Mineral Corporation at a Crossroads... First Bankrupt Public Enterprise or Miraculous Recovery?

Discussion at the Sanjungwi Bill Subcommittee on the 22nd
Government: "April default crisis... Temporary National Assembly in February must pass to prevent first public enterprise bankruptcy"

[Sejong=Asia Economy Reporter Kwon Haeyoung] The integration of Korea Resources Corporation and Korea Mine Reclamation Corporation, which are burdened with debts totaling 7 trillion won, is expected to take shape as early as today. The government’s plan to merge the two organizations, initiated in March 2018, has been going in circles for years. However, given the extremely poor financial condition of Korea Resources Corporation, concerns are growing that if the merger fails to pass the National Assembly this time, it could become the first bankrupt public enterprise.

According to the government on the 22nd, the Industry, Trade, Small and Medium Enterprises Committee will hold a bill review subcommittee meeting this afternoon to discuss the 'Korea Mining Corporation Act,' which centers on merging Korea Resources Corporation and Korea Mine Reclamation Corporation to establish a new Korea Mining Corporation.

An official from the Ministry of Trade, Industry and Energy stated, "The $500 million bond maturity of Korea Resources Corporation is due in April, but it currently lacks the ability to repay on its own," adding, "The bill to merge Korea Resources Corporation and Korea Mine Reclamation Corporation must be passed at the February extraordinary session of the National Assembly before it is too late."

Currently, Korea Resources Corporation is in a state of capital erosion due to massive investment losses from overseas resource development projects pursued during the Lee Myung-bak administration. Its debt has increased from 4.62 trillion won in 2015 to 6.65 trillion won as of the first half of 2020. Capital, which was 66.9 billion won in 2015, turned negative for the first time in 2016, and the current capital erosion amounts to 3.36 trillion won. Accordingly, Korea Resources Corporation is selling off prime overseas assets at low prices to reduce debt, including stakes in the Wyoong thermal coal mine in Australia and the Ambatovy nickel-cobalt mine in Madagascar, Africa.

The government’s position is to promptly promote the merger with Korea Mine Reclamation Corporation, which has high financial stability and operational relevance, and to reduce Korea Resources Corporation’s debt. According to previously announced government plans, all assets, liabilities, and personnel of the two organizations will be transferred to the newly integrated institution, and all assets related to overseas resource development will be sold.

A variable factor is the temporary law, the 'Special Act on Support for Development of Abandoned Mine Areas (폐특법).' Kangwon Land provides part of its profits annually as abandoned mine funds to seven cities and counties based on this law, which expires in 2025. The Ministry of Trade, Industry and Energy is discussing with related ministries to extend the validity by 10 years, but opposition parties are demanding linked processing with a revision bill to abolish the validity period, making the passage of both bills through the Legislation and Judiciary Committee uncertain.

Regarding this, an official from the Ministry of Trade, Industry and Energy said, "Korea Resources Corporation can no longer survive independently," and added, "It is necessary to create an integrated corporation of the two organizations and reduce debt by selling Korea Resources Corporation’s overseas assets at reasonable prices without a time limit to minimize the burden on the public."

However, even after the merger bill passes the National Assembly, challenges remain. The Ministry of Trade, Industry and Energy has set a policy to sell all overseas assets of Korea Resources Corporation, following the recommendations of the Overseas Resource Development Innovation Task Force (TF) formed in 2017 during the Moon Jae-in administration. However, there are concerns that rushing to sell overseas assets may result in receiving less than their value. Recently, resource prices have been rising, and countries worldwide are focusing on securing resources to foster future industries, raising criticism that South Korea is falling behind in the resource acquisition race.

This content was produced with the assistance of AI translation services.