[Overseas Resource Fire Sale] Chile Copper Mine Sold at Half the Investment Principal

Korea Resources Corporation Invested 271 Billion Won Over 10 Years, Selling at Half Price
Raw Material Prices Surge, Global Resource Securing Wars... Selling Without Recovering Principal, Going Against the Times
Government "Serious Insolvency, Selling All Mines"… Industry Concerns

[Sejong=Asia Economy Reporter Kwon Haeyoung] It has been revealed that the government lost half of its investment principal when selling the Chilean copper mine of Korea Resources Corporation (KORES), which it had owned for 10 years. Nearly $250 million had been invested over the years, but it was sold at a 'bargain price' of about $120 million, half of that amount. The government explains that this was an unavoidable choice to normalize the situation after the worsening of public enterprise insolvency due to the past government's reckless resource diplomacy. However, considering that the asset value of overseas resources purchased more than 10 years ago is being re-evaluated due to the sharp rise in raw material prices and that countries around the world are competing to secure key resources, there are criticisms that only Korea is moving backward.

According to the Ministry of Trade, Industry and Energy on the 6th, KORES recently sold its 30% stake in the Santo Domingo copper mine in Chile to Canadian Capstone Mining for $120 million (approximately 135 billion KRW). KORES and Capstone Mining participated in this mine development project with a 30% and 70% stake respectively since 2011, and KORES has now transferred all its remaining shares. The sale price by KORES is about 50% of the amount invested over the past 10 years ($240 million, approximately 271 billion KRW). Although the mine's value has increased due to rising raw material prices, KORES has not even recovered the investment principal. Of this, only $30 million (about 3.4 billion KRW) was paid upfront, and the remaining $90 million (about 10.2 billion KRW) will be received over the next four years.

An official from the Ministry of Trade, Industry and Energy said, "KORES's financial situation is so poor that it is difficult to repay debts, so the decision was made to sell assets," adding, "The actual recovery amount is about $150 million (approximately 169 billion KRW) as the sale price slightly exceeds the book value." He further explained, "The profitability of the Chilean copper mine is not good, and continuous development costs must be invested, making it difficult to maintain the project."

This sale of the Chilean copper mine has raised concerns in the resource industry as it confirms the direction of the government's overseas resource policy. In 2018, the government set a policy for KORES to sell all its overseas mines and is currently promoting the sale of stakes in Australian thermal coal and African nickel and cobalt mines. Although the government has stated that it will sell at reasonable prices without setting deadlines, this case has led to criticism that valuable assets are being hurriedly sold under poor sale conditions.

In particular, concerns about the government's sale policy arise as raw material prices, including copper, have been rising since the COVID-19 pandemic. Copper prices, nicknamed 'Dr. Copper' as a barometer of the economy, stood at $8,768 per ton as of the 1st, nearly doubling compared to a year ago.

Kang Cheong-gu, a visiting professor at Inha University’s Department of Energy and Resources Engineering, said, "Countries like China and Japan are actively securing resources with government support to foster new industries, but we are selling overseas resources we already own at bargain prices." He advised, "Resource policy is a long-term policy that takes 10 to 20 years to bear fruit. The government should have a long-term perspective and increase taxes if necessary to protect and expand key overseas resources, which is the way to enhance national competitiveness."