Young Poong, MBK support Korea Zinc's US project but reject financing method

Korea Zinc's Onsan Refinery in Ulsan / Courtesy of Korea Zinc

By Jun Ji-hye

• Published Dec 16, 2025 4:15 PM KST

Largest shareholder claims third-party allotment capital increase only aimed at diluting its stake

The Young Poong–MBK Partners alliance said Tuesday that it is not opposed to Korea Zinc’s plan to build a large-scale smelter in the United States. It added, however, that the project should be pursued through a more transparent method, such as a rights offering to existing shareholders, rather than a third-party allotment.

The alliance made the remarks after filing an injunction with the Seoul Central District Court to block the issuance of new shares under a third-party allotment. The allotment had been approved by Korea Zinc’s board the previous day to finance construction of the U.S. smelter, a project worth 11 trillion won ($7.5 billion).

“Our action does not target the U.S. smelter project itself,” the alliance said in a statement. “The injunction is necessary because the new share issuance was structured to preserve Korea Zinc Chairman Choi Yun-beom’s control amid an ongoing management dispute, an act strictly prohibited under the Commercial Act and consistently rejected by Supreme Court precedents.”

In a separate statement, Young Poong also stressed that it does not oppose strategic industrial cooperation with the United States, including the recently discussed establishment of a joint venture among Korea Zinc, the U.S. government and U.S. corporations, or the construction of the U.S. smelter.

“The United States is Korea’s most critical ally, and Young Poong supports, in principle, the expansion of strategic partnerships between the two countries to secure critical minerals and strengthen supply-chain resilience,” the firm said. “Our concern is not with cooperation with the United States itself, but with the structure through which such cooperation is being used to defend an individual’s managerial control.”

The Young Poong–MBK alliance is Korea Zinc’s largest shareholder and has been challenging Choi’s leadership since launching a tender offer on Sept. 13, 2024, arguing that his mismanagement has weakened the company’s financial health.

In its injunction request, the alliance noted that the Commercial Act permits third-party share issuance only when objectively required for legitimate business purposes. Courts have repeatedly ruled that during a control dispute, issuing new shares to a specific party in a manner favorable to the existing management is impermissible.

“Allocating new shares to a third party to reinforce Choi’s position during an active governance conflict lacks legal basis and severely distorts shareholder rights and the company’s governance structure,” the alliance said.

Korea Zinc announced Monday that it plans to form a joint venture with U.S. partners to build a large-scale smelter in Tennessee under the so-called Crucible Project. The project involves an investment of about 10 trillion won, rising to about 11 trillion won when operating and financing costs are included, with the U.S. Department of Defense and other entities expected to invest between 2 trillion won and 3 trillion won.

After construction is completed in 2029, the plant will begin producing zinc, lead and copper before expanding into strategic minerals such as antimony and germanium.

To fund the project, Korea Zinc's board approved a 2.85 trillion won third-party allotment capital increase targeting the U.S.-based joint venture, Crucible JV LLC. The deal will involve the issuance of about 2.2 million new shares, equivalent to about 12 percent of the company’s outstanding shares.

As the joint venture emerges as a friendly shareholder for Choi, dilution of the Young Poong–MBK alliance’s stake appears unavoidable.

Investment banking industry sources estimate that the alliance’s combined ownership would fall sharply from about 44 percent to the high-30 percent range, while the stake held by Choi and his allies would decline from around 30 percent to the mid-20 percent range. Should the U.S. joint venture side with Choi, his effective ownership could surpass that of the Young Poong–MBK alliance, potentially altering the balance of control.

The alliance argued that Korea Zinc’s choice of a third-party allotment reveals that the move is aimed at entrenching management control rather than meeting genuine financing needs.

It said it had already expressed its willingness to participate in a shareholder-allotted rights offering, stressing that if capital were truly needed, the company should have opted for this fairer and more transparent option. The alliance noted that U.S. partners supporting the smelter could also invest directly in the project entity, making alternative funding routes available without resorting to a third-party issuance.

“The issue arises from Choi’s attempt to use the smelter project as a justification for a broad third-party issuance, involving private U.S. corporations in addition to public-sector participants, in a way that would influence the domestic governance dispute,” the alliance said.

It also emphasized the urgency of judicial intervention, noting that if the new shares are issued as planned, any subsequent court ruling invalidating the issuance would be ineffective, as shareholder resolutions would already have been adopted under a changed capital structure.