Among the 33 companies facing delisting after receiving a 'rejection of opinion' in this year's audit report, 4 corporations pursued lithium development, which encountered issues. These corporations had optimistic forecasts regarding lithium mine development, which has high industrial demand, but in reality, it was difficult for most to generate specific revenue.
In the past, several corporations initially saw their stock prices rise by focusing on resource development, only to eventually face delisting. This year, the 'cruel history of resource development' is repeating in the stock market. Resource development, such as mining, requires massive capital and time. The associated investment risk is substantial; however, simply news of commencing resource development without proper revenue verification tends to cause stock prices to surge.
Experts noted that while not all resource developments fail or are used for stock manipulation, successful cases are rare, and stock prices fluctuate dramatically based solely on news without results, urging caution in investments.
According to the Korea Exchange on the 25th, 10 companies in the securities market and 23 in the Korea Securities Dealers Automated Quotations (KOSDAQ) received a 'rejection of opinion' for the 2024 audit report. Among them, 4 corporations (Kumyang, EID, Well Biotec, TERA SCIENCE) that account for 12% had a history of pursuing lithium mining, a core material for secondary batteries. Notably, these corporations started development in 2023 when stocks related to secondary batteries surged, with the latter three receiving a rejection of opinion for the second consecutive year following the 2023 audit report, excluding Kumyang.
Kumyang, a KOSPI listed corporation, announced in May 2023 that it would acquire Mongolian mining company Monglasa to secure lithium mining rights for electric vehicle batteries. The stock, priced in the 50,000 won range at the time, soared to over 190,000 won within two months. Its market capitalization nearly reached 10 trillion won. However, just a year after the announcement, the corporation drastically revised its sales and operating profit estimates from 400 billion won and 160 billion won to 6.6 billion won and 1.3 billion won, respectively. Amid controversy over inflated earnings estimates, the exchange designated Kumyang as an unfaithful disclosure corporation and imposed a penalty of 10 points last October.
Well Biotec, which was called a beneficiary of lithium, also stated that year it would develop a lithium mine in Zimbabwe and import lithium ore, causing its stock to skyrocket over 240%, from the 2,000 won range to over 5,000 won in less than a month. However, Samil, the auditing firm for that year, issued a rejection of opinion, stating, 'We did not obtain sufficient and appropriate audit evidence to assess the substance of the transaction related to lithium ore acquisition and the validity of cash flows.'
TERA SCIENCE also discovered South Korea's first lithium brine lake on Aphaedo Island in Sinan in 2023 and stated it would enter lithium development, resulting in a stock increase close to 90%, but later faced a limitation on the audit scope and received a rejection of opinion the following April with no notable progress since then.
There are cases where executives have been imprisoned. Last month, EID, an affiliate of the now-defunct I-Group (formerly the Ewha Group), faced delisting after the former chairman Kim Young-jun was arrested for distributing false promotional materials about a lithium mine in Nevada, USA, which caused stock prices to surge and led to unfair gains. At the time, the announcement of conducting due diligence on the lithium mine caused the stock prices of EID and its affiliates, Ehwa Technologies Information and ETRON, to all rise to the upper limit (daily price limit) within a day.
The resource development boom that started in the 2000s was revealed in the 2010s to be a 'bubble' without business viability, leading to frequent stock price crashes and delistings. KOSPI-listed Korea Technology Industry, which announced plans to build an oil sand extraction plant, along with KOSDAQ companies Gloworks and HANDYSOFT, which stated intentions to develop gold and copper mines in Mongolia, all faced delisting between 2010 and 2011. Notably, Gloworks and HANDYSOFT faced additional charges of disseminating false information related to mine development and profiting from stock sales.
KOSDAQ corporations CNK and TERA Resources pursued diamond mine development in Cameroon and oil field development in Russia, respectively, but both disappeared from the capital market in 2015 and 2014, without significant results.
Until recently, there have been consistent cases of abuse. It is essential to verify whether the corporations embarking on resource development have solid performance and whether there is a connection with the company's main business. A securities industry official said, 'I have been in the KOSDAQ industry for 25 years, but there are almost no successful cases of resource development,' adding, 'Ultimately, losses fall to the investors, so it is crucial to verify whether the projects are genuinely profitable and to be cautious in investments.'