Korea Zinc Sends New Year Shareholder Letter: "Expecting Profitability from U.S. Smelter"

Explanation of U.S. Joint Venture Structure Following Paid-in Capital Increase
Targeting 2029 Operation... Production of 13 Key Minerals
Crucible JV to Exercise Voting Rights at March Shareholders’ Meeting

Korea Zinc has sent a letter to shareholders at the start of the new year outlining the financing and business structure for the construction of an integrated smelter in the United States. The letter focused on the recently completed paid-in capital increase and the joint venture structure with the U.S. government.

On January 6, Korea Zinc announced through the shareholder letter that it had secured initial funding for the construction of the U.S. smelter by conducting a paid-in capital increase for Crucible Joint Venture (Crucible JV). Crucible JV is a joint venture in which the U.S. government is the largest shareholder. Korea Zinc will combine the secured funds with its own capital to invest in its subsidiary, Crucible Metals LLC. Crucible Metals will utilize U.S. government subsidies and other resources to construct and operate the smelter. As Crucible Metals is designed as a subsidiary of Korea Zinc, Korea Zinc will retain control over the business.

The integrated U.S. smelter is scheduled to begin operations in 2029. It is expected to produce 13 types of non-ferrous metals, including base metals, precious metals, and rare metals. Of these, 11 types are designated as critical minerals by the U.S. government. The total project cost is approximately $7.4 billion (about 10 trillion won), with more than 90% of the funding coming from public sources, including the U.S. government.

In the shareholder letter, Korea Zinc cited the growing demand for critical minerals in the U.S. as the background for the project. The company pointed to structural increases in demand for critical minerals due to the growth of artificial intelligence (AI), data centers, the defense industry, and the electric vehicle and battery sectors, presenting this as the basis for establishing a production base. Korea Zinc expects the U.S. smelter’s EBITDA margin to be in the range of 17% to 19%.

The letter also mentioned a subsidy of approximately $210 million under the U.S. Department of Commerce’s CHIPS Act. Korea Zinc explained that, by law, this subsidy will be directly injected into the project entity, Crucible Metals, effectively reducing the capital burden of the project. The company assessed that this paid-in capital increase would relatively mitigate the dilution of existing shareholders’ equity.

Regarding the construction of the U.S. smelter, the payment for the subscription of new shares in Crucible JV was completed on December 26, and procedures related to the issuance of new shares, such as electronic registration and changes to the corporate registry with the Korea Securities Depository, were also recently finalized. As a result, Crucible JV is expected to exercise its voting rights at Korea Zinc’s regular shareholders’ meeting scheduled for March.