Money-losing Korea Coal sets to sell its majority stake in Mongolian coal mine

Money-losing state-run Korea Coal Corp. is setting out to sell its sole overseas coal mine in Mongol possibly at a loss under the government goal to wean the country off fossil fuels.

An unnamed official from Korea Coal said on Wednesday that the company has internally decided to sell its coal mine in Mongol by 2026. Until it finds a buyer, the company plans to maintain the overseas coal mine at minimized operating costs.

Korea Coal’s coal mine in Mongol is its only overseas investment project for long-term profit.

Even until recently, Korea Coal CEO Yu Jeong-bae ruled out the immediate sale of the coal mine in hopes that profitability at the mine will improve significantly once the Mongolian government resumes railway network establishment.

The company however cannot but comply with the Korean government’s strong push to phase out of fossil fuel.

Korea’s latest energy outline to move away from coal fuels has led to massive losses at Korea Coal. Its operating loss worsened from 33 billion won ($29.1 million) in 2015 to 84 billion won last year. Its debt reached 2.1 trillion won last year, more than double its assets.

Korea Coal’s cumulative investment in the coal mine in Mongol reached 25.9 billion won. Korea Coal is the largest shareholder of the coal mine with 62.9 percent. Upon initial investment in 2010, the state-run company expected an average operating margin of 22.9 percent and 76 million tons of mining reserves.

The coal mine operations, however, faced capital erosion in 2013, which expanded to 32.6 billion won in 2018.

Korea Coal was unable to raise its stake to secure management right due to the opposition from the ministry of energy.

Some say sale is not a good idea for the time being as the mine is reserved with quality bituminous coal and down under expensive coking coal, which raises potential value.

Finding a buyer also could be tricky amid global movement away from fossil fuel. Financial support is limited on coal acquisitions in advanced countries and it could be an obstacle for a potential buyer to finance the sale.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]