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Mineral Strategy 2009Update of objectives and plans for mineral exploration activities in Greenland

Mineral Strategy 2009Continuous publication of Bureau of Minerals and Petroleum No. 7

Published December 2009

ISBN 87-91864-19-3

The Greenland Self GovernmentBureau of Minerals and Petroleum

Phone +299 34 68 00 Fax +299 32 43 [email protected] 29P.O. Box 9303900 NuukGrønland

3Mineral Strategy 2009

1. Background and objectives of The Bureau of Minerals and Petroleum’s Mineral Strategy 2009 . . . 51.1 Organisation and division of work in the mineral industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.2 Administrative system and present strategy in the field of minerals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.3 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.4 Mineral strategy themes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.5 Environmental aspects of the mineral strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

2. Geological efforts - status and assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132.1 Geological knowledge base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132.2 Geological mapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142.3 Geophysical mapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152.4 Geochemical mapping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172.5 Databases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.6 Geological environments and resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.7 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

3. Marketing of mineral potentials in Greenland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213.1 Status and evaluation of international marketing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213.2 Status and evaluation of information in Greenland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.3 Future marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233.4 Future information in Greenland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263.5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

4. Economic Terms and Conditions and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294.1 Benchmarking of Taxation and Royalty Levels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294.2 Future Possible Government Take Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354.3 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Contents

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Picture 1.Greenland's location in the North Atlantic.

1. Background and objectives of The Bureau ofMinerals and Petroleum’s Mineral Strategy 2009


Mineral Strategy 2009 is an update of The Bureau ofMinerals and Petroleum’s Mineral Strategy 2004 forhard minerals. The changes in the new strategy havebeen adapted to reflect projects in progress, newobjectives as well as feedback from the dialogue withthe mining industry.

1.1Organisation and division of workin the mineral industry

In recent times, it has been characteristic of mineralexploration in Greenland that initial explorationefforts to develop mature projects have typically beencarried out by the so-called junior companies. In thisrespect Greenland resembles other so-called green-field areas – i.e. areas that are underexplored in termsof potentials for mineral occurrences compared withcountries having similar geological formations.

The level of geological knowledge is central to thepriority given by companies to an exploration area. In astudy of the mining industry conducted by the WorldBank, it is emphasised that the crucial point in a com-panys’ choice of an area is its mineral potential.Depending on the type of company involved, theweight given to that point is somewhere between onehalf and two thirds of the companys’ decision-makingbasis. The most significant parameters for mineralinvestments in any one country are:

• The geological potential for metals and minerals

• Mineral legislation

• Fiscal conditions

• Institutional factors and framework conditions

• Political stability

With a sufficiently high level of geological knowledge,it is possible to define geologically interesting areaswith potential for mineral occurrences. Mineral occur-rences are not evenly distributed throughout theglobe, being concentrated in specific regions such asthe Kalgoorlie-Kambalda province in WesternAustralia, which represents one third of Australia’sgold production even though it represents less than 1 % of Australia’s land area. This type of regionattracts a substantial part of global exploration activi-ty, as companies are confident that the geological pro-cesses at these locations have been able to concen-trate the metals in the form of mineralisations.Therefore, to attract industry interest, it is particular-ly important for a green-field area like Greenland to beable to draw attention to the potential presence ofregions with an attractive geological environment formineral occurrences.

The overall objective of The Bureau of Minerals andPetroleum in the field of ’geological knowledge devel-opment’ is to enhance the level of specific knowledgeof attractive geological environments for mineraloccurrences in Greenland and, through marketing ofthis knowledge, to encourage the mineral industry toapply for exploration and exploitation licences inGreenland.

Junior companies traditionally run more risks thanwell-established mining companies, including by con-ducting exploration in areas where geological know-ledge is limited. Junior companies are normally notfinancially strong but base their activities on externalfinancing of the individual exploration projects, e.g.through share issues on stock exchanges and throughprivate placements1). Junior companies are thereforeparticularly vulnerable to international economic fluc-tuations.

Established mining companies are normally much larger, financially strong companies, which developtheir ore reserves by conducting exploration withinthe ore province in which they are already conductingmining operations. Expansion into new areas is normally carried out on a more conservative basis, e.g.by acquiring junior company projects which have beendeveloped to contain – at least – one identifiedresource.

Figure 1. Developments in the number of mineral licences granted , 1999 – 2009Total number of licences are 11 (prospecting), 85 (exploration), and 4 (exploitation) as well as 1 small-scale licence.

6 1.1 Organisation and division of work in the mineral industry

As a result, junior companies and established miningcompanies use different mineral exploration proces-ses. Methods are rather complementary than compe-titive, reflecting a globally developed division of workin the exploration industry between exploration-ori-ented junior companies and exploitation-orientedmining companies.

In addition to exploration carried out by junior compa-nies, Greenland has gained extra benefits from thementioned division of work. In their search for part-ners and capital, junior companies have helped distri-bute knowledge about Greenland’s mineral potentialthrough direct communication within the industry. Asa result they have significantly contributed to promo-ting Greenland as an attractive exploration area.

Num

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Number of prospecting licences Number of exploration licences Number of exploitation licences


The financial crisis hit globally in 2008, but so far ithas only had limited influence on exploration activityin Greenland. See figure 1 and table 1. In 2002, aninternational recession led to the preparation ofMineral Strategy 2004. In this strategy the marketingof Greenland’s mineral potential was strengthenedthrough more direct dialogue with the mining industryand a geologically focused use of public funds availa-ble to identify geological environments and theirmineral resources

Mineral Strategy 2009 maintains the level of intensityand is particularly focused on maintaining the explora-tion industry’s interest and activity in Greenland. Italso focuses on identifying the mineral potential ofgeologically less well-known areas, using, for example,public funds to pay for mineral resource studieswhilst, simultaneously, strengthening the marketingof the mineral potential in Greenland.

It is necessary to prepare for the possible situationthat the level of exploration activity may drop even toa disappointing level and that it may be necessary tomonitor the financial/economic situation in order toidentify the best possible way of mitigating undesira-ble consequences.

1.2Administrative system and present strategy in the field of minerals

When the Act on Greenland Self-Government enteredinto force on 21 June 2009 the Government ofGreenland was given the opportunity to decide takingover a large number of case areas, including mineralresources and occupational health.

With the new Self-Government scheme all proceedsfrom mineral activities accrue to the Government ofGreenland including revenues via Greenland andDanish authorities in the form of licenses, taxes,ownership shares etc.

The self-government scheme sets up the following keyelements of financial relations between Greenlandand Denmark:

• The State general grant continues without changesat the 2007 level, i.e. DKK 3,202.1 million/year,adjusted with price and wage developments.

• Greenland finances itself transferred case areas.

• Revenues from minerals and petroleum in Greenlandaccrue to the Government of Greenland.

• The State grant will be reduced with an amount cor-responding to half of those revenues from mineralextraction which exceed DKK 75 million/year.

When the State grant to Greenland has been reducedto zero negotiations will be initiated betweenNaalakkersuisut and the Danish government. Thesenegotiations will include the question of distributionof revenues from mineral extraction in Greenland.

8 1.2 Administrative system and present strategy in the field of minerals

In order to give real substance to the self-governmentit was therefore of utmost importance that the mine-ral area – as the first case area – was transferred tothe Government of Greenland. On 1 January 2010 theInatsisartut act no. 7 of 7 December 2009 on mineralraw materials and relating activities (MineralResources Act) entered into force, replacing the for-mer Danish act on mineral resources in Greenland cf.Consolidated Act no. 368 of 18 June 1998.

The following issues were set up as preconditions fortransfer of this area:

• Member of Naalakkersuisut for Industry and MineralResources entered in December 2009 five-yearagreements with the Danish Minister for Science,Technology and Innovation and the Danish Ministerfor Climate and Energy on advisory services andother case-handling in the mineral area;

• The Bureau of Minerals and Petroleum entered five-year agreements with the Geological Survey ofDenmark and Greenland (GEUS) and the NationalEnvironmental Research Institute (NERI).

The Mineral Resources Act establishes in conjunctionwith the Act on Greenland Self-Government and theabove agreements the basis and framework for thefuture regulation of mineral resources. The act deci-des that these activities are to be carried out in accor-dance with best international practice for executionand regulation of such activities and must only takeplace under approval granted by Naalakkersuisut.

For environmental issues a model has been agreedthat ensures research-based independent environ-mental assessments. The above five-year agreementswith the Ministry of Science, Technology andInnovation/NERI prescribes that NERI knowledge willbe transferred to the Greenland Institute of NaturalResources within a five-year period. This should pavethe way for the Institute to take over as many tasks aspossible within the environmental field by the end ofthis period.

Furthermore, it has been agreed that an independentenvironmental assessment should be made of mineralprojects. This will be done by submitting assessmentsmade by NERI/the Institute to Naalakkersuisut in theirentity without any kind of editorial work. These envi-ronmental assessments conducted by research insti-tutes will thereby in reality be independent from theadministration of Naalakkersuisut. This correspondsto the model used for biological advisory servicesgiven by the Greenland Institute of Natural Resourcesconcerning quota etc.

Approvals for mineral activities are handled accordingto the so-called ‘one-door’ principle under which TheBureau of Minerals and Petroleum is the point of entryfor authority handling. Thus, companies must normallyonly call on one authority to achieve the necessarypermits and approvals.

Holders of exploration rights are today entitled to 30-years’ exploitation approvals, provided that the termsof the exploration approvals are complied with andthat the deposits in question are commercially exploi-table and documented in a profitability study.

Table 1. Developments in the number of exploration licences etc. since 2001.

* Calculations are based on ‘exploration obligations’ relating to the respective licence.

2001 2002 2003 2004 2005 2006 2007 2008 2009

Number of prospecting licences 6 6 11 12 12 12 14 14 11

Number of exploration licences 19 17 19 22 33 29 63 68 85

Number of exploitation licences 0 0 1 1 2 2 2 3 4

Number of km2 covered by exploration licences 10,264 5,956 5,714 8,560 12,986 14,782 23,379 24,578 19,306

Total exploration obligations (in million DKK)* 40,5 25,8 23,8 30,5 47,7 46 83 103 124

Total exploration costs (in million DKK) 111.8 20.8 44.9 66.2 191 135 471 497 -

Number of bore metres total 4,071 112 3,195 6,862 25,146 18,101 18,118 45,053 -


1.3Objectives

It is more than five years since The Bureau of Mineralsand Petroleum’s Mineral Strategy 2004 was published.It is therefore natural to evaluate whether the objecti-ve of increased exploration activity has been met. Also,the strategy calls for an update to retain industryinterest.

Mineral Strategy 2004 focused on the identification ofgeological environments as well as gold and diamondsand was a great success as new occurrences of goldwere found in greenstone belts and the understandingof the diamond potential in Greenland was enhanced.

In addition, from 2004 – 2009 the number of grantedexploration licences grew very significantly, as will beseen from table 1 below.

The increasing exploration efforts in recent yearshave comprised the implementation of cost intensiveprojects such as the Malmbjerg project in EastGreenland, the eudialite project in South Greenland,the Isua project in the Nuuk region, West Greenland,the Citronen Fjord project in North Greenland, the dia-mond project at Kangerlussuaq, West Greenland andthe gold-palladium project in the KangerlussuaqSkaergaard intrusion, East Greenland. In other words,increased global activity in the exploration industryhas also made its mark on Greenland in the form of agrowing number of exploration licences.

Thus, a number of the objectives set out in MineralStrategy 2004 have been realised.

It is against this background that The Bureau ofMinerals and Petroleum wishes to present a new mine-ral strategy with new focus areas/themes that will beeffective from 2009.

10 1.3 Objectives

The objectives of The Bureau of Minerals andPetroleum’s Mineral Strategy 2009 are as follows:

• Greenland will be recognised as an attractive explo-ration area.

• A reasonable proportion of the profits generated byextraction should be ensured for society.

• Licence terms must be reasonable for both small andlarge companies, robust to fluctuating economictrends and simple and easy to administer for compa-nies and authorities.

• It must be possible to implement the strategy withinthe framework of a new mineral agreement betweenGreenland and Denmark.

For many years, there has been broad political agree-ment in Greenland that efforts should be made todevelop the mineral sector into a principal industrycontributing positively to economic development andto the creation of new jobs. This goal is an essentialelement of the wish for long-term economic develop-ment in Greenland, including the development of busi-ness sectors alternative to fisheries.

The development of the mineral resource sectorneeds to take place in a manner that will benefit theGreenlandic society as much as possible. Society mustbe secured a fair proportion of the value gained fromextraction. Local insight and knowledge of the activiti-es must be acquired to ensure that local labour andlocal enterprises are used to the greatest possibleextent.

All mineral resource activities are subject to the spe-cific political condition that they shall be carried outproperly in terms of health, safety and the environ-ment. The Arctic environment is very vulnerable, andGreenlandic industry and Greenlandic culture are to agreat extent linked to nature and the environment.

1.4Mineral strategy themes

To make mineral finds, which can be commerciallyexploited and thus support the wish for increasedemployment and earnings in society, the level ofexploration activity must be sufficiently high at alltimes. Furthermore, the commercial mineral industrymust carry out exploration activities on a large scale– both for economic reasons, as mineral exploration isa very cost intensive activity, and due to the need formaximum commercial and professional explorationexpertise. As mentioned, the themes of the 2004 stra-tegy included focusing on gold and diamonds. Thisstrategy is broader than ‘Mineral Strategy 2004’, and it has focus on all economically sustainable metals/minerals and on areas which geologically are littleknown.

Encouraging mineral industry interest in investing inexploration in Greenland remains the most importantoverall strategic objective for the mineral activities.However, a number of countries worldwide are cur-rently competing intensely to attract interest andinvestments from mineral companies. At the sametime, mineral companies carefully analyse, in eachindividual case, the chance of making commercialfinds before they decide to apply for an explorationlicence. This is due to the heavy financial obligationsensuing from a licence.

Picture 2.Ship at the old quay at Maarmorilik


For these reasons, it is of vital interest to the desireddevelopment of the mineral resource area inGreenland that The Bureau of Minerals and Petroleumcan present a reliable and investment-friendly pictureof the potentials and the terms and conditions forexploration and exploitation of minerals in Greenland.In this context, the most significant parameters can besummarised into:

• prospectivity; i.e. geological data and surveys sug-gesting the probability of significant commercialmineral occurrences,

• transparent and competitive licence terms and con-ditions,

• stable framework conditions, and

• efficient administration by the authorities.

Mineral Strategy 2009 is based on these fundamentalparameters with the aim of identifying focusedefforts to be carried out over the coming years to pro-mote the desired development of the mineral resour-ces area.

1.5Environmental aspects of the mineral strategy

An essential aspect of the exploration and exploita-tion of minerals in Greenland is assessments of theimpacts on the environment (EIA) and on other exploi-tation of natural resources. Rules2) have been prepa-red for the conduct of exploration activities, definingthat the activities must be approved before beingimplemented. They also describe that the conduct ofactivities in a number of areas designated as‘Important areas for wildlife’ is subject to special req-uirements. For exploitation purposes, a company wis-hing to exploit a given occurrence must prepare areport on potential environmental impacts as well as aplan describing how to avoid or minimise the impacts.The Bureau of Minerals and Petroleum has preparedguidelines setting out how to prepare such an EIAReport3). The aim of the rules for exploration andexploitation is to protect the environment as much aspossible. In the following, a description is given ofaspects with strategic contents.

12 1.5 Environmental aspects of the mineral strategy

One such strategic aspect is the preparation of so-called SEIAs (Strategic Environmental ImpactAssessments) for a given area. This makes it possibleto carry out a comparison of environmental data for alarger area than that which will/may be affected by agiven mining activity. This knowledge is necessary tobe able to assess the importance of the impact fromsuch an activity and in order to be able to incorporatechanges in a given project to minimise the impacts. Anexample of the latter is the proposed change of thelocation of a runway and a road at Gurreholm inScoresby Sound. Furthermore, several SEIAs havebeen prepared in connection with hydrocarbon activi-ties. SEIA work is typically carried out by public insti-tutions and provides the authorities with an importantprofessional basis for assessing the EIA report for agiven project.

A second strategic aspect is that NERI maintains adatabase for environmental data and samples, whichis particularly useful for companies wishing to opera-te in areas having previously been subject to explora-tions and environmental studies such as CitronenFjord, Kangerlussuaq (East Greenland), Maarmorilik,Kringlerne and Kvanefjeld. This saves time and resour-ces for background studies of ‘new projects’ in ‘oldareas’. According to the rules (‘BMP Guidelines forPreparing an Environmental Impact Assessment (EIA)Report for Mineral Exploitation in Greenland’), thecompanies must deliver environmental data and sam-ples to NERI when applying for new licences.

A third aspect is the timing of environmental studiesin connection with exploitation plans. It is importantthat companies realise that it takes time to carry outthe studies needed to evaluate the environmentalimpacts of a given project, so that the informationnecessary for preparing the EIA Report is available forthe political handling of an exploitation licence. This isthe reason why The Bureau of Minerals and Petroleumhas introduced a practice recently where companiesconsidered close to the ’stage of exploitation’ areinformed of the requirements relating to the EIA workat meetings in which The Bureau of Minerals andPetroleum and NERI participate. It is also consideredto make companies more conscious of all aspectsinvolved in the planning and timing of environmentalwork by producing an overview pamphlet.

Knowledge of mineral occurrences in attractive geolo-gical environments is based on a high level of geologi-cal knowledge linking certain mineral occurrenceswith specific geological environments. A fundamentalfeature of the formation of a mineral occurrence is thelink between the mineral/metal and the hosting rockformation.

The link between the mineral/metal and the hostingrock formation has led to the so-called resourceassessments of geographical areas such as centralWest Greenland, South Greenland and the Nuukregion. The level of detail of the geoscientific datacoverage sets a natural limit to the accuracy of aresource assessment. Therefore, it is important conti-nuously to expand the general level of information ofthe various geological environments and the relatedmineral occurrences in Greenland.

• The aim is to increase concrete knowledge of poten-tial mineral-bearing geological environments inGreenland to such a degree that this knowledge canbe used immediately by exploration companies.Focus in the coming years will be on areas which arenot covered by existing licences and which are characterised by limited geological knowledge.

• Focus will be on all types of mineral resources whichare economically sustainable on large as well assmall scale, with the exception of radioactive ele-ments. These resources can be metallic minerals,gemstones, industrial minerals, ornamental stones,and aggregates.

• Research into associated methods of interpretinggeoscientific data in that respect should be includedas necessary. This is required as, among other reasons, internationally and globally it seems to benecessary to dig deeper and deeper into the Earth’scrust to make major finds.

2.1Geological knowledge base

GEUS plays a very central role in developing and disse-minating the geological knowledge base of Greenland.Existing knowledge is gathered in a large number ofscientific publications, geological, geophysical andgeochemical maps. All company reports are filed atGEUS, where non-confidential reports are available – see also published products at www.geus.dk

Only a limited part of these publications will be ofimmediate use to the exploration industry. Therefore,GEUS also issues publications relevant to explorationfor the purpose of resource assessments of specificareas. In connection with map sheet descriptions,references are also made to publications of explora-tion interest.

• As there are several points of access to relevantpublications regarding mineral exploration and manyof these publications are scattered over a wide rangeof general geological literature, a database is cur-rently being established of literature of interes toexploration and guiding in a simple way companies torelevant geological information, a ‘one door principle’for relevant literature. The web-based database,established by GEUS and financed by The Bureau ofMinerals and Petroleum, will be completed by theend of 2009 – see www.geus.dk/DODEX/

Data coverage and assessment of the most impor-tant elements of the geological knowledge base are divided into four themes: Geological Mapping and Ore Geological Surveys; Geophysical Mapping;Geochemical Mapping; and Databases.

2. Geological efforts –status and assessment


2.2Geological mapping

An important aspect of geological surveys is the esta-blishment of a regional overview of geological condi-tions. The international mineral industry expects geo-logical surveys from GEUS to provide the productsand data which form the basis of this overview.

Publication of geological maps in Greenland is mainly done at two scales: geological overview maps at a 1:500,000 scale and more detailed maps at a 1:100,000 scale.

The overview mapping has been finished in the sensethat all parts of Greenland are now covered by1:500,000 map sheets. 14 map sheets have been published at this scale. A map sheet description ispublished as an important supplement to the indivi-dual maps.

In the future, maps at both scales will be updated anddigitalised progressively in areas of geological explo-ration – see overview at www.geus.dk. Attempts willbe made to prioritise the 1:100,000 map sheetstogether with GEUS, giving highest priority to areaswith the greatest mineral potential. Map limits willincreasingly be undefined (seamless), which meansthat the map size to a greater extent will follow interesting geological and ore geological themes rather than predefined map limits. All future maps areto be digital. Furthermore, it is important to carry outtargeted ore geological surveys.

• Initially, an evaluation should be made of the mapsheet series 1:500,000 and the existing 1:100,000maps with a view to their applicability for mineralexploration purposes, including in particular theircontributions to the delineation and characterisationof favourable geological environments with a pro-mising mineral potential. All future maps are to bedigital and seamless.

14 2.2 Geological mapping

Picture 3.Collection of geophysical data in Greenland.

2.3Geophysical mapping

The purpose of geophysical mapping is to providegeophysical data from Greenland for use in mineralexploration and for characterisation of geologicalenvironments. Geophysical mapping is thus an aid ingeological mapping.

The international mineral industry expects the autho-rities to carry out various types of geophysical stu-dies and to make data available to exploration compa-nies. All countries competing with Greenland toattract interest and investments in exploration havealready conducted or are conducting such regional air-borne geophysical surveys. As an example, airbornegeophysical studies are often one of the first activi-ties that the World Bank finances when implementingdevelopment programmes in the mineral resource sector in the third world.

The following types of geophysical methods used sofar in Greenland are: magnetic measurement, electro-magnetic measurement, radiometric measurement,and remote sensing including hyper spectral measure-ment.

The most frequently used method is airborne magne-tic measurement recording the impact of the variousmagnetic properties of the rocks. This is a simple method and the price per line kilometre is lower thanfor other methods.

Electromagnetic measurements determine the elec-tric properties of soil. Many ore minerals are goodconductors of electric current and large concentra-tions of these minerals are directly detectable by thismethod. The method is therefore suitable for directmineral exploration but is also increasingly used as amapping tool.

As far as both magnetic and electromagnetic data areconcerned, they not only record information fromrocks in the surface but also from deeper-lying bodiesin the Earth’s crust.

Radiometric measurements only reflect the distribu-tion of radioactive elements on the surface. The threemost common elements mapped in these measure-ments are isotopes of potassium, uranium and thorium. Exploration for radioactive elements is notpermitted, but the distribution of radioactive ele-ments in a geophysical map plays an important role inthe interpretation of geological development in anarea.

Remote sensing is a generic term for methods whereradiation in the form of reflected and refracted lightor heat radiation is recorded. Images, for examplefrom satellites, have long been used for geologicalmapping and mineral exploration purposes. A newlydeveloped technology for use from aircraft records alarger spectrum of radiation (hyper spectral measure-ments), thereby improving significantly the resolutionand achieving much greater certainty in the identifi-cation of minerals and rocks on the surface of theEarth. In addition, the signs of important mineralogicalprocesses are directly traceable. Both remote sensingand hyper spectral studies are techniques for thefuture and are part of the preparation of new mapping,for example, of 1:100,000 maps, and for the identifi-cation of potential field areas with a favourable mine-ral potential.


Geophysical measurements from Greenland repre-sent a number of datasets, the quality of which corres-ponds to that of data provided by other countries tothe exploration industry. The utilisation of existingdata offers a significant potential, both for geologicalmapping and in connection with exploration work. Forthese purposes, digital data dissemination is impor-tant.

Many junior companies and small consultancy firms donot have the necessary resources to fully utilise theinformation contained in geophysical data. Therefore,it is important that GEUS continues to present interpretations of geophysical data based on moderntechniques and integrating other geological informa-tion into the interpretation.

• In the opinion of The Bureau of Minerals andPetroleum, current coverage of geophysical datashould be expanded into areas where the mineralpotential is little known. In the coming years’ geophy-sical surveys, a main focus area will be to carry outairborne magnetic and possibly electromagnetic sur-veys in south-east Greenland from 62°N – 67°N. Thisregion is widely covered by the so-called Archaeanbelt stretching from the west coast across southerncentral Greenland to the east coast. Many of thepotential geological/mineral finds identified todayon the west coast may be expected to re-occur onthe east coast, which therefore holds potentials forgold, rare earth metals, gemstones, nickel etc.

• As these types of studies are very cost intensive,major efforts will be made to carry them out by invol-ving private co-financing. In this connection, TheBureau of Minerals and Petroleum will seek to trans-fer the models for cooperation between public authorities and the geophysical industry that TheBureau has developed over a number of years in thefield of oil.

• Remote sensing and hyper spectral data collectionare an important source in the evaluation of an area’smineral potential. This type of data will be prioritisedin connection with the evaluation of the mineralpotential of a new area and in the selection of newfield areas.

16 2.3 Geophysical mapping

2.4Geochemical mapping

The purpose of geochemical mapping is to establishregional coverage of geochemical data for use in mine-ral exploration, for geochemical characterisation ofthe various geological environments and for a regionaldescription of soil and water quality.

The method involves systematic collection of streamsediments with a density corresponding to at leastone sample per 30 km2 or in a denser network.Geochemical mapping in Greenland is done by meansof stream sediments and started in the early 1970s.Since the start of geochemical mapping, analyticalmethods have improved greatly, both in terms of accu-racy and sensitivity of analyses and in terms of thecosts of carrying out analyses. As a result, the analy-ses now comprise about 50 elements. This has wide-ned the use of geochemical mapping, now rangingfrom mineral exploration over characterisation ofgeological environments to purely environmental factors such as pollution, background levels etc.

The west coast of Greenland is covered by streamsediment analyses, and a geochemical atlas has beenproduced – this means that analyses within this areahave been homogenised so that analysis values gene-rated in different years are directly comparable fromone area to another.

Geochemical data are used in different ways in mine-ral exploration. All countries wishing to attract theexploration industry have geochemical mapping pro-grammes and results are made available to industry.

Exploration companies use the regional geochemicaldatasets as a basis for designing their own moredetailed geochemical surveys in their focus areas.

• The priority given to the geochemical area will followthe same focus areas as geology and geophysics, i.e.South-East Greenland. The Bureau of Minerals andPetroleum recommends that this project be initiatedsoon and, if possible, by summer 2011.

• At the same time, geochemical data can be used tocharacterise the inorganic environment and thusform a natural part of environmental assessments inconnection with mineral activities.

• Geochemical samples from stream sediments canalso be utilised in the mapping of indicator mineralsin the search of kimberlites with a diamond poten-tial.


18 2.5 Databases

2.5Databases

GEUS operates as a databank for all data and informa-tion concerning mineral resources in Greenland. Thedatabases contain information and data from varioussources:

• GEUS’ own studies, including projects performed byGEUS in cooperation with, for example, The Bureauof Minerals and Petroleum.

• Exploration and mining companies’ activities inGreenland.

• International scientific studies.

The objectives of the databases are, among others, toensure storage of data for future use and documenta-tion and to provide the basis for meeting stakehol-ders’ requests for insight into geological conditions,including in particular those of the internationalexploration and mining industry. The databases alsoprovide the basis for GEUS’ own activity in the area.After 2009 this web-based database should be fullydeveloped – see www.geus.dk/DODEX

Mineral occurrences in Greenland are also found onthe website www.geus.dk/GMOM . This facility is being continuously developed by GEUS.

The Bureau of Minerals and Petroleum has drillingcore archives in both Kangerlussuaq and Narsarsuaq.These archives contain very valuable material for further studies and it is a facility regularly used by the exploration industry.

2.6Geological environments andresources

Based on the geological knowledge base, a central element of which is the completed overview mappingat a 1:500,000 scale, Greenland can be divided intothe following primary geological environments:

• sedimentary basins

• magmatic provinces

• supracrustal areas

• infracrustal areas

Each geological environment is characterised by aspecific group of rocks. There is a very great differen-ce in terms of rock between, for example, sedimenta-ry basins (sandstone, shales and limestone etc.) andmagmatic provinces (basalt, syenite and granite etc.)while the rock difference between supracrustal areas(crystalline shales, greenstone and amphibolites etc)and infracrustal areas (gneisses, migmatites, charno-kites and agmatites etc.) will not always be so distinct.Furthermore, the rocks are today characterised byhaving undergone long and complex geological devel-opment processes. Therefore, it is important to con-duct ore geological research, which can help us under-stand how minerals occur. In connection with resourceassessments, The Bureau of Minerals and Petroleumand GEUS have held ’workshops’ in association withCanadian geological institutions in order to comparethe mineral resource potential between Canada andGreenland. International cooperation is important inproviding a solid position for Greenlandic mineraloccurrences and potential in the international main-stream of research and exploration.


• In the coming years efforts will be made to obtainmore detailed knowledge and to delineate the mostfavourable environments in areas of Greenland thatonly to a limited extent have been studied geologi-cally.

• The resource assessment projects in progress inSouth West Greenland will be completed over thenext two to three years through cooperation and co-financing between GEUS and The Bureau of Mineralsand Petroleum.

• As regards the potential for mineral occurrences inthe individual primary geological environments andthe actual mineral occurrences related to these envi-ronments, focus is on the areas a) South-EastGreenland, b) the Thule Basin and Melville Bay, c) North-East Greenland and d) sub-areas of South-Greenland. South-East Greenland will be the princi-pal activity and the other areas will be studied if theyalready have the necessary logistics.

• The work of the international exploration industryincludes exploration and exploitation of many diffe-rent metals/minerals and it is therefore essential toapproach the assessment of the geological potentialof an area from a correspondingly broad viewpoint.

• During the past decade The Bureau of Minerals andPetroleum and GEUS have cooperated excellently inanalysing and illustrating the link between geologicalenvironments and potential types of mineral occur-rences. This cooperation on resource assessments isalso important from an international perspective andis a significant activity which should be enhanced inthe years to come.

2.7Summary

In the field of geology, the Mineral Strategy will pro-mote the following objectives over the next few years:

• Increase specific knowledge of the geological envi-ronments which are favourable to the generation ofmineral occurrences, particularly in areas that aregeologically little known in Greenland. The purpose isto establish a level of detail which will enable theexploration industry to use the information directly.Main focus will be on South-East Greenland.

• Focus will be on all types of mineral resources, whichare economically sustainable both on a large scaleand on a small scale, e.g. metallic resources, gemsto-nes, industrial minerals, face stones, and aggregates.

• The current joint projects between The Bureau ofMinerals and Petroleum and GEUS in SouthWestGreenland will be completed within two to threeyears. The Bureau of Minerals and Petroleum andGEUS will continue to assess the link between geolo-gical environments and potential types of mineraloccurrences in the resource assessment projects.

• In South-East Greenland there are currently noknown mineral occurrences in the Archaean block.However there are expected to be occurrences of thesame types as those in South-West Greenland as thegeological development is expected to be the sameas in that area. Expected metals and minerals includegold, platinum, palladium, diamonds, iron, chromium,titanium and vanadium, rubies, nickel, copper, nio-bium, tantalum, and phosphate.

• Expansion of the existing web database on inte-resting exploration literature (DODEX), which canguide companies to relevant geological information – a ‘one door principle’ for relevant literature. GEUSwill continue to expand the already existing data-base on mineral occurrences on the web (GMOM).

• Recommend GEUS to prepare a plan for completionof the remaining map sheet descriptions and givehighest priority to the map sheet descriptions thatunderpin the efforts of The Bureau of Minerals andPetroleum to focus on geological environmentswhich are favourable to the generation of mineraloccurrences in the focus areas.

• Geophysical data will be included in the characterisa-tion and delineation of the geological environments.Also the work on interpreting geophysical datashould support The Bureau of Minerals andPetroleum’s focus on geological environments favou-rable to the generation of mineral occurrences.

• Prioritisation within the geochemical area is espe-cially directed at application of these data, which arean integral part of the characterisation of geologicalenvironments. Geochemical data are also to be usedfor characterising the inorganic environment and inthis way form a natural part of environmentalassessments in connection with mineral resourceactivities.

• The time horizon for surveys of the focus area inSouth-East Greenland will be: geochemical collec-tion of data in 2009–2010 and geophysical data in2011-12. This work will be followed by the selectionof sub-areas based on geophysical, geochemical andremote sensing data for geological follow-up onpotential mineral resources in the form of ore geo-logical studies and the decision on a possible map-ping of sub-areas in 2011–2014.

20 2.7 Summary

Mineral Strategy 2009 21

The strategy behind the new Mineral Resources Act in1991 focussed particularly on the need to commenceactive information and marketing activities in relationto Greenland’s mineral resource potential. In terms ofinformation and marketing, the strategy incorporatedthe following main components:

• Preparation of comprehensive information materialon Greenland of a general as well as a specific natu-re, aimed at the international mining and oil industry.

• Continuous preparation of information material inthe field of on mineral resource developments, aimedat the population of Greenland.

• A more pro-active effort from the authorities in relation to the mining and oil industry with a view topromoting international investments in mineralresource activities in Greenland.

3.1Status and evaluation of interna-tional marketing activities

The marketing activities aimed at the internationalindustry concerning promotion of the Greenlandicmineral resource potential can be divided into twogroups: participation in trade shows/conferences andpublication of data and preparation of informationmaterial.

Trade shows and conferencesIn recent years, The Bureau of Minerals and Petroleumhas been a regular participant at two mineral tradeshows and conferences, i.e. the ’Mineral ExplorationRoundup’ in Vancouver in January and the ’PDAC’ tradeshow in Toronto in March.

Through its participation in these trade showsGreenland has moved from being a fairly unknownexploration area to a well-known area with potentialfor mineral exploration on equal terms with otherareas in the Arctic. In addition, these trade shows havehelped establish a good contact with internationalexploration companies and with other leading playersin the industry. Maintaining a well-considered presen-ce at international trade shows to secure Greenland aplace in the world’s attention is considered important.

The direct, specific objective of participation in tradeshows is to market different aspects of the mineralresource potential in Greenland, the aim being to makeindustry apply for exploration and exploitation licen-ces in Greenland. In popular terms, the objective canbe summarised as follows: The Bureau of Minerals andPetroleum is to ’sell’ exclusive licences to serious, pro-fessionally competent and safety and environmental-ly conscious mineral resource companies, aiming tomake industry finance exploration of the Greenlandicmineral resource potential, which may lead to devel-opments of actual mining projects.

3. Marketing of mineral potentials in Greenland

Picture 4.Rock with corundum/ruby.

21

Information materialThe production and dissemination of data and infor-mation is key to spreading of knowledge ofGreenland’s mineral potential to the surroundingworld. As a result of many years of systematic datacollection, GEUS today has a number of databaseswith geological information. These data are publishedin various formats such as analogous maps, digitalcompilations of projects on CD/DVD or on websitesand in GEUS reports.

In addition, over the years informative products easilyavailable to the industry have also been produced inconnection with the marketing efforts:

The newsletter Minex is published three times a year,typically in connection with participation in internatio-nal trade shows. Minex covers current news such asnew data publications and status of exploration pro-jects in Greenland.

‘Greenland’s Mineral Resources’ is a marketing-friendly product consisting of a) Power Point presen-tations (Topics on Greenland Mineral Resources), b) Fact Sheets (Exploration and Mining in Greenland)and c) a series of publications of a general scientificnature on ores in Greenland (Geology and Ore). Thethree products are produced independently of eachother and with different themes. The material is launched under the heading ‘Greenland MineralResources’. The two latter products are popular infor-mation materials frequently used by the mining indu-stry.

As part of the digital development, GEUS has publis-hed the products (Minex, Fact Sheet and Geology andOre) on www.geus.dk, from which they can be downloa-ded. Experience shows that Minex operates well, pro-viding quick access to data and information on explo-ration in Greenland and that the newsletter is used bya broad group of stakeholders in the geological world.

As part of the digital development, both The Bureau ofMinerals and Petroleum and GEUS have an English-language website used in connection with marketingand servicing of, among others, exploration compani-es. The Bureau of Minerals and Petroleum’s websitefocuses on information concerning licences and legi-slation, while the GEUS website naturally attachesimportance to geological information. The websitesare maintained and updated on a continuous basis. Inthe coming years, efforts will be made to increasinglycoordinate these websites. GEUS is responsible foradministering the databases, which support GMOMand DODEX.

Another means used in the communication of know-ledge and data about Greenland includes the exten-sive service provided by GEUS and The Bureau ofMinerals and Petroleum to visiting companies andother stakeholders. At these visits companies receivepersonal service, getting in this way quick access toboth data and information in addition to exchange ofpersonal experience with relevant researchers. Thisservice is greatly appreciated by the visiting compani-es.

Every second year, special workshops on geologicaland administrative topics are held by The Bureau ofMinerals and Petroleum together with GEUS with thespecific aim to increase contact and collaborationwith Canadian organisations.

3.1 Status and evaluation of international marketing activities22

3.2Status and evaluation of information in GreenlandPublicationsDuring the years focus has been put on translatingpopular geological publications and information mate-rials into Greenlandic in order to optimise the effectand communication of information. In addition, TheBureau of Minerals and Petroleum’s annual report hasbeen published in Greenlandic, English and Danish.

Meetings and similar activitiesThe Bureau of Minerals and Petroleum holds severalpublic meetings on major mining projects and generaltopics, for example the uranium hearing. Experienceshows that local residents are highly interested inthese types of events where they can ask questionsand obtain general knowledge of geology, mineralsand projects.

The mineral hunt, Ujarassiorit, and the Prospectorcourses also deserve special mention. Ujarassioritwas started in 1989 and the Prospector courses in1995. Even though these two programmes do notdirectly belong under the information heading, theyhave for many years contributed greatly to creating apositive interest in Greenland’s world of mineralresources and involving the local people directly intomineral exploration.

3.3Future marketing

Marketing efforts aimed at international industryhave so far been concentrated around the trade showsin Vancouver and Toronto, as already mentioned. Forseveral years, presentations concentrated on generalgeological topics aimed at industrial exploration acti-vities in Greenland, with a broad variety of mineralresources and geology and a wide geographic covera-ge. In future exhibitions, there will be greater focus onselected topics. The selected topics will mainly focuson the mineral potential of areas which are littleknown in terms of exploration in Greenland.

Geological projects, which are carried out in coopera-tion between GEUS and The Bureau of Minerals andPetroleum, for example resource assessment pro-jects, will also be promoted.

Greenland’s participation in trade shows located out-side North America has been the subject of discussion.The Bureau of Minerals and Petroleum is regularlyconsidering which trade shows to attend for promo-tion of the country’s resources. Currently, manyAustralian companies are operating in Greenland, soparticipation in an Australian mining event (’Diggers & Dealers’) is being considered. As in Greenland,exploration activity has grown considerably inFennoscandia, and it is being considered whether TheBureau of Minerals and Petroleum should participatein the Nordic mining event in Rovaniemi, Finland.


At some of the trade shows, The Bureau of Mineralsand Petroleum will give thematic presentations onGreenland (typically half a day) addressing the poten-tials for mineral resources. Companies attending aregiven the opportunity to obtain detailed informationabout Greenland’s potential mineral occurrences inaddition to knowledge of the conditions relating tooperations in Greenland. Such events are also a suitable forum for publication of news such as newgeological data or promising mineralisation finds.

In connection with Greenland’s participation in theToronto trade show, a so-called Hospitality Event washeld as part of the marketing efforts. This is an eventwhere people from companies, consultants, investorsand others interested in exploration in Greenland areinvited to a reception. The Hospitality Event is main-tained as an event because it provides a suitableforum for advertising news and since it is a placewhere the participants get the opportunity to havedetailed discussions with the Greenland delegation inaddition to the opportunity to meet other professio-nals with experience from operations in Greenland.

The trade shows in Vancouver and Toronto have developed into important meeting places for the entire spectrum of people related to the explorationindustry, including mining companies, investors, juniorcompanies, service companies, consultancy compa-nies etc. Junior companies have used the Greenlandicbooth as a meeting place for their contacts at thetrade shows, thereby contributing to a different kindof marketing of Greenland. This also gives the booth adifferent and positive function compared with thedirect marketing of Greenland’s mineral potential.

Maturing of projectsAs a result of international competition to attractexploration to the country, the role of public authori-ties in exploration and data collection must match thenew conditions in order not to lose ‘market shares’.

Regional mapping and collection of basic data used tobe surveys that were publicly supported. If a projectlooked promising based on regional data, private com-panies would naturally conduct the more specific andextensive surveys. This was the division of work.However, international competition has created a shiftin this arrangement between the public sector and theprivate sector in the field of mineral exploration. Moreradical efforts by the public sector are expected anddemanded. In certain cases, it is therefore necessaryfor the public sector to take action and perform moreradical geological and geophysical surveys in order to‘mature’ projects.

The Bureau of Minerals and Petroleum has previouslygranted support for maturing of areas by collectinggeophysical and geochemical data or collecting largekimberlitic samples for the purpose of acquiring moreknowledge that benefits the mining industry. Surveysof this nature are only carried out in areas not coveredby exploration licences.

Before the release of data from such publicly suppor-ted projects, an evaluation of the results should becarried out. If such a project does not show remark-ably interesting results, data may be released imme-diately and be included in companies’ totalassessment of an area’s geological potential. If, on theother hand, a project shows very positive results, thearea may be tendered with an exploration licence withspecial terms and conditions. In addition, the marke-ting potential must be utilised.

3.3 Future marketing24

Marketing through the InternetThe Internet has become a very important source forcompanies in search of information and data for use intheir strategic considerations. Therefore, to encoura-ge companies to include Greenland in their strategicconsiderations, it is important to use the Internet toprovide information and data in an easy and transpa-rent manner. Today, the following information can bedownloaded from the Internet:

• Greenland Mineral Occurrence Map (GMOM) –www.geus.dk/GMOM

• ‘The Geoscience DOcuments and Data forExploration’ (DODEX) – www.geus.dk/DODEX

• The Bureau of Minerals and Petroleum’s own web-site, www.bmp.gl , from which there is access toinformation about licence cards. The website isupdated twice a month.

• The Ujarassiorit programme, under which theGreenlandic population submits interesting mineralsamples can be followed on www.ujarassiorit.gl

• Geological literature, geological maps, Minex,Geology and Ore, Fact Sheets, and popular science publications can be found onwww.geus.dk/publikationer and www.geus.dk/minex

The Bureau of Minerals and Petroleum is carefully stu-dying the choice of available publication media andhow these products can be continuously improved.

Simultaneously with the production of data in general,marketing plans must be prepared setting out bothhow to process data and how to publish them. By wayof example, raw data have great professional valuebut not necessarily a large marketing potential.

A good example of data publication with good marke-ting quality is the growing number of interdisciplinaryGIS compilations made on the basis of data from acertain geographic area or for a certain mineralresource and published on a CD/DVD. Interdisciplinarycompilations are compilations of geochemical data,geophysical data, geological maps etc. where thebuyer will get a complete data package for one area.These products have received great attention amonginternational companies. It is therefore recommendedto continue to develop and produce these products. At the same time, it is necessary to work towards pub-lication of these data on the Internet.


3.4Future information in Greenland

Existing activities providing information to theGreenlandic population such as information meetingsin municipalities, circulation of popular publicationsand booklets on exploration and mining operations aswell as Ujarassiorit should be maintained and furtherdeveloped to retain and enhance the population’sinterest in mineral resource exploration and exploita-tion. A further goal is to get as much information aspossible on the Internet.

When the Greenland Home Rule Government’s (now Government of Greenland) common websitewww.nanoq.gl, was introduced, The Bureau of Mineralsand Petroleum decided to close down its website inGreenlandic and Danish, and consequently usewww.nanoq.gl to inform the population. Whilst TheBureau of Minerals and Petroleum’s existing platformon www.nanoq.gl still needs further development, allfuture information for the population concerningmineral resource activities will be provided mainlythrough this website.

The Bureau of Minerals and Petroleum will maintainwww.bmp.gl as an English-language website, primarilyaimed at professional users. This site is particularlywell branded in the international mining (and oil) indu-stry, and will therefore also in future be the centralInternet platform in relation to the mineral resourceindustry.

3.5Summary

The most significant elements of the information andmarketing efforts under Mineral Strategy 2009 can besummarised as follows:

• Future marketing of Greenland’s mineral potentialmust reflect and support activities and initiatives ingeological focus areas.

• Marketing efforts relating to Greenland’s mineralpotential must continue to be aimed at internationalindustry. At the same time, the population must beinformed about geological projects and explorationefforts in Greenland.

• It is recommended that Greenland should continue tobe represented at the international trade shows, theMineral Exploration Roundup in Vancouver and thePDAC in Toronto, and that additional marketing drives should be launched at similar trade shows in,for example, Australia and Europe. The impact ofactivities should be evaluated on a continuous basis.

• At these events, marketing efforts should, whereverpossible, focus on topics that are geologically littleknown. In addition, it is suggested that half a day beset up as a theme day involving active participationin the trade shows by giving presentations on geolo-gical topics relating to Greenland’s mineral potential.

3.4 Future information in Greenland26

• It will to some extent be necessary for the publicsector to intervene and carry out extensive studiesto develop mature projects so that it will subseq-uently be more interesting and easier for companiesto raise capital for investment in exploration pro-jects in these areas.

• As part of more offensive marketing efforts, severaltypes of direct marketing are proposed aimed atspecific company contacts. Examples include themarketing of matured projects, economic/professional cooperation with companies on the collection of geological data, organising specificgeological excursions for industry and/or the acade-mic world etc. In addition, the Hospitality Eventreception will be maintained at the PDAC in Torontoas it has been very successful as a meeting place forcompanies with interests in Greenland.

• Marketing via the Internet is an obvious opportunityfor regularly bringing new developments to as widean audience as possible. In connection with thedevelopment of marketing through the Internet,work is being carried out to achieve comprehensivedigitalisation of existing and new map data.

• All existing publications and reports will eventuallybe made accessible via the Internet. Today, the GEUSwebsite provides access to several publications onGreenland. In future, the expansion of the DODEXdatabase will be completed, after which Greenlandrelated reports and literature will be available on theInternet.

• Regarding information within Greenland it is recom-mended to maintain and further develop existingactivities such as information meetings in municipa-lities, translation of publications and periodicals,Ujarassiorit and Prospector courses, and public pre-sentations in order to retain and increase the popula-tion’s interest in mineral resource exploration andexploitation. Furthermore, it is recommended toexpand www.nanoq.gl as a source of information forNewsletters to local authorities and descriptions ofongoing geological projects.

• The Bureau of Minerals and Petroleum maintainswww.bmp.gl as an English-language website, primari-ly aimed at professional users. This site is particular-ly well branded in the international mining (and oil)industry and will therefore also in future be the cen-tral Internet platform in relation to the mineralresource industry.


3.5 Summary

Picture 5.Geological map of Greenland with themost important geological periods.

28

The update of current economic and administrativeterms and conditions as well as procedures is basedon the above objectives, see chapter 1.

Based on experience from mining operations (goldmine and olivine mine) in Greenland gained over thepast four years, focus below is on evaluation and revi-sion of terms and conditions in force today.

4.1Benchmarking of Taxation andRoyalty Levels

As part of the work on preparing Mineral Strategy2009, The Bureau of Minerals and Petroleum askedPriceWaterhouseCoopers (PWC) to revise a bench-mark analysis carried out in 2004 of economic termsand conditions (‘government take’) concerning exploi-tation of mineral resources in Greenland in accordan-ce with the Mineral Resources Act.

The updated benchmark analysis4) comprises the fol-lowing countries, of which the latter three are newcompared with the 2004 analysis: Greenland,Argentina, Norway, Sweden, Australia, South Africa,Chile, Canada (ONT), Canada (NFL), Russia, Ghana, andJapan.

The base case of the benchmark analysis is a gold minewith a mine life of 12 years5), a reserve of 1 millionounces, an annual revenue from 100,000 ounces soldat a market price of USD 650 per ounce, a total invest-ment of USD 93 million, and annual production costsof USD 300 per ounce.

PWC has re-investigated the economic terms and con-ditions for exploitation of minerals in the selectedcountries and compared them with the economicterms and conditions in force for exploitation of mine-rals in Greenland.

Based on the comparison of countries, The Bureau ofMinerals and Petroleum and PWC have collaboratedon selecting, calculating, and processing possible‘government take’ models to be implemented in futuremineral licenses.

The following presentation only includes analysedgovernment take models that best match the criteriaoutlined6). Models resulting in a strong disincentive toinvest or models that are markedly degressive in natu-re (with a rising tax rate on a falling profit, and viceversa) have been omitted.

4. Economic Terms and Conditions and Procedures


Table 2.Overview of Nominal Taxation of Mining Operations in the 12 Selected Countries.

Noter:

1 Deductible if the annual income exceeds CAD 500,000.

2 Certain possibilities of deduction in the computation of the revenue subject to royalty.

3 In 2009, a supplementary royalty of 1.5-3 % is expected to be levied.

4 Dividend tax is levied on gross income before tax less an allowance for corporate tax paid.

5 Government tax of 20.5 % and municipality tax of 14 %; the government tax will be reduced to 15 % in 2012, resulting in a total tax rate of 29 % in 2012.

6 Government tax of 20.5 % and municipality tax of 11 %; the government tax will be reduced to 15 % in 2012, resulting in a total tax rate of 26 % in 2012.

7 To be levied on dividends exceeding the taxable income.

8 The current rate fluctuates between 3 and 6 %; 3 % is regarded as a representative rate.

9 The corporate tax component of 1.8 % is not included since mining companies are, in practice, exempted from it.

4.1 Benchmarking of Taxation and Royalty Levels

Corporatetax

Gross royalty

Mining tax

Interest dividend tax

Stamp duty

Import tax

Property tax

Export tax

Effective tax rate excl.dividend tax

Dividend tax

Effective tax rate incl.dividend tax

Argentina 35 % 3 %2 1 % 5 % 51 % 35 % 51 %

Can - NFL/Lab 34.5 % 5 10 %1 10 % 0.5 % 40 % 25 % 56 %

Can - Ontario 31.5 % 6 15 %1 10 % 0.5 % 35 % 25 % 50 %

Chile 17 % 15 % 1.5 % 19 % 35 %-17 % 4 37 %

Ghana 25 % 3 %8 8 % 34 % 8 % 39 %

Greenland 30/37 % 9 30 % 37 %-30 % 4 37 %

Japan 40.69 % 1 % 20 % 45 % 10 % 50 %

Norway 28 % 28 % 25 % 45 %

Russia 20/24 % 6 %2 20 % 5 % 2.2 % 45 % 15 % 53 %

South Africa Max 34 % 3 %3 33 % 33 %

Sweden 28 % 28 % 28 %

Western Austr. 30 % 2.5 %2 10 % 37 % 30 % 7 40 %

30

According to table 2, just over half of the countries,including Greenland, collect corporate tax in the rangeof 30–40%; the remaining countries collect corporatetax at a level of 17–28%. When other direct and indi-rect taxes are added, including dividend tax, a greaterspread is seen yielding effective tax rates between 28and 56%. Greenland’s effective tax rate of 37%, inclu-ding dividend tax of 7%, is the third-lowest rate in thefield.

Dividend paid is subject to a 7% tax rate in Greenlandand is different from the dividend tax levied in othercountries in that dividend paid in Greenland is deduc-tible in the calculation of taxable income. By payingout the whole amount of taxable income as dividendan investor in Greenland could attain an effectivetaxation level of 37%7).

In 2008, Greenland only had double taxation treatieswith Denmark, Iceland, the Faroe Islands, and Norway.In addition, a few sections of the double taxation trea-ty between Denmark and Canada also apply toGreenland. Consequently, of the selected countries,only a Norwegian investor will be granted a deductionby his/her tax authority for the special dividend tax of37% in Greenland.

Apart from the volume of additional direct and indi-rect taxes levied, the large spread in effective taxrates, including dividend tax, in table 2 reflects diffe-rent depreciation rules among the countries.Greenland maintains a relatively favourable scheme ofdepreciation rules8) that reduce the effective tax ratein comparison with the nominal tax rate:

• Exploration and exploitation expenses are immedia-tely deductible.

• Investments in manufacturing facilities, productionequipment, as well as expansion thereof may bedepreciated by up to 30% of the net book value.

• In excess of the amount actually invested in manu-facturing facilities for refining extracted occurren-ces, a further 10% of the invested sum may bededucted for tax purposes.

• Additional annual depreciation of up to 50% of thetaxable income in any given year is permitted, there-by allowing for investments in manufacturing facili-ties and equipment to be fully written off over aperiod of 10 years.

As of 1 May 2007, Greenland has implemented a set ofanti-avoidance tax rules, including transfer pricing andthin capitalisation rules, to prevent the tax basis frombeing eroded. These anti-avoidance rules have notbeen in force sufficiently long for their effect to beevaluated. Therefore, the use of anti-avoidance taxrules in the other countries has not been included inthe analysis.


0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

SWE SA

GREENCHILE

GHANAAUS

NOR

JAPAN

CAN-ONT

ARG

RUSSIA

CAN-NFL/L

AB

Corporate tax

Royalty

Surplus Mining Tax

WHT dividends

WHT interest

Provincial taxes

Other Duties

Profit to permit holder

Figure 2. Distribution of Proceeds on Repatriation of Dividend in 12 Countries.

Figure no. 2 shows proceeds received by the licensee(green) and proceeds received by the public sector (allother colours), respectively. The table below the figu-re complements the graph with proceeds percentagerates as well as total figures for mining production(exported volume) in each country in 2006.

Figure 2 shows that corporate tax remains the mostimportant single component of the government take inthe selected countries. Only Japan has a higher corpo-rate tax rate than Greenland. Among the countrieswith the lowest government take, South Africa is stillthe only country that levies royalty9) on mining opera-tions. The government take profile of the group ofcountries, which collect a total rate of 50 % or more, isof a more complicated and complex nature.

Countries with direct and indirect taxes lower thanor at the level of that of Greenland:The picture has not changed substantially comparedwith the previous benchmark analysis. Sweden andSouth Africa, which are well-developed mining coun-tries with a much higher mining activity level thanGreenland, collect a government take of 28 % and 33 % (direct and indirect taxes), respectively. 37 % iscollected by Chile, which is one of South America’slarge mining countries. Greenland collects 37 % eventhough the mining activity in Greenland is significant-ly lower than in the aforementioned countries.

Ghana and Australia collect 39 % and 40 %, respecti-vely, which is largely at the Greenlandic level of directand indirect taxes. This is noteworthy since Australiais one of the leading mining countries in the world.

4.1 Benchmarking of Taxation and Royalty Levels32

SWE SAGREEN

CHILEGHANA

AUSNOR

JAPANCAN-ONT

ARGRUSSIA CAN-

NFL/LAB

Revenue to the public sector 28 % 33 % 37 % 37 % 39 % 40 % 45 % 50 % 50 % 51 % 53 % 56 %

Revenue to the permit holder 72 % 67 % 63 % 63 % 61 % 60 % 55 % 50 % 50 % 49 % 47 % 44 %

Production (kg/year) 6,848 270,000 2,800 42,100 66,205 280,000 0 8,904 55,000 44,131 160,000 2,000

Countries with a level of direct and indirect taxeshigher than that of Greenland:Japan, Canada, Argentina, and Russia all collect agovernment take of around 50 % which is viewed asthe maximum level of direct and indirect taxes leviableon minerals exploitation if a country is not to lose itscompetitive position completely.

With a large number of mines, good geology and infra-structure, well-trained labour, a reasonable cost level,stable democracy, etc. Canada is amongst the mostattractive mining countries in the world.

The Canadian government take level thus probablyrepresents the maximum level of direct and indirecttaxes that can be collected from mining activity. Inthis context it should be mentioned that the Canadianprovinces Ontario and Newfoundland are planning toreduce their government tax rate from 20.5 % to 15 %in 2012, i.e. a reduction of the level of direct and indi-rect taxes with the objective of improving their com-petitive position in relation to other countries.

Greenland is the only frontier area in the country com-parison. Nevertheless, it has a higher level of directand indirect taxes than more established mining coun-tries. Greenland has fewer mines and lower levels ofexports and employment than established miningcountries such as Australia, Russia and Canada(Ontario). If Greenland wishes to maintain its competi-tive position the level of direct and indirect taxesshould not be increased. The current Greenlandicgovernment take profile is still competitive. This issupported by the substantial growth in mineral feasi-bility studies and exploration activities thatGreenland has witnessed since 2004.

In light of the low government take levels in Swedenand South Africa, the only slightly higher governmenttake levels in Chile, Ghana, and Australia, andGreenland’s limited competitiveness in terms of infra-structure, labour, logistics, cost level etc, there seemsto be little if any scope for an increase in the govern-ment take on mining operations in Greenland. At thesame time, compared to 2004, Greenland’s competiti-ve position has not deteriorated. Consequently, thecountry comparison at hand does not provide anincentive to reduce the government take level inGreenland, either.

However, in the event of a loss-making mining produc-tion the present Greenlandic government take systemwill only generate proceeds from the licensee in theform of personal tax10) (tax deducted from income atsource). Furthermore, it does not ensure progressivity(proportionate increase) in the collection of proceedsin the event of growing revenue and/or profit, whichmust be characterised as a weakness.

Related to the position of Greenland in the compari-son, PWC also highlights the level of personal taxationin Greenland which is only surpassed by Sweden andArgentina, see figure 3 below. Thus, the level of payrolltaxes levied by Greenland is high compared with othercountries.

As from 1 January 2008, Greenland has collected per-sonal tax from foreign employees in Greenland aftertwo weeks of continuous employment. The high levelof personal taxes compared with the other countriesin the analysis increases the total government takeand, other things being equal, reduces Greenland’scompetitiveness from an investor point of view.


0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

SWE SA

GREENCHILE

GHANAAUS

NOR

JAPAN

CAN-ONT

ARG

RUSSIA

CAN-NFL/L

AB

Employer cost

Social security

Income tax

Net Compensation

PWC also points to some areas of the prevailingGreenlandic tax system that might well be revised without generating uncertainty among investors:

• Conclusion of double taxation treaties with morecountries in general.

• Abolition of depreciation rules for extraordinarydeductions (items C and D, see above), as they arenot needed by the investor since maximum dividendis repatriated. At the same time, this abolition canremove the risk of government take being deferred,particularly in capital intensive mining investments.

• Abolition of the special 1.8% tax which, in addition tocorporate tax, is levied on companies that extractnatural resources in Greenland.

• Adaptation of the rules on transfer pricing to themining industry.

• Abolition of the right to deduct financial incomefrom financial instruments in the calculation of tax-able income.

4.1 Benchmark af beskatnings- og royaltyniveau34

Figure 3. Comparison of employee taxation in 12 countries.

4.2 Future Possible GovernmentTake Models

With a so far limited number of mining operationsGreenland may still be called a frontier area in termsof commercial extraction of mineral resources.Therefore, in order to maintain the competitiveness ofGreenland as a mining country the total governmenttake must remain unchanged as the base case scenario.

In light of the increase in mineral feasibility study andexploration activities since 2004, however, it seemsappropriate to consider alternative government takemodels. Incorporating the existing corporate and divi-dend taxes plus a royalty such alternative models mayensure Greenland timely and proportionately increa-sing proceeds from growth in revenue and/or a gro-wing profit yielded by mining operations.

At the same time, a reduction of government take bydeclining revenue and/or profit is considered to be ofsecondary importance in the consideration of alter-native (progressive) models since the competitivepostion of Greenland is still comparatively strong, cf.figure 3 above.

The following four alternative models have beenselected for comparison with the present model forgovernment take in Greenland:

Model 1: ‘Extended Progressive New Zealand Model II’The model is based on the existing corporate and divi-dend tax rates. In addition, it collects a profit royaltyof 5 %, 10 %, and 15 %, respectively, when the accu-mulated income exceeds accumulated expenses by 30 %, 37.5 % and 45 %, respectively. The royalty isassumed to be deductible in the calculation of corpo-rate tax/dividend tax.

Model 2: ‘Extended Progressive New Zealand Model I’The model is based on the existing corporate and divi-dend tax rates. In addition, it collects a profit royaltyof 2 %, 4 %, 7 %, 7 % and 7 %, respectively, when theaccumulated income exceeds accumulated expensesby 15 %, 22.5 %, 30 %, 37.5 % and 45 %, respectively.The royalty is assumed to be deductible in the calcula-tion of corporate tax/dividend tax.

Model 3: ‘Extended Progressive New Zealand Model III’The model is based on the existing corporate tax rate.In addition, it collects a revenue royalty of 1 % and aprofit royalty of 3 %, 6 %, and 10 %, respectively,when the accumulated income exceeds accumulatedexpenses by 30 %, 37.5 % and 45 %, respectively.Both royalties are assumed to be deductible in the cal-culation of corporate tax/dividend tax.

Model 4: Corporate Tax 30 % + Revenue-BasedRoyalty of 2.75 %The model is based on the existing corporate tax rate. In addition, it only collects a revenue royalty of2.75 %, i.e. no dividend tax. The royalty is assumed tobe deductible in the calculation of corporate tax.


In comparing all four models with the base case scena-rio, sensitivity analyses have been carried out to showchanges in government take when market price andproduction each drops by 20 %, rises by 20 %, or risesby 40 %, respectively, cf. table 3 and figure 4 below.

4.2 Future Possible Government Take Models

Change Profit before Tax, USDm Gross Revenue, USDm

-20 % market price 51 520

-20 % production 123 520

Base case 181 650

+20 % production 239 780

+40 % production 297 910

+20 % market price 311 780

+40 % market price 441 910

Table 3. Sensitivity Analysis of Earnings in the Gold Mine Case of the Analysis.

The alternative models in figure 4 are presented inorder of priority with model 1 preferred to model 2 ifthe present government take model is to be changed.Models 3 and 4 are included to illustrate the degres-sive effect of a revenue-based royalty as part of thetotal government take.

As illustrated, in addition to having the same basecase as the present government take model, model 1generates an undiminished government take in case ofa fall of 20 % in production and revenue, respectively.The same applies if production goes up by 20 %. At thesame time, model 1 results in a proportionately gro-wing government take of up to 49 % by an increase inthe market price of 20 % and 40 %, respectively, andthe resulting larger profit before tax. The compositionof model 1 reflects the desire to both maintain a

government take of 37 % as the base case, and toensure Greenland growing proceeds from growingprofits without establishing a system which becomescomplex or acts as a disincentive to invest.

Compared to model 1, model 2 collects profit royaltyat an earlier stage (if profits are lower) and at severalincreasing rate levels. Model 2 only maintains the pre-sent level of government take in case of a reduction inthe market price of 20 %. By a production reduction of20 % model 2 results in a government take of 39 %which is 2 % points higher than the government takelevied under the existing model. With rising marketprice and growing production, respectively, model 2produces steadily growing proceeds culminating in agovernment take level of 44 %.

36

Model 3 is found to be degressive, resulting in agovernment take of 44 % and 40 %, respectively, by a20 % reduction in both market price and production. Inboth cases the result will be a substantial increase indirect and indirect taxes compared with the presentmodel. In its base case as well as in case of increasingproduction, model 3 yields proceeds of 39 % which isstill 2 % points higher than the present governmenttake. In case of increasing prices, model 3 is found toproduce proportionately growing proceeds of up to 45 %.

By a reduction in market price of 20 %, model 4 willyield as much as 50 % in government take which isconsidered undesirable and a strong disincentive toinvest. A reduction in productivity of 20 % will alsoresult in a government take higher than that of thebase case as well as a 20 % productivity increase inmodel 4, both of which will yield a government takeequal to that of the present model. Model 4 producesprogressively rising proceeds of up to 45 % by anincrease in market price of 40 %. To obtain an unchan-ged government take of 37 % in the base case, and toproduce progressively growing proceeds on a growingprice/production, model 4 incorporates abolition ofthe current dividend tax.


Figure 4. Proceeds from the Present and 4Alternative Government Take Models.

Price Minus 20 %Production Minus 20 %Base Case (28 % margin - profit USD 181M)Production Plus 20 %Production Plus 40 %Price Plus 20 %Price Plus 40 %

Presentmodel

Model 1:NZ model II, incl.

profit royalty

Model 2:NZ model I, incl.

profit royalty

Model 3:NZ model III, incl.

revenue royalty andprofit royalty

Model 4:Corporate tax 30 %

+ revenue royalty2,75%

4.2 Future Possible Government Take Models

Table 4 shows Greenland’s additional proceedsexpressed as percentage points from each of the fouralternative models in relation to the present govern-ment take model.

As a mining frontier area Greenland must remain verycareful in implementing revenue-based taxes as partof its government take on minerals exploitation asexperience from other parts of the world shows thatsuch taxes have a negative effect on mining projectswhich are typically capital-intensive and risky.Therefore, Greenland should maintain its currentpractice and, as a minimum, treat the investor in a neu-tral manner in the event of reduced revenues.Furthermore, model 4 cannot be recommended as theabolition of dividend tax will open up the possibility oftax evasion through distribution of dividends.

Model 1 is basically preferred to model 2 because itdoes not affect the investor if the revenue is reducedor the mining operation is loss-making. At the sametime, the current proceeds of 37 % are maintained. Inaddition, model 1 is simpler to administer.

It can be seen from table 4 that by a price increase of40 % model 1 will produce a total government take of49 %11) which is 5 % point higher than in model 2. Thissupports the case for carrying out further adjust-ments to model 1, in order to prevent Greenland frombeing left too far behind by competing countries suchas Australia, South Africa, and Chile if the marketprice rises.

Table 4. Additional Proceeds to Greenland from Four Alternative Government Take Models.

Scenario Presentmodel

Model 1:NZ model II, incl.profit royalty

Model 2:NZ model I, incl.profit royalty

Model 3:NZ model III, incl.revenue royalty andprofit royalty

Model 4:Corporate tax 30 % +revenue royalty

Extra Total Extra Total Extra Total Extra Total

-20 % market price 37 % - 37 % - 37 % 7 % 44 % 13 % 50 %

-20 % production 37 % - 37 % 2 % 39 % 3 % 40 % 1 % 38 %

Base case 37 % - 37 % 2 % 39 % 2 % 39 % - 37 %

+20 % production 37 % - 37 % 3 % 40 % 2 % 39 % - 37 %

+40 % production 37 % 1 % 38 % 4 % 41 % 2 % 39 % - 37 %

+20 % market price 37 % 6 % 43 % 6 % 43 % 4 % 41 % 2 % 39 %

+40 % market price 37 % 12 % 49 % 7 % 44 % 8 % 45 % 8 % 45 %

38

Based on the discussion above the following is recom-mended:

• In the short term, status quo should be maintained inlight of the current financial crisis.

• In the longer term, work on model 1 (New Zealandmodel II including profit royalty) should continue ifthe present government take model is to be changed.Based on model 1, the investor will not be excessive-ly affected by, e.g., losses, and Greenland will retainits competitive position measured in terms of corpo-rate tax and dividend tax and will also be ensuredproportionately growing proceeds if profits increa-se.

• Total government take is to be kept below 50 % inorder not to lose too much ground compared withcompeting and more established countries collec-ting a low government take.

• The personal tax rate should not be raised. Even incase of losses and in times of depression the existingpersonal taxation scheme (‘A tax’) ensures Greenlanda total level of proceeds exceeding the level ofgovernment take shown in figure 3.

• Work on revising elements of the Greenlandic taxlegislation as suggested by PWC should continue.

4.3Summary

An extended and updated comparison of countries hasshown that the competitive position of Greenland wasunchanged at year-end 2008. Sweden and SouthAfrica, which are well-developed mining countrieswith much greater mining activities than Greenland,collect a government take (direct and indirect taxes)of 28 % and 33 %, respectively. Chile, which is one ofSouth America’s large mining countries, collects 37 %.Greenland collects a government take of 37 %, eventhough the mining activity level in Greenland is signifi-cantly lower than in the aforementioned countries.

Ghana and Australia collect 39 % and 40 %, respecti-vely, which is largely at the Greenlandic level of directand indirect taxes. This is noteworthy since Australiais one of the world’s leading mining countries.

Japan, Canada, Argentina, and Russia all collect agovernment take of around 50 % which is consideredto be the maximum level of direct and indirect taxesleviable on minerals exploitation if a country is not tolose its competitive position completely.

If a restructuring of the present government takemodel is desired in light of the significant increase inmineral feasibility study and exploration activitiescarried out in Greenland since 2004, the benchmar-king analysis points to the New Zealand-inspiredmodel II, which only collects a profit royalty of 5 %, 10 % and 15 %, respectively, on top of existing corpo-rate tax and dividend tax when accumulated incomeexceeds accumulated expenses by 30 %, 37.5 % and45 %, respectively.

This model does not affect the investor if revenue isreduced or a loss is suffered as the current govern-ment take of 37 % is maintained. At the same time,Greenland is ensured proportionately growing pro-ceeds of up to 49 % if the profit from mining opera-tions increases. The New Zealand-inspired model IIwill also be fairly simple to administer.


Above all, the model in question will not hamperinvestment as it will affect the investor in much thesame way as the existing government take model.

As a mining frontier area Greenland must remain verycareful in implementing revenue-based taxes as partof its government take as experience from other partsof the world shows that such taxes have a negativeeffect on mining projects which are typically capital-intensive and risky.

If a new model for direct and indirect taxes is desiredincluding a revenue-based royalty for the purpose ofensuring public income from the start of a mining pro-ject, the mentioned New Zealand inspired model IIImay be considered. In addition to the current rates ofcorporate tax and dividend tax, this model collects arevenue royalty of 1 %, and a profit royalty of 3 %, 6 %, and 10 %, respectively, when the accumulatedincome exceeds the accumulated expenses by 30 %,37.5 % and 45 %, respectively. However, this modelwill probably act as a disincentive to invest and willconsequently lead to a reduction of mining invest-ments in Greenland and, thus, fewer companies andjobs.

Model 4 is another option. This model is based on theexisting corporate tax on top of which a revenue royal-ty of 2.75 % is collected, i.e. no dividend tax is leviedas the current competitive level of the base case scenario should remain unchanged. However, model 4equally acts as a disincentive to invest because areduction in market price of e.g. 20 % will increase thelevel of direct and indirect taxes to 50 %. The intro-duction of such a model may therefore very well leadto a reduction/abandonment of certain mining pro-jects and hence a reduction in tax income and numberof jobs.

Gross royalty models act as a disincentive to investbecause the royalty on gross revenue is typically paidfrom the start of production as a fixed share of pro-duction value. Payment of royalty is therefore inde-pendent of the profit derived from the exploitation ofa mineral resource. The advantage of a revenue-basedroyalty is that the public sector receives income fromthe start of production regardless of the profitabilityof the mining operation in question. The disadvantageof a revenue-based royalty is that mining companiesrisk having to pay a royalty in a situation where theproduction is loss-making. Mining companies there-fore regard this kind of royalty as an inappropriatetaxation constraint and, consequently, they prefercountries that use other fiscal tools in securinggovernment take.

To ensure that the Greenlandic society receives a fairshare of mineral exploitation proceeds in suitablerelationship with registered income, a profit royaltycalculated on profit relative to invested capital maybe introduced. The advantage of such a profit royaltyis that mining companies do not pay a profit royaltyuntil a reasonable return on investment has beenachieved. In this way, mining companies are guaran-teed that they are not to pay royalty in a situationwhere production is loss-making. This fact supportsthe case for the New Zealand-inspired model II descri-bed above.

4.3 Summary40

The following is recommended:

• In the short term, status quo should be maintained inlight of the current financial crisis.

• In the longer term, work on model 1 (New Zealandmodel II including profit royalty) should continue ifthe present government take model is to be changed.Based on model 1, the investor will not be excessive-ly affected by, e.g., losses, and Greenland will retainits competitive position measured in terms of corpo-rate tax and dividend tax and will also be ensuredproportionately growing proceeds if profits increa-se.

• Total government take is to be kept below 50 % in allevents in order not to lose too much ground compa-red with competing and more established countriescollecting a low government take.

• Work on revising elements of the Greenlandic taxlegislation as suggested by PWC should continue.


1) Page 5’Private placement’ can be described as capitalcontributed by one investor or by a limited groupof investors.

2) Page 11Rules for Field Work and Reporting regardingMineral Resources (excluding Hydrocarbons) inGreenland. Greenland Home Rule Government,Bureau of Minerals and Petroleum, November2000. 26 pages + Appendices.www.bmp.gl/minerals/fieldwork.html.

3) Page 11BMP Guidelines for Preparing an EnvironmentalImpact Assessment (EIA) Report for MineralExploitation in Greenland. Bureau of Minerals and Petroleum, 13 March 2007. 16 pages.www.bmp.gl/minerals/EIA_guidelines.pdf

4) Page 29‘Comparison of royalties and taxes, etc. related to Mineral Resources (Gold) – with proposedimprovements of the tax and royalty system in Greenland’, PWC October 2008.

5) Page 29Including a pre-production phase of two years.

6) Page 29Simple, stable and transparent terms, undiminis-hed competitive strength, timing and progressivecollection of government take, no disincentives to invest, etc.

7) Page 31The comparison of Greenland with the selectedcountries is based on this assumption but is nototherwise based on a specific investor nationalitylike the previous benchmark analysis.

8) Page 31In autumn 2008, the national agency of taxation in Greenland set up a working committee with participation of The Bureau of Minerals andPetroleum and the Danish tax authorities to revise current tax rules for the mining industry in Greenland.

9) Page 32With the introduction in 2009 of an additional royalty of 1.5 %, the difference between SouthAfrica’s total government take and the level leviedin Greenland and Chile will be reduced to just a few percentage points.

10) Page 33Compared with the original feasibility study the gold mine generated social proceeds of DKK 41 million more than originally anticipatedduring the period 2004 – 2007, most of whichwas personal tax.

11) Page 38As mentioned, the analysis indicates that agovernment take of approx. 50% is the maximumrate that an established mining country can collect and still be able to attract investment.

Notes

Notes

42

Cover photo: Bureau of Minerals and Petroleum

Layout: Boman Qujan’

The continuous publications of Bureau of Minerals and Petroleum1. Kulbrintestrategi 2003 (only in Danish)2. Mineral Strategy 20043. Samfundsmæssige aspekter (only in Greenlandic and Danish)4. Arbejdsbetingelser og jobmuligheder

i råstofsektoren (only in Greenlandic and Danish)5. Efterforskning og udnyttelse af uran (only in Greenlandic and Danish)6. Hydrocarbons Strategy 20097. Mineral Strategy 2009

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