projects, in particular to cover relatively underexplored areas such as East, North and Northwest Greenland. Therefore, based on the numbers provided and on analysis from within the project team, any investment in improved geological knowledge in Greenland is likely to be high, and go far beyond what is currently available.

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There are a number of areas where funding could be used:

 Firstly, improved coverage of regional geological data is needed in order to identify and evaluate regional mineral endowments in Greenland. Such regional data is a prerequisite for modern exploration and evaluation work;  Secondly, there may be a need improve the integration earth observation systems with geological knowledge systems;  Thirdly, in country facilities, such as the development and construction of a central modern drill core storage facility are required:  Finally, improving and enhancing knowledge on the quality of existing deposits may also bring benefits in the shorter run.

In terms of possible EU policy instruments, while the ideal (or at least the simplest) tool to use for this may be the Instrument for Greenland where a certain amount of funding could be devoted to enhancing geological knowledge in Greenland, this would only be possible if monies currently devoted to improving education are used instead for this purpose, which is not possible given the October 2014 agreement to focus assistance on education and training.

Beyond the Instrument for Greenland, there is also the strong possibility that projects to enhance geological knowledge would qualify under the EU’s research and innovation programme, Horizon 2020. Indeed, there has been a whole host of EU-funded research projects relating to the Arctic in some manner or another – usually related to climate change or maritime affairs or to new mining methods such as deep-sea mining – which have received substantial EU funding the last seven years. Therefore, there is no reason, from a policy coherence point of view why such funding cannot be allocated to furthering geological knowledge in the Arctic. In addition, as Horizon 2020 has a societal challenge covering raw materials – Societal Challenge 5 – and considering that international co- operation with mineral producing countries has been included in the SC5’s work programme to date, greater co-operation with Greenland in the area of geological knowledge is within scope. In addition, the funds available can be large – for example the FP7 ProMine project on “Nano-particle products from new mineral resources in Europe” obtained €11 million of its €17 million budget from EU funds.

That said, there are a number of barriers. Firstly, the types of investments required – i.e. investments in improving geological knowledge and capacity – may not qualify as being innovative, and hence may not qualify for EU Horizon 2020 grants. Specifically, to qualify, innovative actions have to go beyond the state-of-the-art. The type of investments referred to above would conceivably fall under regional funding, which is meant to complement Horizon 2020, not replace it. While there are opportunities within regional policy to enhance geological knowledge – namely through smart specialisation – as Greenland is not eligible for the majority of regional funding, this does not appear to be an option.

In addition, successful Horizon 2020 projects need to include participants from a number of Member States. In this regard, Greenland – and Denmark – would have to collaborative with a number of partners from other Member States. Furthermore, as Horizon 2020 is very competitive, there is no guarantee of success; for a country with a small administration, this level of competition may be dissuasive. The final challenge is that, unlike regional funds and indeed development funds, Horizon 2020 grants are not allocated on the basis of geography.

Overall, there are a number of challenges which need to be overcome. However, in terms of the innovative character of enhancing geological knowledge in Greenland and in the Arctic in general, one option which could be considered would be to create specific topics covering improvement of mineral knowledge or the application of geological methods in extreme environments, such is in the Arctic. In addition, as one of the action areas (n° III.5: investment activities) of the European Innovation Partnership on Raw Materials Strategic Implementation Plan of 2013 is to promote actions to (1) support, through specific policy tools, the European mining, research and geological companies in exploration and development of mining projects abroad and in Europe, it would appear that the use of

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Horizon 2020 to geological companies in exploration and development of mining projects abroad would include Greenland.

As regards competition and the number of participants required, the current EURare project, which involves Greenland based mining companies, GEUS as well as a number of other EU partners provides an example of how such co-operation including Greenland could be developed. Finally, with regards to geographical nature of Horizon 2020, the current draft of the SC5 work programme, or ‘scoping paper’, for 2016/17113 includes the “Arctic” as priority topic.

This scoping paper also notes that innovative use of the EU’s earth observation capabilities should be recognised as a priority for the Work Programme 2016-2017. Here, the objective is to “enable business sectors in Europe to seize the opportunities offered by the wealth of sophisticated Earth Observation data – ‘big Earth data’ – to develop information products that can provide vital inputs to help decision makers, industry and citizens adapt to changes affecting the Earth's systems. Free, full and open access to space-based, airborne and in-situ Earth Observation data globally is becoming a reality through the implementation of GEOSS and the launching of the operational phase of Copernicus. Environmental information is necessary for sustaining the economic sectors in Europe and worldwide (e.g. transport, energy, agriculture, fisheries, tourism, construction) and for facilitating the transition to a green economy, and the global markets for related products are growing”. Such a topic could conceivably include raw materials. In addition, in 2012, the Commission commissioned a study which included an assessment of the “The potential of Earth Observation and Copernicus Downstream Services for the Oil and Gas Extraction Sector". Again such an analysis could be extended to raw materials in the Arctic.

The main challenge here however is that the type of funding Greenland is looking for with regards to geological knowledge concerns applying existing techniques to expand geological knowledge, techniques which although state-of-the-art are not innovative. Another is that such geological knowledge would require significant sums over long periods of time; this may not be the case under Horizon 2020.

The literature on Horizon 2020 stresses the importance of increasing complementarity between research and innovation on the one hand and regional policy on the other. One way of doing this through promotion of the ‘smart specialisation’ of the EU’s regions in the area of geological knowledge and how such specialisation can be promoted on a cross-border basis. The Nordic regional of Lapland in Finland currently benefits from EU assistance in the area of raw materials. Regional funding can also be used to promote improved geological knowledge on a cross border basis. For example, €5 million of INTERREG funds are currently being used to enhance geological knowledge on the Ireland-Northern Ireland border114.

As Greenland participates within another INTERREG programme, the Northern Periphery programme (NPP), there is no reason why INTERREG funds could not be used to enhance geological knowledge across the Nordic region including Greenland. However, this would require a special focus within the NPP on geological knowledge as well as much increased funds. Such funding could conceivably be combined with other regional policy instruments (e.g. smart specialisation) aimed at promoting research and development specifically devoted to the Arctic in the area of raw materials

Measure/ Effectiveness/Relevance Feasibility Overall Criteria

113 Found at: http://www.utwente.nl/sb/test/eu-office/Draft%20H2020%20papers%2011%20November%202014/annex-14- sc5-scoping-paper-10-oct-clean.pdf. Here it is noted that “The Arctic region is particularly affected by global warming: sea ice is diminishing and permanently frozen ground is thawing, with strong geo-political and geo-economic consequences, including opening up of new transport routes and previously inaccessible natural resources. In addition to new socio- economic opportunities and local environmental challenges and threats, change in the Arctic has global consequences such as sea-level rise, changing weather patterns and more extreme weather events, with socioeconomic impact on the EU”. 114 www.tellusborder.eu

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(iv) Support for greater Yes. Geological knowledge – Tentative. Using EU research Yes, depending on geological which is basic requisite for and innovations funds the availability of knowledge in mining investments – can be enhancing geological R&D and future Greenland improved in Greenland. knowledge is possible in theory regional funding but difficult in practice. for Greenland/Arctic and mining.

Based on the above assessment, a sample of hypothetical projects in the area of environment has been proposed. This is presented below and is further elaborated on in section 6.

Possible projects

 Examine the feasibility, and sourcing of funds to enhance geological knowledge in Greenland in the following areas: o improved coverage of basic regional geological data; o use of EU earth observation systems to support geological mapping in Greenland; o development and construction of a central modern drill core storage facility; o enhancing knowledge on the quality of existing deposits.

4.3.3.3 Helping tackle socio-economic and environmental risks associated with mining

In addition to seeking to address the challenges posed by infrastructure and investment risks, and the need to improve geological knowledge, a third, central aim of the Letter of Intent is to cooperate to manage social and environmental risks related to mining.

As presented at the start in Section 4.3.3 above, and as based on the risk assessment undertaken in Section 2, there are a number of possible measures which could be included in a co-operation concept. These include providing EU assistance for the following ‘socio-economic’ and environmental measures: (i) Assistance to improve access to labour/mining related skills; (ii) Help for Greenland diversify the economy into other sectors; (iii) Promotion of undertaking of enhanced national/ regional environmental planning for mining activities.

(i) Improved access to labour/mining related skills

A key aspect for any mining company is access to available and skilled labour. As Greenland has a stagnant small population and limits on immigration, this is considered by some investors as a problem.

There are, however, many factors which help mitigate this risk. Firstly, Greenland has made significant changes to ease immigration rules, especially for large mines. Likewise, given the expected limited staffing needs of mines in Greenland (compared with metal processing where substantially more and more skilled staff are required), the need for substantial immigration (and the alleged threat that it is supposed to represent) may be overstated. In terms of demand for high-skilled workers, it is understood that there is unrestricted two-way migration between Greenland and other Nordic countries, thereby allowing for skilled mining and infrastructure employees from Norway, Sweden, Finland and of course Denmark. The real challenge here may relate more to the effect of greater immigration of low or semi-skilled staff. On a more political level, however, Greenland has indicated on a number of occasions that it wants a substantial proportion of mining staff to be Greenlandic. Overall, given the sensitivity of this issue, EU action to encourage the immigration of staff may be counterproductive.

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Another option here is to help improve mining education in Greenland. To date, the majority of EU assistance provided has focused, upon Greenland’s request, on primary and secondary/vocational level education and less tertiary education, at least not at present. However, as noted above, without real training and related employment opportunities, school graduates may emigrate. Therefore the prioritisation of school level education may be warranted.

That said, it is understood that under the current Instrument for Greenland there will be an increased focus on the latter type of training. While there are a number of measures which the EU could potentially take a number of initiatives here – including further efforts to reinforce training of Greenlanders, sharing competences between Greenland and EU mining regions, as well promoting transfer of skilled workers – the question which needs to be asked is whether there is a need to go beyond existing levels of support. At present appears that EU levels of support in this area are sufficient.

(ii) Assistance to help Greenland diversify the economy into other sectors

Another socio-economic risk which may arise is that investors may be wary of the social impacts which their investment may have on the population. This could manifest itself in a number of ways, namely through the impact which commodity price cycles may have on national budgets. For Greenland, which is planning to base much of its economic growth in the coming years on mining investments, overdependence on the sector may potentially lead to social instability which would increase risk for investors.

A number of studies have already focussed on these issues, most notably the recent work done by the OECD and its NORA initiative115 which included coastal regions of Norway, Iceland, the Faroe Islands and Greenland. With regards to Greenland, as outlined in Section 2, a number of factors have encouraged Greenland to look towards mining. These include a declining budgetary situation as well as a stagnating fisheries sector which is facing increased competition. While a sustainable minerals industry would help address these issues, over-reliance on minerals may bring other challenges. In this regard, the EU may wish to promote other industries, such as tourism and processing of basic metals.

The EU may also wish to encourage Greenland promote fiscal stability mechanisms for the management of mining revenues. However, in this regard, firstly Greenland has already promised to create a minerals revenue stabilisation fund, along the same lines as those in place in Chile and Norway. Secondly, as a major importer of minerals, the EU has a limited track record in this area, and hence does not have policy instruments in place to specifically promote such policies in third countries.

Overall, as these issues are outside of the scope of this stud, no instruments have been examined in detail. However, there would be merit in further considering how such aims could be addressed in a future EU-Greenland co-operation concept.

(i) Improving the information necessary for regional and national environment planning in the minerals sector

As outlined in Section 2, overall Greenland has in place a robust legal and regulatory environmental framework for mining. This includes dynamic requirements on project developers to develop and implement EIAs and associated conditions. Greenland also has a clear forward looking national mining strategy for the years 2014 to 2018.

115 See: http://www.oecd-ilibrary.org/urban-rural-and-regional-development/oecd-territorial-reviews-nora-region- 2011_9789264097629-en

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Despite this, the government has not produced a broader strategic environmental assessment, or environmental baseline assessment, for the sector. Although SEAs are not often conducted for the mining sector, the combination of a pristine environment and vulnerable eco-systems with government plans to develop five to 10 mines across the island over the next ten years may warrant such an assessment.

In 2012, the Greenlandic government requested EU financial assistance to undertake Strategic Environmental Assessments of five regions in Greenland: - the Northeast, Southeast, Southwest, Northwest and far North. The amount request amount to €5 million a year, or €1 million euro per SEA over seven years, or €35 million in total. Firstly, it would appear that given the potential impact of mining on the fragile Arctic environment as well as the extent of mining activity planned, there are merits in considering undertaking such SEAs. Likewise, given that the EU is a world leader in this area, it should consider support in this area. However, with regards to costs, these appear excessive. In terms of available policy instruments to undertake such SEAs, unfortunately one of the main policy instruments that can be used for this purpose in the EEA – regional funding – is for the most part unavailable to Greenland.

Nevertheless, the EU also manages the LIFE programme which has in the recent past been used for funding for specific innovative stand-alone environmental projects, such as pilot SEAs, outside of the EEA. Indeed, despite the changing mandates of the LIFE programme, the EU has in the past provided funding for a number of projects outside of the EU, in particularly in the southern and eastern neighbourhood. Greenland, as an OCT, is eligible for this funding through Denmark under the current LIFE

Another point is that these extra-EEA SEA projects had a significantly lower budget than what Greenland has been looking for. The next practical point is that it, and its resident entities, would have to compete against other for this funding. As the Commission receives roughly four or five proposals for each accepted project, the competition is stiff. While the current LIFE allows for funds for capacity building, as these funds are limited by Member State, Denmark as the EU ‘host’ country would have to prioritise it. Next, as the point of the LIFE programme is exploratory and project based, it is does not appear likely that a number of SEAs could be funded; however there is conceivably the possibility that one or two pilot, exploratory SEAs could be funded.

Failing this, given the exploratory nature of conducting environmental assessments in extreme, arctic environments, funding could possibly be provided through other programmes, as was the case of the ‘Strategic Environmental Impact Assessment of development of the Arctic’ project which was funded by the European Commission and carried out by a network of nineteen European research and communication institutions specialised in Arctic affairs, led by the Arctic Centre, University of Lapland.

Beyond LIFE funding, the EU provides extra-EU assistance for environmental assessment and capacity enhancement in the areas of civil protection (e.g. funding for detailed studies concerning oil spills in the Southern Mediterranean), nuclear safety (e.g. technical assistance for management of uranium mining sites in central Asia), as well as to developing countries through development instruments. The main challenge here is that responsibility for promoting environmental protection in developing and non-EU countries is managed across a number of EU policy areas, policy areas which are not necessarily focussed on promoting sustainable mining. Therefore clarification of how and whether, say, a mineral sector SEA could be funded with LIFE and/or foreign policy instruments is required.

Measure/ Effectiveness/Relevant Feasibility Overall Criteria

(i) Improved access to No. While access to mining skills is Not applicable given the existing No labour/mining vital for companies, and the levels support provided by the EU for related skills improvement of skills is clearly improvement of education in

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Measure/ Effectiveness/Relevant Feasibility Overall Criteria

important for Greenland, the EU Greenland. already provides substantial funding for education/skills.

(ii) Assistance to help No. While the provision of support Not applicable. No Greenland diversify to help Greenland diversify its the economy into economy may be in the interest other sectors of the EU and mining investors, this is an issue which goes beyond the mining sector and hence is out of scope.

(iii) Improving the Yes. The promotion of large scale Unclear. Although the EU has in Yes, information sustainable mining in Greenland recent years provide substantial provided necessary for may require improvements in support to the undertaking of similar sources regional and forward looking national and studies outside of the EU, the sources of national regional environmental baseline of such funding with respect to support environment information/ planning. mining environmental assessments are planning in the would need to be clarified. clarified minerals sector

Based on the above assessment, one sample project in the area of environment has been proposed. This is presented below and is further elaborated on in Section 6.

Possible project

 Support the undertaking of regional environment/mining SEA-style baseline studies.

4.3.3.4 Enhancing Administrative Capacities

The next set of possible measures which could be considered to increase the ability of Greenland’s government and business sector to manage mining. These measures include:

(i) Help to increase Greenland’s capacity to regulate the mining sector in general; (ii) Assistance to allow Greenland and other parties to participate effectively in and implement any EU-Greenland co-operation agreement on raw materials.

(i) Help to increase Greenland’s capacity to regulate the mining sector in general

As regards capacity to regulate the sector, in 2012, the Greenlandic government requested financial support for competence building in the areas of inspection and technical staff, geological staff, licencing and economic analysis and assessment. The amount requested was €3 million a year. While this may actually be seen as too many staff for a country with no active mines, it would conversely be too low for a country looking to open five or more medium to large mines within the next five years. Therefore the question is whether the EU should support such activities.

While operational costs in this area should be covered by mining tax/royalty receipts etc. In this context, in the absence of operating mines, Greenland would most likely need to depend on external consultants and/or Danish expertise. Indeed, on an on-going basis, it may be worthwhile to rely somewhat on external expertise (available in Europe and Canada in the public sector, and in the private sector) as training and employing staff to oversee a small number of mines may not make sense. This depends on the number of mines and the amount of local knowledge required. It is beyond the scope of this study to determine this need. Overall, it may not make sense for the EU to fund such expertise when this is already being done through Danish and Greenlandic tax.

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(ii) Assistance to allow Greenland and other parties to participate effectively in and implement any EU-Greenland co-operation agreement on raw materials

In terms of the narrower aim of supporting participation in EU-Greenland co-operation on raw materials, this is crucial for achieving the policy measures outlined above. In short, while the Agreement which exists between the EU and Greenland quite clearly outlines both sides desire to reinforce co-operation in the area of raw materials, the environment and natural resources to name a few areas, there are no funds available to ensure that such political commitments are translated into concrete actions.

One example of how to do this is the EU-Gulf Co-operation Council Trade and Business Co-operation Facility which is being set-up by the European Commission’s Service for Foreign Policy Instruments under the Industrialised Countries Instrument (ICI) in order to implement main of the actions contained in the EU-GCC Joint Action Programme of 2010-2013. The Facility is specifically geared towards providing policy support, training and events & communications for the promotion of trade in a number of areas, including non-energy raw materials.

If the abovementioned initiatives are to be further discussed, considered and acted upon, such an Action Programme and Facility may need to be put in place for the Arctic region if not for Greenland based on the political aims agreed within the 2014 EU-Greenland Agreement, the 2012 Letter of Intent as well as on the objectives set in the EU’s last Arctic Communication. As the ICI has been replaced by the Partnership Instrument, the funding would need to come from the latter.

In addition to this, specific attention may need to be given to how Greenland’s participation in LIFE, Horizon 2020 etc. can be facilitated, through technical assistance for project development proposals as well as through specifically focussing certain calls on developing sustainable mining/minerals in the Arctic region.

Finally, if Greenland is to be seen as central to helping meeting EU needs in terms of raw materials, consideration could be given to encouraging participation in EU forums/groups on raw materials.

Measure/ Effectiveness/ Relevance Feasibility Overall Criteria

(i) Help to increase No. While a small Not applicable No Greenland’s capacity to administration can always regulate the mining sector in benefit from additional general administrative capacity, it would appear that such capacity is currently available to Greenland through national and Danish sources. Once mining is up and running, such expertise can be procured from elsewhere and funded through mining revenues.

(ii) Assistance to allow Yes. Given the scope of Yes. Similar support for the Yes Greenland and other parties EU policies and implementation of international to participate effectively in programmes which would co-operation agreements with and implement any EU- have to be understood industrialised and extractive Greenland co-operation and accessed by industry dependent countries is agreement on raw materials Greenland, as well as the already provided through EU limited of EU staff and foreign policy instruments. stakeholders to participate, such assistance would appear to be crucial to the success of the

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implementation of any co-operation concept.

In order to implement any co-operation concept – including the suggested measures and projects suggested above – there is a clear need for an overarching structure to allow Greenland, the EU institutions and stakeholders to implement the co-operation concept. This is presented below and is further elaborated on in Section 5.

Possible projects

 In order to build on the raw materials priority of the EU-Greenland Council Decision of 2014 and operationalise the Letter of Intent and more specifically the type of projects identified above, the EU could consider developing with Greenland a Joint Action Programme.

Summary: Possible projects which could be included in a co-operation concept

Area Measure Possible project(s) Improving Investment Offer funding facilities Develop a needs assessment and feasibility studies for Conditions/Adequacy of and related incentives for establishing: Infrastructure infrastructure and  An ‘Investment & Infrastructure Facility’ to cover investments Northern countries, including Greenland, possibly managed/funded by EIB in collaboration with NIB Provide incentives to EU  a voluntary supply chain certification process for industry to procure minerals originating in Greenland. Examine the minerals from jurisdictions advantages/disadvantages of establishing a with good governance voluntary ‘CSR-style’ sustainable mineral supply and environmental chain (e.g. certification processes) for minerals arrangements in place, originating in Greenland and similar countries. including Greenland Assistance for the Examine how EU-Greenland business to business improvement of access support and coordination can be structured, possibly to horizontal local using the COSME, through the possible establishment business services and funding of an EU-Arctic Business Mining Cluster. Enhancing Geological Support for greater Examine the feasibility, and sourcing of funds to Knowledge geological knowledge in enhance geological knowledge in Greenland in the Greenland following areas:  improved coverage of basic regional geological data  use of EU earth observation systems to support geological mapping in Greenland  development and construction of a central modern drill core storage facility  enhancing knowledge on the quality of existing deposits Enhancing Administrative Assistance to allow In order to operationalise any future co-operation on Capacities Greenland and other raw materials under the EU-Greenland Agreement, parties to participate operationalise the Letter of Intent and more effectively in and specifically the type of projects identified above, the implement any EU- EU could consider developing with Greenland a Joint Greenland co-operation Action Programme. agreement on raw materials Helping tackle socio- Improving the information Support the undertaking of regional economic and necessary for regional environment/mining SEA-style baseline studies. environmental risks and national associated with mining environment planning in the minerals sector

All-but-one of the suggested projects are brought-forward and elaborated on in Section 5 below. The exception – ‘assistance for the improvement of access to horizontal local business services’ – is excluded for two reasons. Firstly, there are already a number of organisations already involved in promoting raw materials developments in the Arctic, of which the Arctic Cluster of Raw Materials is

103 already quite active. Secondly, as this cluster is somewhat (though by no means exclusively) focussed on Denmark. The scope of the ‘Joint Action Programme’ suggested above under ‘Enhancing Administrative Capacities’ could be expanded, if required, to include a forum on business-to government, business to business or even business-to-civil society co-operation. This inclusion could for example assist EU exploration companies in better understanding and overcoming the diverse hurdles in establishing such projects in Greenland, help the EU to build a materials value chain between Greenland and the EU, as well as ensure that environmental norms are understood and respected by companies.

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5 Towards an EU-Greenland Raw Materials Co-operation Concept

5.1 Introduction

Section 4 above on the possible policy measures presented a number of broad project ideas which could be considered for and further developed within an EU-Greenland ‘co-operation concept’.

For the EU, the focus of any co-operation concept would have to be, in the first instance, in promoting infrastructure and investments to allow currently proposed projects to go ahead and hence increase the likelihood that the EU may import minerals from Greenland in the next 10 to 15 years, and in the second instance, in improving geological knowledge and hence ensuring the sustainability of the mining industry in the longer term.

The projects proposed in the other areas are more of a complementary nature with the project on developing an EU-Greenland Action Programme aimed at putting in place the co-operation framework needed to progress the above projects and the project on developing Minerals SEAs primarily aimed at ensuring that any EU involvement in promoting mining in Greenland ensures that the mining projects which could directly or indirectly benefit from any support provided are as sustainable as possible.

These projects can be summarised in the Figure 16 below.

Figure 18: Project Ideas for EU co-operation with Greenland in the area of Raw Materials

Improving Investment •Sustainable Minerals Investment and Infrastructure Facility Conditions/Adequacy of •Voluntary Raw Materials Supply Chain Certification Infrastructure

•Use of Earth Observation systems to support geological mapping in Greenland •Regional data collection programmes to support mining and Enhancing Geological Knowledge exploration in Greenland •Development and construction of a central modern drill core storage facility •Enhanced geological knowledge of existing deposits

Enhancing Administrative (& •Developing a Joint EU-Greenland Action Programme (including possible support for EU-Greenland business co- Business) Capacities operation)

Helping tackle socio-economic and environmental risks •Minerals Strategic Environmental Assessments (SEA) associated with mining

As a disclaimer, the projects proposed are very much exploratory in nature and given the large levels of funding involved the undertaking of supplementary feasibility studies and plans would be required before any of the projects are agreed.

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In terms of the structure of each project idea presented below, an overview of the proposed project idea is given, the changes to policy instruments which are needed, a full description of the project as well as its objectives, its justification and expected results. In addition, the anticipated activities, a rough estimate of the resources required as well as a suggested implementation timetable is provided. Finally, sustainability issues as well; as possible risks are identified. Finally, possible partners and their expect roles are outlined in each case.

5.2 Improving Investment Conditions/Adequacy of Infrastructure

5.2.1 Investment and Infrastructure Facility

5.2.1.1 Basic information

Co-operation area: Improving investment conditions/adequacy of infrastructure. Needs assessment and feasibility study for establishing an investment and Specific co-operation area: infrastructure facility to cover Arctic countries, including Greenland, potentially managed/funded by EIB in collaboration with NIB. Consultancy assignment for time period of 12 months with an input of 12 to Project overview: 18 person months in total, and including extensive consultation activities. Government of Greenland:  Ministry of Mineral Resources.  Ministry of Finance (Greenland) Ministry of Finance (Denmark) Governments of other Arctic Countries (e.g. Canada, Iceland, Norway, Implementing agency/ Involved Finland). parties/ potential partners: European Investment Bank (EIB) Nordic Investment Bank (NIB) DG Growth DG Economic and Financial Affairs Mining companies Raw material processing companies DG Internal Market, Industry, Entrepreneurship and SMEs (GROW) (for the needs assessment and feasibility study) Funding sources: EIB / NIB (for the investment projects under the facility) Mining and raw material processing companies

5.2.1.2 Policy/ programming prerequisites/changes required

The project to carry out the needs assessment, feasibility study and planning of such a facility would most likely be a consultancy project and could be funded by DG Growth in combination with either another DG and/or the EIB.

The main activities under the facility itself would then be the financing of infrastructure and other project investments managed by mining and processing companies, such as financing of ports, energy infrastructure or in-site activities etc. This funding under the facility would mainly come from the EIB and/or NIB.

As the EIB's existing envelope of funding for OCTs, including Greenland, is too small for any funding, either a new dedicated facility with new funds would need to be mandated or Greenland would have become eligible under an existing programme. The NIB tends to fund projects with a green profile focusing on sustainable development (e.g. in Greenland this has included hydropower, housing insulation, and infrastructure such as fibre optics), and therefore it may require a specific dedicated fund to be set up to fund mining-related infrastructure. The consultancy project would need to review possible sources of these funds, including from the EIB’s own resources, the NIB, or potentially, others such as the Swedish Industrial Development Fund for example which is linked to a number of private equity players active in the Swedish and Nordic markets.

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In addition, some funding might be provided under the facility for technical assistance (TA) projects associated with the specific planning components, such as design, ESIA116, etc., for the infrastructure. Although such components would normally be considered the responsibility of the private investor, there might be public benefits of TA contributions by the facility in order to stimulate the investment. Such TA funding is likely to be sourced from the EU, with the exact details being planned during the needs assessment and feasibility study.

In terms of potentially securing EU support for undertaking such activities, it is understood that the European Commission as well as Member State Ministries for Finance, play a strong role in seeing lending priority sectors and regions. While the two main RMI Communications from 2008 and 2011, as well as Council and Parliament responses, are quite clear on the positive role which investments and infrastructure play in promoting sustainable mining, as well as the EIB’s central role in promoting these activities inside and outside the EU, this message has if anything been reinforced in recent years by the European Parliament commissioned ERECON paper on rare earths which calls on the need to promote investment in a stable EU-oriented raw material supply chains117. While an investment facility dedicated to the raw materials sector would therefore be consistent with these policy communications, a clearer indication by the EU on how investment and infrastructure in the mining sector can be promoted in the Arctic region would be beneficial.

Therefore, the main prerequisite for the setup of an investment facility is likely to be for the EU to provide a mandate to the EIB to explore such a facility, and official confirmation that the sustainable development of the raw materials sector in the region is a strategic priority of the EU. However, the exact policy requirements and actions would be planned under the project on the needs assessment and feasibility of the facility.

Putting this context, in November 2014 the EU launched an investment plan for growth and jobs118 (the "Juncker Plan") and the EIB will be a key stakeholder in implementation. In detail, the European Fund for Strategic Investments119120 (€21bn) is being set up and managed by the EIB. The needs assessment and feasibility study should be carried out well before the EIB's next review of lending (likely to be in 2016 or 2017) An investment fund for sustainable mining could be included here.

5.2.1.3 Description

Background and justification

The lack of infrastructure in Greenland, such as roads, etc., is recognised as a major constraint to investment in the raw materials sector. This project will therefore involve the activities associated with the planning of an infrastructure facility, which would provide finance to private investors (such as mining and processing companies). The facility would cover infrastructure such as roads, port facilities, power infrastructure, and would aim to bring together public and private sector players and ensure investments at high standards of environmental protection and social performance.

There are several considerations that the needs assessment of such a facility would need to take into account, including:

116 Environmental and Social Impact Assessment (ESIA). 117 Erecon 2014, Chapter 6 Strengthening Europe’s Rare Earth Supply Chain. 118 http://ec.europa.eu/priorities/docs/pg_en.pdf 119 The proposed EFSI Regulation was presented by the Commission in January, it is currently being negotiated on, and between, EP and Council preparatory bodies. The Council (Economic and Financial Affairs) agreed on a general approach on 10 March. Following the adoption at committee level of a draft EP opinion, trilateral EP-Council-Commission negotiations have started with a view to an agreement in time for the European Council on 25 June. The Regulation could then enter into force in the second half of the year. In parallel, the EIB and the Commission are currently negotiating an agreement on the operational aspects of EFSI. EP and Council are kept abreast of these negotiations. 120 http://www.eib.org/infocentre/press/news/all/eu-launches-investment-plan-for-growth-and-jobs.htm

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 The benefits of the coverage of the facility being wider than just Greenland, as total investments in-country might be too small to justify such a facility, and therefore it might be more effective for the facility to be available to other Arctic or near Arctic countries (e.g. Norway, Sweden, Finland, Iceland and even Canada) as well as Greenland.  The raw material processing activities are highly relevant to securing a more stable supply of these materials, and therefore the funding under the facility could also support infrastructure associated with raw material processing activities (although the majority of process is likely to be outside Greenland in facilities in the Nordic area/EU or Canada), as well as that associated with mining.  Much of the infrastructure would be anticipated to be specific to the raw materials sector (and potentially a single entity), and likely to have minimal other need, so there would be a risk that the infrastructure would not be used after the life times of the mines, and innovative designs/concepts may be needed to enable recycling of infrastructure, so to avoid short payback periods.

Once such a facility is approved and set up, it generally has a benefit that it speeds up the lending process and reduces potential associated bureaucracy.

Link with past activities/existing goals, strategies, projects

The Letter of Intent between the EU and Greenland on co-operation in the area of mineral resources (2012) recognises the need for development of the mineral resources sector in Greenland as a potential lever for economic diversification. In addition, the subsequent EU-Greenland Agreement on relations between the EU and Greenland and the Kingdom of Denmark (2014)121 covers six areas of co- operation, one of which is natural resources (including raw materials). The proposal from the Government of Greenland on areas of co-operation with the EU in 2012 included contributing to the sustainable development of Greenland in the mineral resources area, and a speech122 by the former Prime Minister of Greenland in 2014 specifically suggested the need for dedicated funds to mobilise private investments in Arctic countries through institutions such as the IFC and the NIB. The set-up of a facility for investments in infrastructure is therefore in line with these agreements and policy directions, and also consistent with the objectives of expansion of the mining sector in Greenland's Oil and Mineral Strategy (2014-2018)123.

There are several examples where IFIs such as EIB, EBRD, World Bank have set up facilities or funds for investment in specific sectors across regions. Examples include the Green Growth Fund124 (EIB/KfW) for energy efficiency and renewable energy investments in SE Europe; and the Facility for Euro-Mediterranean Investment and Partnership125 (FEMIP), which is a multi-donor, multi-sector fund that supports private sector development in the Mediterranean partner countries, although these examples do not specifically cover the raw materials sector. Amongst its portfolio of projects126, in the mining sector, the EIB does have experience in funding infrastructure related to mining projects (e.g. in Madagascar (Ambitovy) and Mozambique (Kenmare)). The NIB web site127 lists 8 loans since 2007 linked to the mining sector, although none of these were specifically for infrastructure, a number included infrastructure aspects (e.g. the loan for the expansion of the Boliden Mineral AB. Sweden, which included improvements in the infrastructure in the mine area128). The governance structure of the EU Africa Trust Fund129 is also a possible example of an approach which could be used in

121 Council Decision 2014/137/EU 122 The Arctic Summit (March 2014, London) - Speech by Premier Aleqa Hammond: "Open for business - developing the Arctic's economic potential." 123 http://www.govmin.gl/images/stories/about_bmp/publications/Greenland_oil_and_mineral_strategy_2014-2018_ENG.pdf 124 Green Growth Fund: http://www.ggf.lu/ 125 FEMIP http://www.eib.org/projects/regions/med/trust-fund/ 126 Examples of EIB mining projects: http://www.eib.org/infocentre/press/news/all/eib-financing-for-mining-projects.htm 127 http://www.nib.int/search?search=mining 128 http://www.nib.int/loans/agreed_loans/296/boliden_mineral_ab 129 http://www.eu-africa-infrastructure-tf.net/about/governance/index.htm

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Greenland/Arctic Region and should be evaluated by the project. Finally, the EU (including the EIB) and African Union are currently examining how the EU and the AU can work together to assess and improve the infrastructure needs of the raw materials sector in Africa130.

Private sector initiatives for investment in the raw materials sector in Greenland have been minimal to date. Alcoa has expressed interest in potential investment in an aluminium smelter, and the related investment in a power plant, although there has been no significant progress reported in the planning.

5.2.1.4 Overall objective

 To facilitate sustainable EU investment in the raw materials sector in Greenland and other Arctic countries.

5.2.1.5 Specific objectives of the project

 To carry out a needs assessment and feasibility study for establishing an investment and infrastructure facility to cover Arctic countries, including Greenland.  If the feasibility study is positive, then to plan the operational framework for the facility.

5.2.1.6 Expected/Potential Results

The expected outputs of the project will be:

 Report on the needs assessment for the facility.  Workshop and individual consultation on the needs assessment (notes of workshop).  Report on feasibility study on the facility.  Workshop on feasibility study (notes of workshop).  Summary report on all consultation activities.  Report on the operational framework for the facility.  Final report on specific next steps (i.e. tasks to obtain agreement on operational framework for the facility).

The expected results of the project will be the agreement on the set up of the investment and infrastructure facility and agreement on the plan for the operational framework for the facility.

5.2.1.7 Activities

The following tasks would be expected under the project:

Task 1 – Needs Assessment for the Facility

The project inception phase would involve a rapid assessment to confirm the needs of an investment facility in Greenland. The task would involve preliminary consultation with relevant stakeholders from Greenland, other Arctic countries, EIB, NIB, etc. A small workshop could be held to present the findings of the needs assessment and to gain agreement to continue to the feasibility study. There would be some overlap of tasks in the needs assessment with the feasibility study, with the needs assessment carrying out preliminary analysis of options and then more detailed analysis being carried out under Task 2. Examples of points to consider in Tasks 1 and 2 are provided below (under Task 2 activities).

Task 2 – Feasibility Study on the Facility

130 http://www.africa-eu-partnership.org/newsroom/events/eu-au-joint-session-infrastructure-raw-materials-sector

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A more detailed feasibility study will be carried out under Task 2, with comparison of advantages and disadvantages of various options related to the design of the facility. Points to consider in the needs assessment and feasibility study will include:  Assessment of the option of direct lending by EIB (or other finance institutions) for infrastructure projects, compared to the option of setting up a facility;  Options for different partners of the facility;  Options for the responsibility for management of the facility, for example by EIB, NIB or other institutions;  Identify the scope of work (terms of reference) for the facility, for example probably covering raw material processing activities as well as mining;  Identify the region and countries covered by the facilities;  Assess options for inclusion of TA components of the facility, including identifying funding sources for the TA, and the activities that can be funded by the TA;  Taking into account lessons from other similar multi-country funds under World Bank, EIB, EBRD, NIB, etc.;  Consider wider options for the development of the raw material sector and improving the reliability of supply to the EU, for example the potential for a processing plant to be located in Greenland or Iceland (where power infrastructure is more readily available), or for using existing processing facilities in Canada, depending on existing capacity;  Include consideration of the role of Canada, taking into account the competitive aspects;  Consider local capacity to implement the infrastructure projects, and the links to Project 8 on the development of administrative capacity.

A larger workshop on the results of the feasibility study will be held, and there will be detailed consultation throughout this task with relevant stakeholders. A summary report on all consultation activities will be produced.

The feasibility study will be developed in final draft form before the workshop so that written comments can be obtained, as well as discussion at the workshop.

Task 3 – Design of the Operational Framework for the Facility

Based on the agreed format and scope of the facility under Task 2, the detailed design of the operational framework for the facility will be developed. The report on the operational framework for the facility will include the draft terms of reference for the facility, criteria for project funding (including TA projects), responsibilities for management, etc. For example, the facility might be set up with steering committee, secretariat, fund management team etc., similar to the existing EU Africa Infrastructure Trust Fund131.

A final report on specific next steps will also be produced, which will identify the tasks to obtain final agreement on the operational framework for the facility.

5.2.1.8 Resources

The project to carry out the needs assessment, feasibility study and plan the investment and infrastructure facility will require a small team of consultants with experience in setting up similar funding mechanisms and a strong understanding of the raw materials sector.

It is envisaged that 12-18 person months of input would be needed.

A substantial travel budget would be required to ensure detailed consultation, which will be essential to obtain the commitment of key stakeholders.

131 http://www.eu-africa-infrastructure-tf.net/about/governance/index.htm

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5.2.1.9 Implementation schedule (indicative)

The timescale for the implementation of the project to carry out the needs assessment, feasibility study and plan the investment and infrastructure facility will be 12 months, with the following indicative milestones:  Months 1 to 2 – Project inception and needs assessment.  Months 3 to 8 – Feasibility study.  Month 8 – Main workshop on feasibility study.  Months 9 to 11 – Design of the operational framework.  Month 11 – Final draft report.  Month 12 – Final report.

5.2.1.10 Sustainability

The sustainability of the project depends on the commitment of any involved stakeholders to the implementation of the facility, and therefore the consultation activities in the planning project will be particularly important.

As well as ensuring the on-going commitment of the relevant parties and financial institutions, the sustainability will also depend on the interest of private investors in the raw materials sector, and the availability of bankable projects.

In the longer-term, when the facility is in operation, the sustainability of the investments will be in part compromised by the fact that much of the infrastructure might not be used when the mines are closed.

5.2.1.11 Risks to the project

The main risks to the project are covered in the section on sustainability above, in particular the risks related to the commitment of the relevant national governments and financial institutions.

If the facility was just set up for investment in Greenland, then there would be a risk that its use would be minimal, and therefore the design is likely to have multi-country Artic region coverage.

There are risks that the private investors (e.g. mining companies) will not be interested in using the facility.

Any limitations in the options for raw materials processing might also affect the interest in investment in mining in Greenland, and the planning of the facility will therefore need to take into account coverage of investments in processing activities.

5.2.1.12 Information on partners

Partner Summary Ministry of Mineral Resources132, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland. issues, marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. Ministry of Finance133 (Greenland). The Ministry of Finance of Greenland is responsible for the budget of the Government of Greenland and would be a major stakeholder in an investment facility. European Investment Bank (EIB)134 The European Investment Bank is the European Union' bank. Its mission is to

132 Ministry of Mineral Resources http://www.govmin.gl/ 133 Government of Greenland web site http://naalakkersuisut.gl/en/Naalakkersuisut 134 http://www.eib.org/

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promote EU's objectives by providing long-term financing on favourable terms Nordic Investment Bank (NIB)135 NIB finances projects that improve competitiveness and the environment of the Nordic and Baltic countries (Iceland, Norway, Sweden, Denmark, Finland, Estonia, Latvia, and Lithuania).

5.2.2 Voluntary Raw Materials Supply Chain Certification

5.2.2.1 Basic information

Co-operation area: Improving Investment Conditions/Adequacy of Infrastructure. Needs assessment and feasibility study for establishing a voluntary supply Specific co-operation area: chain certification process for minerals originating in Greenland. Consultancy assignment for time period of 12 months with an input of 12 to Project overview: 18 person months in total, including consultation activities. Government of Greenland:  Ministry of Mineral Resources (MMRMIM),  Environment Agency for the Mineral Resources Activities (EAMRA), and  Mineral Licence and Safety Authority (MLSA). EU  DG Growth.  DG Trade Implementing agency/ Involved  Possibly member states active in raw materials parties/ potential partners: Others  Mining companies and potentially other Arctic governments and agencies  Industry bodies (e.g. German BDI136)  Refining companies  Electronics and other downstream industry bodies  Non-Governmental Organisations/Civil Society e.g. CSR Europe137 EU DG Growth and/or DG Trade (for the needs assessment and feasibility Funding sources: study). EU Partnership Instrument for discussions with international partners

5.2.2.2 Policy/ programming prerequisites/changes required

An initial study on this issue could be funded by DG Growth or DG Trade. The study would evaluate the advantages and disadvantages of establishing a voluntary CSR-style supply chain, as well as examining the most likely and appropriate sources of funding for a CSR-style supply chain certification process.

In terms of ongoing funding for any certification system, funds could come from a range of sources, including from development programmes aimed at supporting transparency in mineral supply chains (e.g. Kimberley, EITI etc.). Alternatively, the feasibility of industry self-financing certification could be examined.

Overall the main barrier to such systems may relate less to levels of financing and funding available and more to potential opposition from industry and governments. Therefore, European Commission trade and enterprise policy support, as well as the buy-in from important downstream industry players, for such a certification system would be essential.

5.2.2.3 Description

Background and justification

135 http://www.nib.int/about_nib/vision_mission 136 An umbrella association of German Industry: www.bdi.eu 137 http://www.csreurope.org/

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In addition to the need to reduce the supply risks associated with sourcing of critical raw materials, there is also a need to reduce the social and environmental impacts of such sourcing. In light of the increased focus in sustainable responsibly-produced and processed commodities in other areas, the coming years may see a growing desire from manufacturers and their customers for transparent, sustainable supply chains. In addition, as many raw materials go into goods which are classified as environmental or renewable, it would be coherent on the part of many downstream manufacturers to promote the sourcing of these materials from countries which adhere to ‘best practice’ rules.

Against this background, the introduction of a voluntary supply chain certification process for minerals originating in Greenland is considered likely to add value to minerals originating in Greenland. As well as such CSR certification being expected to enable better access of Greenland’s raw materials into the global markets, the interest of downstream producers can potentially increase the attractiveness of investors to funding mining and associated projects in Greenland.

For its part Greenland has demonstrated its support and interest in similar schemes. For example it is taking part in the EU system to implement the Kimberley process138, and in doing so has become the first OCT to become part of the Kimberley Process (KP) – there are 54 members of the Kimberley Process, with the EU counting as a single participant. The Kimberley Process membership effectively means that Greenland can only export raw diamonds to other countries participating in the Kimberley Process. In addition to being part of the Kimberley process, Greenland participates through its co- operation with the EU. Therefore there is already a precedent in place whereby the EU and Greenland co-operate on both the political and administrative levels to ensure sustainable sourcing of minerals.

The project would evaluate the options for developing such an approach further, and adopting or building on similar schemes to control imports by EU metal processors of conflict minerals139. It would also evaluate the applicability of other international and industry practices such as those presented in the table below.

Organisation/Initiative Website Aluminium Stewardship Initiative which is supported by a http://aluminium-stewardship.org significant number of EU Companies such as BMW. Global Reporting Initiative. https://www.globalreporting.org International Council on Mining and Metals (ICMM)’s 10 http://www.icmm.com/our-work/sustainable- Principles signed up to by a number of European mining development-framework/10-principles companies e.g. Anglo-American. UN Global Compact https://www.unglobalcompact.org/ Extractive Industries Transparency Imitative (EITI) implemented, or https://eiti.org/ being implemented, by a number of European Countries e.g. Norway. EU Rare140 partially funded by the European Commission http://eurare.euhttp://euare.eu NordMin Programme funded by the Nordic Council of Ministers. http://www.norden.org/en/nordic-council-of- ministers/council-of-ministers/nordic-council- of-ministers-for-business-energy-regional- policy-mr-ner/nordmin

This tabled list is not exhaustive and other industry bodies and companies141 would need to be evaluated and, where considered appropriate, contacted for their views and opinions as stakeholders.

138 The Kimberley Process (KP) is a joint initiative of governments, industry and civil society to stem the flow of conflict diamonds – rough diamonds used by rebel movements to finance wars against legitimate governments. 139 This scheme is focused on conflict-affected and high risk areas, but key CSR principles could be adopted for a sustainable mining system for Greenland and/or other stable source countries. 140 The main goal of the EURARE project is to set the basis for the development of a European Rare Earth Element (REE) industry. It will safeguard the uninterrupted supply of REE raw materials and products crucial for sectors of the EU economy (including automotive, electronics, machinery and chemicals) in a sustainable, economically viable and environmentally friendly way. 141 for example those on the EC raw materials links: http://ec.europa.eu/enterprise/policies/raw-materials/links/index_en.htm

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The objective would be to identify either an existing system which can be adopted for Greenland or scope a CSR-style supply chain certification process that will deliver the necessary robustness and consumer confidence to achieve the project aims. One of the keys to the success of any such system will be its ease of use (i.e. lack of bureaucratic burden), its transparency and auditability, as well as it defensibility.

Overall, the undertaking of a needs assessment and feasibility study for establishing a voluntary supply chain certification process, for minerals originating in Greenland, will enable decision makers in the EU to determine whether such a scheme should be supported and promoted to mining companies, industry and investors.

Link with past activities/existing goals, strategies, projects

As mentioned above there are current projects which are being undertaken (such as the implementation of the Kimberley process). However, there has not been a higher level raw materials supply chain developed that covers a wider range of CSR issues and is not just focused on an issue such as conflict minerals. This project will seek to address and evaluate potential solutions, and learn lessons from other schemes.

5.2.2.4 Overall objective

The overall objective of the project is to contribute to a more financially and regulatory conducive market in Greenland that will encourage the exploration and development of mineral resources which can ultimately supply the European Market.

In the short term it should encourage preferential financing of mining industry in Greenland, and in the longer term the diversification of global REE supplies and a reduced likelihood of market spikes and raw materials shortages which would detrimentally impact European manufacturing and consumers.

5.2.2.5 Specific objectives of the project

The specific objective of the project is to evaluate the need for and feasibility of implementing a voluntary supply chain accreditation process for minerals from Greenland which could make them preferentially sought by European manufactures and their customers. This should strengthen and stabilise supply chains and differentiate Greenland minerals from those resourced from the rest-of-the- world where CSR considerations are less.

For Greenland the objectives of the project over the short term are:

 facilitate the promotion of Greenland as a mining destination;  open up access to new and/or potentially cheaper sources of financing for the mining industry;

In the medium to long term the objectives would be:

 increasing revenue from the mining sector and strengthening Greenland’s budgets and balance of payments  enable Greenland’s mining industry to demonstrate responsibility and provide independent, credible and verifiable proof of its environmental, social and governance performance;  reinforce and promote consumer and stakeholder confidence in mineral products from Greenland;  provide the basis for a system that would enable the identification of suppliers and materials throughout the supply chain, based on their sustainability;  reduce reputational risks concerning mining and mineral processors; and  address the needs of end-use customers and consumers for traceability of minerals throughout the value chain.

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5.2.2.6 Expected/Potential Results

If it is demonstrated that there are clear benefits to implementing a CSR-Style supply chain certification process, and stakeholders are generally in agreement, the outcome of this project will be a scope of works and plan its development and implementation.

The project would be expected to take 12 months to implement and deliver. Indicators of its success would be:  Delivery of detailed scope of works, schedule and budget for the development and implementation of a supply chain accredited system. This would include the following:  Report on the study presenting the actions undertaken and the outcomes;  List of stakeholders consulted in the process and a summary of their views;  Details of the funding mechanisms for the development of the system and its on-going support;  Affirmative buy-in from stakeholders through the supply chain;  Positive interest from Greenland in the form of a written letter of support.

5.2.2.7 Activities

The activities which would need to be undertaken to deliver this project can be summarised as a series of tasks, which are presented below:

Task 1 – Needs assessment and consultation

Under this initial task there would be detailed consultations with all potential stakeholders on the need for, and advantages and disadvantages of, setting up a CSR-Style supply chain certification process. The selected stakeholders to be consulted are expected to include the Ministries in the Government of Greenland, European Commission DGs, mining companies and industry specific organisations, accreditation authorities, smelters, electronics industry representatives, environmental goods manufacturers and users, NGOs, research institutions, and other parties identified by the study.

The consultation would aim to gather the collective views and opinions from the different parties on developing the CSR-Style supply chain concept, it would seek to gather best practice, link to existing or developing schemes, and further quantify the benefits and risks of the project. It would also seek consensus on and definition of the responsible parties for the development, implementation, and support of a CSR-Style supply chain for minerals from Greenland.

To effectively implement this task there is a requirement for face-to-face consultation with stakeholders in Greenland, EU offices, and other European Countries.

Task 2 – Research into CSR Approaches

Whilst leading mining companies have signed up to CSR principles either voluntarily, due to market requirements, or as a result of customer demands, it is thought that a supply chain certification scheme has not been previously implemented for a group of raw materials, or for a supply chain. Under this Task, the team would undertake research into existing company, and similar, CSR schemes, and the accreditation approaches which have been taken, to develop a detailed appreciation of good practice and key lessons learnt.

The outcome would be a description of how a robust supply chain could be developed which addressed issues such as traceability, and avoiding dilution of the raw materials by those from non- CSR sources.

Task 3 – Development of Detailed Description of Voluntary Supply Chain Certification Process

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The outcomes of Tasks 1 and 2 will be integrated and a detailed description of the structure of the scheme generated. This will include detail on the responsible parties for the various aspects of the scheme (implementation, funding, ownership, auditing, governance, etc.).

The outcome of Task 3 will be submitted for consultation to selected stakeholders to ensure that there is maximum buy-in for the scheme from all parties so as to increase the certainty of the success of its role out. Consideration should also be made for the early promotion of the scheme to potentially interested parties such as mining companies, investors, carriers, and industry customers.

Task 4 - Development of detailed scope of works, schedule and budget for the development, implementation, promotion and support for the scheme

Once the detailed description of the project has been completed, the scope of works to develop and finalise the scheme ready for implementation will be developed. In addition to the detailed scope of works, a schedule with allocation of responsibility, and a budget will be finalised. In addition a provisional scope of works and budget for the implementation and support of the scheme will be developed, and then finalised once the scheme was ready for implementation.

5.2.2.8 Resources

The project to carry out the needs assessment, feasibility study and plan the supply chain structure and accreditation approach will require a small team of consultants with experience in setting up similar accreditation scheme and a strong understanding of the raw materials sector. To deliver this it is envisaged that 12-18 person months of input would be needed.

A substantial travel budget would be required to ensure detailed face-to-face consultation is undertake, which is considered to be essential to obtain the views and commitment of key stakeholders.

5.2.2.9 Implementation schedule (indicative)

It is envisaged that the timescale required for the project to undertake the needs assessment, feasibility study and produce a detailed plan and scope for the supply chain process will be 12 months, with the following indicative milestones:  Months 1 to 2 – Project inception and needs assessment.  Months 3 – Report on outcome of needs assessment and stakeholder consultations  Month 4 to 8 – Feasibility study on Supply Chain Process.  Month 8 – Workshop on Supply Chain Process.  Months 9 to 11 – Design of the Supply Chain Process.  Month 11 – Final draft report.  Month 12 – Final report.

5.2.2.10 Sustainability

The sustainability of any supply chain will depend on the system being supported by the Greenland Government and by the EU, with the promotion of the scheme to the EU and international markets to engender interest from investors and buy-in from mining companies. This is likely to include a requirement from the Greenland Government that all mining operations meet the supply chain requirements and that a suitable audit trail is put in place. It is also crucial that the scheme is viewed as adding value to business and not an extra administrative burden, and hence it design must be well thought through, and it needs to be promoted.

5.2.2.11 Risks to the project

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Some of the principle risks to the success of the project and its future sustainability are presented below. These and other stakeholder concerns would need to be addressed by the project to ensure that these risks are minimised and/or mitigated:  A lack of a funding mechanism to support the development and implementation of a supply chain certification process;  Rejection by the Greenland Government of the idea of imposing such a process to its raw material exports (e.g. due to then considering it burdensome or to not add value);  A lack of promotion of the scheme to the market leading to limited demand and therefore limited added value for Greenland’s raw materials, and no uptake by mining companies or markets; and,  Issues around purity of the supply chain through the refining process being unresolvable due to the limited global refining capacity  The lack of processing facilities for certain materials may impede the ability of downstream manufacturers to source sustainably (however this issue is chicken-and-egg as most sourcing at the moment comes from countries which are characterised by a high degree of supply environmental risk.

5.2.2.12 Information on partners

Partner Summary The Ministry of Mineral Resources is responsible for policy, strategy, legal Ministry of Mineral Resources issues, marketing of mineral resources in Greenland and socio-economic (http://www.govmin.gl/) issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. The Mineral Licence and Safety Authority (MLSA) is the overall administrative authority for licences and mineral resources activities, and is the authority for Mineral Licence and Safety safety matters including supervision and inspections. Licensees and other Authority parties covered by the Mineral Resources Act communicate with the MLSA ([email protected]) and receive all notifications, documents and decisions from the MLSA. The MLSA would be expected to be a key player in the auditing of the CSR-style supply chain in Greenland. Environment Agency for the Mineral Resources Activities (EAMRA) is the Environment Agency for the administrative authority for environmental matters relating to mineral Mineral Resources Activities resources activities, including protection of the environment and nature, ([email protected]) environmental liability and environmental impact assessments. In this role it would be a key stakeholder in the design of the CSR scope.

5.3 Enhancing Geological Knowledge

In line with the findings on risks presented in section 2, although the level of geological knowledge available for Greenland is relatively high for certain regions compared with certain other resource rich countries – in particular in the developing world, It is often described as ‘under-explored’ in relation to mineral resources; knowledge of Greenland’s geology can be significantly enhanced. In addition to being of interest for the EU, additional geological knowledge is a stated main and immediate priority of the Greenland government.

On the downside, while the results of such investments can be uncertain and long term, the costs are substantial. For example, potential investments in data collection, drill core storage, enhanced earth observation would run into several tens of millions of euro. Therefore a further examination of the potential long term of interests of the EU would need to be considered.

5.3.1 Use of Earth Observation systems to support geological mapping in Greenland

5.3.1.1 Basic information

Co-operationCo-operation area: Enhancing Geological Knowledge Specific co-operation area: Explore how Greenland can benefit from EO systems to map geology,

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deep seated structures, alteration and mineralisation patterns, vegetation mapping etc. relevant to exploration and mining activities. Implementation of subsequent measures. Project overview: 5-10 year programme Implementing agency/ Involved Ministry of Mineral Resources in Greenland. parties/ potential partners: European Space Agency (ESA) including Copernicus/GMES. NASA EnMAP (Germany). EU DG Growth. Mining and exploration companies. Geological surveys. Possible funding sources: EU DG Growth Copernicus EU Geological surveys. Mineral exploration companies

5.3.1.2 Policy/ programming prerequisites/changes required

At the moment it is not clear how EU policy and programming instruments related to earth observation cover extraction and minerals activities. The scope of such policies as well as eligibility for funding needs to be clarified. This could be done through an initial study on potential benefits for geological knowledge from Copernicus and then on an ongoing basis from dedicated Copernicus funds. EU geological surveys could also be involved.

5.3.1.3 Description

In general, mapping of geology and the processes associated with the formation of the geological landscape is a must-have for all countries that wish to utilise their mineral wealth for economic development. All major nations have geological survey organisations and have pursued this goal for a long time, always contributing to and benefitting from the development of the Earth Sciences. In modern times, geological, geochemical, geophysical programmes have been carried out in many nations of the developing world financed by e.g. the World Bank and EU, as the first step in major development programmes aimed at bringing natural mineral resources to the forefront of the national development. Thus, today many poorer nations in e.g. Africa have full coverage with this type of data and attract the attention of the international exploration industry.

Greenland has been the object of geoscientific research and surveying in more than a hundred years, but its small economy could not and cannot support the surveying in sufficient scale; major regions have still not been surveyed. Over the last twenty years, the acquisition of geophysical data, and the use of satellite remote sensing data based on public funding has been significant, but the continued financing of the operations have been difficult or impossible to maintain. This is a hindrance for Greenland’s attempts to benefit from the use of its natural resources.

The enormous and largely uninhabited regions of Greenland, with sparse vegetation and well-exposed geology, are ideal for Earth Observation (EO) and here the need is still for satellite carried instruments tuned for geological purposes. For other aspects life and society in Greenland, the same satellites as in Europe can be used for monitoring and change, but the pristine geology calls for another type of satellite. Thus it is not only a question of coverage, but also the type of coverage. A study of the many satellite projects underway globally can help decide on which satellite data to prepare for and to use.

In the area of earth sciences, satellite data of many types have already been used in geological mapping and exploration by research institutes and the exploration industry working in Greenland. This encompasses satellite measuring physical parameters such as the earth’s gravity and magnetic fields as well as remote-sensing of the Earth’s surface. Recently, the emphasis has shifted toward the use of hyperspectral data from both satellites and aircraft. Supporting national programmes of traditional geophysical surveying is an integral part of Greenland’s natural resources management and exploration; approximately half of the ice-free area is still not surveyed geophysically. Hyperspectral

118 measurements from aircraft are limited to a few selected regions on the West coast and on the east coast.

EO monitoring of changes is expected to become more important in the future, e.g. monitoring the effects of mining (Greenland participated in the MINEO project); the expected changes due to global warming will give rise to new needs for monitoring traffic at sea and parameters for various hazards. This goes beyond the earth sciences as such, but underlines the need for competence and facilities in Greenland that can exploit the EO possibilities of the future, e.g. Sentinel142 and EnMAP143.

Facts about the MINEO project

MINEO - Monitoring and assessing the environmental impact of mining in Europe using advanced Earth Observation Techniques) - was funded through the European Commission under the 5th research framework programme. The project involved nine partners from Denmark, Finland, Germany, the UK, Austria, Portugal, Italy and France.

The general objectives of the project were to: - Improve the already proven hyperspectral imagery capabilities in mineral mapping to the mapping of mining-related contaminated areas in European vegetated environments. - Prepare tools for regular updating of environmental databases from very high-resolution future spaceborne missions.

These objectives were met through mapping at six mine test-sites in Europe and Greenland with different climatic and socio-economic background.

The Danish Centre for Environment and Energy was, together with GEUS, responsible for the fieldwork carried out at the Arctic site in Mestersvig, NE-Greenland. The test-site at Mestersvig was centered around an old lead- zinc mine, where mining took place between 1956-1963 and where most environmental issues are related to the redistribution of the tailings deposit.

The field work in the Mestersvig area proved that the hyperspectral data can provide a background for a more accurate delineation of sources of pollution and polluted areas. This can have at least two important perspectives: Monitoring costs of mining operations will decrease and delineation of pollution will be much better defined. In addition to this, it will also be possible to assess long term pollution effects on vegetation types.

Using the same equipment but different funding, several classical mineralised sites in East Greenland and a kimberlite region in central West Greenland was surveyed (principal investigator: GEUS), and the methods for extracting information from hyperspectral data to such geological sites was examined.

5.3.1.4 Overall objective

 To identify and utilise all relevant EO-data for mineral resource exploration management in Greenland.

5.3.1.5 Specific objectives of the project

 To carry out specific a scoping survey of available and future EO data of relevance for the exploration, utilisation and for the monitoring of change brought about by future mining;  To test out selected types of data in realistic model cases;  To empower Greenland authorities with competence and facilities for the use of EO data in their monitoring of various aspects of exploration and mining.

5.3.1.6 Expected/Potential Results

 Knowledge of best suited EO systems;

142 https://sentinel.esa.int/web/sentinel/home 143 http://www.enmap.org/

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 Basic material for the development of national competences and facilities for the use of EU data;  Studies of real case scenarios based on known mineral resources in various geological environments: exploration, monitoring of production and change of the environment;  Adding relevant EO data to the geoscience database available for public research institutions and industry.

5.3.1.7 Activities

Task 1; Survey of suitable EO systems: There are many systems operational at the present time and more are becoming active, run by NASA and ESA and increasingly private operators. The most promising must be selected and examined in detail as to operational conditions, coverage, costs etc.

Task 2: Identify a small number of suitable deposits and carry out realistic evaluations of how these can be detected by EO methods, and how their conditions could be monitored in case of mining being initiated.

Task 3: Analysis of ways to implement facilities and competences in the Greenland administration

Task 4: Implementation of surveys and other data acquisition

5.3.1.8 Resources

Suitable organisations well versed in EO matters would have to be involved. There are several EU programmes touching on these subjects and their expertise could be involved. In the order of 12 person months are estimated as required to conduct the scoping survey. In addition, further funding would be required for collection of the EO data either as a direct cost to the data provider for gathering the data (NASA, ESA, EnMAP etc.) or to the data collector (e.g. NERC144) if the data collection is conducted as airborne surveys. Funding should also be available for the processing and interpretation of the data.

5.3.1.9 Sustainability

The activity is sustainable because EO techniques can be expected to be a major player in all future activities related to the subject matter of this project. The sustainability of the project depends on the impact the new data has on the level of knowledge in an area and to which extent increased EO knowledge results in the increased investments and identification of new resources.

5.3.1.10 Risks to the project

The main risks to the project are that the EO data and techniques do not necessarily result in increased prospectivity leading to new discoveries. The risk, that private exploration/mining companies will not use the data can be mitigated by ensuring sufficient dissemination of the data.

5.3.1.11 Information on partners

Partner Summary Ministry of Mineral Resources145, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland. issues, marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. The Ministry

144 The Natural Environment Research Council (NERC) is the UK's largest funder of independent environmental science, training and innovation, delivered through universities and research centres: http://www.nerc.ac.uk/ . 145 Ministry of Mineral Resources: http://www.govmin.gl/

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is also responsible for the budget of the Government of Greenland and would therefore be a major stakeholder in an investment facility.

5.3.2 Regional data collection programmes to support mining and exploration in Greenland

5.3.2.1 Basic information

Co-operation area: Enhancing Geological Knowledge Improve the regional coverage of basic regional geological data i.e. Specific co-operation area: stream sediment data, geophysical and seismic data as well as 3D data to attract mining and exploration companies Project overview: 5-10 year programme Ministry of Mineral Resources in Greenland. Implementing agency/ Involved EU DG Growth. parties/ potential partners: Mining and exploration companies. Geological surveys. EU DG Growth for any study EU Regional funding/Horizon 2020, mining and exploration companies, the Funding sources: government (Greenland and Denmark) and EU Geological Surveys for any on-going funding

5.3.2.2 Policy/ programming prerequisites/changes required

The main tools available to the EU in terms of supporting Member States improve their scientific capacity, and hence geological knowledge, are found in the area of regional policy. Unlike other areas where Greenland’s eligibility is not certain, it is clear that Greenland is not eligible for the vast majority of EU regional funds.

Nevertheless as Greenland is party to the albeit small Northern Periphery interregional programme, this would appear to suggest that interregional programmes specifically dedicated to minerals and related activities, as well much increased funding, could be considered in the future. However, as investments in geological knowledge require significant sums, such a programme would require substantial funding, such as that provided to funding of geological knowledge in Ireland in recent years.

Another potential but difficult, and therefore second best, source of funding is Horizon 2020. A specific area to be included with SC5 on raw materials could cover geological knowledge in extreme environments/in the arctic.

5.3.2.3 Description

Background and justification

Improved modern coverage of basic regional geological data is needed in order to identify and evaluate regional mineral endowments in Greenland. Such regional data is a prerequisite for modern exploration and evaluation work. Basic regional datasets can include geological, geochemical and geophysical data. Regional data gathering programs have been undertaken by the Danish and Greenlandic Government for decades, when funds have been available. Additional data collection could help boost the knowledge and derived industry engagement in Greenland and the European Union could play a role in supporting such a boost.

Basic regional data is essential for the mineral exploration industry for selecting areas where exploration and detailed data acquisition programs should take place. At the same time, improved modern basic data coverage allow institutional-driven geological research that will improve the general geological knowledge level, is also a precondition for attracting private funding and initiatives as well as improving the chances for finding new mineral resources. Also, considering Greenland’s

121 geological settings and good rock exposures, a boost in gathering of basic geological data and the associated geological research-initiatives that could be carried out from such data could be utilised to understand geological processes in other areas worldwide; areas that in many cases are not as well exposed as in Greenland.

Link with past activities/existing goals, strategies, projects

The Letter of Intent between the EU and Greenland (2012) on co-operation in the area of mineral resources recognises the need for development of the mineral resources sector in Greenland as a potential lever for economic diversification. In addition, the subsequent EU-Greenland Agreement on relations between the EU and Greenland and the Kingdom of Denmark (2014)146 covers six areas of co-operation, one of which is natural resources (including raw materials).

The proposal from the Government of Greenland on areas of co-operation with the EU in 2012 included contributing to the sustainable development of Greenland in the mineral resources area. In a speech147 by the former Prime Minister of Greenland in 2014, the need for dedicated funds to mobilise private investments in Arctic countries through institutions such as IFC and NIB were specifically mentioned. Facilities for investments in infrastructure is therefore in line with these agreements and policy directions, and also consistent with the objectives of expansion of the mining sector in Greenland's Oil and Mineral Strategy (2014-2018)148.

The proposed ‘Enhancing Geological Knowledge’ project should be cooperated and coordinated closely with the former and present basic data programmes and strategies carried out by the Greenlandic and Danish governments.

5.3.2.4 Overall objective

 To increase the basic data coverage in Greenland and enhance the geological knowledge to facilitate and attract exploration and investment in the raw materials sector in Greenland and other Arctic regions.

5.3.2.5 Specific objectives of the project

 To carry out and support a project that through new data collection increases the basic geological data coverage in Greenland; especially on the following basic data sets:  Geophysical data for near-surface crustal configuration mapping (mainly magnetic, electromagnetic and/or gravity surveys, radiometric);  Geochemical data for mapping of geological environment and mineralising systems (mainly stream sediment and water geochemical surveys)  Other basic data types that also can be considered within the project are:  Photogrammetry;  Geological bedrock mapping;  Deep-seated crustal configuration mapping through seismic (refraction and reflection seismology) and other geophysical methods for deep-crustal data surveys;  To make data freely available to the public for mineral exploration and research;  Publish interpretations of the new data to increase the geological knowledge for the regions investigated.

146 Council Decision 2014/137/EU 147 The Arctic Summit (March 2014, London) - Speech by Premier Aleqa Hammond: "Open for business - developing the Arctic's economic potential." 148 http://www.govmin.gl/images/stories/about_bmp/publications/Greenland_oil_and_mineral_strategy_2014-2018_ENG.pdf

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5.3.2.6 Expected/Potential Results

The expected outputs will be:  New regional data (geophysical, geochemical and geological data) freely available to industry and researchers;  Reports describing and interpreting the acquired data;  Workshops on the acquired data;  Research initiatives based on the new data.

5.3.2.7 Activities

The following tasks would be expected under the project:

Task 1 – Assessment, gap analysis and formulation of strategy for new data collection

The project inception phase would involve a workshop to assess which data types should be acquired and from which areas, and the strategy and timeframe should be outlined. The task would involve consultation with relevant stakeholders from Greenland, from the exploration and mining industry and from European research institutions. The findings would be released as a report that should specifically suggest and outline which new data acquisitions should be undertaken (including detailed description of missions, budget, deliverables, etc.).

A project steering group of the initiative would need to be established, to consist of representatives from different stakeholders (European Commission, representatives for Danish and Greenlandic authorities and research institutions, exploration/mining industry and selected European research institutions). The Steering Group would be responsible for the Task 1 workshop and would also make the decision on the types and specifications of the data acquisition projects that will be carried out. The selected projects will be described in detail and could be sent in public tender.

For each data acquisition project, a contractor (the company or consortia that was awarded the bid) should undertake the management of the project and the geo-scientific research. The data acquisition itself could either be carried out by the contractor or by a contracted private service provider company (especially relevant for geophysical data).

The steering group should ensure quality control of data, data distribution and utilisation and interpretation of data undertaken by the awarded contractor

Task 2 – New Data Acquisition projects

The individual projects that will acquire new data will be initiated. Each acquisition will be followed by the release of new regional data, a report on the acquired data and a subsequent workshop. The workshop will serve to present the new data and stimulate utilisation of the new data by industry and researchers, and should identify new research initiatives that could be based on the new data.

Task 3 – Enhanced Geological Knowledge

Research initiatives identified under Task 2 and interpretation of newly acquired data will be carried out and reported.

5.3.2.8 Resources

Each data acquisition project would require involvement by institutions with experience in Greenlandic geology and expertise in the data types that should be acquired. A substantial budget would be required to carry out new data acquisition. Geophysical and geochemical surveys are costly and have to be carried out under logistical challenging conditions. The project should be for a long

123 period, e.g., 5-10 years, to ensure that data are acquired, quality controlled, released and utilised by relevant stakeholders. A regional geophysical or geochemical survey typically costs €1 million to €1.6 million. With several surveys conducted over a 5-10 year period and including initial assessments and data processing, an overall budget would be €10-15 million.

5.3.2.9 Implementation schedule

The first year of a multi-year data acquisition programme would be dedicated to Task 1.

The following years in the project should be used to carry out the different data acquisition projects, each of which would run for two years; the first for preparation and data acquisition and the second for processing, quality control and publishing of data. Each year the Steering Group should deliver an annual report to the EC.

5.3.2.10 Sustainability

The sustainability of the project depends on the impact the new data has on the level of geological knowledge in an area and on to which extent increased geological knowledge results in the increased investments and identification of new resources.

5.3.2.11 Risks to the project

The main risks to the project are that the increased geological knowledge does not necessarily result in increased prospectively leading to new discoveries. The risk, that private exploration/mining companies will not use the data can be mitigated by ensuring sufficient dissemination of the data.

5.3.2.12 Information on partners

Partner Summary Ministry of Mineral Resources149, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland. issues; marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. The Ministry is also responsible for the budget of the Government of Greenland and would therefore be a major stakeholder.

5.3.3 Development and construction of a central modern drill core storage facility

5.3.3.1 Basic information

Co-operation area: Enhancing Geological Knowledge Support and development of the central drill core storage facility in Specific co-operation area: Greenland with modern methods for storing, handling, logging, and sampling of drill cores 2 years for scoping, feasibility study, design and construction and making the storage facility operational Project overview: 1 year for transfer and re-establishing of drill cores currently stored around Greenland Ministry of Mineral Resources in Greenland. Mining school in Sisimiut EU DG Growth. Implementing agency/ Involved Mining and exploration companies. parties/ potential partners: Geological surveys (SGU, GTK) Royal Arctic Lines (for transport of drill cores) Air Greenland (for transport of drill cores) Funding sources: EU DG Growth for any initial study

149 Ministry of Mineral Resources http://www.govmin.gl/

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EU Regional funding, EU Geological Surveys, Government of Greenland for ongoing financing

5.3.3.2 Policy/ programming prerequisites/changes required

As with the geological data collection, the main policy tools available to the EU in terms of supporting Member States improve their geological capacity – including in physical scientific facilities – are found in the area of regional policy, and more specifically in the area of INTERREG and smart specialisation funding. As above, unlike other areas where Greenland’s eligibility is not certain, it is clear that Greenland is not eligible for the vast majority of EU regional funds. Again, as Greenland is party to the albeit small Northern Periphery interregional programme, this would appear to suggest that interregional programmes specifically dedicated to minerals and related activities, as well much increased funding, could be considered.

5.3.3.3 Description

Background and justification

Readily available and easy accessible geological information attracts exploration companies. The easy accessibility has been greatly promoted by online data of which the internet supports. However, in many cases inspection of rock samples and in particular drill core samples is an important tool in the initial stages in exploration.

Commonly, exploration is an iterative process and it is usually not the first company holding a claim that makes the discovery. Therefore, it is of paramount importance to keep historic data, such as company reports available, as well as making sure catalogued geological, geochemical and geophysical data are stored in an accessible manner and that drill core material is stored properly to ensure future use. Experience from national drill core storage facilities in Sweden (SGU, Malå) and Finland (GTK, Rovaniemi) show that exploration companies make use of these primary geological records by conducting geological core logging and re-assaying previously untested segments geochemically. This is an important stage during the initial phase of entering a new area and helps to focus the formulation of geological exploration models and strategies. It represents a vital step for maximising the outcome of the exploration investment.

Due to the remoteness of many prospective areas and the costs involved in mobilizing drilling equipment the drill cores already generated in Greenland represent a substantial value. It needs to be ensured that these can be reused by future exploration campaigns to increase the chances of ultimately reaching critical mass of information required for discovery.

In Greenland drill core storages are located in Kangerlussuaq and Narsarsuaq on the West Coast and Mestersvig on the East Coast. Exploration companies are obliged150 to deliver in their exploration drill cores for storage when they relinquish a licence if this is requested by the Greenland authorities. However, there are several instances where drill core from historic exploration campaigns have not been moved from the field to these collection points. The existing storage facilities are generally in poor order and provide no infrastructure or service. Here, there is ample room for improvement by considering the experiences from the Finnish and Swedish geological survey with regard to building a centralized core storage facility that is easy accessible and offers good working conditions and support service. By giving the exploration industry better access to original geological data such as drill core, Greenland will be able to attract more exploration companies.

150 According to section 2102 in the Standard Terms for Mineral Exploration Licences in Greenland of 25 June 2013 the Greenland authorities may within 1 year after the expiry of the licence take over, free of charge, all data, drill cores and other samples acquired by the licensee or on his behalf regarding the licence area. Transportation expenses will be paid by the Greenland authorities. After this time-limit the licensee may at any time scrap such data, drill cores and other samples.

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5.3.3.4 Overall objective

 A central and modern drill core storage facility in Greenland could benefit the EU as it will improve the accessibility to geological knowledge and thus increase the level of exploration and mining activities in Greenland.

5.3.3.5 Specific objectives of the project

 To carry out a needs assessment and feasibility study for establishing a central modern drill core storage facility in Greenland.  If the feasibility study is positive, then to plan the design and construction costs for the facility.  Transfer drill cores from all regions of Greenland to the central storage facility  Update the current regulation in Greenland to meet the requirements for a mandatory delivery of drill cores to the central drill core storage for the future (the issue of who should pay the transportation, should also be resolved as neither the Greenland authorities nor the exploration company will be able to carry this cost themselves)

5.3.3.6 Expected/Potential Results

The expected outputs of the project will be:  Report on the needs assessment for the facility;  Workshop and individual consultation on the needs assessment (notes of workshop);  Report on feasibility study on the facility;  Workshop on feasibility study (notes of workshop);  Specific design of the facility;  Tender bid round for the construction of the facility;  Construction and internal design.

5.3.3.7 Activities

The following tasks would be expected under the project:

Task 1 - Scoping Assessment for the drill core storage facility

The scoping phase would involve a rapid assessment to confirm the specific needs related to a central modern drill core storage facility in Greenland. The task would involve preliminary consultation with relevant stakeholders from Greenland, exploration companies, municipalities, mining school in Sisimiut, other Arctic countries, EIB, NIB, etc. The inception phase should include a study trip to SGU’s central drill core facility in Malå (northern Sweden) and to GTK’s drill core facility in northern Finland (Rovaniemi) in order to learn from their experiences. Also, visits to the existing Greenlandic storage facilities shall be carried out to document an accurate picture of the current situation. Furthermore, there should be a mapping project of stocks of drill core from historic drilling campaigns that were never delivered to the collection point. This is indicated by anecdotal evidence and should be clarified by consultation with relevant stakeholders. A workshop should be held to present the findings of the needs assessment and to gain agreement to continue to the feasibility study.

Task 2 - Feasibility Study on the Facility

A detailed feasibility study will be carried out under Task 2, with comparison of advantages and disadvantages of various options related to the design and location of the facility. Points to consider in the needs assessment and feasibility study will include:  Assessment of the option of direct lending by EIB (or other finance institutions) for infrastructure projects, compared to the option of setting up a facility.  Options for different partners of the facility.

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 Options for the responsibility for management of the facility, for example Ministry ofMineral Resources in Greenland, the Mining school or other institutions.

A larger workshop on the results of the feasibility study will be held, and there will be detailed consultation throughout this task with relevant stakeholders. A summary report on all consultation activities will be produced.

The feasibility study will be developed in final draft form before the workshop so that written comments can be obtained, as well as discussion at the workshop.

Task 3 - Design and construction of the Facility

Based on the agreed format and scope of the facility under Task 2, the detailed design and estimated costs of the facility will be developed.

Task 4 – Update current legislation in Greenland

Greenland would need to revise the current legislation so that it would be mandatory for an exploration company to deliver excess drill cores to the core storage facility. The specific details of such requirement and the expenses associated with this should be investigated as part of Task 1.

5.3.3.8 Resources

The setting up of the project needs to ensure that all stakeholders in the Greenlandic geology and exploration sector are included. A project management group should include members from the Greenlandic and Danish governments, the Mining and Contracting school in Sisimiut, company representatives and representatives from the Investment and Infrastructure Facility suggested under Task 1 of this project.

In the order of 24 person months are required to conduct the scoping assessment and the feasibility study.

In addition, funding for study visits to core storage facilities in Sweden, Finland and Greenland are required as well as workshops in Greenland.

It is not possible to estimate the costs related to design and construction of the drill core storage and associated facilities at this stage, and this will be part of the findings of the Feasibility study. However, a rough estimate will be in the area of €3½-4½ million. In addition to that, another €1-2 million is estimated for transportation of drill cores from various parts of Greenland to the new drill core storage.

5.3.3.9 Implementation schedule151 (indicative)

The timescale for the implementation of the project to carry out the scoping assessment, feasibility study and design and construction of the facility is estimated to be around 40 months, with the following indicative milestones:  Months 1 to 2 – Project inception and needs assessment.  Months 3 to 7 – Feasibility study.  Month 7 – Main workshop on feasibility study.  Months 8 to 10 – Design of the core storage facility.  Months 10 to 11 – Tender bid round.  Months 11 to 13 – Contracting, funding etc.

151 The window for construction, mobilisation and transfer of drill cores in Greenland are limited due to the seasonal conditions in Greenland. This is therefore reflected in the implementation schedule.

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 Months 13 to 25 – Construction phase and establishing the facility  Months 25 to 40 – Transfer and re-establishing of drill cores currently stored around Greenland

5.3.3.10 Sustainability

The outcome of the project shall be a core storage infrastructure that has the capacity to hold drill core material generated during future drilling campaigns and provide the services to host exploration company representatives when conducting investigations on legacy material. Hence, the result will be a living institution that sustains the Greenlandic exploration and mining industry on a long term basis.

5.3.3.11 Risks to the project

It is important to highlight that collecting the drill core and securing its future availability is a component of securing the long term viability of mineral exploration in Greenland. Ultimately, some form of funding will be required to ensure the manning of the service facility to maintain the cataloguing work. The quality of the service will be determined by the quality of the planning achieved during this project and the long term commitment for baseline funding.

5.3.3.12 Information on partners

Partner Summary Ministry of Mineral Resources152, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland issues, marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. The Ministry is also responsible for the budget of the Government of Greenland and would therefore be a major stakeholder in an investment facility. The Mining and Contracting school The Mining and Contracting school in Sisimiut offers among others training in Sisimiut courses related to mining and exploration. Examples of courses are: Common core, mining and contracting, blasting, drilling and driving & heavy machine operator certificates.

5.3.4 Enhanced geological knowledge of existing deposits

5.3.4.1 Basic information

Co-operation area: Enhancing Geological Knowledge Further invest in examining and increasing the quality of knowledge on mineral deposits in order to ascertain their geological model and future Specific co-operation area: production potential, with a focus on deposits that are more developed and/or can quickly be brought into production. Project overview: 36 months Ministry of Mineral Resources in Greenland. Implementing agency/ Involved EU DG Growth. parties/ potential partners: Mining and exploration companies. Geological surveys. EU DG Growth for an initial study Funding sources: Regional funding, governments (Greenland, Denmark), mining and exploration companies and EU geological surveys for ongoing funding.

5.3.4.2 Policy/ programming prerequisites/changes required

As with the geological data collection, the main policy tools available to the EU in terms of supporting Member States improve their geological capacity – including in physical scientific facilities – are found in the area of EU regional policy, and more specifically in the area of INTERREG (European

152 Ministry of Mineral Resources http://www.govmin.gl/

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Territorial Co-operation) and smart specialisation funding153. As above, unlike other areas where Greenland’s eligibility is not certain, it is clear that Greenland is not eligible for the vast majority of EU regional funds. Again, as Greenland is party to the albeit small Northern Periphery interregional programme, this would appear to suggest that interregional programmes specifically dedicated to minerals and related activities, as well much increased funding, could be considered.

5.3.4.3 Description

Background and justification

Greenland is endowed with geological settings that record most of Earth’s history and record many different geological environments. Exploration in Greenland has been undertaken by private and institutional institutions for more than hundred years and has successfully, even though Greenland is still very under explored, discovered numerous mineral deposits of various sizes. However, the short period of fieldwork, the remote locations of the deposits often only been visited once and the many deposits which have not seen any thorough research, have often impeded a good and deep understanding of the deposits and its real resource potential. Even large and more explored deposits or deposits that have seen minor historical production lack larger research studies in many cases.

The objectives of this proposed research project would be to devote resources to examine and increase the quality of knowledge on mineral deposits in Greenland in order to ascertain their geological model and future production potential. Focus of the research project should be on deposits that are more developed and/or can be brought into production quickly. One good example could be to investigate the genesis and geological setting of the recent closed Nalunaq Gold Mine, as new knowledge on this type of gold deposits have evolved within the last 10 years and there might be a yet undiscovered potential for other deposits in the area, which could be tested by enhancing the knowledge level.

The geological survey of Finland are actively doing similar knowledge enhancing projects on existing deposits and have succeeded in attracting exploration companies to acquire many of these projects and on special commitments. Such a model could also be suggested for Greenland for the selected deposits that will be chosen as part of this project.

5.3.4.4 Overall objective

 To enhance the geological knowledge of some of the lesser known or lesser studied mineral occurrences and deposits in Greenland and hereby also address their future production potential.

5.3.4.5 Specific objectives of the project

 To assess a selection of the known mineral occurrences and deposits in Greenland and evaluate their current level of geological knowledge. The selection will be based on viability, i.e., deposits that are more likely to be developed towards production in the near to medium term future and/or, at this time, easily can be brought into production relatively quickly.  Based on the state of knowledge for the selected mineral deposits ‘Metallogentic Research Programs’ should be proposed. The programs should aim at increasing the geological knowledge level in order to ascertain the future production potential. The research programs could either be on individual deposits or groups of deposits with similar geological characteristics.

153 Smart specialisation is a new innovation policy concept designed to promote the efficient and effective use of public investment in research. Its goal is to boost regional innovation in order to achieve economic growth and prosperity, by enabling regions to focus on their strengths. Smart specialisation understands that spreading investment too thinly across several frontier technology fields risks limiting the impact in any one area. See: http://ec.europa.eu/research/regions/index_en.cfm?pg=smart_specialisation

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5.3.4.6 Expected/Potential Results

The expected outputs of the project will be:  A report providing an overview of some of the more viable mineral deposits in Greenland including a review of former work, the current level of understanding and proposed ‘Metallogentic Research Programs’.  Reports and publications from a number of ‘Metallogentic Research Programs’ with the aim of increasing the geological knowledge to ascertain future production potential and from that assist the exploration and mining industry.

5.3.4.7 Activities

The following tasks would be expected under the project:

Task 1 – Assess viability of known deposits in Greenland

A Task 1 working group of representatives from research institutions and private industry should be established. The Task 1 working group should review, assess and describe a selection of known mineral deposits in Greenland according to their viability; i.e. their likelihood to be developed towards production e.g. according the commodity they represent, know and potential size of resources and the potential for them to represent an economical, technical and environmental sustainable mining production.

The assessment should end up with a selection of deposits that judged to be more likely to be developed towards production in the near to medium term future and/or, at this time, easily can be brought into production relatively quickly. Each of these deposits (or groups of deposits) should be reviewed in form of former research and exploration work and the current level of understanding, considering both the geological model, technical issues (e.g. mining and processing of ore), economic issues and environmental issues, should be addressed. Based on this ‘Metallogentic Research Programs’ should be suggested for each deposits (or groups of deposits). The programs should identify the geo-scientific research that would be required to increase the level of geological knowledge on the deposit(s) in order to support a development towards production of the mineral resource. The research will in some cases require new analytical work and in some cases maybe also fieldwork.

A Project Steering Group of the initiative should be established. The Steering Group should consist of representatives from different stakeholders (European Commission, representatives for Danish and Greenlandic authorities and research institutions, exploration/mining industry and selected European research institutions). The Steering Group is responsible for evaluating and select which of the research program from Task 1 should be carried out. The selected projects will be described in detail and could be sent in public tender under e.g., Horizon 2020.

For each research programs, a contractor (the company or consortia that was awarded the bid) should undertake the management of the project and the geo-scientific research.

The Steering group should ensure quality control of data and results, distribution and utilisation and interpretation of data and results are undertaken by the awarded contractor

Task 2 – Metallogentic Research Programs on Deposits in Greenland

The research programs defined during Task 1 should be carried out by contractors (see above) and results hereof will be published as reports and international publications.

5.3.4.8 Resources

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The work carried out by the working group in Task 1 is estimated to take one year. The working group would consists of 5-7 persons which each should have 6 months for reviewing, assessing and describing the selection of mineral deposits and develop the Metallogentetic Research Programs. During this process the working group should meet 3-4 times.

The Task 1 work and travel cost is estimated to amount between €350,000 and €500,000.

The Task 2 work ‘Metallogentic Research Programs on Deposits in Greenland’ – a number of research programs will be proposed from the Task 1 work. A present it is hard to estimate how many and the exact budget for each program. It is envisaged that there could be anything in between 5-10 research programs and that each program would be in between €140,000 € to €675.000 depending on the specifications for the research programs and if these include new analytical work and new fieldwork. This means that the total estimated costs of carrying out e.g. 10 research programs would be anything in between €1.4 to €6.8 million. The individual Task 2 research programs are estimated to run for 12– 35 months depending on the different program specifications.

5.3.4.9 Implementation schedule

The timescale for the implementation of the project to carry out the needs assessment, feasibility study and plan the investment and infrastructure facility will be 12 months, with the following indicative milestones:  Months 1 to 12 – Task 1: Assess viability of known deposits in Greenland.  Months 12 to 36 – Task 2: ‘Metallogentic Research Programs on Deposits in Greenland’.

5.3.4.10 Sustainability

The sustainability of the project depends on the impact the new data has on the level of geological knowledge in an area and on to which extent increased geological knowledge results in the increased investments and identification of new resources.

5.3.4.11 Risks to the project

The main risks to the project are that the increased geological knowledge does not necessarily result in increased prospectivity leading to new discoveries. The risk, that private exploration/mining companies will not use the data can be mitigated by ensuring sufficient dissemination of the data.

5.3.4.12 Information on partners

Partner Summary Ministry of Mineral Resources154, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland. issues, marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. The Ministry is also responsible for the budget of the Government of Greenland and would therefore be a major stakeholder in an investment facility.

5.4 Increasing administrative capacity to allow for full participation in a raw materials co-operation arrangement

As noted in section 4, the ability of Greenland and the EU to implement any of the above projects depends on putting in place the right implementation framework wherein policy-makers, experts and industry from both could meet and discuss projects. One way of doing this would be to develop and

154 Ministry of Mineral Resources http://www.govmin.gl/

131 agree on a joint action programme which could include co-operation at both administrative and business levels.

5.4.1 Establishment of a Joint EU-Greenland Action Programme

5.4.1.1 Basic information

Co-operation area: Increasing administrative capacity to allow for full participation in a raw materials co-operation arrangement. Specific co-operation area: The planning of a Joint Action Programme to operationalise the raw materials components of the EU-Greenland Agreement (2014), the Letter of Intent (2012) and the projects identified in the study on EU needs with regard to co-operation on raw materials with Greenland (2015). Project overview: Consultancy assignment for time period of 6 months with an input of about 6 person months in total, and including extensive consultation activities. Implementing agency/ Involved Ministry of Mineral Resources, Government of Greenland. parties/ potential partners: DG Growth, European Commission. European External Action Service (EEAS). Possible funding sources: Costs incurred in initial scoping could possibly be met by Commission own funds, while ongoing funding for a Joint Action Programme could be sourced from the EU Partnership Instrument155.

5.4.1.2 Policy/ programming prerequisites/changes required

The funding of the project to design the Joint Action Programme would be a short consultancy156 project (e.g. 6 months) and could be possibly be funded by the European Commission.

Higher levels of funding might be needed later for the implementation of the Joint Action Programme itself, for example to support an organisational secretariat and any capacity development activities. Such funding could conceivably come from an agreed budget through the EU Partnership Instrument, which is considered to be an applicable route given the EU Partnership Instrument’s aim is to promote co-operation between the EU and non-developing countries/OCTs, such as Greenland. However this would require a larger pot for co-operation with Arctic regions than is currently the case.

The funding for implementation would be for a specified timescale (e.g. 4 years), following which the Government of Greenland would be expected to fund on-going activities through revenues from mining activities (4 years is considered the likely timescale for mining projects to start generating revenues).

Alternative funding for the planning or implementation could conceivably be available under specific EU initiatives, such as the call for proposals in 2014 on strategic international dialogues and co- operation with raw materials-producing countries and industry157 under the Horizon 2020 Research and Innovation Programme.

Additional EU approval on any Joint Action Programme would be managed would be needed, as well as approval of the funding of the relevant associated co-operation projects. A more detailed agreement between the EU and the Government of Greenland would be needed, specific to the Joint Action Programme.

5.4.1.3 Description

Background and justification

155 Partnership Instrument: http://ec.europa.eu/dgs/fpi/what-we-do/partnership_instrument_en.htm 156 This assumes the EU and Greenland do not have internal resources (personnel) available to plan the Joint Action Programme. 157 https://ec.europa.eu/research/participants/portal/desktop/en/opportunities/h2020/topics/2163-sc5-13f-2015.html

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It is likely that the Government of Greenland would need to increase its capacity in order to manage, and administer, the implementation of the raw materials components of:  the Letter of Intent between the EU and Greenland on co-operation in the area of mineral resources (2012);  the Council Decision on EU-Greenland Co-operation for 2014-2020 (2014); and  the projects identified in the study on EU needs with regard to co-operation with Greenland (2015).

In addition, the EU might need additional administrative capacity for these tasks.

This project will therefore relate to the strengthening of the capacity of the Government of Greenland and the relevant EU department (e.g. DG Growth or EEAS), through a Joint Action Programme. This short project will involve the planning of the Joint Action Programme, including a capacity needs assessment, identification of options for the structure of the Programme, selection of preferred option, planning the detailed management framework, planning implementation timescales and planning budgets.

If agreed upon, the main benefit of the Joint Action Programme could be to ensure the efficient implementation of any raw materials components of the EU-Greenland Agreement and the priority projects identified.

There are a number of formats that the Joint Action Programme could take. This project will identify and assess potential options, including, for example, assessing the need for a wider initiative on setting up a trade/business facility. Such a facility would help to engage industry and other stakeholders in the consultation activities under the Joint Action Programme. There are similar trade/business action programmes, such as for example the EU-Gulf Co-operation Council (GCC) Co-operation Agreement, which includes in its remit the intention to broaden co-operation on energy, industry, trade and services, agriculture, fisheries, investment, science, technology and environment.

During the planning, the project could also examine the potential for the Joint Action Programme to cover the development raw materials sector across the entire or a parts of the Arctic Region (e.g. Nordic Arctic, Canada, US), and just be restricted to Greenland.

Link with past activities/existing goals, strategies, projects

The Council Decision on relations between the EU and Greenland and Denmark (2014)158 covers six areas of co-operation, one of which is natural resources (including raw materials). More specifically, the Council Decision states that it should contribute to the capacity of the administration of Greenland to diversify its economy and increase the skills of its labour force. The Agreement also states that EU financial assistance may be given for activities that include institutional development, capacity building and reforms and projects that are in line with the Programming Document for the Sustainable Development of Greenland (PDSD) that is to be developed by the Government of Greenland.

The proposal from the Government of Greenland on areas of co-operation with the EU in 2012 included competence building, engagement and training of staff in the Ministry of Industry and Mineral Resources. A Joint Action Programme to increase the ability of Greenland to participate in a co-operation arrangement with the EU administrative capacity would appear therefore to be in line with the priorities of the Government of Greenland. It would also appear to be consistent with the objective of expansion of the mining sector in Greenland's Oil and Mineral Strategy (2014-2018)159.

158 Council Decision 2014/137/EU 159 http://www.govmin.gl/images/stories/about_bmp/publications/Greenland_oil_and_mineral_strategy_2014-2018_ENG.pdf

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There are a number of examples, such as the example in the box below, where the EU has funded projects to strengthen capacity at counterpart institutions in countries in order to ensure the efficient implementation of future strategies, programmes and projects, and to promote investment.

Example of EU assistance for implementation of agreements with third countries

In 2010, the EU and GCC adopted the Joint Action Programme and laid out a roadmap for promoting common trade interests, ranging from trade, energy and climate change to education, culture and communications, and to reinforcing their trade co-operation.

The EU-Gulf Co-operation Council (GCC) Trade and Business Co-operation Facility160 is being set up in order to implement the main actions contained in the EU-GCC Joint Action Programme of 2010-2013. The objective of the Facility is to strengthen EU-GCC sustainable trade, investment and business co-operation through mutual understanding and dialogue.

The Facility is specifically geared towards three components; policy support, training, and, events and communications161. This is to be managed through a steering committee consisting of EU Officials (from HQ and the concerned EU Delegations), officials of the GCC (if feasible) and the Project Director. Its aims are to increase trade and investment opportunities through enhancing policy dialogues between the EU and GCC policy-makers and business community. For SMEs there will be a particularly focus on – but not restricted to – sectors such as non-energy raw materials, renewables, and/or clean energy and/or energy security and/or energy efficiency and/or sustainable construction but also ICT, transport, water, and waste management.

There may also be strong linkages to the ongoing NordMin programme162, the aim of which is to create a network of expertise which will bring together universities, research institutes, businesses and other entities involved in, or affected by the Nordic mining and mineral industry operations in order to develop the Nordic mining and mineral industry in a sustainable way for increased competition and growth. Based at the Luleå University of Technology in Sweden, while NordMin will close in 2016, the aim is that the network will continue after that as a self-financed organisation.

5.4.1.4 Overall objective

 To facilitate the efficient implementation of any future raw materials components of the EU- Greenland Agreement and priority projects identified, in order to enhance the mutual benefits to both parties in the development of a sustainable raw materials sector.

5.4.1.5 Specific objectives of the project

 To plan the management framework for the efficient implementation of any future raw materials components of the EU-Greenland Agreement and the priority projects identified, within a Joint Action Programme.  To identify and plan capacity development needs under the Joint Action Programme, including timescales and required budgets.

5.4.1.6 Expected/Potential Results

The expected outputs of the project will be:  Project inception report, including stakeholder identification.  Report on stakeholder needs assessment.  Report on options for the management framework for the Joint Action Programme.  Report on the planned management structure for the Joint Action Programme.

160 http://ec.europa.eu/dgs/fpi/documents/grants_tenders/2013_eu_gcc_co-operation/eu_gcc_trade_business_coop_tor_en.pdf 161 http://di.dk/SiteCollectionDocuments/DIBD/AE-Network/Network%20Meetings%202014/Copenhagen%202014/8%20- %20EU-GCC%20Trade%20and%20Business%20Co-operation%20Facility%20-%20Tanderup.pdf 162 http://www.norden.org/en/nordic-council-of-ministers/council-of-ministers/nordic-council-of-ministers-for-business- energy-regional-policy-mr-ner/nordmin

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The expected result of the project will be the agreement on the set up of the Joint Action Programme, including agreement on the management framework and funding of the Programme.

5.4.1.7 Activities

Task 1 – Project inception

The main activities undertaken during project inception will be to identify the relevant stakeholders for setting up the Joint Action Programme. An analysis of similar existing initiatives for co-operation should be carried out, so that applicable lessons can be learned, for example from the Nordmin Programme.

Task 2 – Stakeholder needs assessment

A detailed stakeholder needs assessment will be carried out. This will cover all stakeholders and activities relevant to the development of the raw materials sector in Greenland. This assessment should be much wider than stakeholders relevant to the set-up of the Joint Action Programme because the capacity shortfalls, and training needs, to be identified relate to the overall development of the sector. The stakeholder needs assessment should include stakeholders relevant to the Joint Action Programme as a subset of the overall task. As noted above, the Joint Action Programme may possibly have a multi-country coverage, and not just apply to Greenland, and therefore relevant institutions in other Arctic countries and regional co-operation groups should be included.

Task 3 – Options for the management framework for the Joint Action Programme

Based on the stakeholder needs assessment in Task 2, the options for the management of the Joint Action Programme will be identified and compared. This will include the identification and evaluation of options in regards to the designation of responsibilities, details of technical and managerial resources needed, the potential sources of, and approaches to funding, and the terms of reference for and governance of the Programme.

A series of consultative working meetings will be held with key stakeholders, and later a workshop on the options for the management framework. A draft report on the options will be produced before the workshop. At the workshop, agreement on the preferred option will be obtained through facilitated discussion.

Task 4 – Detailed planning of management framework for the Joint Action Programme

Based on the stakeholder needs assessment in Task 2, and the options analysis in Task 3, the detailed design of the management framework for the Joint Action Programme will be developed based on the preferred option agreed at the workshop. This might, for example, involve identification of the EU institution that will provide funding for the Programme, identification of the EU institution that will manage the Programme, identification of the resources needed (e.g. number of full-time or part-time staff), planning the detailed terms of reference of the Programme, planning the physical location(s) of the management, etc. It would also include production of a capacity development plan for the management framework.

For illustrative purposes, the Joint Action Programme might be managed by a Secretariat role, potentially funded by the EU, which might involve the appointment of a full-time specialist for 2 years in Greenland with responsibility for management of the projects under the Programme, working closely with local counterparts in the Ministry of Industry and Mineral Resources.

An important part of the management of the Joint Action Programme will be to ensure strong co- operation and communication between the Government of Greenland and the EU during development

135 of the raw materials sector. One aspect of this will be to encouraging participation of the Government of Greenland in EU forums/groups on raw materials.

The output of Task 4 would be a detailed document on the planned management structure for the Joint Action Programme. The document will include sufficient detail to ensure an approval decision can be made, and will include a capacity development plan. A stakeholder consultation workshop will be held to present and discuss the final draft report.

5.4.1.8 Resources

The project to design and set up the Joint Action Programme will require a small team of consultants with experience in planning and setting up similar institutional frameworks that involve EU support, and experience in planning EU funding.

It is envisaged that 6 person months of input would be needed.

A substantial travel budget would be required to ensure detailed consultation, which will be essential to obtain the commitment of key stakeholders.

5.4.1.9 Implementation schedule

The timescale for project to design and set up the Joint Action Programme will be 6 months, with the following indicative milestones:  Month 1 – Project inception report.  Month 2 – Report on stakeholder needs assessment.  Months 3 to 4 – Report on options for the management framework for the Joint Action Programme.  Month 5 – Final draft report on the planned management structure for the Joint Action Programme.  Month 6 – Final report on the planned management structure for the Joint Action Programme.

5.4.1.10 Sustainability

The sustainability of the results of the project depends on the commitment of the relevant stakeholders to the Joint Action Programme and its implementation structure. The approach during the analysis and planning should therefore focus on extensive consultation, particularly with the Government of Greenland and the EU, to ensure full support of the project.

5.4.1.11 Risks to the project

This project to plan the Joint Action Programme is important, because other projects related to the EU- Greenland Agreement depend on this one in terms of administration. The main risks to the project are a potential lack of commitment of Government of Greenland, and a lack of commitment of EU, including approval of the budget needed for the secretariat or other management structure.

5.4.1.12 Information on partners

Partner Summary Ministry of Mineral Resources163, The Ministry of Mineral Resources is responsible for policy, strategy, legal Greenland. issues, marketing of mineral resources in Greenland and socio-economic issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes.

163 Ministry of Mineral Resources http://www.govmin.gl/

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5.5 Helping tackle socio-economic and environmental risks associated with mining

5.5.1 Mining Strategic Environmental Assessments (SEA)

5.5.1.1 Basic information

Co-operation area: Helping tackle socio-economic and environmental risks associated with mining Specific co-operation area: Undertaking a regional or semi-regional strategic environmental impact assessment in Greenland. Project overview: Consultancy assignment for time period of 12 months with an input of about 18 to 24 person months in total, including stakeholder consultation activities. Implementing agency/ Involved Government of Greenland: parties/ potential partners:  Environment Agency for the Mineral Resources Activities (EAMRA), Ministry of Mineral Resources (MMRMIM), and  Mineral Licence and Safety Authority (MLSA). EU:  DG Environment  DG Growth. Others:  Mining companies and potentially other Arctic governments and agencies Possible funding source: LIFE programme

5.5.1.2 Policy/ programming prerequisites/changes required

In terms of available policy instruments to undertake such SEAs, unfortunately one of the main policy instruments that can be used for this purpose in the EEA – regional funding – is unavailable to Greenland as it is not a member of the EU or EEA.

Nevertheless, the EU also manages the LIFE programme which has, despite the changing mandates of the LIFE programme, been used in the past as a source of funding for allowing non-EEA, third countries and regions, particularly in the EU’s southern and eastern neighbourhood, undertake specific environmental assessment projects. In the past, several institutional and administrative capacity building projects and awareness raising projects were financed in neighbouring countries.

Box: Examples of EIA and SEA projects in LIFE

 SEA - Strategic environmental assessment and land use planning in Lebanon  Training and Awareness in Environmental Impact Assessment (EIA)  IMPERIA - Improving environmental assessment by adopting good practices and tools of multi-criteria decision analysis  METAP Creation of an environmental impact assessment unit (Syria)  EIA Unit (Phase II) (Morocco)  Action plan for the site location and the development of design, operation and environmental impact assessment methods of solid waste sanitary landfills in Egypt governorates  Strengthening the permitting and auditing system for industries  Systems for establishing effluent limits based on best available technology in accordance with Helcom recommendations as a basis for improved environmental conditions

To assess whether this funding source is available the following will need to be evaluated:

 Confirm that Greenland, as an OCT, is eligible for this funding through Denmark under the current LIFE programme. This is not clear at present. The amount of money potentially available for extra-EEA SEA projects needs to be identified.

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 Evaluate the chance of success that Denmark, and its resident entities, winning against others for this funding. It is recognised that the Commission receives roughly four or five proposals for each accepted project, and therefore the competition is high. While the current LIFE programme allows for funds for capacity building, as these funds are limited by Member State, Denmark as the EU ‘host’ country would have to prioritise it.

Although the LIFE programme could be used for performing SEAs or other studies in the Arctic and Greenland, the tough conditions which would have to be met to obtain funding, along with the high level of competing proposals for each project supported, would most likely make it quite difficult for Greenland to, for example secure funding for a pilot SEA. Therefore, a special category for the arctic or an extended pot for the OCTs could potentially help here. Likewise, simpler and more open rules for participation would also help. Finally, a direct reference to sustainable mining and stewardship in the LIFE programme would also provide clarity.

5.5.1.3 Description

Background and justification

Greenland’s mining exploration is occurring in remote terrain with major potential environmental risks, particularly to biodiversity and landscape, as expected with similar extractive industry development in the Arctic region. The development of the mining sector in Greenland, and more particular any EU assistance, would be very high-profile, and would come under detailed scrutiny from environmental NGOs and the media.

In terms of the current situation, there is very limited environmental baseline information. This presents an issue for both the regulator, in terms of correctly designing the scope of works for any SEA or issuing mining licence boundaries, and for mining companies with significant uncertainty around the potential for the presence of significant environmental constraints on development.

SEA covers broad environmental effects and aims to ensure that these aspects are properly considered in policy and planning, taking into account cumulative impacts of different development projects by identifying and prioritising the environmental and social risks. SEA is particularly applicable where the development of sectors (e.g. extractive industries) is being planned for a region, and/or where there could be a significant cumulative impact on a region such as a coastal zone. The SEA is typically carried out by national or regional governments.

The undertaking of a comprehensive SEA would help the Government of Greenland to manage environmental and social risks, and provide confidence to private sector investors.

The exact scope of the SEA (i.e. the specific region of Greenland covered by the SEA) would need to be determined during the development of the Terms of Reference for the project. In parallel, buy-in from stakeholders on the need for and benefit of an SEA would need to be obtained.

Link with past activities/existing goals, strategies, projects

One ‘preliminary’ SEA on mining and hydrocarbon extraction activities has already been undertaken for Jameson Land in the east of Greenland164. This was undertaken by Aarhus University; DCE - Danish Centre for Environment and Energy and financially supported by the Bureau of Mineral and Petroleum, Greenland. It was published in March 2013 and was undertaken at the request of the Bureau due to the increasing interest in exploration activities in Jameson Land. The report provided valuable information on the environment, areas requiring more study, and an assessment of the

164 http://www2.dmu.dk/Pub/SR41.pdf

138 potential environmental impacts. The SEA was aimed at covering the hydrocarbon and mining sector for one region of Greenland, although it was predominantly focused on mining.

The SEA for Jameson Land provides a good illustration of the value of an SEA for managing environmental impacts and identifying knowledge gaps that will need to be addressed in the medium term. However, the SEA did not provide any useful clear direction on the designation or restrictions which should be placed on exploration (e.g. buffer zones around sensitive or protected areas), and this should be developed in future pilot/regional SEAs.

5.5.1.4 Overall objective

The overall objective of the project is to contribute to developing a better appreciation of the environmental sensitivities and potential impacts which could arise from mining projects, and therefore assist the Government of Greenland to strengthen policy, enhance development plans, and to provide the appropriate regulatory controls. Such a knowledge base would also assist the exploration companies to manage their impacts and take this guidance on board at an early stage of their planning and so reduce permitting uncertainty and potentially reduce ESIA time and costs.

5.5.1.5 Specific objectives of the project

The specific objective of the project is to carry out a SEA in support of mining projects in Greenland.

In the medium to long term the wider specific objectives would be:  make Greenland more attractive to mining companies;  enable an open and constructive debate with Greenland’s and International NGOs;  assist the mining industry demonstrate good management of the environment;  protect Greenland’s most sensitive and pristine environments.

5.5.1.6 Expected/Potential Results

The project would be expected to take 12 months to implement and deliver. The output would be a comprehensive SEA report that provides applicable information and recommendations to the Government of Greenland so that policy and plans can be strengthened to manage the environmental and social risks of sector development.

An example structure of an SEA is provided below, in line with the EU SEA Directive165. The SEA should also take into account IFC Environmental and Social Performance Standards and Guidance Notes166.

SEA: Sample content

(i) An outline of the contents, main objectives of the plan or programme and relationship with other relevant plans and programmes; (ii) The relevant aspects of the current state of the environment and social situation and the likely evolution thereof without implementation of the development programme; (iii) The environmental characteristics of areas likely to be significantly affected; (iv) Any existing environmental and social problems which are relevant to the development programme including, in particular, those relating to any areas of a particular environmental importance; (v) The environmental protection and social performance objectives, which are relevant to the programme and the way those objectives and any environmental and social considerations have been taken into account during its preparation;

165 Directive 2001/42/EC of the European Parliament and of the Council of 27 June 2001 on the assessment of the effects of certain plans and programmes on the environment; http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32001L0042 166http://www.ifc.org/wps/wcm/connect/topics_ext_content/ifc_external_corporate_site/ifc+sustainability/

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(vi) The likely significant effects on the environment, including on issues such as biodiversity, population, human health, fauna, flora, soil, water, air, climatic factors, material assets, cultural heritage landscape and the interrelationship between the above factors; and the likely significant effects on social aspects, including land use, labour, community development, etc.; (vii) The measures envisaged to prevent, reduce and as fully as possible offset any significant adverse environment and social impacts on the of implementing the plan or programme; (viii) An outline of the reasons for selecting the alternatives dealt with, and a description of how the assessment was undertaken including any difficulties (such as technical deficiencies or lack of know-how) encountered in compiling the required information; (ix) A description of the measures envisaged concerning monitoring; (x) A non-technical summary of the information provided under the above headings.

5.5.1.7 Activities

The activities which would need to be undertaken to deliver this project can be summarised as a series of tasks, which are presented below.

Task 1 – Initial stakeholder consultation and information collection

Under this initial task there would be detailed consultations with all potential stakeholders on the need for, and advantages and disadvantages of, undertaking an SEA. This will help to strengthen buy-in and commitment, provide stakeholders with an understanding of the process, identify stakeholders that can contribute to components of the SEA, and identify existing information. In particular the consultation should identify existing development policies, programmes and projects in Greenland and assess their relevance to the cumulative impacts. The selected stakeholders to be consulted are expected to include the Ministries in the Government of Greenland, EU DGs, community groups, mining companies, research institutions, NGOs, and other parties identified by the study.

The consultation would aim to gather the collective views and opinions from the different parties on developing the SEA scope of works and identifying the best location for the SEA. The selection of the area of interest for the SEA would be based on a combination of geographical; constraints and terrains, community locations, mining prospectively, and regional sensitivities. Its area should be commensurate with the environmental diversity and likely mining focus, and to take into account the variability of mining approaches in the area and therefore impacts.

To effectively implement this task there is a requirement for face-to-face consultation with stakeholders in Greenland, and EU offices.

Task 2 – Risk analysis

This task would involve field work and further co-operation with stakeholders to identify the potential impacts from the mining sector development and potential cumulative impacts taking into account other development. These potential environmental impacts would then be assessed and prioritised through methodological risk assessment. A stakeholder consultation workshop should be facilitated to present and discuss the risk assessment and obtain agreement on the priority potential impacts.

Task 3 – Development of SEA report

This task would involve the collection of more information on the priorities and further analysis to identify potential mitigation measures. The analysis would be collated into the SEA report. The report must include recommendations on areas, if applicable, where mining activities should not take place, as well as recommendations covering mitigation actions. The scope should include any potential infrastructure development associated with the mining sector. A final stakeholder consultation workshop should be carried out to present and discuss the main recommendations of the SEA.

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5.5.1.8 Resources

The project to carry out the SEA will require a small team of consultants with experience in SEAs, environmental risk mitigation, and a strong understanding of the impacts that can arise from the raw materials sector. To deliver this, it is envisaged that 18 to 24 person months of input would be needed over a 12 month time period.

A substantial travel budget would be required for working in Greenland and stakeholder consultation.

5.5.1.9 Implementation schedule

It is envisaged that the timescale required for the project would be 12 months, with the following indicative milestones:

 Months 1 to 2 – Project inception and initial stakeholder consultation.  Months 3 to 6 – Report on risk analysis, including consultation workshop on the risk analysis.  Month 6 to 10 – Development of draft SEA.  Month 11 – Final draft SEA report and stakeholder consultation workshop on recommendations of the final draft report.  Month 12 – Final SEA report.

5.5.1.10 Sustainability

The sustainability of any SEA approach will depend on the support of the Greenland Government and their agreement to support and act on the outcomes of the SEA. There is a need for these SEAs to be practicable and not to take on detailed new environmental baseline studies, but to be pragmatic and where needed identify follow up studies which the Greenland Government might undertake or require to be undertaken as part of any mining ESIAs proposed.

5.5.1.11 Risks to the project

Some of the principle risks to the success of the project and its future sustainability are presented below. These and other stakeholder concerns would need to be addressed by the project to ensure that these risks are minimised and/or mitigated:  Rejection by the Greenland Government of the idea of the SEA given that they had requested funding for these under their own terms;  A lack of a sponsor to apply for funding (e.g. if the Danish Government does not want to support the funding application);  A lack of a funding mechanism to fund the SEA; and,  A failure to implement the recommendations from the SEA.

5.5.1.12 Information on partners

Partner Summary Ministry of Mineral Resources The Ministry of Mineral Resources is responsible for policy, strategy, legal issues, marketing of mineral resources in Greenland and socio-economic (http://www.govmin.gl/) issues related to mineral resources activities, such as Social Impact Assessments, Impact Benefit Agreements and royalty schemes. Environment Agency for the Environment Agency for the Mineral Resources Activities (EAMRA) is the Mineral Resources Activities administrative authority for environmental matters relating to mineral resources activities, including protection of the environment and nature, ([email protected]) environmental liability and environmental impact assessments. In this role it would be a key stakeholder in the design of the CSR scope.

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6 Conclusions

Based on the findings of the European Commission’s two reports of 2010 and 2014 on critical raw materials (CRM) needs for the EU, as well as the conclusions of the RMI communications of 2008 and 2011 on raw materials in general, it is clear that the EU will continue to be dependent on a number of insecure and sometimes unsustainable sources for its industrial raw materials needs.

While the EU has examined, and is putting in place, a number of policy responses to this challenge– in particular with regards to promoting recycling, increasing substitution options and reduce its usage of these materials – it is nonetheless also clear that the EU and its downstream industry will remain dependent on primary (mining) sources for the foreseeable future and that industry may need to engage further with more stable primary mineral supply countries such as Greenland and Canada, as well as Scandinavian regions within Europe, in order to obtain sustainable supplies of certain base metals and critical raw materials in the coming years.

There are, however, a number of barriers to the goal of increasing the sustainable sourcing of raw materials. From an economic point of view, the current market slump – coupled with the long-lead times required for opening mines – are factors which act as a deterrent to investing in the development of long-term raw material supply chains with more stable supply countries. Another, related challenge concerns the very long and fragmented supply chain which characterises the metal industry. The fact that downstream manufacturers do not engage in mining and generally buy their materials on the market does not facilitate the establishment of sustainable raw materials supply chains. Finally, the lack of awareness and knowledge on the part of customers of what raw materials are used in environmental and high-tech goods, and where they may be sourced from, may also prevent the development of sustainable sourcing.

One solution to this is to better communicate the fact that sourcing materials from more stable, sustainable source countries – including Greenland – may be preferable to the status-quo situation in particular given that, as mentioned above, many of these materials are used in sustainable and high- tech industries which are essential for meeting EU environmental and growth goals. Another, more interventionist solution is to directly encourage downstream manufacturers to source from stable sources. In short, greater engagement of downstream companies in sustainable mineral sourcing would assist investment in stable mineral rich countries like Greenland as well as promote sustainable and stable supplies of raw materials for the EU. While this is an issue which goes beyond specific EU- Greenland relations, the existing co-operation of the EU and Greenland within the Kimberley process could inform the possible consideration of a pilot sustainable sourcing initiative involving Greenland based mining companies and EU downstream buyers.

With regards to mining in Greenland, its potential as a partner is undermined by the fact that its clear mineral potential has yet to be translated into substantial investment and operating mines on-the- ground. A lack of infrastructure and ‘lower-than-optimal’ geological knowledge levels are barriers to further investment. As a result, there may be similar, alternative opportunities in other countries (e.g. Canada) which have similar geological characteristics but which may be better equipped to foster and manage investments. Against a background of falling mineral prices, it would appear that any such substantial barriers may result in limited investment for the foreseeable future. In addition, as the development of infrastructure, and in particular the enhancement of geological knowledge, is expensive and may take many years to bear fruit, another fundamental challenge is that any developments in Greenland – with the exception of 3 or 4 projects which are already well developed – may take several years to bring to the production stage. This time horizon, which may be too long for downstream companies who tend to buy minerals in the short to medium term, may therefore require leadership from EU and Member State public bodies to fill the gap. One possible solution here is to help level the playing field between Greenland and other mineral rich countries by providing

142 investment lending for companies wishing to invest in mines in the EU and the OCTs, including Greenland.

In practical terms, this may mean considering extending the possibility of EU support – for example EIB lending – for investments in mining related infrastructure. As the level of funds available to OCTs like Greenland is low, such investments would have to promoted through own resource strategic funds, such as those currently used for promoting investment in the area of climate action. Likewise, given the current political focus on the need for EIB lending to promote growth and jobs in Europe, any EIB lending facility would need to be focused on how investment in mining-related infrastructure in Greenland would benefit Europe directly, namely in terms of how any materials mined in Greenland would be integrated in a supply chain involving EU member states and international partners.

In the area of geological knowledge, as with funding for infrastructure and related mining investment, such knowledge does not come cheap. For Greenland’s potential to be fully understood, further long term investment in skills, facilities and knowledge would be needed. Unfortunately the most appropriate instrument for developing such activities – EU regional policy and programming – is not currently available to Greenland while EU research and innovation funding is highly competitive and is not specifically linked to promoting mining in extreme or arctic regions, let alone in Greenland. Possible long term solutions here include extending regional funding programmes with OCTs like Greenland and increasing the amount of monies available for such programmes for enhancing regional specialisation in the area of mining and related processing. These solutions would however require major changes to EU regional policy. Another possible option would be to identify the promotion of geological knowledge enhancement in peripheral regions/extreme environments as a stand-alone topic within Horizon 2020 so that the innovations required to tackle specific challenges faced can be identified.

With regards to how EU-Greenland co-operation in the area of raw materials can be developed in practical terms, there is a need for a dedicated co-operation framework which allows public authorities from both Greenland and the EU to agree and implement joint co-operation raw material projects. This could also be extended to include businesses and civil society stakeholders.

Overall, although the EU provides Greenland with substantial per capita funding in the area of education, it does so in line with EU development policy goals, which may not be optimal for building mutually-beneficial relations with a medium income neighbourhood country in an area of such importance for EU industry. Moreover, while Greenland is in theory able to access most funding programmes, it is de facto excluded due to the difficulties for a country with a very small administration in applying for and being awarded funding. Outside of Horizon 2020, the lack of a specific instrument aimed at sustainable raw materials does not help. Finally, as mentioned above, Greenland is de jure excluded from what would arguably be appropriate for its needs, that is access to regional funding, where policy goals to develop ‘smart specialisation’ in raw materials in peripheral regions of Europe, such as Lapland, is aimed at promoting broader economic sufficiency and diversification. An open question here, however, would be how regional funds for greater geological knowledge could live side-by-side with OCT development funding for education and training.

To conclude, while many of these challenges go beyond the remit of this study, the ongoing development of an EU Arctic Policy and the promotion of closer relations with Greenland in raw materials are opportunities to address both the EU needs for raw materials as well as the development of a sustainable mining in Greenland .

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