Chinese investors are held at arm's length

The Australian company Energy Transition Minerals (ETM) no longer believes that its Chinese investor Shenghe Resources, which currently holds 6.5 percent of the shares in the company, still has the right to retain its relative share of the company – the so-called top-up right. This is stated in a current stock exchange announcement.

Strategic collaboration in 2016

According to ETM, Shenghe Resources was granted this special top-up right back in 2016 when they acquired 12.5 percent of the shares in the then company Greenland Minerals and Energy.

This was done with reference to the fact that it was not just a shareholder, but a strategic collaboration established to support the technical and financial development of the Kuannersuit project.

The relationship changed character.

The stock exchange announcement states that Shenghe Resources carried out optimization and consulting work on the project in 2017, but that work then stopped.

“Over time, the nature of the relationship has changed fundamentally. As the Kuannersuit project progressed through the statutory public consultation phase as part of the application process for a mining license from the Greenland Self-Government, Shenghes’ technical involvement ceased, along with all optimization and advisory work,” writes ETM, which further points out that they have also developed their own corporate strategy in recent years, including acquiring other projects in Canada and Spain.

"This has resulted in a significant diversification of ETM's portfolio and an expansion of the strategic focus on critical mineral projects beyond Kuannersuit in line with the vision," it reads as justification.

Fully in line with the company's US strategy

Professor of financial management at Aalborg University, Per Nikolaj Bukh, believes that the announcement from ETM falls entirely in line with the company's new strategy, where they are trying to find investors in the American market, and a Chinese investor with a special agreement does not look too good on paper.

– The original plan was that the Chinese would transport the raw materials to China and make their production technology available. The Chinese company had strategically secured this with the top-up right, which gives the company the opportunity to maintain its ownership stake, even if there were to be a capital increase, says Per Nikolaj Bukh.

Today, the situation is completely different than it was in 2016. Energy Transition Minerals has filed a lawsuit against the self-government because they believe that their project in Kuannersuit has been unjustly put on hold as a result of the law prohibiting the exploration and exploitation of uranium from 2021. The company believes that they are entitled to permission to continue the project towards an exploitation permit. Alternatively, they are seeking 76 billion kroner in damages.

Potential investors

The company is currently trying to go public in the US, and has also engaged with Ballard Partners, who have close ties to the Trump administration, to engage with both politicians and potential investors.

– If you want to make your pants green in the US, whether it's to gain political influence or investors, it's probably smart to sideline the Chinese, and that's probably what we're seeing, assesses Per Nikolaj Bukh.

– With Shenghe sidelined, the company's position is that they can more easily get an American investor on board. In principle, an investor could also throw a big bid on the table and potentially take over all the shares - by paying a so-called controlled premium, you can often take over a listed company. So this should perhaps be seen in a larger geopolitical game, where there could be some rich investors with pro-Trump intentions who would like to strengthen the American presence by investing directly in Greenlandic companies. And who might be even more eager to invest if they could, like a feather in their cap, push the Chinese out of the company completely.

ETM notes in the stock exchange announcement that Shenghe Resources may have a different view of the matter and that it is now up to the stock exchange authorities to resolve any dispute.