KORES Turns to M&A Deals

CEO unveils policies to capitalize on an opportunity ― plummeting asset prices of mines, firms

Korea Resources Corp. (KORES) President and CEO Kim Shin-jong said his corporation will pull out all the stops to conduct M&A deals for overseas natural resources mining blocks and companies.
Meeting with reporters on the occasion of the company's 42nd anniversary at the KORES headquarters in Dongjak-gu, southern Seoul, on April 28, KORES President Kim said, "now is an opportune time for striking M&A agreements for overseas mining blocks and companies, so we're willing to take steps including even the disposal of stakes and the issuance corporate debentures to Korean companies in order to secure the money necessary for the deals."
"Now is an opportune time for the nation to turn its focus on the exploration of overseas natural resources as the recent drop in crude oil prices has caused the asset value of mining blocks to plummet. However, we face difficulties in securing the necessary funds,"he said.
Kim said, "It is possible for us to dispose of 6 percent out of our 21-percent stake in Madagascar's Ambatobi nickel mine (to domestic companies) if it is necessary to secure funds." KORES's move to dispose of its stake in overseas mines to domestic firms is interpreted as a win-win strategy to buy foreign mines or companies without changing its own natural resources development rate, industry analysts said.
The KORES president called for institutional support from the government for raising funds in order to help KORES move forward with overseas natural resources exploration.
"Due to a lack of our own funds, we have little choice but to issue debentures abroad in order to secure the funds necessary for striking M&A deals, but borrowing foreign capital would cause a rise in our debt, which in return could have an adverse impact on our management assessment, something considered unacceptable to a CEO."In this regard, he noted, the government should take a temporary step not to categorize borrowings of foreign capital for M&A deals into debts on its financial statements when assessing the management of public enterprises.
Kim demanded an institutional overhaul, saying that Korea lags behind other nations competitively, as the nation has to spend up to two months in doing such things as placing a public notice on the designation of a consulting company and undergoing a complex economic assessment as required by the act on contracts with states.
Currently, KORES has zeroed in on four companies specializing in uranium, copper and bituminous coal as M&A targets, and in particular during the second half of this year, it plans to buy out three mines, including a uranium mine, he said. A $50 million fund will be raised for the purchase of the mine and, to this end, a fund-managing company has been designated with the establishment of collaboration ties with legal and accounting firms.
KORES suffered a setback due to a lack of funds and a slow process as it failed in a race to acquire the Roseberry mine in Tasmania, Australia. But this time, the company is confident it will succeed in striking deals, he said.
Kim unveiled the "2+2 Strategy"focusing on two natural resources, copper and uranium, and two continents, Latin America and Africa. In the 10 months since he took office, Kim has stressed on-the-spot management as he has made business trips to Latin America, Africa and Central Asia. He attached a priority on uranium, which is low at its own development rate, and copper, a basic material for Korea's mainstay industries ― electronics and the IT industry.
"Korea has made no progress in its own development of uranium, and we've secured the right to sell 400 tons of uranium in Niger, Central Africa, and we're considering mines as investment targets in Namibia and South Africa, a center of information and funds,"he said.
KORES is actively engaged in not just conducting M&A deals, but the development of domestic mines.
In Korea, the demand for natural resources has skyrocketed 92 percent in the last five years, whereas the cost of acquiring them has dropped an average of 1 percent.
KORES plans to prospect 50 mines in search of 10 natural resources by 2020 and it will jointly explore mines with private companies. nw

Korea Resources Corp. (KORES) President and CEO Kim Shin-jong