Korea Zinc Shares Plummet 30% on $1.8 Billion Capital Increase

Korea Zinc, the world's largest zinc smelter, saw its shares tumble by nearly 30% on Wednesday, following the announcement of a $1.8 billion capital increase through the issuance of new shares. The company's board decided to issue 3.73 million shares at 670,000 won per share, a significant discount of 57% from Tuesday's closing price of 1,543,000 won.

The new share issuance is expected to have a significant impact on Korea Zinc's earnings per share (EPS) and valuation. By diluting the existing shareholder base, the issuance will likely reduce EPS, as the same earnings will be spread across a larger number of shares. However, the exact impact will depend on the company's future earnings growth. As for valuation, the lower share price may lead to a decrease in the company's market capitalization and price-to-earnings ratio, making it appear less attractive to investors.

The dilution effect on existing shareholders is substantial, with the issuance of new shares representing approximately 11% of the company's current outstanding shares. This dilution will reduce the value of each existing shareholder's stake, although the extent of the impact will depend on the company's future performance and the market's perception of the capital increase.


The market perceives the use of funds raised from the new share issuance, particularly for debt repayment, as a positive move by Korea Zinc. By using the proceeds to pay off debt, the company aims to strengthen its financial position and reduce its interest expenses. This should improve the company's overall profitability and cash flow, benefiting both existing and new shareholders in the long run.


The capital increase aligns with Korea Zinc's long-term strategic plan for debt reduction and growth. By repaying a significant portion of its debt, the company will have more financial flexibility to invest in new projects or acquisitions, driving future growth. The exact timeline for debt reduction will depend on the company's cash flow and future capital expenditure plans. However, the capital increase is expected to accelerate the debt repayment process, potentially leading to an improved credit rating for Korea Zinc.

In conclusion, Korea Zinc's capital increase, while diluting existing shareholders, is a strategic move to strengthen the company's financial position and reduce its debt levels. The market's positive reception of the capital increase suggests that investors believe in the company's long-term growth prospects. As Korea Zinc continues to execute its strategic plan, investors should monitor the company's progress in debt repayment and its ability to create value for shareholders.