SEOUL, South Korea — Shares of Korea Zinc, the world's largest zinc smelting company, tumbled more than 13% on Tuesday amid fierce opposition from its largest shareholder group to a proposed U.S.-backed joint venture that would dilute their stake in the firm.
The sharp decline came just a day after the company's stock had surged over 26% on news of a ambitious $7.4 billion mineral smelter project in Tennessee, though gains later moderated to about 5%. The project, announced Monday, aims to build an integrated facility for producing base metals and critical minerals, with phased commercial operations targeted for 2029. According to Korea Zinc's statement, the smelter could produce up to 540,000 tons of materials annually in the U.S., a move that aligns with Washington's efforts to secure domestic supplies of strategic resources amid growing tensions over reliance on China.
The controversy centers on the structure of the joint venture, which would see the U.S. Pentagon taking a 40% stake. As part of the deal, Korea Zinc plans to issue new shares worth $1.9 billion to the JV, controlled by the U.S. government and unnamed American strategic investors. This issuance would effectively grant the group a 10% stake in the South Korean company, leading to significant dilution for existing shareholders.
The largest shareholder alliance, comprising private equity firm MBK Partners and conglomerate YoungPoong Corporation, has vowed to fight the plan. According to a report in The Korea Times, the group claims the arrangement is designed to help Chairman Choi Yun-beom maintain his grip on management control. They intend to seek a court injunction to block the issuance of the new shares, arguing that it unfairly benefits the chairman and his allies.
Business Korea, another South Korean media outlet, provided further details on the potential impact. It reported that the new shares would reduce the combined stake of YoungPoong and MBK from about 44% to the high 30% range. Meanwhile, friendly stakes held by Choi and the incoming U.S. government interests would rise to around 40%, shifting the balance of power within the company.
The alliance's opposition highlights ongoing internal tensions at Korea Zinc, a key player in the global metals industry with operations spanning zinc, lead, and precious metals refining. Founded in 1974, the company has long been a cornerstone of South Korea's nonferrous metals sector, but it has faced shareholder disputes in recent years, including battles over governance and expansion strategies. The Tennessee project represents one of the largest foreign investments by a Korean firm in the U.S. critical minerals space, coming at a time when global supply chains are being reshaped by geopolitical pressures.
From the U.S. perspective, the initiative is seen as a strategic win. Early Tuesday, U.S. Commerce Secretary Howard Lutnick posted on X, formerly Twitter, that
"Starting in 2026, the United States will have priority access to Korea Zinc's expanded global production, putting American security and manufacturing FIRST."Lutnick's statement underscores the Biden administration's push — continued under the incoming Trump team — to build resilient supply chains for electric vehicles, defense technologies, and renewable energy components, reducing dependence on Chinese dominance in mineral processing.
The U.S. Commerce Department has emphasized the project's role in national security. Officials there noted that the facility in Tennessee would not only produce zinc and other base metals but also process rare earth elements and battery materials essential for modern industries. This comes as the U.S. has ramped up partnerships under initiatives like the Minerals Security Partnership, involving allies from Australia to Japan, to counter China's control over 80% of global rare earth processing.
Korea Zinc's announcement on Monday initially sparked optimism among investors, with the stock's intraday peak reflecting enthusiasm for the company's international expansion. The project is slated for a site in the Tennessee Valley, leveraging the region's industrial infrastructure and proximity to automotive and aerospace hubs. Construction is expected to begin soon, with the first phase focusing on zinc smelting capacity before expanding to critical minerals by 2029.
However, the shareholder backlash quickly overshadowed the positives. MBK Partners, which acquired a significant stake in Korea Zinc in 2020 alongside YoungPoong, has been vocal about corporate governance issues. The private equity firm, known for investments in Asian firms like Asiana Airlines, argued in statements to media that the JV terms lack transparency and prioritize short-term control over long-term shareholder value.
YoungPoong, a family-controlled conglomerate with roots in mining and metals, echoed these concerns. Representatives from the alliance told reporters that they were not consulted adequately on the deal and believe it could expose the company to undue geopolitical risks tied to U.S. government involvement. The Pentagon's stake, while providing access to federal funding and security clearances, raises questions about foreign influence in a South Korean-listed entity.
Analysts tracking the situation pointed to broader implications for Korea Zinc's strategy. The company has been under pressure to diversify beyond Asia, where environmental regulations and competition from Chinese producers have squeezed margins. The Tennessee smelter, if realized, could position Korea Zinc as a bridge between U.S. demand and global supply, but legal challenges could delay or derail it.
In Seoul's financial district, traders watched the stock's volatility with caution. By midday Tuesday, Korea Zinc shares were down 13.2% at around 450,000 South Korean won, erasing much of the prior day's gains. Market observers noted that similar shareholder revolts have previously forced Korean chaebols — family-run conglomerates — to rethink expansion plans, as seen in cases like Samsung's governance reforms.
Looking ahead, the injunction sought by the MBK-YoungPoong alliance could land in South Korean courts within weeks, potentially stalling the share issuance. Korea Zinc has not commented directly on the opposition, but executives indicated in the project announcement that the JV would enhance technological partnerships with U.S. firms. U.S. officials, meanwhile, expressed confidence in the deal's progress, citing it as a model for future Indo-Pacific collaborations on critical minerals.
The saga underscores the delicate balance between corporate ambition and shareholder rights in an era of heightened U.S.-China rivalry. As the U.S. races to onshore mineral production — with investments exceeding $50 billion announced since 2022 — deals like this one could reshape global trade patterns. For Korea Zinc, navigating the legal and political hurdles will be crucial to turning its Tennessee vision into reality.