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KORES under audit over overseas mining

Korea Resources Corp., a state-run mineral resources explorer and developer, is under investigation by the nation’s top audit agency for wasting its budget in pursuit of overseas mining projects over the past five years, industry sources said.

One of the target overseas mining projects under investigation by the Board of Audit and Inspection is the Boleo copper-cobalt-zinc project in Mexico, the sources said.

KORES secured a 10 percent stake in the project for $276 million in 2008, but it increased its shareholding rate to 70 percent last year, injecting an additional $115 million on request from the financially struggling Canada-based Baja Mining, which had controlling stakes in the Boleo project.

“The additional investment decision was made to save the faltering project, which resulted from Baja Mining failing to control the costs required to build production facilities,” KORES said in its press release.

“The company is making all-out efforts to complete the construction by the end of this year and so it will be able to seek profit from the mining from 2014.”

Industry watchers estimated the average annual mineral output for the Boleo project’s first four years at 55,750 tons of copper cathode, 1,535 tons of cobalt cathode and 6,300 tons of zinc-containing metal. The outlook for profit from the Boleo project, however, is dim due to falling international mineral prices.

The BAI confirmed that it would expand its audit into KORES’ other overseas projects after completing an investigation into the Boleo project to determine if it was a malinvestment, and thus wasted the budget for overseas mineral resource development projects.

Boosted by the previous government’s encouragement to raise the resource self-sufficiency rate, KORES tripled the budget for overseas mining projects to 779 billion won ($695 million) in 2011 from 226 billion ($201 million) in 2008.

“The BAI’s audit into KORES is expected to have a negative impact on overseas energy source exploration and production projects by state-run companies like the Korea Gas Corporation and Korea National Oil Corporation,” industry watchers said.

The Ministry of Trade, Industry and Energy also repeatedly said that the new government would put more focus on the normalization of large-scale, energy-related state-run companies rather than external expansion.

By Seo Jee-yeon  (