Source: Korea Zinc
The Solidarity for Economic Reform has urged Korea Zinc Chairman Choi Yun-beom’s side to provide more concrete explanations to shareholders and investors regarding the necessity of the third-party allocation rights offering chosen as the funding method for the 11 trillion won U.S. smelter construction project currently being pursued.
In a commentary on the 19th, the Solidarity for Economic Reform pointed out that “the controversial aspect is the issuance of new shares through the third-party allocation rights offering method.”
Previously, Korea Zinc’s board of directors resolved on December 15th to invest $7.4 billion (approximately 11 trillion won) to construct a smelter in the United States and decided on a $1.9 billion third-party allocation rights offering targeting the JV to secure funding.
Upon completion of the rights offering, the JV will secure a 10.59% stake in Korea Zinc. In response, the Young Poong-MBK alliance, Korea Zinc’s largest shareholder, has filed for a court injunction to prohibit the new share issuance, claiming that “the purpose is to strengthen Chairman Choi’s control rather than achieve business objectives.”
The Solidarity for Economic Reform stated, “Looking at the project business structure, Crucible JV (hereinafter JV) will participate in Korea Zinc’s rights offering to acquire a 10.59% stake, and Korea Zinc plans to invest the $1.9 billion paid by the JV into establishing Crucible Metals,” adding “If the purpose is to raise funds for establishing Crucible Metals in the United States, a method where the JV directly invests $1.9 billion into Crucible Metals would also be possible, rather than this complex structure.”
The organization particularly emphasized, “While the direct investment method could lower Korea Zinc’s stake in Crucible Metals, given that there are conditions allowing the U.S. government to purchase shares based on future operational performance, this is certainly a feasible option,” and “it could also reduce risks associated with business failure.”
It also stated, “Young Poong, Korea Zinc’s largest shareholder, does not oppose the U.S. smelter construction itself, and has indicated that if funding is needed, shareholder allocation rights offering is also possible,” adding “the shareholder allocation method is a less controversial alternative than third-party allocation.”
The Solidarity for Economic Reform also raised concerns about the potential formation of cross-shareholding structures. The organization pointed out, “The JV will acquire a 10.59% stake through Korea Zinc’s rights offering, and Korea Zinc plans to acquire a 9.99% stake in the JV by investing 132 billion won immediately before the rights offering, forming cross-shareholdings,” and “by effectively creating a mutual investment structure, the current management can obtain a subsidiary effect of expanding control.”
The Solidarity for Economic Reform also criticized that Korea Zinc failed to adequately inform shareholders and investors about the related details, despite reports that it granted the U.S. government side warrants to acquire up to 34.5% of Crucible Metals shares.
The Solidarity for Economic Reform urged, “Even though this is a matter that could significantly impact investment decisions, specific details have not been disclosed,” and “the Financial Supervisory Service should promptly verify matters that could affect company management through JV investment and, when necessary, ensure complete investor protection through corrective disclosure orders.”
