From Minesite.com March 02, 2010 By Alastair Ford

Greenland Minerals Confirms That It Is On Course For A Full London Listing And A £40 Million Raise Early Next Year

It’s now official. Greenland Minerals & Energy will list on the full board of the London stock exchange in the early part of next year. The brokers will be Evolution, and one other, yet to be appointed, though Greenland managing director Rod McIllree says he’s currently in advanced talks on that front. The decision to move straight onto the full list is a bold one, given that there have been precious few new mining listings on the LSE proper for a year now. But the Aim market is beginning to loosen up, and already there have been a few new arrivals this year. As the global economy gradually recovers its poise, and demand stabilizes, there’ll no doubt be a few more.

But if Greenland’s decision to go straight onto the main market is a sign that economic conditions continue to improve for the miners, it’s also a reflection of the company’s own ambitions. The company’s key asset is the Kvanefjeld rare earth and uranium project in Greenland. As at the latest resource update, compiled last year, Kvanefjeld contains, on a mid-case scenario that uses a 0.02% U3O8 cut-off, 339 million tonnes of ore grading 0.032% U3O8, 1.14% total rare earth oxide (TREO), and 0.23% zinc. That’s not small potatoes, and the money that’s required to get it into production isn’t small potatoes either – US$2.3 billion at the last count. This is definitely big board stuff, so the company’s decision to sidestep Aim completely at this stage makes perfect sense – a listing there would just add to the bureaucratic side of things, without providing a secure enough platform for growth.

The company recently completed a pre-feasibility study, which has allowed it to hang some hard numbers on what was previously little more than a theoretical undertaking. Perhaps the most eye catching figure was the projected cashflow. At US$500 million per year, you can see why Rod McIllree is reasonably confident that Greenland Minerals will, in due course, be able to attract a major into the project to provide a significant portion of the funding. Payback could come within a matter of five years or so, which isn’t too bad on a multi-billion dollar project. The next step now will be to complete a full feasibility study, and that will include the construction of a pilot plant. For a project this size that’s essential, as what happens under laboratory conditions isn’t always the same as what will happen out there under the relatively extreme meteorological conditions of Greenland.

In the meantime, for anyone wondering about the viability of a uranium and rare earths project in a jurisdiction that hasn’t yet quite made up its mind about uranium mining, and in a global market for rare earths which is opaque to say the least, there’s some comfort to be had in the company’s latest board appointment. Michael Hutchinson has served as chairman and director of the London Metal Exchange, and was also a director of Wogen, a speciality trader in what’s termed “off-exchange” metals, of which the rare earth elements are prime examples.

And, on an administrative level, Michael Hutchinson’s appointment is just the first in a series of planned steps that will gradually see the company migrating from the current home base of Australia into Europe. There’ll be a new office in Copenhagen, and the management team is moving over to London later this year. That, says Rod, is pure pragmatism. There was only so long a multi-billion dollar project in Greenland could be managed out of Perth. It was alright at the conceptual stage, but as the reality of an actual mine draws ever closer, a more hands-on approach at the local level is required.

Rod’s also hopeful that the Greenland government itself will help the company in its quest to reduce the perceived risk of operating over there. It’s not always been easy for companies to make a go of things out in Greenland, and not only from a meteorological perspective. In any case, Greenland Minerals isn’t not at the sharp end of Greenland’s weather extremes by any means, nestled as it is almost as close to the south of the country as it’s possible to go. It’s not weather that’s the cause of the perceived “Greenland risk”, but uncertainty about the government’s stance on mining. Lately, though, things have been running in favour of the resources sector. The government has recently passed a new Mineral Resources Act, and this, reckons Rod, should make things much easier, although full oil and mineral rights have yet to pass completely out of the control of the Danish government.

All told, it may yet be five years before first production comes rolling out of Kvanefjeld, and that’s on a reasonably optimistic scenario. But it’ll be an interesting one to follow from a London perspective, not least because there’ll no doubt be a concerted drive to push the value of the company on the Aussie stock exchange ahead of its listing in London. Under that scenario, canny UK investors will have plenty of time to phone their brokers Down Under to buy in ahead of the pack