– Korea Zinc sets out detailed strategies for its smelting business, Troika Drive businesses, and sustainable management

– Leveraging its technologies and capabilities accumulated over the past 50 years, Korea Zinc targets to achieve a 2.5-fold increase in revenue by 2033

– The Troika Drive businesses are likely to take hold beginning in 2025, becoming as big a revenue contributor as the smelting business in 2033

Korea Zinc, the global no.1 non-ferrous smelting company posting positive operating results for the 95th consecutive quarter, successfully hosted the 2023 Investor Day, its first investor relations event since its foundation, and presented its future vision and growth strategy for the next 10 years to stakeholders such as investors and analysts. The event was held at the Conrad Hotel in Yeouido, Seoul from 2 p.m. on the 7th, with presentations devoted to three topics, i.e., smelting business, Troika Drive, and sustainable management. The event was held amidst great interest from investors, as analysts projected that Korea Zinc will benefit most directly from the recent announcement of the US government’s guidance on Foreign Entities of Concern (FEOC) and was followed by a heated Q&A session. With this, Korea Zinc has moved past its perception as a dividend stock with stable performance, to a growth stock with great potential.

Through the Investor Day, Korea Zinc announced its ambition to expand into new businesses, taking a step further from its past growth strategy based on innovation in the smelting business and leveraging its leading smelting technologies and capabilities accumulated over the past half-century in the field of non-ferrous metal smelting. Against this backdrop, Korea Zinc unveiled a ‘quantum jump’ strategy of increasing its revenue 2.5-fold to KRW 25.3 trillion by 2033. To this end, the company will bring sales from the Troika Drive businesses to KRW 12.2 trillion by 2033, contributing almost half of the total revenue of 2033. This is an expression of confidence that Korea Zinc will achieve an average annual growth rate of 10% over the next 10 years.

CAGR(연평균 성장률, compound annual growth rate)

Founded as a non-ferrous metal smelter in 1974, Korea Zinc posted record-high earnings in 2022 with positive operating results for the 95th consecutive quarter. Looking to the next 10 years, Korea Zinc plans to maximize profitability by expanding the sales of high-purity electrolytic copper and semiconductor sulfuric acid in the smelting business and secure future growth drivers such as renewable energy, secondary batteries, and resource recycling, building on its competitiveness in the smelting business. At the same time, the company intends to fulfill its role as a global leader through ESG management. By doing so, Korea Zinc aims to achieve its revenue target of KRW 25.3 trillion in 2033 and continue its journey to carbon neutrality in 2050.

For the smelting business, which displayed positive operating results for the 95th consecutive quarter since 2000, Korea Zinc pledged to focus more on profitability and competitiveness and defend its dominant position in the global non-ferrous metal smelting market. Korea Zinc is the world’s largest smelter, singlehandedly commanding 8.4% and 9.3% of the global zinc and lead markets, respectively, in the fourth quarter of 2022, according to Wood Mackenzie, a global research firm.
Korea Zinc plans to increase production efficiency by rationalizing its production processes to address variables such as declines in treatment charges (TC) and increases in electricity prices. Korean Zinc will deploy an integrated process designed to maximize the recovery of four major non-ferrous metals, i.e., zinc, lead, copper, and nickel with the scheduled completion of an all-in-one nickel refinery in 2026. Korea Zinc also presented electrolytic copper and semiconductor sulfuric acid as future growth drivers for the smelting business. With these measures in place, Korea Zinc targets to expand smelting revenue to KRW 13 trillion by 2033.

<Troika Drive>

For the Troika Drive businesses, Korea Zinc will proactively seek new business opportunities, taking advantage of its competitive smelting technology. To drive a paradigm shift to ‘Green Metal’, Korea Zinc is committed to actively promoting three businesses—renewable energy/green hydrogen, secondary battery materials, and resource recycling. In addition, the company will take full advantage of the positive impact of the US government’s recent guidance on Foreign Entities of Concern (FEOC), to expand its business. In doing so, Troika Drive businesses target to achieve a revenue of KRW 12.2 trillion by 2033, with a steady investment of KRW 11.9 trillion over the next 10 years.

The 2050 Carbon Neutrality Roadmap was the highlight of Korea Zinc’s ESG management strategy designed to ensure sustainable management and establish a green production system. As part of the roadmap, Korea Zinc plans to reduce carbon emissions by 40% from 2020 to 2040 and an additional 60% by 2050.
For safety management, Korean Zinc expanded its safety-related budget by 2.5-fold year-on-year to KRW 100 billion and increased the number of safety-related personnel 5-fold from 26 in 2022 to 131 persons in 2023. Meanwhile, led by the Safety Innovation Committee, Korea Zinc is set to chart out a roadmap in 2024 to enhance workplace safety and health with full implementation scheduled for 2027. Korea Zinc will also align its supply chain with global ESG standards on environment, human rights, and safety and further expand responsible minerals sourcing.

Korea Zinc also unveiled its shareholder return policy as well as plans to secure financing for existing and new businesses in the mid- to long-term. For the next 10 years, Korea Zinc will implement various shareholder return policies valued at around KRW 4 trillion, including dividend payout, share buyback, and cancellation.

The two-hour IR event was well-received by attendees. Korea Zinc presented various customized response strategies amidst various external threats such as the global economic downturn, which was enough to gain the market’s trust in the company’s future growth. In particular, Korea Zinc presented growth targets for the next 10 years that exceeded expectations and expanded attention beyond its smelting business, toward its various businesses such as secondary batteries and resource recycling.
In addition, the company broke existing stereotypes that it had a conservative culture regarding disclosures, only providing minimal information, and differentiated from other companies by providing detailed data and figures.

“Looking to the next 10 years, Korea Zinc is committed to concentrating its resources and capabilities on the Troika Drive businesses on top of the existing smelting business,” said Korea Zinc’s spokesperson upon the successful hosting of its first Investor Day. “Korea Zinc will maximize shareholders’ value and ensure sustainable management, while continuously engaging shareholders, investors, and other stakeholders.”

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* Background information

[Strategy by business]

For the smelting business, which displayed positive operating results for the 95th consecutive quarter since 2000, Korea Zinc pledged to focus more on the profitability and competitiveness of the Onsan Smelter, the cradle of Korea Zinc’s smelting operations, and defend its dominant position in the global non-ferrous metal smelting market. Korea Zinc is the world’s largest smelter, singlehandedly commanding 8.4% and 9.3% of the global zinc and lead smelting markets, respectively, in the fourth quarter of 2022, according to Wood Mackenzie, a global research firm.

In response to variables such as declines in treatment charges (TC) and increases in electricity prices, Korea Zinc plans to increase production efficiency by streamlining and rationalizing its production processes without affecting production volumes and product competitiveness. Previously, the focus was on the most effective recovery of byproducts from the zinc smelting process. Going forward, processes will be improved in a way that will avoid the production of byproducts, while ensuring a high recovery rate of valuable metals such as zinc. In addition, despite the refitting of a lead smelter to expand the production of high-purity electrolytic copper, Korea Zinc plans to maintain its annual lead production capacity at 420,000 tonnes by expanding capacity at other smelters.

Notably, Korea Zinc announced its strategy of deploying an integrated process, where nickel smelting is added to the existing processes for zinc, lead, and copper, to maximize the recovery of four major non-ferrous metals with the scheduled completion of an all-in-one nickel refinery in 2026. Once the next-generation integrated process is in place, Korea Zinc will be well-positioned to consolidate its leadership in the global non-ferrous metals segment.

At the same time, Korea Zinc presented electrolytic copper and semiconductor sulfuric acid as future growth drivers for the smelting business. As global demand for copper is set to increase through 2035, supported by steady investments in electric vehicles and power grids, Korea Zinc plans to expand the annual production of high-purity electrolytic copper, with 30% lower raw material costs than competitors, to 150,000 tonnes by 2028. In addition, the company intends to increase its annual production capacity of semiconductor sulfuric acid, a byproduct from zinc and lead smelting processes, up to 500,000 tonnes in a cost-competitive way by 2033 and expand zinc production volume through Sun Metals Corporation (SMC), its Australian zinc smelter subsidiary. Through these measures, Korea Zinc targets to achieve a 30% increase in its smelting revenue to KRW 13 trillion by 2033.

<Troika Drive >

For Troika Drive, a move to address the fast-evolving industry and changes in the operating environment, Korean Zinc plans to create new business opportunities, leveraging its competitive smelting technologies. To drive a paradigm shift to Green Metal, Korea Zinc is committed to promoting three new businesses, i.e., renewable energy/green hydrogen, secondary battery, and resource recycling. The Troika Drive businesses target to achieve a revenue of KRW 12.2 trillion by 2033, with a steady investment of KRW 11.9 trillion over the next 10 years.

First, with a focus on nickel sulfate (KEMCO), precursor (KPC), and copper foil (KZAM), the secondary battery materials business is expected to post a revenue of KRW 5.3 trillion by securing an annual production capacity of 85,000 tonnes of nickel sulfate, 80,000 tonnes of precursor, and 60,000 tonnes of copper foil by 2033. Notably, the establishment of an all-in-one nickel refinery in Korea would enable Korea Zinc to secure a reliable source of IRA-compliant feedstock. Following the US Department of Energy’s (DOE) guidance on Foreign Entity of Concern (FEOC), Korea Zinc’s nickel sulfate business is more competitively positioned than rivals that are more reliant on Chinese vendors. Going forward, Korea Zinc will establish a closed-loop value chain, where waste batteries and process scraps from battery manufacturers or automakers are recycled and refined to produce nickel sulfate and precursor.

The resource recycling business sets an annual revenue target of KRW 6 trillion by 2030 by securing front-end and back-end processing capacity of 230,000 tonnes of e-waste, 320,000 tonnes of decommissioned solar PV panels, and 100,000 tons of waste batteries. Korea Zinc advanced to the copper foil business in 2020 to make the best use of byproducts from its key products, such as zinc and lead. In 2022, Korea Zinc acquired a majority stake in Igneo, the world’s largest e-waste producer which has a collection system for copper-containing end-of-life products in the US, to establish a value chain where copper feedstock can be procured from recycled sources. Korea Zinc is set to take a step further by expanding its business to post-consumer batteries and decommissioned solar panels in tandem with the evolving industry structure.

The renewable/green hydrogen business intends to realize Green Zinc by 2050, with a 100% transition to green energy and net-zero carbon emissions. The renewable energy business is set to build a power generation capacity of 4.6GW by 2033 with an initial revenue of KRW 900 billion which will be expanded over the years. Meanwhile, the green hydrogen business will lay the foundation for Korea Zinc to enter the hydrogen business while solidifying its position as a supplier of renewable energy sources other than hydrogen. Korea Zinc has already secured development licenses for renewable energy projects in Australia with a capacity of 4.6GW, primarily in the wind power segment, and will build renewable energy generation facilities with a total capacity of 9GW by 2040. Once Sun Metals Corporation (SMC), Korea Zinc’s subsidiary in Australia, accomplishes RE100 in 2040, Korea Zinc will take the first step on its path to realize RE100 by 2050 by producing and using green hydrogen in Australia through the 1MW-scale Sun HQ Hydrogen Hub project and eventually creating a system where the hydrogen will be exported to Korea.

Korea Zinc also unveiled its ESG management strategy for ensuring sustainable management and building an environmentally sustainable production system. The highlight is the 2050 Carbon Neutrality Roadmap, under which Korea Zinc will scale back its carbon emissions by 40% from 2020 to 2040 and an additional 60% from 2041 to 2050. To this end, Korea Zinc will phase in facility upgrades and process rationalization for the Onsan Smelter and gradually shift its energy mix to renewable energy sources such as PV solar. Meanwhile, Korea Zinc is committed to developing technologies and building infrastructure through the Han-Ho H2 consortium, to export green hydrogen and green ammonia for electricity to be produced by a 9GW pipeline of renewable energy projects in Australia to Korea. That said, accomplishing the 2050 Carbon Neutrality Roadmap requires efforts from the individual company as well as the government’s support, especially in the development of technologies and infrastructure for the shipment of hydrogen, regulatory and institutional reform, and the promotion of the hydrogen market for active trading of hydrogen.

For safety management, Korea Zinc will meaningfully enhance its safety management system to ensure safety is a top priority in its business operations. Against this backdrop, the firm’s safety-related budget expanded 2.5-fold from KRW 40 billion in 2022 to KRW 100 billion in 2023 and safety-related personnel increased 5-fold from 26 in 2022 to 131 persons in 2023. Meanwhile, led by the Safety Innovation Committee comprised of external experts and employees, Korea Zinc has been upgrading the workplace safety and health system in 2023 and will begin to establish a mid- to long-term roadmap in 2024 with full implementation scheduled for 2027. Korea Zinc will also step up sustainable management to ensure compliance with global standards on environment, human rights, and safety by further integrating ESG into its supply chain, expanding responsible minerals sourcing, and executing human rights impact assessment (HRIA).

In addition, Korea Zinc unveiled mid- to long-term plans to secure financing for its existing and new businesses. The firm also expressed its strong commitment to enhancing shareholders’ value in the long term and plans to actively implement various shareholder return measures, including dividend payout, share buyback, and cancellation. To this end, Korea Zinc will implement shareholder return policies worth around KRW 4 trillion.

[Photo] 2023 Korea Zinc Investor Day Q&A session

[Photo] 2023 Korea Zinc Investor Day Q&A session