[The Editors' Verdict] The Raw Materials Supercycle Has Arrived, but the Government Lacks Strategy

Kang Cheon-gu, Invited Professor, Department of Energy Resources Engineering, Inha University

At the end of last year, Korea Resources Corporation (hereinafter referred to as KORES) decided to sell the Wyong thermal coal mine in Australia, which it had developed over 26 years. KORES announced a bid to sell its entire 82.25% stake in the Wyong thermal coal mine held by its Australian local subsidiary. Stakes held by SK Networks (8.5%) and Kyungdong (4.25%) will also be sold together. The deadline for submitting bid documents is the 22nd of this month.

The Wyong mine, located 80 km north of Sydney, Australia, is known among insiders as a "prime mine." Although a total of 1.38 billion tons of thermal coal is estimated to be reserves, development plans have only been established for the western mining area, where the extractable reserves are about 150 million tons. At current market prices, the value of just part of the mine is estimated at $13.5 billion, approximately 15.08 trillion KRW (calculated by multiplying 150 million tons by $90 per ton), and the annual production capacity is up to 5 million tons. Additionally, the Newcastle port, only 70 km away from the mine, provides well-established export and operational infrastructure.

KORES has devoted all efforts to developing the Wyong mine over the past 26 years. In 1995, during the Kim Young-sam administration, it obtained exploration rights from the New South Wales government in Australia. In 2005, KORES became the largest shareholder by acquiring an additional 78% stake from the global resource company BHP Billiton for AUD 16.4 million (approximately 13.7 billion KRW at the time). During the Lee Myung-bak administration in 2011, KORES received a notice of development disapproval, but the author, acting as the head of the protest group, managed to revive the project. After the inauguration of the Moon Jae-in administration in 2018, KORES obtained development approval from the state government, and in 2019, finally secured environmental impact assessment approval from the federal government. Now, the mine is ready for development and production. The reason for selling this carefully developed mine is the government's policy to reduce KORES's debt by selling all overseas assets. South Korea imported 120 million tons of thermal coal last year.

KORES recently also sold its entire 30% stake in the Santo Domingo copper mine in Chile. The sale amount was $154 million (including $120 million in cash and $34 million in debt relief), recovering only 63% of the investment cost. Currently, copper prices are rising.

In 2019, South Korea imported 1.82 million tons of copper, worth $3.448 billion (approximately 3.9 trillion KRW). Copper is used across industries including secondary battery manufacturing, construction, electricity, and electronics. Besides the sale of the Santo Domingo mine, the government has decided to sell KORES's stakes in the Ambatovy nickel mine in Madagascar, the Boleo copper mine in Mexico, and the Cobre Panama copper mine in Panama.

In contrast, Japan's Sumitomo Corporation is currently investing a total of $4.7 billion in the second phase development of the Quebrada Blanca copper mine in the Tarapac? region of northern Chile, in partnership with Teck Resources, Canada's largest mining company. The Quebrada Blanca copper mine is expected to produce an average of 946,000 tons of copper concentrate annually for 28 years starting in the second half of this year.

Domestic companies such as LG Energy Solution, Samsung SDI, and SK Innovation are competing with Chinese and Japanese companies for the top positions in electric vehicle battery manufacturing worldwide. Experts have repeatedly advised reconsidering the complete sale of existing overseas mine stakes, but the government policy remains unchanged. Overseas resource development requires long periods, specialized technology, and experience. The fact that KORES took 24 years to acquire the Wyong mine stake and obtain mining permits illustrates this. In a resource-poor country, it is difficult to achieve meaningful results when a 10 to 20-year national resource project is overturned by a five-year administration.

Kang Cheon-gu, Adjunct Professor, Department of Energy Resources Engineering, Inha University