On December 16, 2025, shares of Korea Zinc the world’s largest zinc smelter fell more than 13%, just one day after surging on news that the company would pursue a large-scale U.S. metals and critical minerals project in Tennessee. The selloff was driven by reports that the company’s largest shareholder bloc an alliance of Young Poong and MBK Partners is preparing to seek a court injunction to block Korea Zinc from issuing new shares tied to the project.

The Tennessee project: a strategic “China-independent” supply chain play

Korea Zinc has announced plans for an investment package totaling roughly $7.4 billion to build an integrated smelting and processing complex in Tennessee. The facility is intended to produce both base metals (such as zinc, lead, and copper) and a range of critical and strategic minerals that are increasingly vital to advanced manufacturing and defense supply chains.

This is not just a commercial expansion. It fits squarely into Washington’s broader strategy to rebuild domestic processing capacity and reduce reliance on China across key minerals used in semiconductors, defense systems, electrification, and other strategic industries. U.S. agencies have been pushing for partnerships that can secure supplies outside China-dominated processing networks, and Korea Zinc’s project is being positioned as one of those cornerstone initiatives.

According to U.S. government statements cited by major media outlets, the planned facility could eventually produce about 540,000 tons of materials per year in the United States, with phased commercial operations targeted around 2029.

The JV structure and the dilution that set off the conflict

The flashpoint is the way the project will be financed and governed. Korea Zinc plans to establish a joint venture (JV) to build and operate the Tennessee complex, and the arrangement reportedly includes substantial participation from U.S. entities. Under the disclosed framework, the JV would take a meaningful stake in the project and crucially would also be connected to a new share issuance by Korea Zinc, a move that would dilute existing shareholders.

Reports indicate that Korea Zinc would sell new shares worth about $1.9 billion to a group described as U.S.-backed strategic investors. In practical terms, the issuance could translate into roughly a 10% equity stake for the new investor group in the South Korean parent company. South Korean business media have suggested the share issuance would reduce the combined Young Poong–MBK stake from about 44% down into the high-30% range, while potentially lifting the influence of management-friendly holdings alongside U.S.-aligned stakes toward the 40% range.

That shift matters because Korea Zinc has been in the middle of a high-stakes struggle over corporate control. In this context, dilution is not a purely financial decision; it becomes a governance weapon that can redraw the balance of power between management and rival shareholder blocs.

Why the biggest shareholder bloc is pushing back

Importantly, reporting suggests the shareholder alliance is not opposing the Tennessee project itself. Instead, it is challenging the mechanics of funding and governance especially a targeted share issuance that could weaken its voting power. The bloc argues that the financing structure is designed to entrench the current leadership, notably Chairman Choi Yun-beom, by strengthening friendly shareholdings at a critical moment in the control contest.

This is where the story becomes politically and strategically complex. Korea Zinc’s plan is being framed not only as an industrial investment but also as a national-security-aligned initiative for the United States. U.S. officials have publicly highlighted the project’s strategic angle, emphasizing that the U.S. would gain priority access to expanded production starting in 2026 and that the investment supports American manufacturing and security objectives.

Market implications: volatility now, strategic upside later if governance risk clears

In the short term, Korea Zinc’s stock is being pulled in opposite directions: optimism over a landmark U.S. expansion versus escalating legal and governance risk from an injunction fight. Investors are effectively pricing a three-way tension between (1) long-term strategic growth, (2) near-term litigation and execution uncertainty, and (3) the premium or penalty attached to a corporate control battle.

Over the medium term, if the project proceeds on schedule, Korea Zinc could become a rare and valuable player with critical minerals processing capacity inside the U.S., positioned at the heart of an increasingly fragmented global supply chain. But the key question for investors remains: who controls the capital strategy during a multi-year, multi-billion-dollar buildout and whether the JV and new share issuance will permanently reshape Korea Zinc’s ownership and governance landscape.

Source: Reuters