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Sharp Market Reaction

Korea Zinc shares dropped more than 13 percent on Tuesday after reports emerged that the company’s largest shareholder alliance is actively challenging plans for a major U.S. based smelting project. The selloff reversed a strong rally seen a day earlier when the stock surged as much as 26 percent following the announcement of a large scale expansion into the United States before settling with gains of about 5 percent.

The volatility underscores growing investor unease around ownership dilution and corporate control even as Korea Zinc positions itself as a key supplier in the global critical minerals supply chain.

The Project at the Center of the Dispute

At the heart of the controversy is a proposed 7.4 billion dollar integrated smelter project in Tennessee. The facility is designed to process base metals alongside critical and strategic minerals and is part of broader U.S. efforts to secure supply chains that are less dependent on China.

According to company disclosures the project would be operated through a newly created joint venture in which the U.S. Department of Defense would hold a 40 percent stake. Phased commercial operations are targeted to begin in 2029 with total annual output expected to reach approximately 540,000 tons of processed materials once fully operational.

Share Issuance and Dilution Concerns

To fund the project Korea Zinc plans to issue new shares worth around 1.9 billion dollars to the joint venture which is expected to be controlled by the U.S. government and unnamed U.S. based strategic investors. This transaction would effectively give the JV about a 10 percent stake in Korea Zinc itself.

South Korean media reports indicate that this move would dilute the combined ownership of the company’s largest shareholder alliance significantly. The group currently holds roughly 44 percent of outstanding shares but that figure could fall into the high 30 percent range following the issuance. At the same time stakes aligned with Chairman Choi Yun beom and friendly partners including U.S. government linked investors could rise toward the 40 percent level.

Shareholder Pushback and Legal Threats

The opposition is being led by an alliance between private equity firm MBK Partners and conglomerate YoongPoong. According to local reports the group argues that the proposed structure is designed primarily to preserve Chairman Choi’s management control rather than maximize shareholder value.

The alliance is reportedly preparing to seek a court injunction to block the issuance of new shares a move that could delay or derail the U.S. expansion if successful. The situation highlights long standing governance tensions at Korea Zinc where ownership concentration and control have been sensitive issues for years.

Strategic and Political Dimensions

The project has drawn strong backing from Washington. Early Tuesday U.S. Commerce Secretary Howard Lutnick stated that starting in 2026 the United States would have priority access to Korea Zinc’s expanded global production emphasizing the project’s role in strengthening American manufacturing and national security.

From a strategic perspective the Tennessee facility fits squarely within U.S. industrial policy goals aimed at reshoring critical mineral processing and reducing reliance on foreign supply chains. For Korea Zinc it represents an opportunity to deepen ties with the U.S. government and secure long term demand but it also introduces geopolitical and governance complexities that investors are now pricing in.

What Comes Next

With legal action looming and shareholder resistance intensifying the future of Korea Zinc’s U.S. expansion remains uncertain. Markets will be closely watching whether the company can negotiate a compromise with its largest investors or whether the dispute escalates into a prolonged court battle.

In the near term continued volatility is likely as investors weigh the long term strategic benefits of the Tennessee project against the immediate risks of dilution governance conflict and execution challenges.