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Korea Zinc, the world’s leading zinc smelting company, saw its stock plummet by over 13% on Tuesday. The sharp decline comes amid reports that its largest shareholder is opposing a proposed U.S.-backed joint venture, which would result in a dilution of their equity in the South Korean firm.
Just a day prior, Korea Zinc’s shares had surged by more than 26%, fueled by the company’s announcement of a $7.4 billion smelter project in Tennessee. However, the initial excitement waned, and the stock closed with a 5% gain on Monday, only to tumble significantly the following day.
The opposition from the company’s largest shareholder alliance is rooted in their intention to seek a court injunction to prevent the issuance of new shares, which they argue would dilute their holdings. This alliance comprises private equity firm MBK Partners and the conglomerate YoongPoong, both of whom have expressed concerns over the motivations behind the plan.
According to The Korea Times, the shareholder coalition suspects that the initiative is a strategic move by company Chairman Choi Yun-beom to maintain his grip on management control. The deal involves establishing a joint venture to construct the Tennessee smelter, with the Pentagon slated to hold a 40% stake in this new entity.
The Korea Times reported that the alliance, made up of private equity firm MBK Partners and conglomerate YoongPoong, said the plan was designed for company Chairman Choi Yun-beom to hold on to management control.
Under the deal, a joint venture company will be set up to build the smelter in Tennessee, with the Pentagon having a 40% stake in the JV.
As part of the project, Korea Zinc will sell new shares worth $1.9 billion to this joint venture controlled by the U.S. government and certain U.S.-based strategic investors that have not been named, effectively giving the group 10% stake in the South Korean company.
South Korean media outlet Business Korea said that issuing 10% of new shares will reduce the combined Yoong-Poong-MBK stake ratio from about 44% to the “high 30% range” while allowing friendly stakes from Choi and the U.S. government to rise to the 40% range.
Early Tuesday, U.S. Commerce Secretary Howard Lutnick said in a post on X that “Starting in 2026, the United States will have priority access to Korea Zinc’s expanded global production, putting American security and manufacturing FIRST.”
The Tennessee project seeks to build an integrated smelter producing base metals as well as critical and strategic minerals, with phased commercial operations targeted for 2029, Korea Zinc said in a statement.
The planned critical minerals smelting and processing facility could produce 540,000 tons of materials in the U.S. per year, according to the U.S. Commerce Department, and comes as the U.S. seeks to form critical mineral partnerships that are not dependent on China.
