Balancing resource security and environmental responsibility: an interview with Lee Ji-hoon

Due to a combination of geopolitical and environmental factors, overseas resource development is increasingly sophisticated, as both foreign relations and environmental stewardship come into play. In this interview, Lee Ji-hoon at LX International's Natural Resources Business Planning team discussed how the company takes on the responsibility of environmental rehabilitation and attempts to diversify energy resources to mitigate risks.

What kind of work are you currently doing?

I work at LX International, a Korean general trading company. Broadly speaking, the company is primarily engaged in trading, but we also do some mining development. This involves either directly developing mines ourselves or investing capital to acquire partial ownership of a mine. I’m part of the Natural Resources Business Planning team, which handles administrative duties for these activities.

That’s the general scope of our work, and our team primarily manages the mines we currently operate. For example, we operate coal mines and nickel mines. Our department is responsible for managing the financial performance—specifically, tracking revenue and profits—of these operational mines. Additionally, these mines are located overseas. Our mines are in Indonesia. Since they’re in remote areas of Indonesia, we receive data from the field operators there at our headquarters in Seoul, process it, and compile reports for senior executives and decision-makers at headquarters.

So, after exploring and developing mineral resources, where are you primarily investing?

We’re currently focusing a lot on Indonesia. Our existing coal and nickel mines are located there. We do have some operations in China as well, but we’re primarily looking at Indonesia because it’s a resource-rich country. It has abundant coal reserves, and its nickel reserves rank first or second globally. So, we’re looking into the potential for resource development there. Also, our company has been doing business with Indonesia for a long time and has been developing projects there, so we’ve studied the market more thoroughly than other companies and have experience there, which makes development a bit easier. We’re also looking at the Philippines and Australia, and recently, we’ve been looking at Africa as well. So, we are always traveling on business trips all over the world, studying where to invest and what to invest in.

When working with foreign countries or searching for resources like minerals there, how do those foreign governments’ resource policies affect your company’s strategy?

You’ve raised a very important point. Since this involves overseas operations, there are actually many constraints, regulations, and legal restrictions even when trying to do something within Korea alone, but I’ve heard it’s even more difficult when going abroad. Of course, it’s more difficult, and recently, because of the war in the Middle East, there are now so many intertwined issues. For example, if oil prices rise, the government has to figure out how to control oil supplies to ensure stability and prevent disruptions to production by foreign companies.

In fact, aside from the Middle East, as I mentioned, we have a significant presence in Indonesia. We’re engaged in various businesses there, but the Indonesian government doesn’t seem to be as fully systematized as South Korea’s. So, I get the sense that the maturity of their policies lags slightly behind Korea’s. Because of that, when it comes to securing tax revenue—companies operating there pay taxes to the government in exchange for doing business there. They call it a royalty or a tax, but in any case, when a foreign company enters Indonesia to do business, it has to provide that level of compensation to the country. There are many such requirements, so if the government demands a higher royalty rate, we have no choice but to pay more since we have to operate there. 

Also, we have to obtain a permit to operate businesses and getting that approval from the government is a huge hassle. For example, if we’ve prepared everything to produce 100 tons, but the government suddenly tells us to produce only 50 tons, that’s when our company goes into a state of total chaos since we have to scrap all the preparations we made for the 50 tons. To avoid that, we have to find new ways and study the regulations more deeply. We might try to add 30 more tons to reach 100, or figure out how to manage up to 80 tons—we spend a lot of time agonizing over these kinds of decisions. So, there are inevitably many factors that are quite exclusionary toward foreign companies.

That’s the case in Indonesia, and in places like Africa, the so-called country risk is actually much greater. There are many countries in Africa that are in a state of near anarchy, where the government operates without any rules—if they tell you to pick up a gun and fight, you have to do it. I understand that places like the Democratic Republic of the Congo are rich in resources, producing large amounts of iron ore. Yet, companies that have entered those markets say they always have to accept the associated country risk.

You’ve mentioned many political and diplomatic issues. Mineral development is an essential industry, but it causes significant environmental destruction. Have there been efforts to pay more attention to this or to reduce environmental damage?

Yes, I understand that Korean companies take their responsibilities very seriously and always strive to minimize environmental damage as much as possible while conducting mineral development. For example, we’ve been operating a copper mine in the Philippines for nearly 10 years and have now completed all environmental restoration work. When you develop a mine, a lot of harmful substances are released because the forests are cleared up. However, whether it’s a coal mine or a nickel mine, once we’ve excavated and finished using the site, we always simultaneously plant trees and restore the land. Also, we’ve fully remediated the environmentally harmful substances released by covering them or collecting and treating wastewater, and by cleaning everything up in this way, we recently received a government commendation. 

But if we’re suddenly challenged with accusations of environmental destruction, it really undermines our intentions. That’s why we always strive for environmental restoration and plan every step—from the initial stages of mine development through Phase 1, Phase 2, and Phase 3—to ensure the mine we must obtain government approval. To develop a mine in Indonesia, for example, we must submit a comprehensive plan from the very beginning—covering everything from mining to the completion of mine restoration—and we are monitored to ensure we are carrying out the restoration exactly as planned. So, we consider restoration to be an absolute necessity. 

However, I’ve heard that some companies—even if they’re not from our country or aren’t Korean companies, but rather foreign firms—sometimes think, “We’re not coming back to this country anyway,” so they do a half-hearted job of restoration and just leave. If you do that, there’s always the possibility that you’ll face criticism later on, and if you do, you won’t last long. If people point out a company for destroying the environment, it becomes difficult for the company to survive in the long run. Because reputation matters, we pay close attention to this. We assume that we’ll carry out environmental restoration from the very beginning of development through to the end. We prepare reports, submit them to the government, and actually plant trees—planting them at various stages along the way. We develop a plan to restore the damaged areas to their original state, aiming to minimize environmental destruction as much as possible.

As you mentioned earlier, resource security has recently emerged as a major issue. From a corporate perspective, do you have any strategies to reduce dependence on specific countries or regions overseas, or just generally reduce that dependence?

Currently, we have coal mines and nickel mines—nickel is a mineral, while coal is an energy source. So, our assets are concentrated in those areas. As you mentioned, if Indonesia were to suddenly stop us, it would be a major problem. If all our resources are concentrated there, and something goes wrong with what we’ve been relying on, it would be a disaster. However, we are now approaching these as new growth businesses and managing them in a comprehensive manner.

In the Resources Division, where I work, we are currently focusing on resource development and related areas, while other divisions are primarily engaged in developing new growth businesses—or, as they say, new business ventures. For example, we are also looking into businesses involving large-capacity batteries, such as Energy Storage Systems, and we have our own hydroelectric power plants as a completely new industry. We also operate hydroelectric power plants under other business divisions. By diversifying our business portfolio in this way, we can effectively mitigate risk.

Ultimately, we are not just focusing on coal and nickel but also looking at other new minerals. Recently, we’ve been studying copper quite intensively, and I’ve heard that bauxite is a raw material for aluminum. As you mentioned, to ensure resource security and to ensure that we can still generate sufficient revenue from other areas even if an incident occurs in one location, we are working hard to develop new businesses.