A task force reviewing measures to restructure overseas resources businesses at public entities suggested Monday that the government integrate scandal-ridden and loss-making Korea Resources Corp. with a related organization to solve the organization’s liquidity problem. 

“If the organization is immediately abolished, it will face problems in terms of its public functions and employment,” said the task force Monday. 

“We recommend the government abolish the departments related to direct investments of Korea Resources Corp. and maintain its public functions such as supporting a mining industry,” it added.

The task force consisting of professionals in the private sector was set up in November to address the challenges of the beleaguered public organizations related to overseas resource development that had enjoyed their heyday under the former Lee Myung-bak administration.

The task force’s ambiguous position came after facing immediate backlash from the union of the state-run Mine Reclamation Corp. following speculations in the morning that it suggested the government integrate Korea Resources Corp. with Mine Reclamation Corp. 

“We strongly oppose the idea of integrating with Korea Resources Corp. without a fundamental plan to address the massive losses of Korea Resources Corp. We will not stand by and see the move that will harm even the most financially sound organization,” said the union in its statement.  

It added that around 70 union members had begun holding a rally in Jongno, central Seoul, and warned that the number could get bigger if the integration plan is confirmed. 

Korea Resources Corp. now has impaired capital after investing around $4.7 billion in overseas resource development since 2008. It faces losses of around $4.6 billion so far due to poor management and continued business failures. 

According to sources, the task force suggested that Korea Resources Corp.’s integration with Mine Reclamation Corp. would lead to extra capital of $900 million, with which the former could address its liquidity problem.
The union, however, said, “If the revenue of Mine Reclamation Corp. -- which includes dividends from the casino and resort company Kangwon Land -- is poured into the loss-making Korea Resources Corp., it would face strong resistance from residents of the abandoned mine lands in Gangwon Province.”

Kangwon Land was originally designed to recover the regional economy of abandoned mine lands in Gangwon Province. 

The major losses of Korea Resources Corp. came from business failures after investing in a nickel mine in Madagascar and Mexico’s Boleo project.

It invested $1.5 billion in developing a nickel mine in Madagascar and ended up recouping $24 million. It also invested $900 million in a copper mine as part of Mexico’s Boleo project and recovered only $150 million. 

Last month, Park Joong-koo, chief of the task force and professor of Seoul National University of Science And Technology, said, “The problem of Korea Resources Corp. is very structural. Without an exceptional measure, it is very difficult to overcome the challenges.” 

The task force also plans to recommend the restructuring of two other organizations related to overseas development: Korea National Oil Corp. and Korea Gas Corp. The combined losses of the two organizations stand at $49 billion.

The task force completed a field survey of Canada’s Harvest Operations Corp. invested by Korea National Oil Corp. and Australia’s Golar LNG invested by Korea Gas Corp.

By Shin Ji-hye (shinjh@heraldcorp.com)