GOLD DIGGERS Australian gold mining company Molopo's gamble on a gold mining prospect in a remote part of North Korea could well pay dividends.A Melbourne mining company to profit from North Korean thaw.
When the runaway Peregrine Investments vehicle spectacularly crashed in Hong Kong at the depths of the Asian crisis it left behind a trail of oddball ventures across the region. None looked more curious than a partnership with Kim Jong-il's North Korean government to develop a gold prospect at an isolated outpost in the hermit state. It transpires Peregrine may not have been wrong - just early. An adventurous Melbourne-based company, Molopo Australia NL, has taken Peregrine's place in a joint venture with the Korean Hungson Economic Group. And things appear to be going swimmingly.
Molopo managing director Stephen Mitchell says: "We were encouraged to take the plunge last year when we discovered that Lloyd's of London would insure the mining equipment. We also knew that Pyongyang was anxious to re-establish relations with [Australia] and we thought a state-run agency would be keen to work with an Australian company as one of the very few foreign firms operating in the country."
That was good timing. Since the historic meeting between South Korean President Kim Dae-jung and his reclusive counterpart over the border, North Korea has gone from pariah to diplomatic flavour of the year. The North Korean embassy in Bangkok is practically having its door knocked down by emissaries seeking an audience for prominent foreign officials. US Secretary of State Madeleine Albright has already had talks with the Pyongyang Foreign Secretary Paek Nam-sun, the highest ever contact level between the two countries, and Australian Minister for Foreign Affairs Alexander Downer also had an appointment.
As the European Commission for External Affairs Chris Patten observed at the Asean Bangkok forum, "the permafrost is starting to melt".
In point of fact, it will soon be freezing over again at the Molopo alluvial gold site in the tiny village of Changjin, which is a third of the way up the east coast of North Korea, and 100 kilometres from the nearest sizeable town of Hamhung Bay. All groceries and beer will have to be trucked into the remote mining site. Work will have to stop in November with winter closing in. By that time, the company hopes to have taken its first gold out of the project.
The North Koreans supply the workforce of 30, together with temporary housing, heavy vehicles and fuel. The Australians put in US$300,000 seed money plus the mining plant, which was made in Ballarat, Victoria. The gold is weighed and divided up between them. Molopo can take its share out of the country to be refined and melted into bars at the Perth Mint in Western Australia. The North Koreans will get an additional agreed percentage of sales of the bullion in sorely needed hard currency.
"They are extremely tough negotiators," says Mitchell, "but they are very keen to get a mining industry going, and there is absolutely no sign of any corruption." The Changjin enterprise is on a small scale but, as trust builds up between the partners, the Australians are being offered more projects, including one involving extracting gold from old tailing dumps in the town of Danchon, which may contain as much as a million ounces.
Molopo has been seeking mineral riches for the past 15 years with conspicuous lack of success. It is certainly not afraid to go into offbeat areas. The company is drilling for methane gas at its Liulin project in Shanxi Province, China, where US giants like Philips, Arco and Texaco have taken out leases around the Molopo concession. Nor is it too shy to take on the local courts in hostile climes. Molopo was granted an exploration licence over a potentially vast copper resource called Tsagaan Suvraga in Mongolia - only to have it arbitrarily revoked by the government agency that had issued it. In what is a rare win for a foreign company, it succeeded in getting the Mongolian courts to restore the licence. The decision is being appealed.
By comparison, dealing with the North Koreans has been a piece of cake.
The company got a new lease of life a year ago when a group of private investors, headed by Mitchell, financed the injection of the Chinese and North Korean prospects. The share price has almost doubled in recent weeks, but that still amounts to a market capitalisation of just A$20 million (US$11.68). Should Molopo meet with success in its bold adventuring, bigger fish will have to be invited in to share the spoils.