Korea Zinc (KRX:010130) plans to invest US$7.4 billion to build a zinc smelter and critical minerals processing facility in the US, marking the first new US-based zinc smelter since the 1970s.
The world’s largest zinc smelter said the facility will be built in Tennessee and will produce non-ferrous metals such as zinc, lead and copper, precious metals including gold and silver, and strategic minerals such as antimony, germanium and gallium.
Washington continues to step up efforts to secure domestic supply chains for critical minerals and reduce reliance on China, which dominates global production of several materials essential to semiconductors, telecommunications equipment and military technology.
To finance the project, Korea Zinc said it will raise US$1.9 billion by issuing new shares to a joint venture controlled by the US government and unnamed U.S.-based strategic investors.
That joint venture would hold around 10 percent of Korea Zinc, with the US Department of War owning a 40 percent stake in the venture and Korea Zinc holding less than 10 percent.
The company said it will secure the remaining US$5.5 billion through about US$4.7 billion in loans from the US government and financial institutions, as well as US$210 million in subsidies from the US Commerce Department under the CHIPS and Science Act.
Shares of Korea Zinc surged as much as 26 percent in early trading following the announcement before paring gains to close up 4.9 percent.
The company maintained that the US smelter is a direct response to the expansion of global supply chain risks and the increasing demand for non-ferrous metals and strategic minerals.
China currently dominates the global supply of minerals such as antimony and germanium. Beijing banned exports of those minerals to the United States in December 2024 following Washington’s crackdown on China’s chip sector, although the ban has been suspended since November.
Zinc facility project sparks internal backlash
The scale and structure of the US project, however, have sparked strong opposition from Korea Zinc’s largest shareholders.
Young Poong Group and private equity firm MBK Partners, which together hold nearly 50 percent of Korea Zinc, said they will seek a court injunction to block the planned share issuance.
The two have been locked in a prolonged dispute with Chairman Choi Yun-beom after launching a tender offer in September 2024 aimed at challenging his management control.
Young Poong said the decision to approve a third-party allotment of new shares was pushed through without proper consultation and was designed to entrench existing management.
“As Korea Zinc’s largest shareholder, directors appointed by Young Poong and MBK Partners express deep regret that they were entirely excluded from any meaningful prior briefing or discussion on a matter of such far-reaching importance to the company’s future,” a Young Poong official said as reported by the Korea Times.
“This represents a severe breakdown in corporate governance and a serious procedural violation.”
The alliance warned that the move could dilute shareholders and undermine the company’s financial soundness, stating that it will “promptly seek a court injunction to halt the issuance of new shares, in order to safeguard Korea Zinc’s long-term viability and shareholder interests.”
Young Poong also questioned claims that the U.S. government is directly investing in the smelter itself.
“In a normal commercial structure, an investor supporting the construction of a new smelter would invest directly in the project entity,” the official added, arguing that the proposed structure instead grants voting rights to a foreign-backed entity at the parent-company level.
The group further warned that replicating Korea Zinc’s integrated smelting process in the United States could weaken South Korea’s domestic smelting industry and increase the risk of transferring proprietary expertise overseas.
Korea Zinc has not yet publicly addressed the governance criticisms. Despite the opposition, commercial operations are expected to begin in phases starting in 2029.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.