Regional Focus

Landmark discussions between the US and North Korea have led to speculation that the latter’s mineral riches, estimated to be worth around $6tn, could soon be within reach. But what do we know about mining in the secretive, dictatorial nation, and how accurate are the resource estimations? Heidi Vella reports

Credit: Shealah Craighead / Wikimedia Commons

What is known about North Korean mining?

According to a Nautilus Institute report written by accountant and expert in North Korea’s resource development sector, Edward Yoon, the DPRK’s economy is heavily reliant on its mineral industry, which he estimates accounted for about 15.2% of the country’s exports in 2005.

The report, entitled ‘Status and Future of the North Korean Minerals Sector’, states that the country holds a great bulk of the total known minerals deposits on the Korean peninsula.

Iron and coal mining in particular have been priority industries for DPRK’s economic development since the 1970s.

Although it was originally published in 2011, Peter Hayes, an honorary professor at Sydney University and director of the Nautilus Institute, says the report’s findings and figures are still “solid and salient”.

Before the fall of the USSR, North Korea had mining and trade deals with other communist countries. However, the sector has been in decline since the 1990s and is thought to be suffering from dilapidated infrastructure, poor planning, a shortage of electricity, and a lack of modern technology.

In fact, according to Yoon, North Korean mines are likely to be using 30-40 year old production equipment, including some inherited from the Japanese colonial period of the 1940s. If so, the country’s production capacity is limited.

Yoon’s report states that due to the factors already outlined, estimated production in 2002 was between one third and one half of known output data obtained during 1989.

Furthermore, Scott Snyder, senior fellow for Korea Studies and director of US-Korea Policy at the Council on Foreign Relations, says the conditions in the North Korean mining industry are known to be very poor.

“The country doesn’t really have safety standards and it’s very clear the people deemed to be traitors or a security threat to the regime would end up doing the bulk of coal mining work in terrible conditions,” he says, adding that “there is no evidence anything has changed”.

Before the fall of the USSR, North Korea had mining and trade deals with other communist countries

The close China-DPRK relationship is celebrated at the Arirang Mass Games in Pyongyang.

Credit: Roman Harak

China also implemented the coal import ban, which was a huge economic blow to the country

Foreign investment in North Korea

From 1997 to 2007, North Korean authorities allowed foreign investors to participate in select mining projects, with most being Chinese. By 2011, it is reported that Chinese companies made up three-quarters of the more than 350 joint ventures operating in North Korea, with the majority in mineral extraction.

Sino Mining International spent more than $123m upgrading equipment at the Hyesan Youth Copper Mine located a mere two miles from the Chinese border, according to a report by Bloomberg.

The mine is estimated to be the largest copper mine in DPRK with 250,000t of reserves. The project had a planned output of 2,000t a day to be sent to China.

Along with others, China Minmetals, Liaoning Machinery Group Holding, and Tangshan Iron & Steel Group, also invested billions in North Korea, according to Bloomberg.

However, in 2016 the United Nations issued a full ban on North Korean coal, iron and iron ore imports, having already halted trade in copper, nickel, silver and zinc the year before.

China also implemented the coal import ban, which was a huge economic blow to the country, as the coal trade has generated more than $1bn in revenue per year for North Korea, according to the US Department of Treasury. Those with investments in mining projects were forced to down tools.

Yoon writes that DPRK’s mineral resources are of considerable interest to the Chinese market, as moving North Korean minerals to China is less expensive in comparison with the transportation costs involved in acquiring Australian and Brazilian mineral resources.

And although the amount of natural resources is not fully known, they are thought to be significant; for instance, he names seven major gold mines in the country. Although total production from these mines has not been officially reported, one of them, Woon-san, has gold ore deposits estimated at 1,500t alone – almost 50% of North Korea’s total gold reserves.

It’s an enticing prospect, as an end to sanctions and renewed relations with the country could open up the 880-mile China-North Korea border to the mineral-hungry Chinese.

If, and it is a very big if at this stage, this happened, companies such as Sino Mining International would be very well placed to benefit.

US President Donald Trump and North Korean leader Kim Jong-un during the 2018 North Korea-United States summit in Singapore, June 2018.

Credit: Dan Scavino Jr.

Future potential in mineral access

However, would others be keen to invest in a country that uses forced labour, has little infrastructure and whose leadership is notoriously fickle?

“The cost of the infrastructure development to access North Korea’s resources, plus the absence of a stable regulatory environment, has deterred international investors in the past,” says Snyder.

“In North Korea political loyalty trumps law, meaning it is unpredictable and so the risk of investing and then finding you are on the wrong side of a political person or the regime simply changes its mind is a huge risk.”

He refers to the country’s current largest foreign investor, Orascom Telecom and Media Technology, an Egyptian firm behind the surprising explosion of mobile phone use in DPRK.

Reports suggest the company has had trouble repatriating funds from the country and has even lost control of the business to the Korean regime completely.

Snyder, who says there is no evidence anything has changed since the Trump-Jong-un talks in June, is not the only one to be sceptical about future global relations with the hermit nation.

According to analyst and independent speculator Lobo Tiggre, the idea that foreign firms will be investing in North Korea soon is ‘premature’ and that the numbers being cited are ‘ridiculous’.

Furthermore, given the forced labour of citizens and human rights abuses infamous with Jong-un’s regime, any foreign mining firm looking to invest in the country should be extremely cautious, particularly as they’d likely face intense scrutiny.

For now and for the foreseeable future, North Korea’s mineral riches, like its denuclearisation, remain just another great hope and, as yet, not a fact.

The cost of the infrastructure development to access North Korea’s resources…has deterred international investors