Major shareholders fail to block Korea Zinc’s share sale for US smelter

A South Korean court has rejected a move by two of Korea Zinc’s major shareholders, MBK Partners and YoungPoong, to block the zinc refiner’s planned new share issuance. 

The company is seeking to issue these shares to raise funds for a $7.4 billion smelter project in the US, according to a spokesperson for Korea Zinc.

Korea Zinc shares climbed as much as 5% following the ruling, which is expected to greenlight the project.

Conversely, YoungPoong shares dropped by up to 10%, Reuters said in a report.

Last week, Korea Zinc, the world’s leading producer of refined zinc, unveiled plans for a substantial investment in the United States, announcing it will construct a major critical minerals refinery in the state of Tennessee. 

This ambitious project carries an estimated cost of $7.4 billion and is set to be overwhelmingly financed by the US government.

Strategic investment targets US critical minerals supply

The primary strategic objective of this new refinery is directly tied to national security and economic resilience: to substantially diminish America’s dependence on China for the supply of critical materials. 

These materials are indispensable components across a vast spectrum of modern industries, including the manufacture of advanced chips, sophisticated electronics, and crucial defense and weapons systems. 

By establishing a domestic, secure supply chain for these vital minerals, the US aims to insulate key sectors from geopolitical vulnerabilities and potential supply disruptions, marking a significant step toward onshoring critical industrial capacity. 

This investment highlights a global trend among Western nations to de-risk and diversify their supply chains away from a single dominant source.

Korea Zinc is set to sell approximately 10% of the company’s shares, valued at $1.9 billion, to a joint venture.

This joint venture is controlled by the US government and includes strategic investors based in America. 

MBK Partners, a private equity firm, and the conglomerate YoungPoong, which collectively possess approximately 46% of Korea Zinc, expressed their disappointment regarding the court’s ruling. 

They repeated their anxieties about the possible dilution of shareholder value and the equity of the investment conditions.

Both companies said in a statement:

Despite this outcome, YoungPoong and MBK Partners intend to support the US smelter project so that it may deliver genuine ‘win-win’ results for the United States, Korea Zinc, and the broader Korean economy.

Share issuance as tactic in corporate control struggle

The US smelter deal is seen by governance experts as significantly benefiting Korea Zinc Chairman Yun B. Choi, who is currently engaged in a control struggle with MBK and YoungPoong, a conflict that began last October. 

By issuing shares to a potential ally, the company could shift the balance of power in Choi’s favor.

Korea Zinc views its US smelter project as strategically important because it supports Washington’s initiative to diversify mineral supply chains while simultaneously achieving the company’s objective of establishing a growth foundation through early entry into the United States, the world’s most significant critical minerals market.

Shares in Korea Zinc were up 0.4% and YoungPoong’s shares were down 9.0% as of 0403 GMT, contrasting with a 0.1% rise in the benchmark KOSPI.

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