Greenland Minerals and Energy Limited

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As the Danish government lessens its control over Greenland, offering the arresting icy land further self-governance for its political future, the timing for one mining project simply couldn’t be better.

This project belongs to Greenland Minerals and Energy Limited, a Perth-headquartered team of minerals industry experts, and is known as the Kvanefjeld Project, nestled within the Ilimaussaq Intrusive Complex, near the southwest tip of Greenland.

As self-governance arrives, it brings with it the rights to Greenland’s oil and minerals and since the beginning of this year, the country has held these thus creating a new mining act. Greenland Minerals and Energy applied for a new mining license under this latest act, and successfully too, gaining approval in February which offers the company another 25 years to mine Kvanefjeld.

But this is still just the tip of the iceberg, because Greenland and the company’s perfect timing comes into play following exciting and truly ground-breaking economical promise from this multi-commodity project. On February 1, 2010, Greenland Minerals and Energy announced to the ASX the initial development scenario from the recently completed interim report on the Kvanefjeld pre-feasibility study.

To Kvanefjeld

Rod McIllree, Managing Director at Greenland Minerals and Energy, took some time to talk more about when, why and how the company came upon its Kvanefjeld project. McIllree founded the company with two other directors who are currently still on the board, Mr. Simon Cato and Mr. Jeremy Whybrow.

“From that point we listed on the Australian Stock Exchange and set about the systematical review of country jurisdictions that were attractive from the point of both political security and also prospectivity,” McIllree says.

“One of the things that became apparent quite early on was that Greenland was quite high on both of those measures. Once we had defined the country we’d like to operate in, we did a field trip over there, and evaluated all of the existing work and infrastructure that had already been done.”

In fact, one interesting discovery McIllree and the team made was the multi-decade state sponsored exploration which had already taken place at the location, allowing them to identify the Kvanefjeld Project amongst the country’s metallurgenic provinces more easily.

“We purchased the project from its original owners in late 2006/early 2007 and went through what has amounted to a three year exploration campaign through which we’ve drilled 45,000 metres of diamond core and completed a pre-feasibility study on the ore body which indicates a very robust mining proposition,” McIllree explains.

“We initiated the pre-feasibility study mid to late 2008, with a view to identify whether or not it was technically feasible and economically possible to extract metals from what is essentially a new ore type.”

Acquiring the pre-feasibility study in late-2009 was the culmination of 18 months work, and revealed that the substantial amount of mineralised material at Kvanefjeld offered potential to drill for years, perhaps even decades, whilst still expanding its overall resource.

“I think that one of the most important things we identified early on was the need to define whether it was going to be an economic proposition to get at the metals anyway,” McIllree says.

“Both of those processes have now been done, we’re in direct dialogue with the government about the future development scenarios and we’re working very closely with them.”

Approval of the new mining license in February, 2010, offered, “a clear signal that the Greenlandic administration is prepared to enter development dialogue with us,” according to McIllree. And as Greenland Minerals and energy goes about just that, both the company’s position as technological advancement demands more rare earth elements, and its ability to attract key members of staff, are proving vital.

Positioned for future growth

McIllree keenly highlights the need for local knowledge and communication as the company goes about advancing Kvanefjeld.

“Greenland doesn’t necessarily have a lot of people, I think it’s about 57,000 people, and it’s roughly a land area four times the size of France,” he says. “So it’s very important that we interface and keep these people up to date with our activities.”

In doing so, the company even has an ex-Prime Minister of Greenland on its board, exemplifying the power both the company and Kvanefjeld have in attracting those ideal people to the project. Considerations here are the market and worldwide understanding of rare earth elements themselves, particularly in approaching this multi-commodity project.

“The main point here is that rare earths have been around for quite some time, it’s just that the Western world has been more focused on the base metals, the bulk commodities such as iron ore,” McIllree says.

And as the West has continued to trend towards bulk resources, China has gained great headway in holding approximately 97 per cent of the rare earth elements market today. “They’ve been developing those over the last 20 years and the interesting thing about rare earths is they are a key input to all things technological,” McIllree tells.

“One of the advantages that China has is it identified the role of these metals in a world that is becoming more and more technologically advanced, and it moved to secure its role as a dominant market player.”

Yet that multi-commodity proposition offered up by the Kvanefjeld Project offers a chance to return balance to this monopolistic market and Greenland Minerals and Energy is just the company to see this through.

“We can do that in a number of ways, the first of which is because of our multi-commodity output, and one of those commodities essentially pays for the production and set up of the mine to produce the whole suite,” McIllree explains.

“One of the interesting outcomes from our pre-feasibility study was that we anticipate producing about 44,000 tonnes of rare earth oxide which at that time is expected to be about 25 per cent of the world’s supply, but we’ll do that at a negative cost.”

This, resultantly, provides a significant competitive advantage to the Kvanefjeld Project.

Timing, cashflow and further development

While 2009 may have proved to be a busy and successful year for Greenland Minerals and Energy, 2010 promises to be equally pivotal.

“The next 12 months will see us initiate another exploration programme in Greenland. We’ve identified a second ore body that we’ve decided to conduct resource drilling on. We’ll continue with the optimisation of the pre-feasibility as it is,” McIllree says.

“Essentially what we’re looking at here is a very economically robust mining exercise which looks like it will produce $600 million annually in free cashflow.”
It certainly makes for a substantial and standout operation, with a payback of three years and a 25-year mining license behind it. Economically robust, expertly handled and poised to de-monopolise the burgeoning growth in the rare earth elements market, this project really demonstrates how perfect timing will benefit the country of Greenland, the company in the driving seat and the wider world market too.

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