MBK "SMC Acquired Youngpoong Shares Using Loan Guaranteed by Korea Zinc"

MBK Partners claimed that the source of funds for Korea Zinc's Australian subsidiary Sun Metal Corporation (SMC) to acquire Yeongpung shares was a loan guaranteed by Korea Zinc.

SMC is the company that, one day before Korea Zinc's extraordinary general meeting, abruptly purchased 10.3% of Yeongpung shares from Chairman Choi Yoon-beom's family and others, and was used to exclude the voting rights of Korea Zinc's shares held by Yeongpung.

On the 23rd, the day of the Korea Zinc extraordinary general meeting of shareholders, Korea Zinc shareholders are lining up to enter the shareholders' meeting hall at the Grand Hyatt Seoul in Jung-gu, Seoul. Photo by Jo Yong-jun

On the 2nd, MBK issued a press release stating, "SMC used capital expenditure (CAPEX) funds borrowed through Korea Zinc's payment guarantee to purchase Yeongpung shares unrelated to its core business under Chairman Choi's instructions," and added, "SMC's acquisition of Yeongpung shares will serve as clear evidence that it was conducted on Korea Zinc's account to circumvent the mutual investment prohibition applied to Korea Zinc."

MBK cited an analysis of SMC's financial statements and Korea Zinc's consolidated and separate audit reports, revealing that as of the end of 2023, SMC's short-term borrowings amounted to approximately 116 billion KRW, which was borrowed from the Australian ANZ Bank and others with Korea Zinc providing the payment guarantee.

As of the end of September last year, MBK explained that SMC had repaid about 30 billion KRW of the 116 billion KRW loan and was still bearing the remaining 85 billion KRW in borrowings.

MBK stated, "As of the end of 2024, most of SMC's cash holdings exist not due to operating profits but because Korea Zinc provided the payment guarantee," and claimed that Park Ki-deok, an SMC director who also serves as a Korea Zinc executive, and Lee Sung-chae, SMC CEO, purchased Yeongpung shares under Chairman Choi's instructions.

SMC disclosed that it spent 57.5 billion KRW to acquire Yeongpung shares. MBK pointed out, "57.5 billion KRW is a large amount, equivalent to about 54% of SMC's average annual CAPEX investment of 106.8 billion KRW over the previous five years up to 2023," and added, "It is difficult to see that SMC acquired Yeongpung shares based on its own management judgment."

MBK also noted that when large-scale investments were necessary, SMC had received additional capital injections from its parent company through paid-in capital increases, including an additional injection of 140 million USD (approximately 165 billion KRW) from Korea Zinc in 2020.

An MBK official emphasized, "Given SMC's financial structure, it is highly likely that the loan guaranteed by Korea Zinc was used, making it even clearer that SMC's acquisition of Yeongpung shares was conducted on Korea Zinc's account," and stressed that this constitutes an illegal act to evade the mutual investment prohibition under the Fair Trade Act.