Korean MFA: KORES Greenland REE+Nb+Ta project to be ‘delayed’ by NunaMinerals bankruptcy

A terse news item on the website of South Korea’s ministry of foreign affairs states that the Qeqertaasaq rare earth, niobium and tantalum project near Maniitsoq in western Greenland is “expected to be delayed” now that Greenlandic state-owned firm NunaMinerals has filed for bankruptcy. NunaMinerals and Korean state-owned miner KORES (한국광물자원공사) agreed to jointly explore the site and started drilling last year.

South Korean SOEs invested heavily in natural resource projects abroad, sometimes as part of a ‘resource diplomacy’ policy during president Lee Myung-bak’s administration. These investments have become a source of controversy after a government audit that became public not a month ago questioned their profitability and suggested already scheduled investments could put these companies, that include KORES, in financial trouble. The agreement between Nuna and KORES was signed during Lee Myung-bak’s visit to Greenland in September 2012.

Baosteel subsidiary drops case against General Nice

Ningbo Steel (宁波钢铁) has withdrawn a petition to wind up Loudong General Nice Resources, General Nice Group’s HK-listed company, soon after the latter reacted with claims for $100m as compensation for damages to its reputation. Ningbo Steel, a subsidiary of state-owned steel giant Baosteel, is claiming some $1.2m in unpaid debts. For some background on Ningbo Steel, check my post from a few days ago.

In other news, it has emerged that a sixth of Loudong General Nice is now owned by Zhuguang Holdings (珠光控股), a property developer led by Zhu Qingyi 朱庆伊 (also known as Zhu Qingsong/Chu Hing Tsung 朱庆凇). Mr Zhu and his elder brothers, Zhu Layi 朱拉伊 and Zhu Mengyi 朱孟依, possess a diversified business empire whose origins go back to the early 2000s. The Zhus stem from the Chaoshan 潮汕 region of Guangdong province, just like General Nice’s chairman Cai Suixin 蔡穗新. Zhu Mengyi is rumoured to be have been banned from leaving the country amid a corruption crackdown targeting collusion between real estate developers and officials, notably disgraced Guangzhou Party secretary Wan Qingliang 万庆良.

Zhuguang‘s stake in Loudong General Nice is owned through a BVI company that acquired company shares last December as part of a deal involving oil fields in the US. There’s more on that deal in my recent background article on General Nice.

SOEs buy into General Nice HK listed company

Two Tianjin-based state-owned companies, Bohai Steel (渤海钢铁) and Tewoo (天津物产), a logistics and trading conglomerate, have increased a previously existing stake in General Nice Group’s Honk Kong-listed company to 7%. The SOEs own these shares through a Hong Kong company, New Asia Worldwide Limited (新亞環球有限公司). Both companies are known to have had contacts with General Nice in the past.

General Nice’s HK listed arm, Loudong General Nice Resources (China) Holdings (樓東俊安資源(中國)控股有限公司), resumed trading today after a short halt and an announcement that the group is considering buying a Mainland logistics and trading business from an “independent third party” (thus presumably not Tewoo). There are no concrete agreements and the deal might not proceed. Loudong GN had announced similar plans for a similar deal late last year, but scrapped them later.

General Nice Group owns the Isua iron mine in Greenland, but not through Loudong GN. Bohai and Tewoo’s share acquisition doesn’t imply an interest in the mine, although General Nice’s stronger ties to SOEs in the steel industry would obviously become relevant should plans to develop Isua eventually come about.

More on General Nice Group and their various companies, including Loudong GN, in my background article and occasional shorter posts.

General Nice HK-listed company stops trading after shares soar

Loudong General Nice Resources (China) Holdings (樓東俊安資源(中國)控股有限公司), General Nice Group’s Hong Kong-listed company, has requested the HK stock exchange to halt trading in its shares starting this afternoon, to wait for a company announcement. As I reported on Friday, Loudong GN shares have jumped in the last few days, rising above 70% in less than a week.

General Nice Group CEO Jaffe Lau (柳宇) has aired plans for the group to increase cooperation or even seek mergers with (so far unspecified) Chinese SOEs.

General Nice’s HK listed company reported losses in 2013 and 2014, larger than its accumulated profit in its previous existence under GN’s control. This was due to the unravelling of its Shanxi coal business, something related to more stringent environmental standards being enforced by the local government, as well as to coal price levels more generally. The company has been trying to diversify away from coal, and has purchased an office building in Sydney and rights to oil fields in the US.

The listed company has been through several hands and has a rather interesting history, summarised in a section of my General Nice background article.

General Nice owns the license for the Isua iron mine in Greenland, though not through the HK-listed company.

Baosteel subsidiary files liquidation petition against General Nice HK company, GN to sue back

Ningbo Steel (宁波钢铁), a subsidiary of state-owned Baosteel (宝钢), filed a petition earlier this month at the Hong Kong’s High Court earlier to wind up General Nice Resources (Hong Kong) Ltd. (俊安資源(香港)有限公司), claiming unpaid debts related to iron ore transactions dating back to last year. Although General Nice acknowledge the debt, they have now countersued, alleging that the winding-up petition seeks to hurt their reputation, and are asking for $100m in compensation, equivalent to some 80 times the debt owed and over three quarters of Ningbo Steel’s 2014 net profit (東網, Quamnet).

Ningbo’s case against General Nice will be heard in mid June.

Ningbo Steel started as a private company, led by (now .85-billionaire) Zhang Zhixiang 张志祥, but was later bought by Baosteel Group, a central SOE and one of the world’s largest steelmakers. Executives at Ningbo Steel must have more pressing concerns than all that suing and countersuing in Hong Kong, such as wondering if they won’t get arrested as a corruption crackdown spreads through state-owned Big Steel. The campaign has claimed several heads at Baogang, the most senior of which so far has been deputy GM Cui Jian 崔健. Mr Cui spent part of his career at Ningbo Steel, after its acquisition by Baosteel, and his “discipline violations” (a euphemism for corruption) are rumoured to have taken place during his stint at Ningbo.

General Nice Resources HK is owned by Mainland-based General Nice Group companies, partly through General Nice Development, the Hong Kong company that owns the Isua iron mine in Greenland through a Jersey entity. That is, the owner of the Greenland license is not being directly targeted by the lawsuit in Hong Kong.

In media statements reacting to Ningbo Steel’s filing, General Nice say that, far from being insolvent, they’re a major ore trader with a large turnover and stakes in several listed companies. The figures the company brandishes when describing itself indeed make it hard to imagine it would have any trouble mustering the meagre debt claimed by Ningbo Steel. On the other hand, while profit figures for the whole group aren’t available, there are multiple signs that it isn’t going through its best times. The Group is moving away from its historical core coal business, and these aren’t good days for iron trading in China. Current iron prices mean that Group assets like the Greenland mine, unlikely to be developed any soon, or the Cockatoo Island project in Australia (owned by a troubled company I might be writing about soon) aren’t precisely profit sources. Loudong General Nice, the Group’s HK-listed company, posted losses in both 2013 and 2014.

I discussed General Nice’s various investments and their interesting history in a long-ish article last month.

In the latest news about General Nice’s changing strategy, General Nice Resources CEO Jaffe Lau (柳宇) said yesterday in an interview that the group is looking to increase cooperation or even mergers with Chinese state owned companies, since as private players they find it hard to compete with SOEs for funding from state-owned banks. Although General Nice’s political contacts have arguably been key to the group’s growth in the past, a merger with a state entity would surely give them access to cheaper funding. Assuming a scenario where the Isua mine is eventually developed, having a SOE around would move it closer to getting the billions in investment it’s been estimated to require.

To finish on a bright note, shares of Loudong General Nice, the group’s loss-making HK-listed company, have been doing very well of late and suddenly jumped in the last few days.

Yakutia: cooperation with South Korean pharma, biotech

Officials from the Far Eastern Russian region of Yakutia (the Sakha Republic) were in Gangwon province in South Korea last month to discuss potential cooperation. The visit included meetings with local pharmaceutical companies, some of which seem to have an interest in Yakutian products such as (deer?) antlers and should refer to the Siberian musk deer (사향노루) or a similar animal (Sputnik 콜리아, ЯСИЯ). Among the Korean companies the visitors interacted with: Hamsoa Pharm (함소아제약), Regeron, Bifido.

Another topic of the talks was tourism. The Yakutians would like to attract South Korean visitors and there are plans to start offering charter flights between Chuncheon and Yakutsk.

Remarkably enough, an important component of tourist flow in the opposite direction, from Russia to Korea, is medical tourism. Around the time of the Russian visit to Gangwon, representatives from Heundae Paik Hospital (해운대백병원) in Kimhae and from a Korean medical tour operator were visiting Yakutia. No less than 13% of patients at that particular hospital come from Russia. Such a figure is of course not that common in the industry, but South Korea is an important medical tourism destination, most famously for plastic surgery. Most customers come from China, but the former Soviet Union also provides an interesting market, and sheer geography would suggest Korea might be attractive to patients in the Russian Far East, closer to South Korea than to their own country’s major population centres.

I’ve written recently about Yakutian efforts to attract investment from East Asia. The region, just like others in the Russian Far East, badly needs foreign investment that is unlikely to come from the West in the current geopolitical climate.

South Korean authorities are just as eager to increase cooperation with Russia in everything Arctic. For a recent sample of this: the Ministry of Oceans and Fisheries (해양수산부) Arctic action plan for this year, presented not two weeks ago, highlights cooperation with Russia, including Korean investment in developing and modernising ports in Russia’s Far East.

Russian Arctic event kicks off today

The long-awaited patriotic Arctic event organised by a Russian NGO with strong state backing I wrote about recently (‘coming to a Pole near you‘) begins today with a ceremony in Moscow, but with a few changes. What was originally planned to be an expedition to the North Pole has been downscaled to a series of events in Svalbard, both in the Russian settlement of Barentsburg and in Longyearbyen.

The most visible aspect of the event, the unfurling of a 1000 m2 Russian flag and 250 m2 flags of Russian regions, towns and “socially responsible companies” will still take place, although in Svalbard and not at the Barneo polar station as previously announced. This, as well as the expected presence at the event of representatives of Norway and Russia-friendly countries like Cyprus and Serbia, somehow dilutes the patriotic overtones and moves the focus away from what had been described as an assertion of sovereignty.

The event is part of the celebrations of the 70th anniversary of the end of World War II, which Norway’s PM Erna Solberg, along with other Western leaders, will be boycotting over the Ukraine crisis. Ironically enough, not only will enormous flags of Crimea and Sebastopol be prominently displayed in Svalbard, but one of the organisators of the event is Sergey Mironov, a politician under Western (and Norwegian) sanctions, which he has said he’s “happy” to be under. Mr Mironov doesn’t seem to be flying to Svalbard, but he is supposed to be taking part in today’s ceremony on Poklonnaya Hill in Moscow.

The organisators have photoshopped a gorgeous picture of what the enormous flags will look like when laid on the snow in Svalbard. The work is a bit short of perfect: the Russian flag in the picture looks the same size as the regional flags, while it’s supposed to be four times bigger; and all the flags lie in a perfectly horizontal plane, so that rather than lie on the terrain they seem to be floating above ground, like a band of over-starched flying carpets.

The expedition leaves Moscow tomorrow and the events in Svalbard will take place during the weekend.

For some background on the organisation behind the event and its patriotic overtones, check my previous post on the project.