By Hyunjoo Jin, Heejin Kim and Heekyong Yang
SEOUL , Dec 24 (Reuters) – A South Korean court on Wednesday rejected a request by two major shareholders of Korea Zinc – MBK Partners and YoungPoong – to block the zinc refiner’s plan to issue new shares to help fund a $7.4 billion U.S. smelter project, a spokesperson for Korea Zinc said.
The ruling, which should clear the way for the project, sent Korea Zinc shares up as much as 5%, while YoungPoong share fell as much as 10%.
Last week, Korea Zinc, the world’s biggest refined zinc producer, said it would build a $7.4 billion critical minerals refinery in the state of Tennessee that will be largely funded by the U.S. government and aimed at reducing U.S. reliance on China for materials used in chips, electronics and weapons.
Under the plan, Korea Zinc will sell shares worth $1.9 billion to a joint venture controlled by the U.S. government and unnamed U.S.-based strategic investors, which would then control around 10% of the South Korean firm.
Private equity firm MBK Partners and conglomerate YoungPoong, which together hold about 46% of Korea Zinc, said that they were disappointed by the court’s decision, reiterating concerns over potential shareholder dilution and the fairness of investment terms.
“Despite this outcome, YoungPoong and MBK Partners intend to support the U.S. smelter project so that it may deliver genuine ‘win-win’ results for the United States, Korea Zinc, and the broader Korean economy,” the pair said in a statement.
Korea Zinc did not immediately comment on the court’s decision. The Seoul Central District Court was not immediately available for comment.
Governance experts say a major beneficiary of the U.S. smelter deal would be Korea Zinc Chairman Yun B. Choi, who since October last year has been locked in a battle for control with MBK and YoungPoong. Issuing shares to a potential ally could tip the balance of power in Choi’s favour.
Korea Zinc has said the U.S. smelter project aligns Washington’s push to diversify mineral supply chains with the company’s goal of building a growth base by gaining an early foothold in the United States, the world’s largest critical minerals market.
Shares of Korea Zinc and YoungPoong were trading up 0.4% and down 9.0%, respectively, compared with a 0.1% rise in the benchmark KOSPI as of 0403 GMT.
(Reporting by Hyunjoo Jin, Heejin Kim and Heekyong Yang; Editing by Ed Davies)
