U.S. Hails "Security Deal," Major Shareholders Claim "Breach of Trust"... Korea Zinc's U.S. Smelter Investment Escalates Management Dispute

Korea Zinc’s $7.4 Billion Tennessee Smelter Investment
U.S. Government’s Public Backing Weakens Major Shareholders’ Opposition
Legal Battle Continues... Will It Hinder the Management Rights Dispute?

The management dispute over Korea Zinc has reached a turning point as the U.S. government has publicly welcomed the company's investment plan for a smelter in the United States. The U.S. government views the investment as a strategic project for building a critical minerals supply chain. However, Young Poong and MBK Partners maintain that the third-party allotment capital increase method could constitute a breach of trust, and they plan to continue with legal action.

On December 15 (local time), U.S. Secretary of Commerce Howard Lutnick described Korea Zinc's decision to invest in the Tennessee smelter as a "big win for America" via social media. He directly mentioned President Donald Trump, calling it a "landmark critical minerals deal to strengthen national security, rebuild industrial foundations, and end dependence on foreign supply chains."

Through this investment, the joint venture between the U.S. Department of Defense, the Department of Commerce, and Korea Zinc will build a critical minerals smelting and processing facility with an annual capacity of 540,000 tons in Clarksville, Tennessee. The site will cover approximately 650,000 square meters. The total investment, including operational and financial costs, amounts to 7.4 billion dollars (about 11 trillion won), with capital expenditures (CAPEX) accounting for 6.6 billion dollars (about 10 trillion won). According to the company’s plan, site preparation and basic civil engineering will begin in the first quarter of 2026, construction will commence in 2027, and phased operations will start in 2029, with the goal of reaching full capacity in the first quarter of 2030.

As Secretary Lutnick has expressed support for Korea Zinc’s investment, attention is now focused on the actions of Young Poong and MBK. Previously, Young Poong and MBK argued that the local investment in the U.S. is "a decision that goes against the national interest by giving up 'zinc sovereignty' for Chairman Choi Yoonbum’s personal defense of management rights, rather than for the company’s business needs." They further claimed, "The U.S. government’s investment is not in the project itself but in Korea Zinc’s shares, which is simply a 'white knight' structure for management defense that defies business logic."

The funding structure combines U.S. government funds, private investment, and financial arrangements. A total of 2.15 billion dollars will be invested by the Department of Defense and other investors, of which the Department of Defense’s conditional investment amounts to 1.4 billion dollars. The Department of Commerce will provide 210 million dollars based on the CHIPS Act. The remaining funds will be raised through loans and project financing centered on the local joint venture. Korea Zinc has stated that its equity stake in the joint venture will be in the 9% range.

Young Poong and MBK responded to Secretary Lutnick’s remarks by stating, "The significance lies in the fact that a U.S. smelter is being built domestically, not in agreeing with or evaluating Korea Zinc’s shares or the third-party allotment capital increase method." They maintained, "Regardless of the U.S. government’s assessment, a capital increase structure that disadvantages existing shareholders poses a potential breach of trust."

In contrast, Korea Zinc insists that the investment structure is not directly related to management rights. The company explains that the U.S. government’s investment vehicle is not a shareholding aimed at management participation or dividends, but a financial investment at the supply chain level to secure strategic minerals. Plant construction, operations, and technology control will also be handled by Korea Zinc’s U.S. subsidiary, and the rights secured by the U.S. are not equity stakes but preferential purchase and access rights.

However, Korea Zinc convened an emergency board meeting and resolved to issue new shares amounting to 10.3% of the total to the joint venture with U.S. government participation through a third-party allotment capital increase, thereby quickly catching up with the Young Poong-MBK alliance’s shareholding. Currently, Young Poong and MBK hold a 44.24% stake in Korea Zinc. Chairman Choi Yoonbum and related parties hold 19.41%, and even when including all friendly shares such as Hanwha, the total only reaches the 32% range. If the capital increase is completed, Young Poong and MBK’s stake will be diluted to about 40%, and Chairman Choi’s side will also see its stake fall to around 29%. However, the joint venture with U.S. government participation will secure 10.3% of the total issued shares, bringing both sides’ stakes to a similar level. As a result, the composition of the board and the structure surrounding management rights ahead of next year’s regular general shareholders’ meeting will once again become a variable.

MBK plans to continue legal actions, including filing for a provisional injunction to prohibit the issuance of new shares, as well as lawsuits to nullify or cancel the board resolution. The possibility of a shareholder derivative suit against the CEO and directors who voted in favor of the agenda is also being considered.