Korea Zinc's Onsan smelter in Ulsan on Wednesday. (Yonhap)
Korea Zinc's Onsan smelter in Ulsan on Wednesday. (Yonhap)

A South Korean court on Wednesday dismissed a request by Korea Zinc’s major shareholders, MBK Partners and Young Poong, to block the zinc smelter from issuing new shares tied to its planned $7.4 billion US investment, paving the way for the project to proceed.

The Seoul Central District Court declined to grant an injunction sought by Young Poong Group and private equity firm MBK Partners — which together hold about 46 percent of Korea Zinc's shares — and formally notified both sides of the decision, according to court officials.

The decision follows Korea Zinc's announcement on Monday to build a large-scale facility in Tennessee to process critical materials, backed by funding from the US government and private companies.

To finance the project, Korea Zinc intends to sell approximately 2.85 trillion won ($1.9 billion) worth of shares to a US joint venture, Crucible JV, which is controlled by the US Department of Defense and an unnamed US strategic investor. This third-party share issuance transaction would give the US government-controlled JV roughly 10 percent ownership of the South Korean company.

Young Poong-MBK faction challenged the plan, arguing the share issuance was aimed at defending the management control of Korea Zinc Chair Choi Yun-beom, amid an ongoing ownership battle. They filed an injunction seeking to stop the issuance, claiming it would dilute shareholder value.

Following Wednesday's ruling, Young Poong and MBK expressed regret, saying issues raised during the proceedings, including “potential dilution of shareholder value, questions regarding the fairness of the investment agreements and the long-term financial and operational risks to Korea Zinc” have not been sufficiently resolved.

The pair, however, said that they will continue to support the US smelter project, “so that it may deliver genuine ‘win-win’ results for the US, Korea Zinc and the broader Korean economy,” they said in a statement.


sahn@heraldcorp.com