"Smelter Construction Won't Begin Until After 2027... No Need for Third-Party Paid-In Capital Increase This Year"
"Criticism Over Hundreds of Billions Spent to 'Defend Choi Yoonbum's Management Control'"
Regarding Korea Zinc's plan to invest in a U.S. smelter, Young Poong on December 18 criticized the move, stating, "This is an example of company funds being spent to defend Chairman Choi Yoonbum's management control."
In a press release issued that day, Young Poong pointed out, "Although the construction of the local smelter is a long-term project, the payment date for the paid-in capital increase has been set within this year. As a result, due to a difference of just three business days, the joint venture (JV) will have to pay out approximately 44.2 billion KRW in dividends." Young Poong criticized this structure.
"After the paid-in capital increase, Crucible JV's equity stake will rise to about 11%"
Previously, on December 15, Korea Zinc announced through a regulatory filing that it plans to construct a U.S. smelter worth 11 trillion KRW and will carry out a large-scale third-party paid-in capital increase for the local joint venture (JV). The entity acquiring the new shares is "Crucible JV LLC," and the payment date is set for December 26.
If the paid-in capital increase is completed as planned, Crucible JV will be listed on the year-end shareholder register and will immediately become eligible for dividends. In this case, the estimated dividend to be paid to Crucible JV is approximately 44.2 billion KRW.
Crucible JV consists of the U.S. Department of Defense, the Department of Commerce, strategic investors in the United States, and Korea Zinc. Through this capital increase, Korea Zinc plans to acquire 2,209,716 common shares for 2.8508 trillion KRW (1.29 million KRW per share). This represents about 10.25% based on the pre-increase figures, and after the company’s treasury stock cancellation (680,010 shares), Crucible JV’s equity stake rises to approximately 10.59%.
On this matter, Young Poong stated, "Given that there is still time before the funds are actually disbursed, the fact that the payment date was moved up suggests that the purpose of this paid-in capital increase is more about defending Chairman Choi’s management control than about the U.S. investment itself." The company argued that in the ongoing management dispute between Young Poong·MBK Partners and Chairman Choi over Korea Zinc, this change in equity stake could effectively serve as a "casting vote."
Young Poong Files for Injunction to Prohibit Issuance of New Shares
Young Poong further stated, "Given the nature of large-scale plant construction projects, which take years from design to completion, there is still time before the funds need to be disbursed. Therefore, there is no clear reason to insist on payment within this year." The company added, "Considering that the plant is expected to break ground after 2027, the schedule for fund disbursement does not align with the timing of the capital increase."
Young Poong also pointed out, "The reason for scheduling the payment by year-end appears to be to dilute the equity of the largest shareholders, Young Poong and MBK Partners, ahead of the shareholders' meeting in March next year, while securing voting rights favorable to Chairman Choi." As a result, the company argued that the outflow of 44.2 billion KRW in cash is not for the company's business purposes, but rather a cost incurred to defend Chairman Choi’s personal management control.
Meanwhile, Young Poong and MBK filed for an injunction with the Seoul Central District Court the previous day to prohibit the issuance of new shares related to the third-party paid-in capital increase. Young Poong and MBK stated, "Allocating new shares designed to maintain Chairman Choi Yoonbum’s control in the midst of a management dispute is strictly prohibited under the Commercial Act and Supreme Court precedents," adding, "An injunction to prohibit the issuance of new shares is a necessary measure."
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