The Trump administration's ambitious push to secure domestic supplies of critical minerals has hit a significant roadblock, entangled in a corporate battle thousands of miles away. A major $7.4 billion investment in a US zinc smelter, announced just this week, is now at the centre of a fierce proxy fight among the largest shareholders of South Korea's Korea Zinc, casting doubt on a key economic and national security initiative.
Deal Structure Sparks Shareholder Revolt
Earlier this week, the US administration revealed a joint venture with Korea Zinc to construct a massive new smelter in Tennessee. The project, valued at $7.4 billion, is designed to dramatically boost American production of zinc and other crucial metals, reducing reliance on Chinese supplies. However, the announcement was met with immediate turbulence. Shares of Korea Zinc fluctuated wildly as its top shareholders, Young Poong Corp. and MBK Partners Ltd., voiced strong opposition.
The activist investors took their grievance to a South Korean court, filing for an injunction to stop a planned share issuance meant to fund the Tennessee smelter. In a statement, they argued the move was a tactical ploy to sidestep an ongoing proxy battle for control of the company. This legal challenge poses a direct threat to the deal's closure and, by extension, a cornerstone of President Donald Trump's strategy to fortify the US industrial base.
Wider Implications for US Strategy and Diplomacy
The controversy extends beyond corporate boardrooms, potentially disrupting a vital national objective and straining international relations. The primary goal of the administration's investment is to spur domestic production of critical minerals used in defence, aerospace, and consumer electronics. This case highlights the risks of the government taking direct equity stakes in sensitive industries, inserting itself into complex business dynamics it cannot fully control.
"This does seem to be the first of these deals where there's a material risk the thing won't close," observed Peter Harrell, a former Biden administration economic adviser now at the Carnegie Endowment for International Peace. He cautioned that while dealmaking involves risk, "that's not how the US government usually works. It is very risk-averse and tries not to put itself into a messy situation."
Furthermore, the dispute threatens to complicate ties between Seoul and Washington, which have already been tested this year by the president's aggressive tariff policies. US officials, speaking anonymously, expressed cautious optimism that the deal will ultimately proceed, emphasising its importance in reinvigorating domestic mineral supply chains.
Inside the Ambitious Tennessee Smelter Project
According to US officials familiar with the negotiations, American authorities were pitched on the project earlier this year. The new facility will be built in Tennessee adjacent to an existing plant, which will serve as a training ground for staff before being decommissioned once the new smelter is operational.
The project promises to be transformative, more than doubling the revenue of Korea Zinc. For the United States, the payoff is priority access to a series of crucial metals. The financing structure involves multiple US government agencies. The Pentagon is providing debt financing, while the Commerce and Defense departments are working to attract equity investors from the US defence industrial base. JPMorgan Chase & Co. is reported to be among the investors, with the US government contributing just over $2 billion to the venture.
Tennessee Republican Senator Bill Hagerty underscored the high-level involvement, recounting a discussion with a Wall Street contact who was "at the Pentagon working with Deputy Defense Secretary Steve Feinberg on the deal structure." Hagerty noted, "We're bringing Wall Street talent to bear."
While MBK stated its legal action does not mean it opposes the smelter's construction entirely, the proxy fight introduces significant uncertainty. US officials acknowledge awareness of the dispute but stated they do not intend to get involved, with one downplaying it as a potential routine corporate matter. The outcome now rests in the hands of a South Korean court and the warring shareholders, leaving a critical piece of the US economic agenda hanging in the balance.
