The closure of the Daehan Coal Corporation's last mine, the Donggye Mine in Samcheok, is approaching at the end of this month, but the future of the Daehan Coal Corporation remains uncertain. The Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy have yet to conclude on solutions for the corporation's liabilities and its future, as well as coexistence plans for the mining area.
According to government sources on the 16th, the Daehan Coal Corporation, which was established as Korea's first public enterprise in 1950, will only carry out functions of managing stockpiled coal and coal sales after the closure of the Donggye Mine at the end of June. The Daehan Coal Corporation once operated nine coal mines and employed 13,000 people, but it has now lost most of its functions.
The situation requires some form of resolution for the coal corporation, but the problem is that the corporation's liabilities have reached 2.5 trillion won. The borrowing fund dependence of the corporation as of the end of last year also reached 386.77%. Although the production costs of anthracite coal are increasing every year, the inability to raise selling prices has caused liabilities to rise rapidly. Additionally, decreased coal production leading to reduced sales, and increased maintenance costs due to the relocation of work facilities have also contributed to the increase in liabilities.
The coal corporation is currently in a state of complete capital erosion. Even if the corporation sells its overseas asset 'Mongolia Hohgorshana Coal Mine,' it will not be sufficient to cover the liabilities. The Mongolian mine has been evaluated as having a significantly lower actual value (870 million won) compared to the value projected by the corporation (40 billion won), and due to decreasing demand for coal, its sale has failed for the second consecutive year.
As a result, the Ministry of Economy and Finance’s Public Sector and Budget Affairs Office, as well as the Ministry of Trade, Industry and Energy’s Coal Industry Department, are in deep contemplation over the corporation's future.
One solution is for the government to share the borrowing fund and financial expenses while closing the coal corporation. Previously, when the Korea Water Resources Corporation's liabilities had grown to 8 trillion won while undertaking the Four Major Rivers project, the government decided to support 2.4 trillion won. It also agreed to support 2.9 trillion won in interest expenses until 2036. As a result, the Korea Water Resources Corporation's consolidated liability ratio decreased from 167% at the end of 2019 to 98.4% at the end of last year. During the same period, borrowing fund dependence also fell from 51.5% to 36.3%.
There is also the option of merging the coal corporation with the Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR), which would transfer the coal corporation's liabilities to the KOMIR. In 2021, the government merged the Korea Mineral Resources Corporation, which had liabilities of 6.7 trillion won (as of the end of 2020), with the Korea Mine Management Corporation to revive it. This is a method that comprehensively inherits assets, liabilities, rights, and obligations. If the government proposes a merger again, the KOMIR's liabilities, which were 8.5841 trillion won as of last year, would exceed 10 trillion won.
Even if this complex liability issue is resolved, there remain challenges, such as ▲ post-closure management ▲ water source measures ▲ employment succession for remaining personnel ▲ housing and real estate management. An official from the Ministry of Trade, Industry and Energy noted, 'In the case of employment issues, because special payments for closure measures (severance pay) and early closure special compensation (honorary severance pay) will only be paid until this year, it is expected that many personnel will leave this year.'
Residents of the mining area are hoping for a swift announcement of measures regarding the closure site. Currently, the Ministry of Economy and Finance and the Korea Development Institute (KDI) are conducting preliminary feasibility studies on the 'post-mining area revitalization project,' which includes establishing a clean methanol production facility in Taebaek, a medical industry cluster based on a heavy ion accelerator in Samcheok, and attracting a tourism complex in Hwaun. Kim Gwang-tae, the Chairman of the Joint Struggle Committee Against Mine Closures, stated, 'We will hold a citizens' rally in Samcheok in front of the Donggye Mine on the 17th, demanding that the government quickly present measures for the closure site.'
In response, a Ministry of Economy and Finance official remarked, 'The preliminary feasibility study is the final step for determining whether to inject public funds, requiring a systematic and careful decision-making process,' and added, 'It will be difficult to reach a conclusion by the end of this month.'
Meanwhile, some residents in Gangwon Province are expressing hope that President Lee Jae-myung will prepare measures for the closure site. President Lee emphasized during his campaign in Gangwon Province, 'My father was a miner, and my older brother also comes from a mining background and lives in Taebaek.' He added, 'As time passes and the industrial structure changes, mines have closed one by one, leading to a rapid decline in the regional economy of Gangwon Province. Given that Gangwon has made exceptional sacrifices for the national community, the state must now provide special compensation for these sacrifices.'