Yulchon, together with Canadian firms Blakes and Stikeman Elliot have advised on one of Korea’s largest outbound deals to date: a US$1.1 billion investment by Korea Resources Corporation (KORES) and Canadian mining giant, Capstone, centered on their joint acquisition of 100% of Canadian miner, Far West. The deal closed on 17 June.
Structured as a multi-part strategic partnership between KORES and Capstone, the deal will see the Korean state-run company not only invest in Capstone but also acquire a 30% stake in Far West’s mining assets in Chile and a 50% off-take right. The deal will, among other things, increase Korea’s copper self-sufficiency from 10% to 30%.
“This deal is symbolic of the Korean resources industry coming into its own during the past decade,” Yulchon co-lead lawyer David Linton said.“Korea does not have a large domestic source of natural minerals, so the recent spike in natural resources sector deals has been predominantly outbound.”
According to fellow Yulchon co-lead lawyer BW Kim, who has advised KORES on previous deals, two aspects of the deal – its structure and timing – posed the greatest challenges. “From our client’s point of view, the Capstone investment and the Far West acquisition were interdependent. The concurrent timing of closing was crucial and played a major role in the deal’s complexity,” Kim said. Yulchon won the mandate on the back of its relationship with the company.
According to Kim and Linton, the outlook for state-led natural resources work is looking solid. “We are at the early stages of Korea’s growth and expansion in the natural resources sector, and we expect growth to continue over the next few years.” Linton said.
Negotiations for the joint venture and acquisition began in 2010. Yulchon advised KORES on the overall structure of the deal and its Korean aspects and represented them in negotiations in conjunction with the company’s Canadian counsel.
Stikeman Elliott also advised KORES, while Blakes represented Capstone.ALB
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