November 28, 2014 / 9:48 AM / 3 years ago

Mining, independence at stake as Greenland goes to the polls

4 Min Read

NUUK/COPENHAGEN, Nov 28 (Reuters) - Greenlanders go to the polls on Friday with hopes for a mineral-rich independence from Denmark foundering on the reality of a tiny, shrinking economy.

The fall of premier Aleqa Hammond last month in an expense scandal has muted the nationalist rhetoric that promised independence based on wealth from some of the largest mineral deposits on earth.

With major mining projects in limbo due to low commodity prices, regulatory instability and the bankruptcy of the owner of the most promising prospect in the country, politicians of all hues have focused on the ailing subsidised economy.

The campaign appears neck and neck. For weeks, polls showed opposition party Inuit Ataqatigiit, led by 36-year-old Sara Olsvig, would win for only the second time since 1979.

But the ruling Siumut party, now led by former policeman Kim Kielsen, is managing to distance itself from former premier Hammond's expenses scandal. At least one poll in the past week shows Kielsen in the lead.

"Hammond accentuated all the differences between Denmark and Greenland. The differences have not disappeared but the emphasis will now be on the economy, no matter who wins," said Martin Breum, a Danish journalist and author of a book on Greenland.

Greenland, whose capital Nuuk is closer to New York than Copenhagen, became a Danish colony in the early 19th century but has been gradually gaining its own powers since World War Two.

It is more than three times larger that the U.S. state of Texas, but with a population of just 56,000 is the most sparsely nation on earth.

The potential in oil, gas and minerals is not in doubt -- the U.S. Geological Survey reckons there are 31.4 billion barrels of oil equivalent off the east coast alone, about the same as the proven reserves of Nigeria, and some of the largest rare earth deposits are found on land.

Majors such as Royal Dutch Shell and BP hold licences to explore for oil while smaller Canadian and Australlian miners are looking to develop mining, with Chinese interest never too far away.

But no company has yet tapped into the oil reserves while large rare earth and uranium mining projects are years away from development.

Instead, the economy is subsidised by a 3.6 billion Danish crown ($600 million) grant from Copenhagen and is reliant on fishing. It is also heading for three straight years of recession.

"(The new government must) set nationalism and the question of independence aside, as growth in Greenland will require a pragmatic relationship with Denmark," said Damien Degeorges, a Reykjavik-based consultant specialising in Greenland.

Uranium

Campaigning for the election has been fierce in population centres dotted mainly around the western coast of the huge Arctic island. A new generation of young politicians running for parliament have taken to Twitter and Facebook and the national broadcaster has hosted head-to-head debates around the country.

One of the key differences between the parties is their stance on uranium, a mineral critical to both nuclear energy and weaponry that is often found together with rare earth materials, used in high-tech components. China supplies the vast majority of the world's rare earth demand.

Siumut pushed through legislation last year to scrap a decades-old ban on uranium mining, opening the door to rare earth projects. But Olsvig's party strongly opposed this move and has vowed to reinstate the ban.

This would put in jeopardy the Kvanefjeld deposit operated by Greenland Minerals and Energy and Kringlerne operated by fellow Australian company, Tanbreez. Both are described by the operators as some of the largest in the world.

A change in the law would not impact Greenland's Isua iron ore project but that was operated by London Mining, which went into administration in October after racking up too much debt.

For a Factbox of Greenland's foreign mining projects click here (1 US dollar = 5.9586 Danish crown) (Editing by Jeremy Gaunt)

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