Korea Resources Corp., the state-run mineral resources explorer and developer, has recently refinanced its debt-ridden Boleo copper-cobalt-zinc project in Mexico in a debt-for-equity swap, the company said in a press release Monday.

“The KORES-led Korean consortium agreed to the $938 million deal. The agreement will contribute not only to normalizing the project and but also to halving the firm’s debt ratio to 197 percent,” KORES chief executive Koh Jung-sik said.

The consortium, which holds a 90 percent stake in the project developer MMB, consists of KORES, LS-Nikko Copper and SK Networks. Canada-based Baja Mining holds the remaining 10 stake. In the deal, the consortium traded $938 million of their bonds in MMB for equity among themselves.

KORES, the biggest shareholder with a 70 percent stake in MMB, has been saddled with debt after MMB borrowed money to build a production facility for the Boleo development.

The Boleo project’s worsening financial conditions pushed KORES’ debt ratio up to 250 percent in the first half of 2013. Pressed by the government’s initiative to lower the overall debt ratio of all public companies, KORES has sought a way to cut its losses in the Boleo project.

“The company will make all-out efforts to complete the facility construction through project refinancing so it can profit from the mining from 2014,” the company said.

When the Boleo project was launched, 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 the profitability of the Boleo project, however, depends on international mineral prices, they added.

By Seo Jee-yeon (jyseo@heraldcorp.com)