EDITOR: | January 20th, 2014 | 6 Comments

REE deal with North Korea up against a lot of history

| January 20, 2014 | 6 Comments
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nkoreaChecking the news files over recent years, the North Korea rare earth miracle deposit seems to get resuscitated every six months or so. The news reports value it at being anywhere between $3 trillion and $6 trillion. It is described variously as a “bonanza”, a “treasure trove”, as Pyongyang “sitting on a gold mine”. Except, of course, that North Korea can’t manage to get many mines into production — or pretty much anything into production, if it comes to that.

The latest version of the story was reported by the Voice of America thus: “A recent geological study indicates North Korea could hold some 216 million tonnes of rare earths“ and then this: “If verified, the discovery would more than double global known sources and be six times the reserves in China, the market leader.” And this: “The potential bonanza could offer the isolated and impoverished North a game-changing stake in the rare earths industry“.

This was based on a release by a private company registered in the British Virgin Islands, SRE Minerals Ltd. It has a joint venture with state-owned Korea Natural Resources Trading Corporation. (The full news story is posted in our News file.)

This joint venture company has the rights for 25 years to develop the REE deposits at Jongju, in North Pyongan province.

SRE says “exploration carried out to date is insufficient to be able to estimate and report rare earth mineral resources in accordance with (Australia’s) JORC Code”. The conceptual work indicates the mineralisation totals 6 billion tonnes, with 216.2 million tonnes of total rare earth oxides. Just 2.66% consists of heavy rare earth elements. It adds that the technical information was compiled by Dr Louis W. Schurmann, a fellow of the Australasian Institute of Mining & Metallurgy with 18 years of experience with rare earths. (“Australasian” encompasses Australia and New Zealand: many professional bodies incorporate both countries.) The statement does not say who carried out the original exploration.

The joint venture will start exploration in March with 216,000 metres of drilling, the results to be reported according to the JORC code.

So, let’s take a look at several aspects of this. And I stress that none of this reflects on SRE Minerals: if they pull this deal off, it will be a major achievement. The issue, rather, is North Korea.

1. Is this a threat to China’s control of rare earths? Do you really think Beijing would allow that? Remember, North Korea is a client state of Beijing’s; sure, Pyongyang is always a wild card, but without China’s support the regime would not last.
We have to go back to mid-2009 and to a report in South Korean daily newspaper, Joongang Ilbo. It said that “China has found a new source for rare earths“ after then North Korean leader, Kim Jong-il, had visited China and signed an agreement to “exchange free fertilizer and heavily discounted grain for access to North Korea’s newly discovered but abundant reserves of rare earths—17 elements critical to high-tech manufacturing of everything from consumer electronics to missiles“.

Does this agreement still apply, and did it cover the Jongju deposit? A question to which, of course, we cannot know the answer.

China would, one would assume, want at least the heavy rare earths. After all, they are spending money buying into HREE projects around the world, and here is a potential supply on its doorstep.

In the case of graphite, as Investor Intel reported last July, North Korea was the world’s fourth largest producer with most of the output going to China.

2. So how is North Korea’s record with foreign mining companies? Well, just look at how many of them are operating in the country for the answer to that. There have been seeming breakthroughs before. Just over a decade ago, an Australian company was all set up to treat gold tailings in North Korea but that project folded before the first ounce was retrieved. In October 1992, The Wall Street Journal reported that North Korea had passed legislation to allow foreign companies to enter the country, setting up Chinese-style special economic zones for these foreign enterprises. So how’s that working?

3. And North Korea’s track record in terms of mining success stories? According to the U.S. Geological Survey, the country’s total mineral exports were just $27.9 million in 2011. Remember that, when the two Koreas were divided after the Second World War, the north got the bulk of the peninsula’s mineral resources. Yet in 2011 North Korea managed to mine just 12,000 tonnes of copper, just 70,500oz of gold, 900 tonnes of pig iron, 1,500 tonnes of iron ore, 100 tonnes of tungsten, 705oz of silver; the only notable production number was 70,000 tonnes of zinc.

The new rare earth joint venture might break the mold.

And one final point: given that on average it takes 11 years to get a rare earth project into operation (and that’s in more favourable jurisdictions) then it will clearly be some time before any supply from the joint venture becomes an issue.

Finally, for those who have joined the Investor Intel audience more recently, here’s something I reported back in 2010 (when the first of these REE bonanza stories began appearing):

Here’s some background courtesy of the Washington-based National Defense University. A paper by Lt. Commander Cindy A. Hurst of the United States Navy Reserve, which is essentially about Chinese rare earths, has a reference to North Korea. She recalls that in 1988 North Korea formed the Korea International Chemical Joint Venture Company to produce REE from monazite. The plant was reportedly designed to use solvent extraction technology acquired from China’s Yue Long chemical plant near Shanghai. Production began in 1991. Hurst said the monazite was said have come from the Cholsan uranium mine near Cholsan-kun in North Korea.

She also mentions that, in June 2009, North Korean leader Kim Jong-Il visited the Hamhung Semiconductor Materials Factory and the Hamhung branch of North Korea’s State Academy of Sciences, “where he stressed the need to boost production capacity and the need to accelerate technical updating of the factory to increase the production of rare earth metals”.


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Comments

  • Veritas Bob

    I wouldn’t want to be an expat in North Korea when junior decides your company has given him a raw deal. And better make sure your clapping (in support of junior and his worker’s paradise agenda) is not half-hearted. as that is a capital offense in NK – just ask his dear (departed) uncle, who also gave away the store in negotiating bad deals on behalf of the state.

    January 20, 2014 - 1:25 AM

  • neil

    How many tonnes 216 million zillion? whens the next missile test?

    January 20, 2014 - 2:48 AM

  • Carlos Sorentino

    Afghanistan has the world largest rare earth deposits.
    Greenland has the Solar System largest rare earth deposits.
    Mongolia has the . . .
    Now North Korea has the largest rare earth deposits in this spiral of the Galaxy.
    Why do some people peddle so much misinformation?
    How do they benefit from spreading all this non-sense?
    Do they think everyone is an ignoramus and a fool?
    There is not reliable information about North Korea because no serious scientist will ever work in that country and no real geological investigation has ever been done.
    It will be very rare indeed if they have any rare earths.

    January 20, 2014 - 5:59 AM

  • GoBucks

    We need to give credit where credit is due, folks.

    They have a world-class supply of BS in NK.

    January 20, 2014 - 11:12 AM

  • David

    And HREO at 2.66% they may have then the world biggest REE……….

    January 20, 2014 - 2:36 PM

  • tobyjack

    Latest news…

    Brisbane-based geologist Louis Schurmann linked to huge North Korea rare earths mining project
    Lateline By Mark Willacy
    Updated about 2 hours agoTue 5 Aug 2014, 6:16pm

    A leading Asian human rights activist has urged the Federal Government to investigate a Queensland-based resources company and a prominent Australian geologist over mining deals with North Korea that he believes may breach United Nations sanctions.

    One of the deals involves the mining of a potential deposit of 216 million tonnes of rare earths, which are minerals used in everyday items including smartphones, flatscreen televisions and computers, but also essential for sophisticated weapons such as guided missiles.

    The deposit, discovered at Jongju, about 150 kilometres north-west of the North Korean capital Pyongyang, is reportedly one of the world’s largest.

    It could also provide a significant boost to the rogue state’s economy.

    Late last year, a British Virgin Islands-based private equity firm, SRE Minerals, signed a joint venture with the regime-run Korea Natural Resources Trading Corporation to develop the site for the next 25 years.

    The project’s lead scientist and director of operators is Dr Louis Schurmann, an experienced Brisbane-based geologist and fellow of the Australasian Institute of Mining and Metallurgy.

    Tokyo-based Human Rights in Asia director Ken Kato has told the ABC that he wants the joint venture project investigated.

    “Rare earths are an indispensable material for guided missiles,” he said.

    “North Korea’s mining resources are a major source of revenue for its nuclear and missile programs.”

    http://www.abc.net.au/news/2014-08-05/brisbane-geologist-linked-to-north-korea-mining-project/5649912

    August 5, 2014 - 6:24 AM

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