Tuesday, March 2, 2021

Reuters News - Mining magnets: Arctic island finds green power can be a curse

 COPENHAGEN (Reuters) - In the tenth century, Erik the Red, a Viking from Iceland, was so impressed with the vegetation on another Arctic island he had found he called it “the green land.” Today, it’s Greenland’s rocks that are attracting outsiders - superpowers riding a green revolution.

The world’s biggest island has huge resources of metals known as ‘rare earths,’ used to create compact, super-strong magnets which help power equipment such as wind turbines, electric vehicles, combat aircraft and weapons systems.

The metals are abundant globally, but processing them is difficult and dirty - so much so that the United States, which used to dominate production, surrendered that position to China about 20 years ago.

As Greenland’s ice sheet and glaciers recede, two Australia-based mining companies - one seeking funding in the United States, the other part-owned by a Chinese state-backed firm - are racing for approval to dig into what the U.S. Geological Survey (USGS) calls the world’s biggest undeveloped deposits of rare earth metals.

The contest underscores the polluting side of clean energy, as well as how hard it is for the West to break free of China in production of a vital resource. Rare earth metals have many uses, and last year China produced about 90% of them, according to Toronto-based consultancy Adamas Intelligence. As U.S.-China tensions mount, President Joe Biden’s administration said last month it will review key U.S. supplies, including rare earths, to ensure other countries cannot weaponise them against the United States.

Each Greenland mine would cost about $500 million to develop, the companies say. Both plan to send mined material away for final processing, an activity that is heavily concentrated in China. The only rare earth mine now operating in the United States – Mountain Pass in California – is partly owned by a Chinese state-backed company that currently sends material mined in the U.S. to China for processing.

The Greenland sites are less than 16 km (10 miles) from each other at the southern tip of the island, near a UNESCO World Heritage Site. Debate on them has triggered a political crisis in the capital of Nuuk, forcing a general election on the island of 56,000, due in April. Many Greenlanders, while concerned about pollution, feel mining is key to develop their fragile economy. In a 2013 poll, just over half said they want raw materials to become the country’s main source of income.

The country may ultimately back either project, both, or neither, but for those Greenlanders open to mining, the two proposals boil down to a choice between one mine that would not produce radioactive material, and another that would.

The first mine, a private initiative from an Australian geologist who has presented it to U.S. officials, would not involve nuclear material. It has won preliminary environmental approval, but it needs cash and a processing plan.

The second one has already spent more than $100 million preparing to mine, has proven processing technology through its Chinese partner, and won initial political support from Greenland’s coalition government. But its plans include exporting uranium, a nuclear fuel, and it recently ran into strong opposition, including from residents of the nearby town of Narsaq.

“As indigenous people we have lived in harmony with nature for many, many years,” said Mariane Paviasen, an opposition lawmaker who lives in the town. “We use these lands to hunt and fish.”

Greenland, a self-governing territory of the Kingdom of Denmark, has a gross domestic product of around $3 billion - similar to Andorra and Burundi. With its people living mostly on fishing and grants from Copenhagen, its government is keen to attract foreign investments.

It does not have an estimate for royalties from the first project, but expects around 1.5 billion Danish crowns ($245 million) each year from the Chinese-linked one - equivalent to roughly 15% of public spending.

Greenland’s government did not respond to requests for comment for this story. Acting Minister of Resources Vittus Qujaukitsoq said last month that if Greenlanders suddenly decide they don’t want the second project, “we’ll make a fool of investors. The credibility of the whole country is at stake.”

STRATEGIC RESOURCES

Greenland’s rare earth metals are also a chance for America and Europe to regain control of a strategic resource.

The island’s potential as a source of the raw materials needed for renewable energy technologies gained momentum in 2010, when China threatened to cut off its supply of rare earth metals to Japan, and tightened quotas to international buyers.

Prices for some of the metals have jumped in recent months, driven by surging demand for electric vehicles as well as concerns that Beijing may restrict sales.

Greenland’s position near the eastern flank of the United States makes it a sensitive location. Former U.S. President Donald Trump offered to buy the island in 2019, and he was not the first U.S. president to do so: In 1946 Harry S. Truman offered Denmark $100 million for it. A defence treaty between Denmark and the United States dating back to 1951 gives the U.S. military almost unlimited rights there, and Greenland houses the northernmost U.S. military base.

Friedbert Pflüger, a senior fellow at the Atlantic Council think tank, says the revenues generated by a major mine could give its owner leverage over policies in Greenland, and a strong Chinese presence there may pose strategic threats.

“The very presence of Chinese companies in Greenland could be used as justification for China to intervene,” said Pflüger, a former German politician and ex-deputy defence minister.

China’s foreign ministry said in a statement that such comments politicise economic and trade issues through “groundless speculation,” adding “China has always supported Chinese companies to carry out foreign economic cooperation in accordance with market principles and international rules.”

The U.S. State Department said: “We encourage our allies and partners to carefully review any investments... that could give China access to critical infrastructure in ways that compromise their security or allow China to exert undue, adverse influence over their domestic economies.”

Denmark, which handles foreign affairs and defence for Greenland, has in the past headed off Chinese involvement in infrastructure projects, which government sources say was because of security concerns. Foreign Minister Jeppe Kofod declined to comment on the security implications of China’s involvement. But he told Reuters that Copenhagen’s close ties with the United States “should not be seen as an obstacle to commercial investments in Greenland.”

China is a member of the International Atomic Energy Agency, so it can import uranium from Greenland. But since the fuel is used in nuclear weapons, that would be sensitive. Copenhagen, which has the final say, declined to comment.

TRUMP’S OFFER

Trump’s offer for Greenland aimed to help address Chinese dominance of rare earth supplies. Those involved say he was partly following up on talks between U.S. officials and a privately held company called Tanbreez Mining Greenland A/S. Tanbreez is the owner of the first Greenland site - Kringlerne, or Killavaat Alannguat in Greenlandic.

The company’s owner, Australian geologist Greg Barnes, told Reuters he had met U.S. officials weeks before Trump made the offer, and the company website shows Barnes with them and the former U.S. ambassador to Denmark on a site visit. The USGS confirmed its officials had visited the site in 2019; Washington and a representative for the former president declined to comment.

Barnes said he had put A$50 million ($38.6 million) of his own cash into the Greenland project. New York-based investment banker Christopher Messina, managing director at capital markets advisory services firm Mannahatta Partners, is trying to assemble more financing. He says Kringlerne is “such a huge deposit that what comes out of it could satisfy manufacturing demands in the U.S. for years to come.”

Whether or not that pans out, Barnes says the metals produced by his project can be processed outside China, although he has not yet decided where, and declined to say at what cost.

He said the royalties it would generate for Greenland would be roughly the same as those promised by the China-linked plan. “We’ve managed to get our capital costs down without Chinese technology,” Barnes told Reuters.

The only major plant outside China that does the complex work of separating individual rare earth elements is in Malaysia. But others - including the Mountain Pass mine in the United States - are planning or have started to build such facilities.

“For the foreseeable future, China is going to be the major player in all of these supply chains simply because it’s so far advanced and because it’s not stopping and waiting for alternatives to catch up,” said Ryan Castilloux, head of Adamas.

Tanbreez says half the rare earth metals it mines would be lanthanum and cerium - relatively plentiful metals used in telescope lenses and auto catalysts to cut emissions. About a fifth would be yttrium, which is in demand for lasers and the superconductors used in quantum computing.

Neither of the Greenland projects would be pollution-free. Both plan for mined rock to be locally crushed and separated into concentrates to send for final processing.

Tanbreez’s mining waste will be piped to a lake which, while it does not contain fish, feeds a river with a large population of Arctic char. Turbid water could impact the char, according to the company’s environmental report, which says it plans to dump some 550 tonnes a day of waste material into the lake and will dam it to prevent disruption downstream.

Tanbreez’s plan has passed the public consultations stage and received a government permit in September. Now the company is working on parliament approval.

“CRITICAL PERIOD”

Both the Greenland projects, though run from Australia, are part of a European Union initiative, the European Raw Materials Alliance, to boost Europe’s output of critical minerals and cut dependence on China for rare earth metals..

The alliance, funded by the EU, is coordinating investment and providing seed money for European mines, processing plants and industries such as magnets.

Last year, the EU kick-started 10 billion euros ($12 billion) of investment into rare earth and other green-energy-related projects, and it says its demand for rare earth metals could surge as much as tenfold by 2050. It says China currently makes up 98% of its supply.

“This is a very critical period of time,” says the Alliance’s head, Bernd Schäfer. “We in Europe are facing raw materials scarcity on many levels and also the need for action.”

The rival mountaintop site not far rom Tanbreez is called Kvanefjeld, or Kuannersuit in Greenlandic. For John Mair, managing director of its owner, Greenland Minerals Ltd, it’s a world-class opportunity at the right moment.

Kvanefjeld’s main offer is neodymium, needed for wind turbines. Brussels says the EU’s demand for the metal may reach 13,000 tonnes per year by 2050, three times more than it used in 2015. Neodymium is also used in combat aircraft.

Greenland Minerals is a listed firm in which Chinese company Shenghe Resources is the biggest shareholder, with just under 10%. Shenghe, which also has a similar size stake in Mountain Pass, declined to comment for this story.

Greenland Minerals, which bought its concession from Barnes, says its planned mine will, at least initially, send minerals it produces to China for final processing. It says it plans to find a site in Europe, but has not said when.

The company has a strong hand. Back in 2011, the estimated costs for setting up Kvanefjeld were $2.3 billion. By 2019, these shrank to $505 million, the company says: Shenghe, whose biggest shareholder is a state-run Chinese mineral research institute, has helped boost efficiency.

But Greenland Minerals faces public opposition. It is one step behind Tanbreez in the environmental vetting process - and its ores include significant amounts of radioactive materials.

When Greenland Minerals embarked on public consultations this year, protests erupted. At one meeting in Narsaq on Feb. 10, locals both inside and outside the hall banged windows and played loud music to disrupt presentations.

As opposition mounted, a small pro-mining party, Demokraatit, triggered a general election by pulling out of Greenland’s coalition in early February.

Polls suggest Greenland’s main opposition party, Inuit Ataqatigiit (IA), which has a zero-tolerance policy for uranium, will become the biggest in parliament, so would be first to try to form a new coalition.

“Our aim,” IA lawmaker and Narsaq resident Paviasen told Reuters, “is to halt the (Kvanefjeld) mining project.” But IA says it has not expressed opposition to Tanbreez, which is seen as less of a threat to the environment.

Kvanefjeld would dump much more waste than Tanbreez - about 8,500 tonnes each day - into a lake on top of the mountain, the Greenland Minerals plan says.

Greenland Minerals says any increase in background radiation from its Kvanefjeld mine will be minimal. It plans to build a concrete 45-meter dam to contain the radioactive waste and to spray water on the ground to keep the dust from blowing away.

The dam will be built to international standards to “withstand even the worst imaginable seismic activity,” it said in a report submitted to Greenland’s government last year.

Even so, residents say they worry contaminated water will seep into nearby rivers or that the dam will fail entirely. They cite the collapse of a mining dam in Brazil two years ago that killed 270 people.

As the crisis has deepened, Greenland Minerals’ shares have dropped by more than 50%. If the mine goes ahead, Paviasen says, many people plan to move away.

(This story corrects 10th paragraph to delete China as destination for uranium exports)

Reporting by Jacob Gronholt-Pedersen in Copenhagen and Eric Onstad in London; Additional reporting by Ernest Scheyder in Houston, Humeyra Pamuk in Washington and Tom Daly; Edited by Sara Ledwith

Saturday, February 27, 2021

BBC News - Freeports: What are they and will they make the UK money?

 Creating around 10 "freeports" across the UK could help boost trade and manufacturing after Brexit, according to the government.

Chancellor Rishi Sunak - who is expected to announce the location of some freeports in his Budget on Wednesday - says they could "turbo-charge" the economic recovery in the wake of Covid-19.

But critics insist they do not benefit the economy overall, and increase the risk of tax dodging and lower employment standards.

What are freeports?

Freeports are areas, usually around a maritime port or airport, where goods can be imported without having to pay import taxes, called tariffs.

These taxes only become payable when the goods leave the freeport and are transported somewhere else in the UK.

Otherwise, they are re-exported without having to pay the relevant UK tariff.

They are allowed in the EU - and the UK had seven freeports at various points between 1984 and 2012.

After this the UK phased them out, although a number of so-called enterprise zones - which have similar aims - were set up.

Why are they being brought back?

Following Brexit, the UK wants to bring back freeports to regenerate deprived areas.

In England, companies inside the sites will also be offered temporary tax breaks, mostly lasting five years.

These include reductions to business rates as well as stamp duty, a type of land tax. Employers will also pay reduced national insurance for new staff.

Ministers say "at least" seven freeports will be set up in England. Each one can be up to 45km (27 miles) across.

Scotland, Wales and Northern Ireland will set their own freeport policies.


How will sites be chosen?

More than 30 areas in England have reportedly bid to become a freeport, with the winners due to be announced in the spring. The freeports will then be set up later this year.

Bids in England will be ranked according to their potential to drive innovation, the involvement of the private sector, their importance to the economy, and how quickly they can be set up.

But the government says the most important factor will be how they help deliver its ambition to "level up" the country by reducing regional inequality.

Officials will draw up a "longlist" of candidates, with ministers then making the final decisions and publishing their reasons afterwards.

The government says it will consider other factors - such as the impact of Covid-19 on local areas, and ensuring freeports are "spread fairly" across England.

Ministers have faced scrutiny in the past over how winners from such "levelling up" projects are chosen - including how grants from a £3.6bn fund for struggling towns were awarded.

committee of MPs said the contest lacked transparency and could "fuel accusations of political bias," although ministers defended the process as "robust".


Will freeports benefit from Brexit?

There are currently around 80 freeports dotted around the EU.

But some Brexit-backing politicians argue their potential is limited by the bloc's rules on business subsidies - such as government cash payments or tax breaks.

They want the UK - now that it's no longer in the EU - to pursue a more generous policy.

Jonathan Branton, a partner at law firm DWF, said the UK does have more flexibility in this area now it doesn't have to follow the EU's subsidy rules.

He also points out that such tax breaks offered to freeport firms would no longer require prior sign-off from the European Commission.

However, he adds that the Brexit trade deal - agreed by the UK and the EU - still requires subsidies to be justified. Otherwise, they could be challenged in UK courts.

In more extreme circumstances, the EU could ultimately respond to UK subsidies by introducing tariffs on some UK goods deemed to be damaging EU trade or investment.

Furthermore, the UK will still be subject to World Trade Organization rules - which say you can't introduce subsidies linked just to export performance.

There are also questions over Northern Ireland, whose goods trade with the EU will stay bound by the bloc's subsidy rules under the UK's withdrawal deal.

Treasury minister Steve Barclay has admitted the freeport model used in Great Britain will need to be "adapted" for Northern Ireland.

Northern Ireland's devolved government says it is working with the Treasury to find out how much of the model it will be able to follow.


Are they a good idea?

Supporters say freeports can help increase manufacturing and direct jobs and investment towards areas that would otherwise struggle to attract them.

But opponents say they don't boost employment overall, and diverting economic activity comes at a cost to the taxpayer.

The Labour-led Welsh Government says it has reservations about freeports, although it has not ruled out introducing them in Wales.

The SNP Scottish Government - which has previously been critical of freeports - now plans to introduce its own scheme, dubbed "green ports".

Exact details have not been set out - but bidders will be asked to promote "sustainable" growth, and pay the voluntary real living wage.

Wednesday, February 24, 2021

BBC News - China regains slot as India's top trade partner despite tensions

 China has regained its position as India's top trading partner despite a decaying relationship between the Asian neighbours.

The two countries were involved in a bloody border conflict last year and saw India ban 220 Chinese tech apps.

But that did not stop China leapfrogging the US in 2020 to become India's biggest trade partner.

Two-way trade between the long-standing economic and strategic Asian rivals stood at $77.7bn (£55.2bn) last year.

Although this figure was lower than the previous year's $85.5bn total, it was enough to make China India's largest commercial partner, according to provisional data from Delhi's commerce ministry.

Global trade flows have been muted during the pandemic, although there has still been strong demand for medical equipment and supplies.

Despite efforts by India to become more self-reliant and curb trade with Beijing, it still relies heavily on Chinese-made heavy machinery, telecom equipment and home appliances.

Total imports from China stood at $58.7bn, which were more than India's combined purchases from the US and UAE - its second and third largest trade partners.

"The continuing dependence on Chinese imports is lack of availability of these at home," said National University of Singapore economist Amitendu Palit who specialising in international trade.

"Imports from China are cheap and available quickly in sufficient amounts. Imports from several other sources are not as cost-effective, and as easily available, as they are from China," he added.


The two nations were involved in a Himalayan border dispute last June that saw at least 20 Indian soldiers killed in a clash with Chinese forces.

Last week, China revealed that four of its soldiers had also died in the battle.

The incident was the first deadly clash in the border area for at least 45 years.

In response to the clashes, India's government banned TikTok, WeChat and more than 200 other Chinese-made apps in June saying they were a danger to the country.

In a statement, it said the apps were "prejudicial to sovereignty and integrity of India, defence of India, security of state and public order".

Tuesday, February 23, 2021

Reuters News - Analysis: How rich is Saudi Arabia? Kingdom does the math in balance sheet overhaul

 The kingdom is working on creating a consolidated balance sheet of its assets and liabilities which will include items currently kept off the oil-rich economy’s books, including the investments and debts of its powerful sovereign wealth fund.

“The main purpose of this programme is to have a financial equivalent of an MRI of the government balance sheet,” a Finance Ministry spokesman told Reuters, adding that it would include assets and liabilities that are currently “off-balance sheet”.

Saudi Arabia’s Crown Prince and de facto ruler Mohammed bin Salman has put Public Investment Fund (PIF), Saudi Arabia’s main sovereign wealth fund, at the centre of reforms aimed at diversifying the economy of the world’s top oil exporter away from fossil fuel.

Under the prince’s chairmanship, PIF has transformed from a sleepy sovereign wealth fund into a global investment vehicle making multi-billion dollar bets on hi-tech companies such as Uber as well as other equity investments and pledging tens of billions of dollars to funds run by Japan’s Softbank.

Its financial statements are not published and it does not feature in the kingdom’s budget, which is publicly available.

Gulf countries don’t typically publish information about their overall debts and assets but the PIF’s riskier investment profile and infusion of state funding have made its opacity an issue for some investors.

“Transfers of wealth from liquid pools of assets like central bank reserves into PIF’s less liquid (and less transparent) investments increases the overall risk profile of the public sector balance sheet,” said Kirjanis Krustins, a director in Fitch’s sovereign team.

“Debt investors would tend to see the government and its key government related entities such as PIF as representing substantially the same risk. Thus the levering up of the broader Saudi complex could at some point impact the government’s own borrowing costs,” he said.

The government media office did not respond to a request for comment.

ARAMCO BILLIONS

The government started working in the second half of last year on the so-called Sovereign Asset and Liability Management (SALM) framework and the spokesman said it was a ‘long-term project’ with no decision yet made on when and how its results would be disclosed.

“If we use benchmarks we will see countries spent a couple of years to implement the consolidation phase,” he said of the project.

The PIF’s finances are formidable.

Its assets have swelled to $400 billion as of 2020 from $150 billion in 2015, with the fund bolstered by an expected $70 billion payday from Saudi Aramco, the state oil company, for PIF’s stake in a petrochemical giant and a $40 billion transfer from the central bank’s foreign reserves.

It was also the recipient of nearly $30 billion in proceeds from Aramco’s initial public offering in 2019.

The fund has raised $21 billion in loans between 2018 and 2019, and is finalising a new facility expected to be over $10 billion in size, sources have said.

THE ‘NORMAL’ WAY

Despite Saudi’s oil wealth, creating enough jobs for the kingdom’s young population is one of the biggest challenges facing Prince Mohammed, known in the West as MbS.

The government has been pushing through economic policies since 2016 aiming to create millions of jobs and reduce unemployment to 7% by 2030. But fiscal austerity to contain a yawning deficit has slowed investment, and the coronavirus crisis last year pushed unemployment up to a record 15.4%.

To get the deficit down from an eye-watering 12% of GDP last year to a shortfall of 4.9% by the end of this year, Riyadh has slashed capital spending.

It is relying instead on the PIF to fund some of the major infrastructure projects to help boost growth, including NEOM, a $500 billion high-tech business zone, and the recently announced “The Line”, a 1 million inhabitants carbon-free city in NEOM, expected to cost between $100 billion and $200 billion.

PIF plans to inject at least 150 billion riyals ($40 billion) annually into the local economy until 2025, and to increase its assets to 4 trillion riyals ($1.07 trillion) by that date, Prince Mohammed has said.

“MBS understands that unless the economy grows at a rate above 6.5-7%, the youth unemployment rate will stagnate or grow – and that is a ticking time bomb,” said Khaled Abdel Majeed, MENA fund manager at London-based SAM Capital Partners, an investment advisory firm, commenting about transfers of state funds to PIF.

“Doing things the ‘normal’ way through ‘normal’ channels will take more time than is available.”

Reporting by Davide Barbuscia, additional reporting by Tom Arnold; editing by Carmel Crimmins