Tianchi halts work on mine in DPRK over iron ore prices

A Sino-DPRK iron ore program in Musan, in the northern part of DPRK, has been halted by the Chinese side after its DPRK partner increased the price of iron ore by more than 20 percent, a South Korean newspaper, The Chosun Ilbo, reported Wednesday.

The Musan mine is estimated to have reserves of 3 billion tons of iron ore. But according to the report, its Chinese developer, Tianchi Industry and Trade Co, could not accept the price increase, as international iron ore prices have dropped sharply in the sluggish global economy.

Tianchi Industry is an iron ore processor and trader in Helong, Northeast China's Jilin Province. Both Tianchi Industry and its parent, Jilin Tianchi Mining Industry Co, declined to comment on the matter when contacted by the Global Times Wednesday.

In 2005, Tianchi Industry obtained 50 years' exploitation rights for the Musan mine, after signing a trilateral cooperation agreement with Tonghua Group, a Chinese State-run iron and steel mill, and North Korea Ferrous Metals Export and Import Corp.

Since then, Tianchi Industry has been hiring North Koreans to mine iron ore and transport it to Tonghua Group. The report said that annual output of the Musan Mine is about 1 million to 1.5 million tons, with a price of $30 to $50 per ton.

Before transportation, the extracted iron ores have to be processed by Tianchi Industry's refinery in Nanping county, near the border with North Korea. In November 2011, the Jilin government built a railway line of 41.68 kilometers connecting Helong and Nanping.

However, by September 2012, the Nanping refinery, four or five kilometers away from the mine, had been completely shut down, the report said, citing a source in the Yanbian Korean Autonomous Prefecture of Northeast China's Jilin Province.

Tonghua Group could not be reached by press time.

This is not the first time Chinese investors have been deterred when cooperating with North Korean companies, especially in the mining industry.

In 2011, Xiyang Group, a Chinese miner and steel manufacturer, shut down an iron ore processing factory in North Korea which just operated for two months, due to the unfavorable investment environment there, according to The New York Times on September 5.

"This isn't just about us - it is about all companies investing in North Korea," Wu Xisheng, Xiyang Group's vice general manager, told Reuters. "They just don't have the conditions for foreigners to invest."