Korea Zinc shares sink 13% as major shareholders challenge U.S.-backed Tennessee project

Shares of Korea Zinc fell more than 13 per cent on Tuesday, after the company’s largest shareholder alliance moved to challenge plans for a U.S.-backed joint venture that would dilute its stake in the South Korean metals producer.

The decline followed sharp gains a day earlier, when Korea Zinc shares surged more than 26 per cent before trimming advances to close about 5 per cent higher on Monday, after the company announced a $7.4 billion smelter project in Tennessee.

South Korean media reported that the shareholder alliance, comprising private equity firm MBK Partners and conglomerate YoongPoong, is seeking a court injunction to block the issuance of new shares linked to the U.S. project.

According to The Korea Times, the group argued that the proposed structure would enable Chairman Choi Yun-beom to retain management control while diluting existing shareholders. The alliance currently holds Korea Zinc’s largest combined stake.

Under the proposal, Korea Zinc plans to establish a joint venture company to develop the Tennessee smelter, with the U.S. Department of Defense expected to hold a 40 per cent stake in the venture. As part of the deal, Korea Zinc would issue $1.9 billion worth of new shares to the joint venture, effectively giving U.S.-backed investors around 10 per cent ownership in the South Korean company.

Business Korea reported that the issuance would reduce the combined YoongPoong-MBK stake from roughly 44 per cent to the high-30 per cent range, while increasing holdings aligned with Chairman Choi and the U.S. government to around 40 per cent.

The shareholder dispute has raised concerns among investors about governance and control, overshadowing the strategic importance of the U.S. expansion.

Earlier on Tuesday, U.S. Commerce Secretary Howard Lutnick said in a post on X that from 2026, the United States would have priority access to Korea Zinc’s expanded global production, calling the project critical for American security and manufacturing.

Korea Zinc said the Tennessee facility would be an integrated smelter producing base metals as well as critical and strategic minerals, with phased commercial operations expected to begin in 2029.

According to the U.S. Commerce Department, the plant could produce up to 540,000 tonnes of materials annually, supporting Washington’s efforts to build critical mineral supply chains that are less dependent on China.