Foreign nations eyeing up North Korea’s mineral wealth

Foreign nations eyeing up North Korea’s mineral wealth

With increasingly cordial and positive steps toward a normalization of relations between North and South Korea made possible by a strong, targeted push by the Trump administration, there is a possibility of the building of near-term economic ties to help North Korea. Pyongyang’s immediate ticket to the global economy, if all normalization proceeds on the current trajectory, is its mineral resources.

North Korea has mineral resources estimated to be worth at least $6 to $10 trillion. Of the identified resources, deposits of coal, iron ore, magnesite, gold ore, zinc ore, copper ore, limestone, molybdenite, tungsten and graphite are the most significant. Its magnesite reserves are the second largest in the world, following China, and its tungsten deposits the sixth largest. These resources all have the potential for the development of large-scale mines.

North Korea’s bedrock also holds a large amount of metals needed to make smartphones and other technological products. Nobody knows the true value.

Gold mines are located in Pyongan, magnesite mines are mainly distributed in Hamgyong, while iron ore is found in the provinces of Pyongan, Hamgyong and Hwanghae. Large-scale infrastructure projects would obviously need to be built in the highly secretive state, which appears to be seeking a way out of economic sanctions.

In the immediate past, Pyongyang exported minerals to China and Russia, but international sanctions curtailed its export abilities. Importantly, a lack of suitable mining equipment and potential buyers for rarer minerals made it more difficult for North Korea to sell what it extracted. Another key factor is that China wants to maintain a monopoly in certain areas of North Korea’s mineral riches, as it controls 90 percent of Pyongyang’s trade.

Russia, North Korea’s other big neighbor, wants a slice of the mineral pie too. In 2014, Moscow proposed a 2,000-mile rail network that would be built in exchange for mineral rights. Although the plan fell through because of disagreements on both sides at the time, such an agreement may work in the immediate months following normalization of relations, which would bring North Korea’s minerals to the world market in a legal manner.

Both Russia and China have been implicated in skirting international sanctions around North Korea. International investigators noted that, in August 2016, Egyptian officials seized more than 2,300 tons of iron ore from a North Korean cargo ship headed to the Suez Canal. In addition to the large quantity of iron, 30,000 accompanying rocket-propelled grenades marked the largest ammunition seizure in the history of sanctions against North Korea. These activities illustrated Pyongyang’s use of concealment techniques, as well as an emerging nexus between entities trading in arms and minerals.


North Korea’s bedrock also holds a large amount of metals needed to make smartphones and other technological products. Nobody knows the true value.

Dr. Theodore Karasik


Researchers see plenty of potential for extracting resources in locations as diverse as Afghanistan and the Moon, but of course costs — from financial to human capital — continue to complicate mineral extraction. With a shortage of mining equipment and North Korea unable to purchase new equipment due to its economic situation, China, Russia and South Korea are planning to tap the North’s mineral wealth. Seoul’s infrastructure ministry invited bids for possible infrastructure projects in the North, including those concerning the resource sector. It reportedly sees such resources as potentially covering the cost of repairing the North’s infrastructure, should reunification occur.

Financially, any new infrastructure projects to bring North Korea’s mineral wealth to market will require a wealth fund that may be unique in its structure, providing not only a transparent method of accountability but also bringing desperately needed financial thinking on how best to structure transactions in such a future involving mineral wealth.

Foreign investment in North Korea’s mining sector is not new. In 2001, South Korea invested in the Jengchon Graphite Mine project in North Korea but that, and up to 10 other efforts, failed due to electrical shortages and bureaucratic rigor. Other countries including the US and the UK have participated in North Korean mining projects. Of course, multiple layers of sanctions closed down Pyongyang’s mineral extraction capacity and capability.

Clearly, foreign investors are watching for the first signs of opportunity to enter the North Korean mineral market — but there is obviously a long way to go. New laws that are built on the principals of foreign investors participating in North Korea’s mineral development operations will need to be introduced. Most foreign investors want to establish their own companies and operate the mines independently. Therefore, North Korea’s legal provisions, sovereign risk, and antiquated infrastructure are barriers to foreign investment.

US Secretary of State Mike Pompeo’s visit to North Korea was part of the ongoing negotiating process regarding the latter’s re-entry into the international markets in exchange for giving up its nuclear program. It is hoped that, in the near future, Pyongyang and Seoul will continue the extraordinary path to normalizing relations and allowing mining projects to be restarted. Inter-Korean mining cooperation is very important for both sides as the process of rapprochement continues. These projects offer North Korea the potential to increase mineral production and reap the related benefits of economic growth through international investment. It will be mandatory that Pyongyang first creates the favorable conditions required for investment in order to uphold its emerging obligations.

  • Dr. Theodore Karasik is a senior adviser to Gulf State Analytics in Washington, DC. Twitter: @tkarasik
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