By Hyunjoo Jin and Heejin Kim
SEOUL, Dec 15 (Reuters) – Korea Zinc on Monday announced a $7.4 billion smelter project that will be backed by the U.S. government, as Washington seeks to reduce its reliance on China for critical minerals including rare earths.
As part of the plan, the world’s largest zinc smelting company will sell new shares worth $1.9 billion to a joint venture controlled by the U.S. government and unnamed U.S.-based strategic investors, which would then control around 10% of the South Korean firm.
The U.S. Department of War will hold a 40% stake in the venture, while Korea Zinc’s stake will be less than 10%, the company said.
The news sent shares in Korea Zinc surging as much as 26% in Monday trade. They later pared gains to end up 4.9%.
It will secure the remaining $5.5 billion for the plant through $4.7 billion in loans from the U.S. government and financial institutions, as well as $210 million in subsidies from the U.S. Commerce Department under the CHIPS and Science Act.
Major Korea Zinc shareholders, who have been seeking to oust the refiner’s chairman, lambasted the plan, saying it was aimed at cementing management’s hold on the company.
FIRST NEW U.S. ZINC SMELTER SINCE THE 1970S
The deal to build the first U.S.-based zinc smelter and critical minerals processing facility since the 1970s comes as the Trump administration ramps up efforts to secure U.S. supply chains for critical minerals to reduce its reliance on China.
The new smelter, to be built in Tennessee, would produce major non-ferrous metals such as zinc, lead and copper, precious metals such as gold and silver, and strategic minerals such as antimony, germanium, and gallium, Korea Zinc said.
It will start commercial operations in phases from 2029.
Korea Zinc said the plant will “respond to the expansion of global supply chain risks and the increasing demand for non-ferrous metals and strategic minerals in the United States”.
The U.S. Commerce Department and the Department of War did not immediately reply to requests for comments.
MAJOR SHAREHOLDERS TO FILE TO BLOCK SHARE ISSUE
The Young Poong conglomerate, which together with a private equity firm MBK Partners held nearly 50% of Korea Zinc, said it will file a complaint with a court to block the new share issue plan.
It is rare for the U.S. government to acquire a stake in a foreign company, and Korea Zinc’s management was simply attempting to secure a “white knight” so that Chairman Yun B. Choi can retain control, Young Poong said in a statement.
China dominates the world’s supply of critical minerals such as antimony and germanium, which are used in telecommunications equipment, semiconductors and military technology.
Beijing banned exports of these minerals to the U.S. on December 3, 2024, following Washington’s crackdown on China’s chip sector. The ban has been suspended since November.
($1 = 1,475.5400 won)
(Reporting by Hyunjoo Jin, Heejin Kim, Jack Kim; Editing by Edwina Gibbs, Miyoung Kim and Jan Harvey)
