The rare earth of North Korea

Materials World magazine
,
1 Jun 2017

In 2014, North Korea was said to hold the potential to disrupt the global rare earths trade. But three years on, that promise goes unfulfilled. Khai Trung Le explores whether the controversial country may yet shake China’s hold on the market.

Estimates place China as host to a third of the world’s proven reserves and around 90% of the global supply, and although the reasons behind the country’s dominance are more numerous and complex than simple geographic allocation, China’s grip on the rare earths market remains immutable. Any developments that might unhinge this warrant attention, and when a country is said to possess untold quantities of rare earths, people sit up. But complications arise when that country is the Democratic People’s Republic of Korea (DPRK).

In an era of mass information exchange and worldwide communication, the secrecy of North Korea makes it one of the most elusive and compelling countries in the world. But the country’s developing nuclear weapons and military programme, accusations of a totalitarian regime and its continuing official status at war with South Korea and the USA has placed the country under substantial United Nations sanctions. What does the DPRK mean to the rare earths market, and is its promising potential one the world should accept?

Get a tectonic edge

The idea of significant rare earth resources in North Korea is far from absurd. Experts including Choi Kyung-soo, President of the North Korea Resources Institute, and Dr Choe Won Jong, researcher at the National Academy of the Sciences Institute of Geology, South Korea, state that the country hosts resources featuring more than 500 mineral types, and reportedly six rare minerals including holdongsok, suansok and sangpaldongsok were first detected in North Korea. ‘The earth of our country has a long history of more than 3.6 billion years,’ said Choe.

The quantity and accessibility of these resources had long been speculated to be significant. However, in Q4 2013, British private equity firm, SRI Minerals, claimed that the country had the world’s largest deposits of rare earth oxides, including rare earth elements, heavy REEs and minerals. In particular, the Jongju deposit, based in the North P'yo˘ngan province, was said to hold 216 million tonnes of rare earths – more than twice the 110 million tonne global stockpile at the time, and far above expectations.

SRE Minerals’ claim was verified by Dr Louis Schürmann, fellow of the Australasian Institute of Mining and Metallurgy. At the time, SRE Minerals also signed a 25-year deal to develop the Jongju site in a joint venture with state-owned Korea Natural Resources Trading Corporation.

Coverage at the time led to excited declarations of ‘breaking China’s stranglehold on the REE market’ (The Diplomat), ‘radically alter[ing] geopolitics within the region’ (Business Insider) and even led to theories of reunification between North and South Korea (VoA). But, as years passed, the supposed game-changing quantities failed to be further verified and mines struggled to enter production – the North Korean promise has dissipated.

Regardless, Schürmann continues to show faith in the North Korea potential, saying to J.R. Mailey, visiting scholar at the Johns Hopkins School of Advanced International Studies US-Korea Institute, 'I've got 39 years experience in geology in Africa. But I've never seen such a piece of real estate in terms of geology and potential of deposits in my life.' Schürmann has since been revealed as a former director of AAT Corporation and EHG Corporation, two companies linked in the 2016 Mossack Fonseca leak (known as the Panama Papers) to North Korean entities under sanctions. Schürmann spoke with UAE news site, The National, stating, ‘My work and my involvement in any part of the world are apolitical. I do not get involved in any politics and will not even have an opinion, although what we do does have a positive effect.’

Sanctioned

Under UN sanctions, North Korea is completely banned from selling copper, nickel, silver and zinc, and is partially banned from selling gold, titanium and vanadium ore, coal, iron and other rare earth minerals.

The DPRK is allowed coal exports of either a maximum of US$400.87 million or 7.5 million metric tonnes annually, provided UN member states do not purchase from a sanctioned entity and can prove the coal exported is for ‘livelihood purposes’. However, a February 2017 paper from a United Nations Security Council panel has criticised the lack of enforcement from member states, condemning the DPRK’s ‘flouting [of] sanctions through trade in prohibited goods, with evasion techniques that are increasing in scale, scope and sophistication’.

On the difficulties of managing sanctions against mineral trade, the panel wrote, ‘Despite the new sectoral bans adopted for the first time in 2016, the DPRK continues to export banned minerals to generate revenue. This is complicated by the fact that Member States have different interpretations of the minerals listed in the 2016 resolutions and construe their exemption clauses differently in practice […] The panel’s report shows that, despite the support of Member States for strengthened sanctions by the Security Council through two new resolutions adopted in 2016, this effort has not yet been matched by the requisite political will’.

Former member of the UN Panel of Experts, George Lopez, wrote for the Bulletin of the Atomic Scientists, ‘North Korea is often called the “hermit kingdom”, but the report correctly portrays the Kim Jong-un regime as operating a global financial network – intricate, integrated, hidden and akin to a criminal empire.’ Urging greater sanctions, and greater adherence from UN member states, Lopez continued, ‘Such action just might cause enough deterioration in the North Korean kleptocratic state for Kim Jong-un to consider what might be gained from sitting at the table for serious negotiations about his ambitions and capabilities.’

Big red button

Since President Donald Trump’s inauguration, the USA and DPRK have engaged in escalating displays of sabre-rattling, including the deployment of a US Navy strike group to the Korean Peninsula, numerous ballistic missile tests from North Korea that violate UN Security Council resolutions and the fatal assault of Kim Jong-un’s half brother, Kim Jong-nam, with a chemical weapon in Malaysia, speculated to have been ordered by the North Korean ruler, that may land the country back on the US State Department’s list of ‘state sponsors of terrorism’. But between these attempted displays of imperialistic might may be the USA’s most sly and greatest impact on the DPRK – encouraging China, North Korea’s biggest trade partner, to enforce an economic stranglehold.

In November 2016, China had capped total coal exports to the country according to UN restrictions. However, China announced its decision to ban all coal exports from the DPRK on 19 February 2017 as part of the UN Security Council’s Resolution 2321 in response to North Korea’s fifth nuclear test, in what is undoubtedly the country’s most definitive move against the North Korean economy.

In response, North Korea banned the export of rare earths to China. Radio Free Asia (RFA) cites unnamed sources, speaking anonymously for fear of reprisal by the North Korean state, claiming that the DPRK’s central government ordered a complete ban on the export of rare earth metals to China around 20 February. A source from Ryanggang province stated that ‘our province wholly stopped metal exports to China, and they are all rare earth metals,’ while RFA’s source in North Hankyong province said, ‘Iron ores from Musan and magnesia clinker from Dancheon are still shipped to China, and yet the export of rare earth metals such as molybdenum from Musan and cobalt from Hoeryong are completely suspended.’ South Korean news site, DailyNK, and the New York Times report that North Korea has since reportedly sold geological resources – mined or commercialised through processing – below standard international prices in January 2017 due to diminished competitiveness, and Chinese coal traders operating in Dandong, a North Korea/China border town and hotbed for commerce between the nations, claim that all coal trade has ceased.

But the Chinese Foreign Ministry insists that sanctions may provoke instability, and warns the USA that it should not rely on the country to squeeze North Korea. Spokesman Lu Kang said, ‘China has always opposed the frequent use of unilateral sanctions in international affairs, and we especially oppose those sanctions that undermine China’s interests. China always decides its own stance and policy based on the merit of the matter itself.’

This brings Materials World to its original question – is the rare earth promise North Korea holds one that should be accepted? The answer may seem straightforward. But for as long as projects such as Molycorp’s Mountain Pass mine in California, recently auctioned in bankruptcy, continue to disappoint, the temptation to deal with the devil may be too much to bear.