KUMSAN JIONT VENTURE
Case Study: "Kumsan JV Co." – a 50%/50% JV
(with Singapore investment)
KJV Summary 
Kumsan JV Co . (KJV) is the first and foremost JV in gold mining in the DPRK. In just a few years since it was set up in 1998 it has been through several phases of alluvial and hard rock mining, and is now firmly established as the leading JV gold producer in the DPRK.
Invigorated by new investors in 2002, facilitated by KBC, the JV was a able to purchase and ship a CIP processing plant from Perth in W. Australia and transport to a site some 8 hrs north of Pyongyang (by SUV).
The installation of this refining plant in the mountains was completed in mid-2004, and “pouring gold” operations started less than two years after bringing in new investors. Within two years production started, and with regular transfers to the investors, the plant has nearly paid for itself.
KJV is 50% owned by the Hungsong Economic Group, a mining, manufacturing and trading group, and 50% by Singapore-led investors.
The constructive and friendly spirit of the whole team, as well as the dedication and determination, hard work professionalism displayed by all sides of the JV has been a pleasure to be a part of.
We hope that this shining example of success is a forerunner to further ventures in a country rich in resources. Success breeds success.
Coming Year
KJV will continue to work with KBC, who have a variety of mining, metal and mineral projects in different stages of development. KBC is looking at different ways to optimise project potential, both as individual projects and as part of a portfolio.
KBC has a focus on Mining and manufacturing projects. There are many projects that can realise a good cash-flow for relatively small investment, with equity or seed investment. A share of one or more gold projects included would enhance the perceived value of the basket of projects, and could help yield best benefits.
KBC will be taking Mining missions and investor missions to Pyongyang throughout the year – visiting projects as appropriate.
KBC is planning our 2nd and 3rd "Business-Golf Challenges" in the first week of May and October 2007 respectively.
KJV is a member of the China International Mining Group (CIMG) http://www.cimg.org.cn
Kumsan JV Co, (KJV) History:
1996 Early mission to Pyongyang ('PY') by ‘friends of Peregrine’
1998 JV Agreement signed with Molopo & JV Registered in Poyang.
1999-2002 Alluvial gold produces limited success
2002 November – After Investor Mission to Australia, Singapore-led Investors introduced; Basic Agreement signed same day.
‘Project Sierra’ to be leading project; open pit with some underground seams/veins 2003 January; Molopo bought out by Singapore-led investor Group
2003 Equipment specified & Plant Designed for ‘Project Sierra’ & shipped from W. Australia & Victoria (45 TEU equivalent)
2004 October: Plant Commissioned & “Gold is Poured” – with TV & Media Coverage
2006 Investment just missed being fully paid back to investors.
Look forward to resume production in 2007 Q2
Gold Mine Gearing Up For Full Production
Kumsan Joint Venture Company Press Release
The Democratic People’s Republic of Korea’s (North Korea’s) first foreign invested gold mining joint venture operation, KUMSAN JV Co, is now close to its full production target of 500 kg per annum.
KUMSAN JV Co (Kumsan means ‘Gold Mountain’) was set up in 1997 and, particularly since the insertion of Singapore-based investors in 2002, has moved forward with this significant investment. Kumsan JV Co. now employs 235 full time staff in DPRK.
Singapore, Australian and British Investors and senior Korean management from Pyongyang have visited the site the week of October 8-15 to see the modern-equipped plant installation and observe gold being produced. The local DPRK partner is the Hungsong Group, a 100,000 people, and which has six JV’s with various European and Asian partners, manufacturing products from electronics and light bulbs to paint and seafood processing.
The location is approximately 200 kilometres north-east of DPRK’s capital city, Pyongyang.
The investment to date is approximately US$3 million and uses the ‘Carbon-In-Pulp (CIP)’ state-of-the-art technology. The bulk of the equipment was imported from Australia from Bendigo, near Melbourne, Victoria, over the last 18 months in over 20 containers. The plant is expected to process 120,000 tons of ore per annum-with a recovery rate of 90-92 percent. The ore is of exceptionally high grade-averaging 4.8 grams/per ton.
‘What we have got here a world class facility in one of the world’s richest reserves-including supplies of gold and the other minerals and precious metals’, said the Joint Venture’s Technology Director, Dr.Richard Haren from Sydney.
The right photo is Roger Barrett taking the gold to the refinery.
Mr. Li Gil Chun, Managing Director of Kumsan JV co. said: “This is the first foreign invested joint venture in gold mining in our country. We are very pleased to have the investors visit the mountain and see gold being poured. By any world standards we have moved very quickly to start production and realize this investment.”
Roger Barrett, Deputy Managing Director of KJV, said at the site: “This is a very significant project; the DPRK is one of the richest countries in the world in gold resources and in minerals and metals generally.
“A successful project like this raises awareness internationally and acts as a catalyst to encourage investments in other fields – energy, agriculture and manufacturing”, he continued. Mr Barrett said the DPRK is rich in human resources as well. “This project creates jobs, and helps bring economic growth to the country and the people as a whole.”
The right photo is Mr. Li Gil Chun, Maniging Director of Kumsan JV Co. holding the gold.
“A relatively small investment goes a long way; the DPRK government and commercial companies are very willing to offer mutually beneficial terms. In this project the Korean partner has shown exceptional commitment. Their determination to realize the investment quickly and profitably offers great encouragement in mining and many other fields.”
Over 1,000 tons of equipment and supplies were imported, and transported from Nampo port to the mountains. “Some of this equipment is very heavy and bulky – and the logistics effort in bringing it to the site was first class” said Barrett. “The effort and commitment of our partners from the Hungsong Economic Group has been excellent; they are strong and committed.” Singapore venture capital has played a key role in the development of this project – which is the start of much further planned developments including other areas of high-grade deposits and tailings treatments.
“The perception of doing business in the DPRK and the reality are so different - we have seen enormous progress onsite in the last year”, said the major foreign investor, visiting the plant site for the second time, on 14th October. “Australian technology and expertise together with DPRK’s traditional industrial heritage and excellent work force is a very effective combination” said Dr. Haren, a trained geologist. “The equipment has been assembled using the Korean technical team led by the very capable Mr. Kim Jong Chol, and other technical experts from Australia.
The JV now employs 235 North Korean staff, including 65 local supervisory and management and technical staff.” Mr. Kim, a metallurgist educated at Pyongyang’s Kim Chaek University said: “We really appreciate learning how to operate this modern equipment.” Mr Barrett said: “We are pleased to open this mining facility at a time where production levels and profitability are encouraged by the country’s economic reforms initiated in July 2002.
The state’s attitude to economic management and official direction is very helpful. Projects such as this show the willingness of North Korean partners to engage in a JV combining a high level of efficiency and commitment and to engage foreign partners and investors … This is quite a normal but modern business approach here,” said Mr Barrett, speaking in Pyongyang.
Mr Barrett also runs the Beijing-based Korean Business Consultants, that focuses entirely on business development and investment in the DPRK.
DPRK Sun Oven Project
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Accomplished With the Generous Support of: |
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Donations In Kind |
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The Rotary Foundation (Helping Grant)
D6450 Temple Solar Committee
RC Makati
RC Taipei
Rotarians from Chigasaki Shonan RC
Rtn. Christian Brutzer
Rtn. Jose Trinidad Garcia
Our Anonymous “Friend of Rotary” in Shanghai |
The DPRK Sun Oven Project (DSOP) has its beginnings in the Spring of 2001 when the International Committee of RC Shanghai (prov.) under the leadership of President Elect Ivan Polacek, a member of RC Pusan Tombaek actively sought to participate in a World Community Service (WCS) project in the DPRK, in cooperation with his home district. This project eventually did not materialize, but it set the International Committee in search of another project opportunity in the DPRK.
The Committee realized that because DPRK is a non-Rotary country, we would need to ensure we had a strong partner on the ground in the DPRK, that we could trust with facilitating and monitoring any project we would undertake there. We assumed at that point that such a partner would be a foreign partner, likely a foreign Non-Governmental Organization (NGO). Our general interest was to support a project that would help young children. We also thought it would be worthwhile to consider supporting a project in Hamhung, as Hamhung is a sister city since 1988 with Shanghai.
The committee investigated supporting a project with “Children’s Aid Direct”, a British NGO that was focused on Children’s needs, and unusually was quite active in Hamhung and the East Coast province. However the Club did not have sufficient resources ready at the time, and shortly thereafter the NGO ran into financial troubles back in the UK and had to withdraw from the DPRK.
In May of this year, the club invited Roger Barrett, a UK businessman based in Beijing who focuses solely on doing business in the DPRK, to come to Shanghai and to give a presentation entitled “DPRK - Open for Business?”
On a more or less clear day in March in Pyongyang it take us about 60-90 minutes to achieve an operating temperature of 200 degrees F, and about another half hour to reach 250 degrees F.
On the second day of operation while we were out with our Hosts and the orphanage staff were maintaining the oven, we returned to see they had reached 300 degrees F.
After our departure we have been informed that the Orphanage has since reached temperatures of 350 degrees F.
Among our practical successes were enjoying our first taste of rice cooked in a Solar oven – served up with some very generous portions of home made Kimchi from the Orphanage, our first bread baked in the oven, and our first eggs sunny side up.
We had one challenge that was particularly difficult for us to solve – and that we have yet to resolve – using the propane tanks and wand that are supplied with the Sun Oven. There were two major elements to this challenge – filling up the tanks in Pyonyang, achieving a consistent flame, and reaching a useful temperature with the propane system.
This is a backup system for the Sun Oven designed for use on sub-optimal days, or as a pre-warming activity to increase the length of time the oven can be used with solar heating.
Filling up the tank presented a great challenge because the fittings on our US made tanks were different from the fittings used in Pyongyang. Trouble shooting this became more complicated however because we were not allowed to visit the location where the tank was to be filled – as it was a restricted location (curiously underneath one of the 4 star hotels for foreigners), nor would the Koreans provide us a sample of the type of fitting they use – so that we could back engineer a solution in China on our return. We had to simply rely on their efforts to fill the tank.
Within a day we did have a filled tank, but throughout our several days of attempts at operating it during cloudy periods, we did not seem to exceed a temperature above 150 degrees F. We all tried repeatedly to solve the puzzle, but without any luck. We need some feedback from our experienced friends at the Temple Solar Committee – or Sun Ovens Inc. to solve this.
We believe that we have proven that the Sun Oven can operate quite effectively at the Korean latitude, given appropriate weather conditions. However, we do not know that maximum operating temperature could be achieved with the oven through the seasons. We suspect that it may be able to reach 400 degrees F or higher, but we need the Orphanage to report in – via Dr. Jong, on a regular basis so that we can track the efficacy.
We need to understand if we were somehow mistaken in our usage of the propane system. However, it is important to note that propane is not in tremendous supply either, so the oven is most practically useful for the Orphanage using solar power.
Lessons learned:
Don’t expect that standards between the US and DPRK are the same! This proved a challenge with the Propane system.
Ensure that the team has sufficient days on the ground to work with the oven and ensure that it has some sunny days to deal with. In other words it would have been ineffective to only have 3 days on the ground in Pyongyang if 2 of those were cloudy. 7 days was sufficient.
Korea Business Consultants
P&O NedLloyd
Dr. Alison Tam & Rtn. Frank Mulligan
Shanghai SINE Pharm
Richard & Margaret Fang
RC Hampton Australia D9810
Otto International
Adams Childrenswear
Yue-Sai Kan Wawa |
