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Greenland. Stock photo from Pexels

Why does Trump want to buy Greenland?

President Donald Trump wants to buy Greenland from the Danish Government, but China is already present, exploiting a commodity that the US needs: rare earth minerals. China is responsible for 97 percent of global output, and there are no viable alternatives yet.

Published: August 21, 2019, 9:05 am

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    Rare earth metals, a group of 17 chemical elements in the Earth’s crust, are crucial to keeping a modern economy running smoothly. They’re used in electric car motors, lithium ion batteries, computer hard drives, solar panels, and wind turbines.

    China is present through an Australian company, Greenland Minerals, in which the Chinese Shenghe Resources Holdings is largest shareholder with a 11 percent stake. In its June quarter report, Greenland Minerals said of their mining project that it was “one of the most significant emerging rare earth projects globally with a large projected output of neodymium, praseodymium, dysprosium and terbium”.

    According to a US Department of Energy report, it will take the US 15 years to lose dependence on China for its rare earths, after the Mountain Pass Mine in California was shut down in 2002 largely because of lack of demand and environmental issues. The mine had spilled a large amount of radioactive water into a neighbouring lake.

    California’s Mountain Pass did not produce enough to supply all of America’s rare earth metals, partially because contains mainly light rare earths instead of heavy rare earths, a group of chemicals that are often found in smaller concentrations.

    The most important future use of the rare earths is expected to be in electric motors as well as a large number of advanced and strategically sensitive technologies.

    “Shenghe is a leading producer of rare earths in China and has acquired its stake in Greenland Minerals as a future potential source of the elements which find their way into multiple technologies, especially electric motors, as well as certain military applications such as rocket guidance systems,” according to Forbes magazine.

    The Australian company invited Shenghe to invest after it struggled to investors in Europe or North America. Because the original plan for Greenland Mineral’s Kvanefjeld project was to source uranium, Western investors were not interested since the mineral has been in over-supply for a while now.

    But Greenland has switched from uranium to rare earths found in the same ore-body located in the south-west quarter of the country. The massive island is an autonomous Danish territory between the North Atlantic and Arctic oceans. Most of its small population lives along the ice-free, southwest coast.

    Kvanefjeld now produces enough rare earths to sustain an initial mine life of 37 years.

    “An optimized feasibility completed last month has seen the estimated capital cost of developing the project reduced by 40 percent to $505 million, with a similar percentage reduction in operating cost,” Forbes noted.

    Because China has been dominating the industry, US threats of sanctions have in the ongoing trade dispute between the two countries, have focused on rare earths.

    President Trump has meanwhile suggested buying Greenland from Denmark for a “real estate deal”. Previously, the second meeting between Greenland Minerals and Shenge had included the US Ambassador to Greenland, Carla Sands.

    Sands even visited the remote project site where a team from the US Geological Survey had been working with Greenland Minerals. The small Australian company now has both China and the US showing strong interest in the Kvanefjeld project, with the US leader getting involved.

    But a scheduled meeting with the Danish Prime Minister was cancelled after she unequivocally rejected the offer from US President Donald Trump to purchase the resource-rich Greenland.

    Trump thanked PM Mette Frederiksen for being “so direct” and sparing “a great deal of expense and effort” for both countries around his gigantic and absurd real-estate purchase. The meeting was postponed to “sometime in the future” the US president tweeted on Monday.

    It is worth noting that the countries with the highest reserves, are mostly BRICS countries. While in many cases the world’s major rare earths mining countries hold large amounts of reserves, some countries have low rare earths production and high reserves.

    A case in point: mines in Brazil produced only 1 000 metric tons (MT) of rare earth elements in 2018, but the nation’s reserves are the second highest in the world. It’s possible that countries like this could become bigger players in the future.

    The seven countries whose reserves are over 1 million MT of rare earths by country data was taken from the US Geological Survey’s most recent report on rare earths, and they include China, Brazil, Vietnam, Russia, India, Australia and the United States.

    North Korea is also thought to have tremendous potential metal resources, particularly rare-earth metals, which have been valued in excess of US$6 trillion by the South Korean national mining company.

    There is already much investment from Chinese mining companies, with an estimated $500 million investment in the last 11 years.

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