Economy|Business and EconomyKorea Zinc plans $7.4bn US minerals refinery with Washington’s backingKorea Zinc will start the project by acquiring two mining complexes and the only US zinc smelter, which is in Tennessee.

Korea Zinc, recognized as the leading global zinc smelter, has unveiled a $7.4 billion project to establish a smelting facility, primarily funded by the United States government. This initiative aligns with Washington's strategic efforts to decrease reliance on China for essential minerals.

The company disclosed plans to issue new shares worth $1.9 billion to a joint venture predominantly controlled by the US government and certain US-based strategic investors. This arrangement would result in the investors holding approximately 10 percent of Korea Zinc's shares. The US Department of Defense will acquire a 40 percent stake in the venture, while Korea Zinc will retain less than 10 percent.

Funding for the project will be supplemented by $4.7 billion in loans from the US government and financial institutions, alongside $210 million in subsidies from the US Department of Commerce under the CHIPS and Science Act.

Korea Zinc plans to initiate the project with the acquisition of two mining complexes and the sole US zinc smelter, operational since 1978 in Clarksville, Tennessee, from Trafigura's Nyrstar. The transaction is anticipated to conclude in the first half of 2026. Subsequently, Korea Zinc intends to construct an integrated facility in Tennessee, which will commence operations in phases starting in 2029.

The new smelter is projected to produce 540,000 tonnes of nonferrous metals annually, including 300,000 tonnes of zinc, 35,000 tonnes of copper, 200,000 tonnes of lead, and 5,100 tonnes of rare earth minerals. This development aims to address global supply chain risks and the rising demand for non-ferrous metals and strategic minerals in the US market.

Major shareholders, including Young Poong conglomerate and MBK Partners, which collectively own nearly 50 percent of Korea Zinc's voting shares, have expressed opposition to the new share issue plan. They intend to file a court complaint to block the initiative, alleging it serves to reinforce management's control rather than benefit the company strategically.

The US government's involvement in acquiring a stake in a foreign company is an uncommon occurrence, and Young Poong has criticized the move as an attempt by Korea Zinc's management to secure a protective ally, or "white knight."

This project emerges amidst the US administration's efforts to secure supply chains for critical minerals, aiming to reduce dependency on China. The administration has expanded its list of critical minerals and announced plans to develop small-scale refineries for producing materials essential for defense purposes.

In a broader context, South Korea and the US recently agreed on a trade deal, including reduced tariffs and a commitment from South Korea to invest $350 billion in strategic American sectors.

Based on reporting by Al Jazeera.