General Nice, one of the largest coal and iron importers from China, will take over the planned Isua mine project in Greenland.
The $2 billion project was being developed by London Mining which will now move into an administrative role, according to the Greenland government.
The Financial Times reported that the project will become the first in the Arctic to come under Chinese control which could also raise concerns in the region and in the United States.
Plans by a Chinese property developer to buy a large but remote tract of land in Iceland several years ago prompted great unease among Arctic diplomats.
Chinese groups are already active in the Arctic. Some are helping to fund and build Russia’s Yamal liquefied natural gas project – a venture in which oil company CNPC has a minority stake. Cnooc, another Chinese oil company, has a license with a local partner to explore for oil off the coast of Iceland.
Rising temperatures have made parts of the Arctic more accessible to resource development, raising China’s interest in oil and mineral projects there – and the possibility of a sea route to Europe over the top of Russia. In 2013, China also became a permanent observer at the Arctic Council, the decision-making body for the region.
For Greenland and its government, the Isua project is an important part of a plan to exploit mineral wealth and secure full independence from Denmark. But there are still doubts over the viability of the project.
London Mining estimated last year that operating costs would be $45 per tonne while shipping to China would cost an extra $37 per tonne. Iron ore prices are now only $70 per tonne, however, having halved last year as miners ramped up output and demand from China fell.
Even at higher prices, the Isua project is ambitious, with construction set to take more than three years. Although the iron ore reserves there are “beautiful” according to one executive familiar with the deposit, extracting them will be challenging, as they lie under a thick layer of ice.
London Mining had planned to pipe slurry out of the mine, which is made more difficult by the cold.
London Mining fell into administration in October after the tumbling price of iron ore increased the financial pressure on the indebted miner. Operations at its sole mine, in Sierra Leone, were also made more complex by the Ebola virus in the west African country and that mine has now been sold.