[The Era of Mineral Hegemony] Supply Chain Crisis... Korea Going Against the 'Resource Securing Battle'

Gwanghae Gong, 13.2% Return Rate on Overseas Resource Investments
Global Mineral Resource Exploration Investment $11.2 Billion Last Year
400 Korean Overseas Resource Development Projects at Lowest Decline
"Continuous Investment Needed for Domestic Resource Development Technology"

As the weaponization of critical mineral resources intensifies worldwide, it has been revealed that South Korea alone is significantly selling off the mines owned by its state-owned resource companies. This decision comes as a result of the previous administration's large-scale overseas investments, pursued as part of its resource diplomacy policy, falling into chronic deficits, prompting a full divestment. This move runs counter to the global trend of increasing investments in securing resources, leading to calls for a fundamental reassessment of overseas mine sales.

According to the Ministry of Trade, Industry and Energy on the 28th, out of 15 overseas assets held by the Korea Resources Corporation, 13 are currently being sold. The two sites where disposal has been temporarily suspended are the Ambatovy mine in Madagascar, one of the world's top three nickel mines, and the Cobre Panama copper mine in Panama. It has been decided to dispose of Mexico's Boleo copper mine and Australia's Narrabri thermal coal mine by 2025, and the Korea National Oil Corporation and Korea Gas Corporation are also accelerating efforts to secure potential buyers for their stakes in the Gulf of Mexico's Anchor oil field and the Akas gas field.

The government is accelerating the sale of overseas assets held by resource public enterprises due to the judgment that their economic viability is significantly poor compared to the investments made. The Korea Resources Corporation invested a total of $4.349 billion in 15 mines up to last year but only recovered $578 million. The overall recovery rate relative to investment stands at about 13.2%. There were five mines where no returns were generated at all. In the rush to sell, there have also been cases of hasty disposals. The Santo Domingo copper mine in Chile in 2020 is a representative example. The corporation sold its entire 30% stake to Canada's Castor Mining for $152 million, incurring a loss of about 40% of the invested principal.

The problem is that the government's withdrawal from overseas resource development projects could severely weaken global competitiveness. This contrasts with major countries significantly increasing their investments in overseas resource development to secure raw material prices amid a global surge and to enhance future industrial competitiveness. According to a report on overseas resource development published by the Ministry of Trade, Industry and Energy, global mineral exploration investment last year was $11.24 billion, a 60.8% increase compared to $6.99 billion in 2016. In particular, nickel and lithium, used in automobile batteries, showed strong growth as core industrial minerals, with development shares rising 27% and 25% year-on-year, respectively. Meanwhile, South Korea's dependence on overseas minerals is increasing, with imports of lithium carbonate from China alone rising 400% year-on-year to over $2 billion this year.

Domestic overseas resource development projects have been steadily declining. The number of overseas resource projects, which was 535 in 2013, dropped to a record low of 401 by the end of last year. It is expected to fall below 300 next year, raising concerns that the technology and know-how built up in overseas resource development could be lost entirely. Experts argue that the prohibition on overseas direct investment imposed by the previous government needs to be revised. They explain that mineral development requires steady investment for long-term approaches. There is concern that if resource development continues to lag behind the global trend of weaponizing raw materials, South Korea's dependence on overseas minerals will only increase further. An energy industry expert said, "It is not that overseas investments by energy public enterprises were wrong, but rather that operational immaturity and insufficient post-management are major issues," adding, "Appropriate management and continued investment are necessary to sustain our resource development technology."