Court rejects Young Poong-MBK injunction bid, clears Korea Zinc’s US smelter plan

Korea Zinc's Onsan Refinery in Ulsan / Yonhap

Korea Zinc has cleared a key legal hurdle, paving the way for its planned third-party share issuance to fund a U.S. smelter construction project. The development follows a Seoul court’s decision on Wednesday to dismiss an injunction request filed by the Young Poong–MBK Partners alliance amid an ongoing management control dispute.

Following the decision, Korea Zinc’s U.S. joint venture is expected to secure a 10 percent stake in the company later this month, allowing the Crucible Project to build a large-scale smelter in Tennessee to proceed on schedule.

Young Poong and MBK voiced disappointment over the ruling, reiterating concerns about potential dilution of existing shareholder value and longer-term financial risks. Even so, the alliance said it would support the project to help ensure its smooth execution.

The alliance is the largest shareholder of the world’s largest zinc smelter and has challenged Chairman Choi Yun-beom’s leadership since September 2024, arguing that his mismanagement has weakened the company’s financial health.

Korea Zinc plans to form a joint venture, Crucible JV LLC, with the U.S. government and private-sector partners for the smelter construction project, which involves an investment of about 10 trillion won ($6.9 billion), rising to nearly 11 trillion won when operating and financing costs are included. The U.S. Department of Defense and other entities are expected to contribute between 2 trillion won and 3 trillion won. The facility, slated for completion in 2029, will produce base and strategic metals including zinc, copper, antimony and germanium.

The third-party share issuance centers on the U.S.-based joint venture, which plans to invest about 2.8 trillion won to acquire a 10 percent stake in Korea Zinc. The U.S. defense agency is the joint venture’s largest shareholder, holding 40.1 percent of the voting rights.

After Korea Zinc’s board approved the issuance of new shares to the joint venture on Dec. 15, Young Poong and MBK objected, claiming the move violated the Commercial Act and standard business practices and was primarily designed to dilute existing shareholders’ stakes and entrench management. The alliance subsequently sought a court injunction to block the share issuance the following day.

Once the capital increase is completed, the alliance’s combined stake is expected to fall from about 44 percent to the high-30 percent range, while the holdings of Choi and his supporters would decline from around 30 percent to the mid-20 percent level. If the U.S. joint venture aligns with Choi, its 10 percent stake would potentially reshape the balance of control.

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

The court, however, concluded that the share issuance does not violate the Commercial Act.

“The fundraising cannot be viewed as markedly unfair or unreasonable compared with other financing methods,” the court said. “While it may affect the balance of control, it does not decisively alter management control. It cannot be determined that the share issuance was intended solely to strengthen the current management’s position, favor particular shareholders, or violate the directors’ duties of care or loyalty.”

The ruling clears Korea Zinc to proceed with the funding process for the third-party allotment, with payment scheduled for Friday. If the capital is paid in by the end of the month, the new shares will be reflected in the shareholder registry for next March’s shareholders’ meeting.

In a joint statement, the Young Poong–MBK alliance said it remains disappointed, noting that concerns raised during the proceedings — including potential dilution of shareholder value, the fairness of the investment terms and longer-term financial and governance risks — have yet to be fully addressed.

Nevertheless, the alliance said it would stand behind Korea Zinc’s U.S. smelter initiative in its capacity as the company’s largest shareholder, stressing the importance of ensuring the project proceeds smoothly.

“Large-scale overseas strategic investments can only succeed under a governance and decision-making structure that secures sustained trust and support from both the board and controlling shareholders,” it said. “We will continue to pursue all available institutional and legal measures to ensure the company is managed with a focus on maximizing long-term corporate value and safeguarding the interests of all shareholders, rather than serving any individual or short-term agenda.”