Korea Zinc's $6.6 Billion Question: Does Trafigura Actually Own What It's Selling?
- Editor
- 2 days ago
- 3 min read
After acquiring Nyrstar’s U.S. assets from Trafigura, Korea Zinc is planning to invest $6.6 billion in building a state-of-the-art smelter allowing it to extract critical minerals. The operation includes acquiring Nyrstar's Tennessee mines and smelter from Trafigura, alongside the U.S. This in an effort to allow the U.S. to regain independence from China in the critical minerals market. But there's a critical risk: Trafigura may not be legally in position to sell what it intends to divest. Trafigura got the assets out of the Nyrstar listed company, but how they got control is heavily contested in Belgium. Several civil proceedings and an ongoing criminal investigation are examining whether Nyrstar's 2019 distressed asset transfer to Trafigura was legitimate. If investigators determine the transfer was unlawful, ownership could revert to the original shareholders, leaving Korea Zinc holding with a massive legal liability.
Strategic Value: U.S. Zinc Operations
Nyrstar, now a wholly owned subsidiary of Trafigura, intends to sell its U.S. operations to Korea Zinc as part of a broader agreement aligned with Washington's strategy to reduce dependence on foreign supplies of critical raw materials. Korea Zinc will not only acquire Nyrstar's American mines and existing Tennessee smelter. It also plans to invest $6.6 billion to build a new smelter capable to extract zinc but also several byproducts that are critical minerals.
Disputed Ownership and Regulatory Findings
The ownership of Nyrstar's assets—including the Tennessee operations—remains highly disputed. Minority shareholders are litigating the asset transfer before the Belgian civil courts. Meanwhile, Belgium’s financial watchdog FSMA investigated the matter and issued a most critical report, which was transmitted to its Sanction Commission. The commission concluded that Nyrstar manipulated markets preceding Trafigura's 2019 acquisition of the company's assets. However, Nyrstar board members escaped conviction, contrary to the FSMA auditor's recommendations. This decision is now under appeal. Regardless, the FSMA proceedings represent only the tip of the iceberg.
Criminal Investigation: The Real Liability
Korea Zinc's true liability lies in the ongoing Belgian criminal investigation, which extends far beyond the FSMA's administrative proceedings. While the Sanctions Commission examined only a limited period, criminal investigators are dissecting the entire asset transfer in detail. This investigation could potentially determine that the transfer of Nyrstar assets to Trafigura was unlawful, leading to a restoration of original ownership.
In this scenario, Trafigura would now be selling assets it does not legally own. A realistic scenario given the allegedly extensive corporate governance breaches and potential felonies expected to surface during the investigation. If and when fraud would be retained, the whole transaction by which Trafigura took control of the listed company Nyrstar is well at risk to get nullified with retroactive effect.
Transparency Questions and Trafigura's Track Record
The critical question is whether Nyrstar and Trafigura are being transparent with Korea Zinc about the legal risks and liabilities attached to these assets. Trafigura is not known for transparency and carries a track record of convictions related to multiple scandals. Korea Zinc would be well-advised to exercise serious caution. Without comprehensive due diligence into the ownership dispute and criminal investigation, the company risks acquiring assets worth billions only to discover they legally belong to someone else.
What's at Stake
If the criminal investigation concludes the 2019 asset transfer was illegitimate:
• Ownership of Nyrstar assets could revert to original shareholders
• Korea Zinc would face disputed title to the Tennessee operations
• The $6.6 billion investment could become embroiled in prolonged litigation
• Korea Zinc could face claims from legitimate owners
As Korea Zinc prepares to invest billions in U.S. critical mineral infrastructure, the unresolved ownership of Nyrstar's assets represents a legal time bomb that could detonate well after the deal closes.
