Raising regulatory issues in Spain and Greenland offers 2 critical minerals companies a break from the courtroom

The Critical Minerals Institute (CMI) board often debates the growing interest in government investment dollars versus the challenges inherent in bringing an exploration company to production. While recent headlines praise the growing budgets allocated to key mineral supply chains, the relationship between exploration and production companies and governments is often fraught with challenges. Challenges resulting from complex legal, environmental and economic factors. Two recent examples involving Energy Transition Minerals Ltd. (ASX: ETM) in Greenland and Berkeley Energia Limited (ASX: BKY | LSE: BKY) in Spain highlight the complex dynamics and disputes that can arise in this sector.

We watch these stories with great interest.

Energy Transition Minerals Ltd (ETM), through its subsidiary Greenland Minerals A/S (GMAS), has been embroiled (May 27, 2024, source) in a legal dispute with the Government of Greenland over the Kvanefjeld rare earths project. The dispute centers on the Greenland authorities’ refusal to issue an exploitation license to which GMAS claims it is entitled under an existing exploration permit. The company initiated legal proceedings before both the Court of Greenland and the District Court of Copenhagen to assert its rights, challenge the validity of the law prohibiting uranium exploration and mining, and seek compensation for financial losses.

GMAS’s legal strategy covers many claims, such as the right to permit the exploitation of various minerals, including rare earth elements, zinc, fluorspar and uranium. The company questions the application of the Uranium Act to its operations and the validity of the government’s decision to reject its license applications. These proceedings are aimed at determining the company’s rights and potentially overturning the government’s decision, as well as seeking financial compensation for delays and the economic impact on the project.

Similarly, Berkeley Energia is in a dispute (May 28, 2024, Source) with the Spanish government regarding the Retortillo uranium mine project near Salamanca. Despite receiving initial approval in 2013, the project was subsequently blocked by the Spanish Ministry of Energy, citing concerns expressed by the Nuclear Safety Board. In response, Berkeley sought $1 billion in damages through arbitration at the World Bank’s International Center for the Settlement of Investment Disputes, maintaining that the Spanish government’s actions violated the Energy Charter Treaty, which aims to ensure the stable and open functioning of energy markets.

Berkeley argues that the Spanish government’s refusal to give final approval to the project caused significant financial damage, thwarting a major investment that would have created thousands of jobs. The company maintains its commitment to the project and is willing to negotiate with the Spanish authorities, hoping for a solution that will enable the continuation of the project.

These cases illustrate the broader challenges that exploration and production companies face as they navigate government regulations and legal frameworks. Companies often invest significant resources in exploration and development, but face regulatory hurdles that can significantly delay or even derail their projects. Such disputes may arise from differing priorities between governments and companies, such as environmental issues, public opposition and economic considerations.

Legal disputes between companies like ETM and Berkeley and their governments highlight the need for a clear regulatory framework and open channels of communication. These disputes also highlight the potential for significant financial and operational impacts on mining projects, requiring thorough risk assessment and contingency planning by companies operating in the sector.

The relationship between exploration and production companies and governments is inherently complex and multifaceted, encompassing legal, environmental and economic dimensions. The ETM cases in Greenland and Berkeley, Spain, illustrate the potential for conflict and the need for robust legal and regulatory strategies to effectively address these challenges. This situation raises concerns about the stability and confidence in investments in critical mineral supply chains that are crucial to future technological and industrial needs. The need for a comprehensive approach across exploration, technology and processing facilities is essential for a resilient supply chain. It is frustrating to see such important projects hampered by regulatory conflicts, especially when timely investment in new mining ventures could alleviate many of these problems.