Summary

North Korea’s expansion of the March 5 Youth Mine—a showcase facility intended to produce non-ferrous metals encompassing almost 2,500 acres near the Chinese border—began in 2008 and culminated in summer 2014 with the completion of a molybdenum production facility. The factory represents a notable expansion in Pyongyang’s production infrastructure and a significant new tool for earning foreign capital. Besides the financial implications of molybdenum production, domestic uses have both direct and indirect applications within North Korea’s weapons of mass destruction, ballistic missile, armor and artillery programs. There is also the notable fact that the overwhelming majority of North Korea’s molybdenum production is exported to China, allowing China to maintain a dominant role in influencing the price of molybdenum on the world market.

Rare Earth Mineral Mining

While mining in North Korea dates back more then a millennium, industrial-scale mining only began during the Japanese occupation at the beginning of the 20th century. Today the export of North Korean minerals is a key element in its economy and a primary avenue to generate foreign capital, with the mining of rare earth elements and associated minerals one of the fastest growing and most lucrative segments of that market.[1] In 2011, Kim Jong Il described their importance as:

“…a precious natural resource that is urgently needed for the country’s wealth, prosperity, and development, it must thoroughly utilize them without wasting even a lump of ore…[we] must put exploration first to adequately provide the mineral reserves along with carefully establishing deep-mining measures based on the latest science and technology.”[2]

Moreover, North Korea’s rare earth resources have been a key element in its growing economic ties with the world’s largest supplier and consumer, China, which has used its dominant position to secure rights to reserves around the world (including North Korea) and influence the worldwide prices for these precious commodities.[3] To this end, during the mid-2000s Chinese companies formed joint ventures to establish or modernize mines and ore processing enterprises within North Korea, including molybdenum mines in at least three locations—Yonghung-ri, South Pyongan Province; Sepho-gun, Kangwon Province and North Hamgyong Province.[4] Concurrent with these events, North Korea also enhanced its efforts to directly sell rare earth elements and associated minerals on the open market. For example, in 2003, the Korea Kwangsong Trading Corporation, located in Potonggang-guyok (District), Pyongyang, advertised a variety of ferrous and non-ferrous minerals and products available.[5]

Molybdenum is one of the minerals that North Korea has been expanding the mining, processing and export of; it is reported to possess reserves of approximately 54,000 metric tons.[6] Although molybdenum is not technically a rare earth element, it is often included as one because of the challenges presented in mining and processing it as well as its importance in modern metallurgic and high-tech industrial production.[7] For example, molybdenum is used: as an alloying agent in steel, iron and nickel; as a hardening agent for titanium and other alloys; in electronics as heat sinks and electrodes; in chemical and industrial processes for corrosion resistance; in high temperature heating elements; for radiation shielding; in the production of radioactive isotopes for medical use and a variety of other applications.[8]

A clear indicator of molybdenum’s importance is that annual worldwide production from 2000 to 2014 increased from 135,000 to approximately 264,000 metric tons while its price also increased during the same period from $5,630 to $28,400 per metric ton.[9] Recognizing its importance, North Korea has both expanded its efforts to secure diversified private foreign joint ventures (e.g., from Brazil, United Kingdom, etc.) and to expand its production infrastructure over the past 15 years.[10]

Expansion of the March 5 Youth Mine[11]

Located in Chagang Province, along the Amnok River (Yalu River) on the border with China, the March 5 Youth Mine was established during the 1960s around the small village of Hoha-ri to mine non-ferrous ores.[12] Encompassing approximately 9.94 km2 (2,457 acres) as well as several nearby villages, the facility includes an open pit mine, a rock crusher, a 1,900-meter-long covered ore conveyor belt, a non-ferrous metal production plant, dressing and processing plants, a molybdenum factory and an earthen dam. The mine’s products can easily be transported to China by truck while internal delivery would most likely also be by truck to the rail station at Chasong, approximately 32 kilometers to the southwest. Since its establishment, the mine has been held up by Kim Il Sung and Kim Jong Il as an example of a modern industrial complex and has been frequently visited by officials.[13]

A multi-phase project to modernize and expand the March 5 Youth Mine began with a January 2008 visit by Kim Jong Il, during which time he provided guidance for the revitalization and expansion of the complex. Funding for the project came from the Korean Workers’ Party, although foreign investment (e.g., from Chinese companies, etc.) cannot be ruled out. The first phase began shortly afterwards and focused on the reclamation of the open pit mine, which suffered water infiltration from the nearby Amnok River, and modernization of the existing rock crusher, breaker and dressing plants.[14] Reportedly, the net result was a significantly increased production capacity. This project took approximately two years to complete and in September 2010, Kim Jong Il returned to praise the workers for their efforts.[15]

About the same time as Kim Jong Il’s September 2010 visit, the second expansion phase began, calling for the construction of a “non-ferrous metal production base.”[16] Located approximately 600 meters south of the original dressing plant and below the earthen dam impounding the Haye stream, the project covered 75,500 m2 (18.7 acres) and included 15 new structures and a processing line as well as support buildings and an ore pit. North Korean press reports described the new facility as “…equipped with all modern production processes [that] will help make more contributions to developing the country’s economy and improving the standard of people’s living.”[17] While official reports state that the “…workers, technicians and officials of the mine built the base in a little more than a year by their own efforts,” it is likely that foreign investment supported the construction.[18] Construction took a little over a year and the facility was commissioned on October 15, 2012.[19]

Construction of the Molybdenum Factory

Shortly before work was completed on the non-ferrous metal production plant, the third phase of the revitalization and expansion began. At the direction of Kim Jong Il, this phase called for the construction of a “molybdenum factory” to “…process the concentrated molybdenum produced by it as required by the developing world trend.” [20] Construction was reportedly to be undertaken primarily by mine staff and workers, although they would be assisted by the “…teachers and researchers of the faculty of metal engineering of Kim Chaek University of Technology.”[21] The new factory was to be built approximately 400 meters northeast of the “non-ferrous metal production base” on top of the earthen dam. This third phase also included the construction of additional support facilities for the non-ferrous metal production plant.

Satellite imagery indicates that construction of the molybdenum factory began in May 2013 with grading, earthmoving and filling operations to widen the top of the dam to create a suitable pad for the factory. The facility was completed in approximately 15 months and was commissioned on August 4, 2014.[22] It encompasses 12,800 m2 (3.17 acres) and contains 7 structures, including the processing line. Currently, there is no reliable information concerning the types and quantities of products produced at the molybdenum factory.

Conclusion

For North Korea, the expansion of the March 5 Youth Mine and the completion of a molybdenum factory is an important development. The completion of a production factory is significant not only given molybdenum’s direct and indirect uses in the production of North Korea’s weapons of mass destruction, and in its ballistic missile, armor and artillery programs, but also as a significant new tool for earning foreign capital. Its importance also goes beyond its domestic uses since the overwhelming majority of North Korea’s molybdenum production is exported to China, allowing China to maintain a dominant role in influencing the commodity’s price on the world market. Moreover, it is worth noting that this major expansion program, which has significant implications for the DPRK’s economy, took place during a period of increasing tensions and the imposition of international and unilateral sanctions as a result of North Korea’s nuclear and long-range missile tests.

While Pyongyang has sought to diversify its customers by seeking joint ventures with countries as diverse as Brazil and the United Kingdom, its growing economic ties with China, particularly in the mining area, have almost certainly contributed to the expansion of this facility. A close examination of Chinese firms involved in this trade testifies to the depth of the bilateral relationship. For example, past UN Panel of Experts reports to the Security Council describe a 2007 incident in which South Korea seized a shipment of 10 metric tons of graphite from North Korea to Myanmar—for probable ballistic missile use—that was handled by the Chinese company Dalian Liaosin Trading Co. Ltd., a subsidiary of Liaosin Group. According to the Liaosin Group’s website, the company trades in various items (including minerals, chemicals, electronics, machine tools and textiles) and has maintained a close, long-standing business relationship with many entities in North Korea; it even has an office in Pyongyang and a molybdenum ore processing plant in Hamhung.[23]

Joseph S. Bermudez Jr. is Chief Analytical Officer and Co-founder of AllSource Analysis, Inc.

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[1] The term “rare earth elements” is a misnomer as they are actually abundant throughout the world. They are considered “rare” because they are not typically found in commercially viable concentrations, there are high costs required to mine and process them in industrial quantities and highly toxic byproducts are produced during processing.

[2] “Kim Jong Il Visits Hyesan Youth Mine,” Korean Central Broadcasting Station, April 21, 2011.

[3] One report from 2007 states that between 2002 and 2007 “…more than 70 percent of its total investment in North Korea, in iron, copper and molybdenum mines.” “China Investing Heavily in N.Korean Resources,” Chosun Ilbo, April 12, 2007; and Lee, Jong-Heon “China Taps N. Korea Resources,” UPI, May 4, 2007. For a sampling of reports concerning China’s involvement in North Korea’s mining industry see: “China Expanding Mining Rights in N. Korea,” Yonhap, January 14, 2010; Hisashi, Hirai. “North Korea in Dilemma Over How to Capitalize on Mineral Resources Valued at Over 100 Trillion Yen,” Foresight, March 20, 2010, pp. 16-17; “PRC Large Investment in DPRK’s Ports, Underground Resources,” MBC TV, June 18, 2010; Thompson, Drew. Silent Partners: Chinese Joint Ventures in North Korea. Washington, D.C.: U.S.-Korea Institute at SAIS Report, 2011; Petrov, Leonid. “Rare Earths Bankroll North Korea’s Future,” Asia Times, August 8, 2012; Mei Xinyu, “In Carrying Out Economic and Trade Cooperation with the DPRK, Chinese Enterprises Should Be Sure and Accurate and Know the Key to Success,” Guoji Shangbao Online, February 25, 2013.

[4] Author interview data and Choi Kyung-soo. “The Mining Industry of North Korea,” Korean Journal of Defense Analysis, Vol. 23, No. 2, June 2011, 211–230.

[5] North Korean Trading Companies, Korea Trade-Investment Promotion Agency, June 19, 2003.

[6] Pak Pyong Hun. “To Increase Nonferrous Mineral Production,” Korea, No. 675, March 2012, p. 30; and Choi Kyung-soo. “The Mining Industry of North Korea,” Korean Journal of Defense Analysis, Vol. 23, No. 2, June 2011, 211–230

[7] North Korea frequently use the terms rare earth minerals, non-ferrous minerals and molybdenum interchangeably, which presents challenges in precisely understanding what they are specifically referencing.

[8] Applications of Molybdenum Metal and Its Alloys. London: International Molybdenum Association, 2013.

[9] Molybdenum Prices and Molybdenum Price Charts, http://www.infomine.com/investment/metal-prices/molybdenum-oxide/, accessed September 4, 2014; and Molybdenum Statistics, Washington, D.C.: USGS, 2012. http://minerals.usgs.gov/minerals/pubs/historical-statistics/ds140-molyb.pdf.

[10] “Brazil Bets on North Korea To Influence Asia,” InfoRel, November 29, 2011; and Els, Frik. “Largest known rare earth deposit discovered in North Korea,” Mining.com, December 5, 2013, http://www.mining.com/largest-known-rare-earth-deposit-discovered-in-north-korea-86139/; and “Rare Earth Discovery Puts North Korea on the Map,” Rare Earth Investing News, February 10, 2014, http://rareearthinvestingnews.com/19612-north-korea-sre-minerals-rare-earths-jongju.html.

[11] The March 5 Youth Mine is sometimes referred to as the 5 March Youth Mine or March 5th Youth Mine. The author would like to thank Curtis Melvin, Visiting Scholar of the US-Korea Institute at SAIS, for his comments on an earlier draft of this article regarding the locations of the featured mines.

[12] Kim Kum Il. “March 5 Youth Mine,” Korea, No., 686 February 2013, p. 16; and “Non-ferrous Metal Production Base of March 5 Youth Mine Commissioned,” KCNA, October 16, 2012.

[13] Kim Kum Il. “March 5 Youth Mine,” Korea, No., 686 February 2013, p. 16; “Kim Jong Il Visits Hyesan Youth Mine,” Korean Central Broadcasting Station, April 21, 2011; “2011 New Year’s Joint Editorial,” Korean Central Broadcasting Station, January 2, 2011; Pak Ok-kyo’ng. “Let Us Go Straight,” Rodong Sinmun, September 17, 2010; “N. Korea Party Conference Likely To Be Held Early Next Week,” Kyodo, September 11, 2010; and “Mineral production has been on the increase in Korea,” KCNA, January 10, 1996.

[14] The outdated rock crusher was replaced with a large cone crusher while machinery inside the breaker and dressing plants was refurbished or replaced and vibrating sifters, extra-large ore crusher/polisher and floatation machines were installed.

[15] Kim Kum Il. “March 5 Youth Mine,” Korea, No. 686, February 2013, p. 16.

[16] Ibid.

[17] “Non-ferrous Metal Production Base of March 5 Youth Mine Commissioned,” KCNA, October 16, 2012. This phase of the project also called for the revitalization or construction of workers’ housing (each for two households), the Hoha-ri Health Complex, hall of culture and rest home. Kim Kum Il. “March 5 Youth Mine,” Korea, No. 686, February 2013, p. 16.

[18] Ibid.

[19] Ibid.; and Kim Kum Il. “March 5 Youth Mine,” Korea, No. 686, February 2013, p. 16.

[20] “Molybdenum Factory Goes Operational,” KCNA, August 4, 2014.

[21] Ibid.

[22] Ibid.

[23] United Nations Security Council. Letter dated 7 June 2013 from the Coordinator of the Panel of Experts established pursuant to resolution 1874 (2009) addressed to the President of the Security Council, pp. 20-23; and United Nations Security Council. Letter dated 3 March 2014 from the Coordinator of the Panel of Experts established pursuant to resolution 1874 (2009) addressed to the President of the Security Council, pp. 23-24. The Dalian Liaosin Trading Company’s website (http://www.liaosin.com) can be accessed via The Wayback Machine (http://archive.org/web/).