Korea Zinc, the world's No. 1 nonferrous metal smelting company, will build a strategic minerals smelter in the United States. A plan is being pursued for the U.S. Department of Defense and local defense corporations to participate as shareholders. It is an unusual case for the U.S. government to directly hold equity in a corporation established by a Korean private company. It is seen as formalizing a U.S.-Korea "strategic resources alliance" to counter China's "weaponization of resources," as China dominates the global rare earth supply chain.
According to related industries on the 15th, Korea Zinc is said to hold a board meeting that day to discuss the establishment of a U.S. smelter and a plan for the U.S. Department of Defense and local defense-related investors to invest directly in the smelter.
The U.S. direct investment plan is said to include acquiring equity in the local smelter corporation. If the agenda passes, Korea Zinc will be elevated to a core partner in the U.S.-led de-China rare earth supply chain.
The reason the U.S. government is trying to attract the smelter even by becoming a shareholder of corporations is the urgent reality facing U.S. security. America's key industries—semiconductors, defense, and aerospace—cannot operate without Chinese rare earths. In particular, dependence on China for antimony and bismuth, essential for shell and missile production, exceeds 70%.
The United States attempted to rebuild its domestic supply chain, but the smelting industry ecosystem has collapsed due to environmental regulations and profitability issues. In this situation, Korea Zinc emerged as the only alternative. Korea Zinc possesses the world's best hydrometallurgical smelting technology that extracts not only base metals such as zinc, lead, and copper but also scarce metals such as antimony, bismuth, germanium, and gallium from ore without impurities.
In July, the U.S. Department of Defense signed a $400 million preferred stock purchase agreement with MP Materials, the only company operating a rare earth mine in the United States. Likewise, investment in the smelter that Korea Zinc will build is seen as the U.S. government's intent to manage the strategic minerals supply chain at the government level.
At this board meeting, Korea Zinc is scheduled to decide whether to invest in a U.S. smelter worth 10 trillion won. Korea Zinc, the U.S. Department of Commerce and the Ministry of National Defense, and U.S. defense strategic companies will establish a joint venture (JV) worth about 2.8 trillion won, and the U.S. side will invest $690 million (about 1 trillion won) in this JV. $1.25 billion (about 1.8 trillion won) will be borrowed locally by the JV. The remaining 7.2 trillion won will be raised by the U.S. government and JPMorgan borrowing half each, with Korea Zinc providing a joint guarantee. These details were shared by Korea Zinc at a briefing for outside directors on the 13th. Korea Zinc plans to conduct a third-party paid-in capital increase for this corporation in the future, effectively allowing the U.S. side to secure about 10% equity in Korea Zinc.
This investment case is seen as giving concrete shape to the U.S.-minerals cooperation plan announced when Chair Choi Yoon-beom of Korea Zinc visited the White House in Washington, D.C., in August as part of the economic delegation for the Korea-U.S. summit. When China released a rare earth export control policy in Oct., the U.S. side is said to have accelerated the project.
At the end of last month, Chair Choi met with Ambassador to the United States Kang Kyung-hwa in the U.S. and held consultations related to the construction of the local smelter. In the meeting with Ambassador Kang, they shared the fact that the U.S. government directly asked Korea Zinc to build a smelter in the United States. The original list of more than 60 candidate sites has been narrowed, and they are now receiving proposals for investment-attraction incentives from the final candidate regions and conducting detailed reviews.
The new smelter to be established in the United States will be modeled after Korea Zinc's Onsan Smelter in Ulsan. The Onsan Smelter combines wet and dry processes to produce not only zinc but also strategic and critical minerals such as antimony and germanium. The U.S. smelter is also expected to apply such an integrated process to serve as a supply base for advanced industry materials, covering not only critical minerals but also base minerals.