As Korea Zinc has resolved to construct a smelter in the United States in collaboration with the U.S. government and institutions, its largest shareholders, Youngpoong and MBK Partners, criticized that Chairman Choi Yoon-bum has taken on high risks by bearing financial risks to secure management rights.
Youngpoong and MBK Partners expressed regret over the agenda items such as 'Construction of Overseas Smelters and Third-Party Allocation of Paid-in Capital Increase' approved by the Korea Zinc Board of Directors on the 15th, claiming, "This is a serious matter that could lead to the erosion of shareholder value and deterioration of financial stability."
They stated that the board of directors, which is dominated by Chairman Choi Yoon-bum, hastily processed large-scale overseas investments and changes in governance structure without sufficient review and social explanation in the context of a management rights dispute, and announced plans to immediately file for a 'provisional injunction against the issuance of new shares' in order to protect the long-term sustainability of Korea Zinc and the interests of shareholders.
They claimed that the project proposed by Korea Zinc amounts to a total of 11 trillion won, but most of the financial burden falls on Korea Zinc.
According to them, Korea Zinc will directly invest in the local corporation for the joint venture and smelter construction, and in addition, it will provide joint guarantees for the entire 7 trillion won local borrowing that the local corporation borrows. This is estimated to burden 8 trillion won.
They stated, "As Korea Zinc takes on the position of guaranteeing large-scale financial transactions of the local corporation, providing its own financial structure as collateral at an early stage where business viability has not been verified is an extremely risky choice," adding, "The annual interest burden of 7 trillion won alone is estimated to exceed 300 billion won."
They mentioned that if losses amounting to trillions of won occur due to future interest rate fluctuations, exchange rate fluctuations, or project delays, the burden will also be fully borne by Korea Zinc and existing shareholders.
They also claimed that the capital contribution structure for the construction of this smelter has a circumvention structure aimed at securing friendly shares for Chairman Choi Yoon-bum.
Korea Zinc will gather investment funds from the U.S. government and companies to establish a joint venture (JV), and this joint venture will participate in Korea Zinc's third-party allocation of paid-in capital increase. This will dilute the shares of not only Chairman Choi Yoon-bum but also Youngpoong and MBK Partners.
They argued, "Such a complex circumvention investment structure is difficult to avoid reasonable suspicion that it is an intervention in governance structure to secure friendly shares in a management rights dispute rather than for funding purposes," and added, "As a result, the joint venture will secure about 10% of Korea Zinc's shares without substantial business risk, thereby gaining influence over dividends and decision-making structures."
They emphasized, "The capital increase that sacrifices existing shareholders through an opaque share transfer structure does not meet the operational necessity and directly contradicts the principle of shareholder equality," stating, "We will make every effort to correct this decision through legal action and ensure that Korea Zinc remains a company that can be trusted by shareholders, partners, and the entire national industry, rather than being the private property of Chairman Choi Yoon-bum."
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