South Korea Mining Report Q4 2008

South Korea relies on external sources for much of its mineral requirements. The country imports as much as 87% of its minerals and a significant percentage of its energy resources, including almost the entire demand for bituminous coal, ores and concentrates of copper, iron, lead and zinc. However, the country does host small reserves of gold, molybdenum, silver, tin, tungsten and zinc.

Compensating for the lack of mining activities on the domestic front, South Korea has been entering into partnerships worldwide to develop impressive mining properties including a 125mn tonne nickel mine in Madagascar. The Republic of Korea (RoK) has also signed agreements with Laos, Ukraine, Indonesia and Cte d'Ivoire to exploit mines in these regions. In addition, a consortium led by state-run mining company Korea Resources (Kores) recently concluded a deal to take a 30% stake in a new Mexican copper mining project. Further, the country is also building large-scale steel plants in many countries to leverage resource potential around the globe. At the forefront of this intent is the state-owned Pohang Iron and Steel Company (POSCO), which plans to build a US$12bn plant in India and a US$4.5bn project in Vietnam. Possible Free Trade Agreements (FTAs) with the EU would further expand the business opportunities for the country.

The Ministry of Commerce, Industry and Energy (MOCIE) is the apex body that governs the minerals and mining sector of South Korea. It is planning to build-up strategic reserves of 13 metals that it considers of prime importance for the local economy. Some of these metals are chrome, cobalt, indium and molybdenum. Kores will bear the onus of managing the purchase of these metals. To secure raw material supply, the country also opened the first joint office of Inter-Korea Economic Co-operation in 2005. Its main objective is to promote bilateral trade.

In late December 2007, the South Korean energy ministry announced plans to accelerate the development of mineral deposits in North Korea during 2008. The focus would be on two regions of North Korea, Dancheon in South Hamgyong province and Haeju-Nampo in the west, which contain magnesium and graphite deposits. South Korea would invest in infrastructure including rail links and power plants in Dancheon. Private companies would be invited to take part in the development of the Haeju-Nampo mineral belt. Unlike the South, North Korea is believed to be mineral-rich, with deposits of some 20 types of metals, including 5bn tonnes of iron ore, as well as many other minerals, valued at roughly US$2.4trn.

South Korea has created a global name for itself by developing impressive refining and processing facilities despite a paucity of resources at home. However, it needs to be cautious as the cost of imports continues to rise significantly. BMI forecasts a moderate rate of 3.8% industry growth per annum over 2008-2012.

At the present time, the ongoing economic crisis gripping world markets is continuing to play out. BMI will carry out a comprehensive review of its mining sector reports in Q109.