S.Korea to scrap plans to sell Ambatovy mine stake

President-elect Yoon Suk-yeol will scrap the outgoing government’s plan to sell off its stakes in loss-making overseas mines, including the Ambatovy nickel mine in Madagascar, Africa. Instead, it will invite companies from the private sector to lead the development projects, his presidential transition committee said on Wednesday.

The move is in line with Yoon's two-pillar energy policy of strengthening energy security and reviving nuclear power plants, as the Russia-Ukraine war is deepening the weaponization of resources. 

“Among the 15 overseas mines invested in by the Ministry of Trade, Industry and Energy, we are leaning toward retaining our ownership in Ambatovy in Madagascar and Cobre Panama Mine in Panama, especially,” said the transition team's deputy spokesperson Kim Gi-heung.

"According to the plan we are reviewing, the private sector will take the lead in our overseas resources projects and the public sector plays a supporting role," Kim told a briefing. 

Unloading loss-making overseas resource projects was one of the reform plans pledged by outgoing President Moon Jae-in to restructure debt-laden state-run energy companies.

Korea Resources Corp. in 2006 pumped 2.2 trillion won ($1.8 billion) to buy a 33% stake in Ambatovy, a mining joint venture of nickel and cobalt. In 2009, the state-run company acquired a 10% stake in Cobre Panama, a copper mine in Panama for 835 billion won.

In 2008, Korea Resources also purchased a 76.8% stake in the world’s fourth-largest copper mine in El Boleo, Mexico., for 1.7 trillion won.

Korea Resources, Korea National Oil Corp. and Korea Gas Corp. had been at the forefront of government efforts to secure overseas resources during the presidency of former President Lee Myung-bak between 2008 and 2013.

Their aggressive overseas investments in mines in Africa and South America led to snowballing debts at the three state-run companies. As for Korea Resources, its accumulative debt reached 6.4 trillion won by the end of 2019, overwhelming its equity capital.

To attract non-state-owned companies to overseas energy developments, the government will provide tax breaks and financial support such as loans and payment guarantees, alongside R&D support.  

While handing down the leadership of the overseas projects to the private sector, the incoming administration will carry out harsh restructuring for state-run resource companies, according to the deputy spokesman.

Back in 2020, the ruling Democratic Party pushed Korea Resources to sell off its stake in Ambatovy in Madagascar, one of the world’s three-largest nickel mines. 

The Ambatovy JV is Korea Resources' biggest overseas mining project worth $8 billion. Two Korean companies -- POSCO International Co. and STX Corp., a trading company -- hold minority stakes in the venture.

Nickel and cobalt are key raw materials for electric vehicle batteries. In particular, battery manufacturers including South Korea's LG Energy Solutions Ltd. and SK On Co. are working to increase the portion of nickel in their new EV battery models. Nickel increases the energy density in batteries.

President-elect Yoon also will rescind the current administration’s ambitious goal of expanding renewable energy sources to 70% of the electricity supply by 2050, in accordance with its campaign pledge to increase dependence on nuclear energy.

Write to So-Hyeon Kim at alpha@hankyung.com
Yeonhee Kim edited this article.