Final Results

Performance Review

Financial

Group Results Overview

The Group result for the year is a loss of US$6.0 million (2015: US$46.7 million). This includes the loss from discontinued operations of US$112,000 (2015: US$36.7 million) and the loss from the continuing operation of US$5.8 million (2015: US$9.9 million).

As has been previously reported, following the collapse in the Zinc price in the second half of 2015, the Group's ownership of KRP was restructured as follows:

· As at 31 December 2015, a reduced Company interest of 10% in ZincOx (Korea) Ltd, now Zinc Oxide Corporation ("ZOC"), was agreed, with the balance held by KZC. Legal completion of this position was notified to the Group on 29 April 2016.

· KZC provided financial support through the transition period with a loan to KRP amounting to US$5.4 million which was subsequently capitalised, reducing the Company's interest in ZOC and KRP from 10 per cent to approximately 9.2 per cent. Further cash injections from KZC after the legal completion diluted the Company's interest in ZOC to 8.74 per cent, the position at 31 December 2016.

· In January 2017 KZC agreed to pay the Company a total of US$7,950,000, in two tranches, for the Group's remaining interest in ZOC. US$7,000,000 was paid in January 2017 with the balance of US$950,000 due to be paid when KZC has completed various procedural requirements in Korea.

As a result of the loss of control of KRP in 2015, the Korean subsidiary was deconsolidated and no operating results relating to KRP have been reported in the Group financial statements for 2016.

Funding

On 11 May 2016, the terms of the Corporate Loan Notes were renegotiated so as to extend the repayment date to January 2018. Furthermore, interest, which accrues at 10 per cent per annum, was rolled into the principal from August 2016.

The interest charge for the year, in relation to the Loan Notes was US$0.5 million (2015: US$0.6 million). The Loan Notes were repaid on 25 January 2017 using part of the proceeds of the sale of the residual interest in KRP.

In January and June 2016 the Company separately raised £205,000 and £300,000 (before expenses) by way of conditional placings of 20,500,000 shares (at a price of 1p per share) and 30,000,000 shares (at a price of 1p per share), respectively.

Liquidity

The cash funds of the Group at 31 December 2016 were US$0.2 million (2015: US$0.7 million). These cash funds were held in a range of currencies at the year end, the most significant of which were US Dollars 0.1 million (2015: US$0.5 million), and Pounds Sterling 0.1 million (2015: £0.1 million).

Going Concern

In early 2017, the Group sold its remaining interest in KRP for US$7.95 million, generating US$7 million of cash in January, with US$0.95 million to follow. From this cash, the Group repaid its outstanding Loan Notes in January, amounting to US$4.9 million (£3.97 million) and thereby completely clearing any indebtedness of the Group.

The directors, having reviewed future forecasts and commitments combined with the current cash available, believe that the Group has adequate financial resources to manage its business risks and continue in operational existence for twelve months from the date of this report.

Financial Review of Operations

Other Projects

USA

Following the sale of assets at Big River Zinc in 2015, and the remaining assets held in the USA being surplus to requirements, the Group sold the land that was held in Ohio in early 2016. With no further assets of note being held in the USA, the Group decided to waive all inter-company loans made by PLC to its US subsidiaries at the end of 2016.

Turkey

The Group retains 50,850 square metres of land in Turkey which is zoned for heavy industrial use. The land is shown as an asset held for sale at a carrying value of US$1.5 million. The security over this asset that was held by the Company's Noteholders was released following the repayment of the Loan Notes on 25 January 2017.

Environmental, Health, Safety & Quality

The Group is committed to sustainable development, the protection of the environment and the health and safety of its employees.

Risks

Forward Looking Statements

The Chairman's Statement, Chief Executive's Review and the Strategic Report contain discussion of future operations and financial performance by use of various forward looking words such as "anticipates," "estimates," "expects," "projects," "intends," "plans," "believes" and terms of similar substance. These forward looking statements are based on management's current expectations and beliefs about future events but as with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances which could cause the Group's actual activities and results to differ materially from those contained in the forward looking statements.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2016

* adjusted loss per ordinary share calculation excludes impairment provisions

The notes to the financial statements form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016

The notes to the financial statements form an integral part of these financial statements.

CONSOLIDATED BALANCE SHEET

AS AT 31 DECEMBER 2016

Approved by the directors on 29 March 2017.

Donald McAlister

Director

The notes to the financial statements form an integral part of these financial statements.

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2016

The above cash flows aggregate those from continuing and discontinued operations. Separate disclosure has been made in note 8 for those cash flows relating to discontinued operations only.

The notes to the financial statements form an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2016

The notes to the financial statements form an integral part of these financial statements

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016

1. Accounting Policies 

(a) Accounting Convention and Basis of Preparation of Financial Statements

The Company is a public limited liability company incorporated in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been applied consistently to all the years presented, unless otherwise stated.

The Group financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU.

New standards, amendments and interpretations adopted by the Group

None of the new standards, amendments and interpretations adopted by the Group during the year were considered to have had a material impact on the financial statements.

New standards, amendments and interpretations not adopted by the Group

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.

The Directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Company in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 will have an impact on the recognition of operating leases. The directors' detailed review of these new standards is still ongoing and they expect to be able to provide a more comprehensive assessment of the impact in the next set of financial statements. The Group does not intend to apply any of these pronouncements early.

Presentational currency

Notwithstanding that the Group continues to be managed from the UK, the directors recognise that its current and future operations will be overseas. In addition, the Group received sales revenues predominantly in US Dollars and for this reason has reported its financial results in US Dollars.

The Group has applied the principles of IAS 21 'The Effects of Changes in Foreign Exchange Rates' in preparing these financial statements and has applied them to all periods in these financial statements.

The Group has translated its income statement at average monthly exchange rates for the period and to translate its assets and liabilities at period end exchange rates. Share capital and share premium reserves of the parent company have been translated at historic exchange rates with any differences between the historic rates and the period end rates being charged to the foreign exchange translation reserve.

(b) Basis of Consolidation and Presentation of Financial Information

With the exception of certain items noted below, which are carried at fair value, the consolidated financial statements have been prepared under the historical cost convention.

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2016. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee.

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

All intra-group assets, liabilities, income and expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

(c) Segmental Reporting Reported segments are those components of the business where results are regularly reviewed by the Board to assess their performance and to make resource allocation decisions. The reported segments are identified separately as 'recycling operations' or 'other segments' due to the similarity of their economic characteristics and not by their geographical area of operation.

(d) Revenue

The Group recognises revenue for the sale of goods when title and the associated risks and rewards of ownership have passed to its customers. Revenues are measured at the fair value of the consideration received or receivable, net of applicable sales taxes. In the case of zinc concentrate sales, any revenue is recognised at the point of delivery and is priced at the end of each calendar month according to the price at the end of the month of delivery. An adjustment is then subsequently made between the month end price and the month after month of arrival price using the zinc price as published by the London Metal Exchange ("LME").

The Group recognises revenue for the rendering of services when it is probable that the economic benefits associated with the transaction will flow to the customer and that the stage of completion of any such transaction is clearly measurable.

(e) Property, Plant and Equipment

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Property, plant and equipment is depreciated over their useful life. The major categories of property, plant and equipment which are depreciated on a straight-line basis down to their residual values are;

Buildings - up to 40 years or life of lease

Computer Equipment - 3 to 5 years

Fixtures and Fittings - 3 to 5 years

Plant and Machinery - 3 to 30 years

Motor Vehicles - 3 to 5 years

Any gain or loss arising on a disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement.

Residual values, useful economic lives and depreciation methods are assessed annually.

Construction in Progress is an asset class in which project costs incurred during the construction of projects, which may take an extended period to complete, are capitalised. Upon satisfaction of certain completion tests at the end of the construction cycle, the construction in progress will be transferred to the asset classes stated above following which depreciation will commence.

The value of land is only tested when there is an indication of impairment. The carrying values of depreciated property, plant and equipment are assessed for impairment when indicators of impairment arise with any impairment charged to profit or loss.

(f) Impairment Reviews of Intangible Assets and Property, Plant and Equipment

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.

Other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the assets or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation where future cash flows are based on expected useful life, together with estimates of future zinc prices and costs. Any impairment loss is charged to the assets in the cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

(g) Foreign Currency

The functional currency of the parent company is Pounds Sterling. The amounts in the financial statements and accompanying notes for the current year have been translated at 1.23016 US$/£ year end rate where they relate to the Company or consolidated balance sheet and at 1.36548 US$/£ average monthly rate for the year where they relate to the Company or consolidated income statement.

The comparative amounts in the financial statements and accompanying notes for 2015 have been translated at 1.48236 US$/£ year end rate where they relate to the Company or consolidated balance sheet and at 1.53234 US$/£ average monthly rate for the year where they relate to the Company or consolidated income statement.

Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date. Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were initially recorded are recognised in profit or loss in the period in which they arise. Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a gain or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are recognised in profit or loss.

The assets and liabilities in the financial statements of foreign subsidiaries and the parent company are translated at the rate of exchange ruling at the balance sheet date. Exchange differences that arise from the re-translation of a net investment in subsidiaries or from re-translating intra-group balances, which are in substance part of the net investment, are recognised in other comprehensive income and accumulated in the foreign currency reserve in equity.

The Group took advantage of the exemption in IFRS 1 and deemed the cumulative translation differences for all foreign operations to be nil at the date of transition to IFRS.

(h) Intangible Assets

(i) Computer Software

As per IAS 38, purchased computer software that will generate economic benefit beyond one year is capitalised as an intangible asset and amortised over its expected useful economic life of four years on a straight line basis.

(ii) Deferred Development Costs and Related Overheads

Development costs incurred on specific projects are only capitalised in accordance with IAS 38 when recoverability can be assessed with probable economic certainty. The directors review each project on a technical and commercial basis in line with the impairment testing noted in note 1(f). In the event that it becomes evident that capitalised costs are unlikely to be recovered from future revenues, they are either written off immediately to the profit or loss, amortised or an impairment provision is made.

Capitalised development costs relating to the Group in general, and that satisfy the provisions of IAS 38, are amortised over their useful economic life of 10 years on a straight line basis and subject to the same impairment testing noted in note 1(f).

(i) Taxation

Income tax expense represents the sum of tax currently payable and deferred tax.

Current tax is the tax currently payable based on taxable profit for the year using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax is recognised on the difference between carrying values of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Tax losses which are available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax assets and liabilities are calculated at tax rates that have been enacted or substantively enacted. Deferred tax is charged or credited to the profit or loss, except when it relates to items charged directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax relating to items recognised in other comprehensive income is recognised in other comprehensive income.

Deferred tax assets relating to brought forward tax losses are not yet recognised by the Group, but they will be recognised to the extent that taxable profit will be available in the future.

(j) Pensions

The pension costs charged to the profit or loss represent the contributions payable during the period to defined contribution schemes.

(k) Leased Assets

In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of an asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset, or, if lower, the present value of the minimum lease payments to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability.

The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to profit or loss over the period of the lease.

All other leases are regarded as operating leases and the payments made under them are charged to profit or loss on a straight line basis over the lease term.

(l) Financial Assets

All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs. Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed in profit or loss.

The Group has also followed the guidance in IAS 39, indicating that the holding interest in KRP should be categorised as a financial asset within investments. The accounting treatment for this asset is that it should be recognised at its initial value and then subsequently fair valued with any adjustment booked to the Statement of Comprehensive Income.

Cash and cash equivalents comprise cash on hand, deposits held on call with banks and short term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value. For the purposes of the cash flow statement, cash and cash equivalents are adjusted to reflect bank overdrafts which are repayable on demand.

Trade receivables and loans are measured subsequent to initial recognition at amortised cost, less provision for impairment.

(m) Financial Liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual process of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value, all transaction costs are recognised immediately in profit or loss.

Financial liabilities categorised at fair value through profit or loss are re-measured at each reporting date at fair value, with changes in fair value being recognised in profit or loss. All other financial liabilities are recorded at amortised cost, using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

(n) Share Based Payments

All share based payment arrangements granted after 7 November 2002 are equity-settled transactions that are recognised in the financial statements.

The fair value of any share options or warrants granted to employees and directors, or in exchange for goods and services, are recognised as an expense in the income statement with a corresponding entry to retained earnings. This fair value is appraised at the grant date.

If vesting periods or other non-market performance conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options or warrants expected to vest. Estimates are revised subsequently if there is any indication that the number expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options or warrants that have vested are not exercised.

Upon exercise of share options or warrants, the proceeds received net of associated transaction costs are credited to share capital and where appropriate, share premium.

For share options, fair value is measured by use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations. For warrants, fair value is measured by either the Monte Carlo method or the Black-Scholes as appropriate to the circumstances and adjusted in the same way as for the share options.

(o) Borrowing Costs

Borrowing costs directly attributable to the construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets from the commencement of incurring borrowing costs until such time as the assets are substantially ready for their intended use. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are reflected in profit or loss in the period in which they are incurred.

(p) Restricted Cash

Restricted cash is excluded from cash and cash equivalents and is described as current where it is planned to use the cash in the next twelve months and is non-current for the remaining balance.

(q) Going Concern

The financial statements are prepared on a going concern basis. The directors, having reviewed future forecasts and commitments combined with the current cash available, believe that the Group has adequate financial resources to manage its business risks and continue in operational existence for twelve months from the date of this report.

(r) Non-Current Assets Held for Sale

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

2. Critical Accounting Estimates and Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that match the accounting estimate. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amount of assets and liabilities within the next financial year are discussed below:

(a) Impairment Reviews

Intangible assets

In accordance with the accounting policy stated above, the Group performs an assessment of the recognition and recoverability of intangible assets to see whether any of the Group's development expenditures have suffered impairment. This assessment is dependent on the future viability of the relevant technology and the expectation that the technology can be monetised in the future.

At the end of 2015, the Group held intangible assets relating to (a) the historic spend incurred on the development of the RHF technology as a way to treat EAFD, and (b) further development activities aimed at producing a commercial grade zinc oxide product, following the initial generation of the HZO from the RHF.

With the loss of control of KRP at the end of 2015, the Group was forced into reducing its activities during the first half of 2016. As a result, it reduced its overhead in order to continue as a going concern, allowing it time to find a new project. By June 2016, these factors, coupled with the lack of any imminent project opportunities, triggered an impairment review by the directors resulting in a full impairment of the intangible assets (US$3,635k) through the Group income statement.

Since the half year, the Group has successfully found a project in Vietnam (see note 21 'Post Balance Sheet Events') to which the RHF technology and upgrading ability to a commercial grade zinc oxide can now be applied. Furthermore the Group has generated cash from the sale of its residual interest in KRP, thus allowing the Group to adopt a going concern basis (see note 2d).

However, neither of these two events occurred before the end of the year, and so the directors feel that, as of 31 December 2016, the full impairment of intangible assets should remain in place. It is hoped that some of this impairment can be reversed in 2017.

Trade & other receivables

During the year, amounts of US$101k in respect of VAT receivable in Anadolu Cinko SVTAS and US$12k in respect of a trade receivable in ZincOx Resources plc were impaired and charged to the Group income statement.

Investments

Since 2012, the Group has held a 51% investment in an unincorporated joint operation, with Ural Recycling Ltd, to examine the potential to develop a zinc recycling plant in Russia. With no activity in the year and no significant progress made on this project, the directors have valued this investment at US$ nil as at 31 December 2016. The original investment has been matched by an equivalent project expenditure and no further obligations exist. The resultant change in fair value of US$88k has been charged in the year to the Group income statement (see note 30).

The table below summarises the impairment provisions made in the year and included in the Group income statement. For the year ending 31 December 2016, the Group made total impairments, on continuing operations, of US$3,836k, with no impairments made against discontinued operations.

(b) Share Based Payments

In order to calculate the charge for share based payments as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its option or warrant pricing model as set out in note 23. The charge made in the year in respect of options is US$22k (2015: US$57k) and for warrants is US$40k (2015: US$133k).

(c) Carrying Value of KRP Interest

Following the Group's loss of control over KRP at the end of 2015, the Group adopted a carrying value for its holding in KRP. This valuation, at the end of 2015 and 2016, uses the "price of recent investment" guidelines as described by the International Private Equity and Venture Capital Valuation Guidelines. Following the extinguishing of the Development and Offtake loans with Korea Zinc, an equivalent value for the Group's holding was established at US$6.4 million.

The Group has also followed the guidance in IAS 39, which is that the remaining interest should be categorised as a financial asset within investments, recognised at its initial value and subsequently fair valued with any adjustment booked to the Statement of Comprehensive Income.

For the initial valuation at 31 December 2015, a cashflow was prepared, covering a 20 year period and expected future dividend receipts over that time, using a discount rate of 9%, reflecting the 10 year Korean government bonds and an equity risk premium. The cashflow also used consensus zinc price forecasts of US$1,793 per tonne for 2016, US$1,990 per tonne in 2017, US$2,296 per tonne in 2018, US$2,497 per tonne in 2019 and a long run zinc price of US$2,218 per tonne thereafter. The resulting flow of dividends returned an NPV that showed no indication of a material change in value at the end of 2015.

Towards the end of 2016, the directors began negotiations with Korea Zinc to sell the Group's residual 8.74% interest in KRP. The valuation model and inputs were reviewed at this time and whilst the economics were improved as a result of a higher zinc price, there was significant uncertainty as to what could be realised in any potential sale of the residual interest. The discussions with Korea Zinc were concluded only in January and a final Sale and Purchase Agreement was signed on 11 January 2017.

(d) Going Concern

As stated in the Strategic Report, the directors, having reviewed future forecasts and commitments combined with the current cash available, believe that the Group has adequate financial resources to manage its business risks and continue in operational existence for twelve months from the date of this report report.

3. (a) Operating Loss

The table states those charges and credits relating to continuing operations only.

(b) Directors and Employees

The table below relates to continuing operations only.

The monthly average number of persons employed by the Group (including directors) on continuing operations during the year was 6 (2015: 12).

Directors and key management personnel

The directors, which include both executive and non-executive directors, are the key management personnel of the Group. The table below details directors' emoluments and total remuneration.

In addition, an amount equivalent to US$24k (2015: US$98k) for employers' national insurance was incurred by the Group in respect of the key management personnel.

The number of directors who participated in defined contribution pension schemes was one (2015: one).

Full details of directors share options are included under Corporate Governance. There were no share options exercised by the directors in the year (2015: nil).

An amount of US$5k has been charged to the income statement for the year (2015: US$ US$57k) in respect of share based payments on options for directors.

¹ Simon Hall retired as a director on 17 June 2016.

² Donald McAlister was appointed as a director on 11 July 2016.

³ Included above are emoluments paid as related party transactions (see note 3(c) below).

(c) Related Party Transactions

During the year ended 31 December 2016 the Group paid £11k, equivalent to US$15k (2015: nil) for financial consultancy services to Holbans Consulting Ltd, a company in which Donald McAlister, ZincOx Resources plc's Finance Director from 11 July 2016, has an interest.

During the year ended 31 December 2015 the Group paid €102k, equivalent to US$114k for technical consultancy services to Zinc Consult Sprl. a company in which Jacques Dewalens, ZincOx Resources plc's Technical and Production Director up until 15 April 2015, has an interest.

Loan notes

In April 2016, the Company issued Andrew Woollett, ZincOx Resources plc's Chief Executive, 2,193,750 warrants with a three years and ten months life, at an exercise price of 1.6 pence in respect of Loan Notes taken out in 2013. At the same time, 4,026,634 existing warrants at an exercise price of 25 pence were cancelled (see note 23).

During the year ended 31 December 2016, interest (gross of withholding tax) of £37,405 (equivalent to US$51k) was rolled into the principal amount owing to Andrew Woollett in respect of the Loan Notes, leaving a balance outstanding at 31 December 2016 of £914,905 (2015: £877,500).

Furthermore, the Group paid £51,207, equivalent to US$70k (2015: £105,140, equivalent to US$161k) of interest (gross of withholding tax) to Andrew Woollett. This cost was charged to the income statement and included within finance costs.

In April 2016, the Company issued Gautam Dalal, a non-executive director of ZincOx Resources plc, 1,125,000 warrants with a three years and ten months life, at an exercise price of 1.6 pence in respect of Loan Notes taken out in 2013. At the same time, 2,064,940 existing warrants at an exercise price of 25 pence were cancelled (see note 23).

During the year ended 31 December 2016, interest (gross of withholding tax) of £19,182 (equivalent to US$26k) was rolled into the principal amount owing to Gautam Dalal in respect of the Loan Notes, leaving a balance outstanding at 31 December 2016 of £469,182 (2015: £450,000).

Furthermore, the Group paid £26,260, equivalent to US$36k (2015: £53,918, equivalent to US$83k) of interest (gross of withholding tax) to Gautam Dalal. This cost was charged to the income statement and included within finance costs.

Further information concerning the Loan Notes is detailed in note 16 'Loans and Borrowings'.

(d) Operating Costs (net of gains and impairments)

The table below relates to continuing operations only.

 4. Other (Losses) / Gains

The table below relates to continuing operations only.

The loss on disposal of property, plant and equipment in the year relates to small office equipment disposals across the Group.

5. Finance Income / (Costs)

The table below relates to continuing operations only.

6. Taxation

The information below relates to continuing operations only.

The tax assessed for the year is lower than the standard rate of tax in the UK of 20% (2015: 20%). The differences are explained as follows:

The Company has accumulated trading losses of US$10.2 million (2015: US$12.0 million) and accelerated capital allowances of US$26k (2015: US$28k) but doesn't recognise these as deferred tax assets in the financial statements because their value is uncertain.

The Group still has an open tax enquiry in relation to the deferred capital receipts following the sale of its Shaimerden zinc mine in 2003. The nature of the enquiry relates to the value of receipts that were expected at the time of disposal and the availability of double taxation relief in respect of withholding tax which was deducted at source by the purchaser. The directors have sought extensive tax advice, including advice from leading tax counsel, on the specific tax issues and remain of the view that, based on this advice, together with their valuation of the future receipts at the time of disposal, no provision should be required.

7. Loss Per Share

Continuing and discontinued operations

The calculation of the loss per share is based on the loss attributable to ordinary shareholders of US$5,950k (2015: US$46,664k) divided by the weighted average number of shares in issue during the year of 224,336,707 (2015: 176,579,687).

An adjusted loss per ordinary share for the year has been presented to exclude the impairment provisions made in the year of US$3,836k (2015: US$3,521k). It has been calculated based on adjusted loss attributable to ordinary shareholders of US$2,114k (2015: US$43,143k).

Continuing operations

The calculation of the loss per share from continuing operations is based on the loss attributable to ordinary shareholders of US$5,838k (2015: US$9,861k) divided by the weighted average number of shares in issue during the year of 224,336,707 (2015: 176,579,687).

An adjusted loss per ordinary share for the year has been presented to exclude the impairment provisions made in the year of US$3,836k (2015: US$2,207k). It has been calculated based on adjusted loss attributable to ordinary shareholders of US$2,002k (2015: US$7,654k).

There is no dilutive effect of the share options in issue during 2016 and 2015.

8. Discontinued Operations

In April 2016, the Group lost effective operational control of ZincOx Belgium Sprl when it was handed over to Belgian insolvency practitioners for subsequent liquidation. This action was necessary due to the general downturn in the Group's activities in the year, as discussed in the Performance Review section of the Strategic Report.

In December 2015, following the restructuring of KRP, the Group lost effective operational control of ZincOx Korea. A formal legal restructuring of ZincOx Korea, including the issuance of shares to Korea Zinc, and the cancellation of the Offtake and Development Loans made by Korea Zinc, was notified to the Company by Korea Zinc on 29 April 2016.

Analysis of loss for the year from discontinued operations

The combined results of the discontinued operations (i.e. from Belgium and Korea) included in the loss for the year are set out below. The comparative loss and cash flows from discontinued operations have been re-presented to include those operations classified as discontinued in the current year.

Cash flows from discontinued operations

The residual 8.74% holding in KRP is classified as a financial asset within investments (see note 30)

9. Intangible Assets

Following an impairment review in the year of the deferred development costs, impairment provisions of US$3,635k have been made against their carrying value (see note 2(a) for details).

All deferred development costs that have been written off in the year are included in profit or loss in arriving at an operating loss.

The intangible assets of ZincOx Belgium Sprl were de-consolidated from the Group at 29 April 2016 following loss of control of the subsidiary.

Disposals in the year represent obsolete equipment in ZincOx Resources plc, generating a net loss of US$9k, included in profit or loss as Other Losses (see note 4).

The property, plant and equipment of ZincOx Belgium Sprl were de-consolidated from the Group as at 29 April 2016, following the loss of control of the subsidiary.

There is no capitalised depreciation or capitalised interest included within property, plant and equipment.

11. Finance Lease Liabilities

Following the de-consolidation of ZincOx Belgium Sprl., there are no assets held under finance leases within the Group at 31 December 2016 (2015: assets held under finance leases with a net book value of US$67k).

12. Trade and Other Receivables

None of the current receivables are past due.

13. Assets Held for Sale

Following the decision to sell the land inside the Heavy Industrial Zone at Aliaga, Turkey, this asset has now been classified as an asset held for sale. The carrying cost of US$1.5 million (YTL 5.2 million) has been applied, being the lower of cost and net realisable value.

The Turkish land forms part of the Group's recycling segment activity and falls within the geographical region called 'Rest of Europe' (see note 22).

14. Restricted Cash

15. Trade and Other Payables

16. Loans and Borrowings

Secured Loan Notes

In July 2013, the Company issued Loan Notes to a value of £4.2 million together with four year warrants over 9,450,000 new ordinary shares of the Company. During 2015, £420k was repaid to lenders leaving an outstanding balance of £3.78 million (US$5.6 million) at 31 December 2015.

Interest at 10% was paid during in the year until July 2016, following which, it was rolled up into the principal, leaving a balance of £3.9 million (translated at the balance sheet rate of 1.23016 to an equivalent US$4.8 million).

The Loan Notes are secured against the shares in ZincOx Anadolu Cinko SVTAS, the Company's wholly owned subsidiary that owns the freehold land held at Aliaga, Turkey. Any unpaid amounts of interest are secured against the assets of the Company including cash holdings and the remaining 8.74% interest in KRP. However, in January 2017, the Company repaid the Loan Notes in full, including interest that had been rolled into the principal amount (see note 21).

The existing warrants associated with these Loan Notes were re-negotiated in April 2016, with the term extended to February 2020 (see note 23). They were not cancelled in January 2017 when the Loan Notes were repaid.

Other bank borrowings

Other bank borrowings represent an unsecured facility taken out by ZincOx Belgium Sprl to fund short-term working capital requirements. These were de-consolidated in the year.

17. Share Capital

The shares of the Company are denominated in Pounds Sterling but are retranslated for the Group financial statements at their historic rate.

The share capital reserve at 31 December 2016 stated at its historical value in its nominal currency of GBP, is £2,404k (period to 31 December 2015: £26,731k).

On 30 June 2016, following the cancellation of all existing options and the grant of new options, there were options available over 24,030,000 ordinary shares in the Company, 13,930,000 available to directors and 10,100,000 to eligible persons. The exercise price of each option is 1.6 pence, exercisable from 30 June 2019, with an expiry date of 30 June 2026.

At 31 December 2016, there were warrants available over 9,450,000 ordinary shares in the Company, 3,318,750 available to directors and 6,131,250 to other subscribers of the Loan Notes. The life of the warrants, which were extended in the period to expire on 20 February 2020, can be exercised immediately at a price of 5p.

The highest and lowest prices of the Company's shares during the period were 1.23p and 0.3p respectively, and the share price at the end of the period was 0.45p, having been suspended from trading on AIM as at 31 October 2016.

The number of shares which would have been in issue at the end of the period, had all options and warrants been exercised, was 273,893,419. There were no share options or warrants exercised in the period.

Capital Redemption Reserve

On 1 February 2016, the Company cancelled 103,466,716 Deferred Shares with a nominal value of 24 pence and carrying no voting rights, resulting in the creation of a Capital Redemption Reserve.

Company Share Options

The Company has a total of 24,030,000 options in issue, all being granted on 30 June 2016 with a 10 year life expiring on 30 June 2026, exercisable after three years from 30 June 2019, at an exercise price of 1.6 pence.

18. Operating Leases

Non-cancellable operating lease rentals are payable as follows:

Following the de-consolidation of ZincOx Belgium Sprl. in April 2016, there are no longer any operating leases held within the Group.

19. Financial Instruments

Capital Management Policies and Procedures

The Group's capital management objectives are:

· to increase the value of the assets of the business,

· to provide an adequate return to shareholders in the future when assets are taken into production, and

· to ensure the Group's ability to continue as a going concern.

These objectives will be achieved by identifying the right development recycling projects, adding value to these projects and ultimately taking them through to production and cash flow, either with partners or by our own means.

The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the consolidated balance sheet.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in the economic conditions and the risk characteristics of the underlying assets. Capital for the reporting periods under review is summarised as follows:

The disclosures detailed below are as required by IFRS 7 'Financial Instruments: Disclosures'. The Company's principal treasury objective is to provide sufficient liquidity to meet operational cash flow requirements and to allow the Group to take advantage of new growth opportunities whilst maximising shareholder value. The Company operates controlled treasury policies which are monitored by the Board to ensure that the needs of the Company are met as they evolve. The impact of the risks, required to be discussed in accordance with IFRS 7, are detailed below, supported by a specific explanation of these risks in the Strategic Report.

Liquidity and Funding Risk

The objective of the Group in managing funding risk is to ensure that it can meet its financial obligations as and when they fall due as shown below:

Credit Risk

The Group's principal financial assets are bank balances and cash, trade and other receivables, a financial asset investment and investments in other Group companies, which represent the Group's maximum exposure to credit risk in relation to financial assets.

The Group's credit risk is primarily attributable to its other receivables. It is the policy of the Group to present the amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

Foreign Exchange Risk

The Group's transactional foreign exchange exposure arises from income, expenditure, financial asset investments, and the purchase and sale of assets denominated in foreign currencies. As each material commitment is made, the risk in relation to currency fluctuations is assessed by the Board and regularly reviewed. The Group does not have a hedging programme in place at this time.

Foreign currency denominated financial assets and liabilities, translated into US Dollars at the closing rate, are as follows:

The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group's financial assets and financial liabilities that are held in a currency other than the functional currency of the underlying Group entity. The main exposure is in ZincOx Resources plc where the functional currency is Pounds Sterling, yet significant financial assets are held in US Dollars, namely the 8.74% investment in KRP as a financial asset.

It assumes a +/-5% change of the US Dollar-Sterling and US Dollar-Euro for the year ended 31 December 2016 (2015: 5%). The sensitivity analysis is applied to the Group's foreign currency financial instruments held at balance sheet date. If the US Dollar had weakened by 5% against Sterling and Euro this would have had the following impact by currency:

If the US Dollar had strengthened against these respective currencies, there would be an equal and opposite effect on the net result for the year and equity.

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group's exposure to currency risk.

Interest Rate Risk

The Group is exposed to interest rate risk in respect of the cash balances held with banks and other highly rated counterparties. If the interest rate the Group received had increased/decreased by 0.1 percent during the year, the net result for the year would have been increased/reduced by US$1k (2015: US$ nil). There would have been no impact on other equity.

Financial Assets and Liabilities

The Group's financial assets comprise cash and cash equivalents, which include short-term deposits held by the Group treasury function, trade and other receivables and financial asset investments available for sale. Their fair values are not considered to be materially different from their carrying values.

The Group's financial liabilities comprise loans and trade and other payables, and are carried at amortised cost, with their fair values not considered to be materially different from their carrying values.

The following is an analysis of the Group's financial instruments:

The following table analyses the Group's financial instruments in accordance with IFRS 7:

Investments relate to the Group's remaining share in KRP. This asset has been recognised at its initial value and then subsequently fair valued. The valuation at 31 December 2016 uses the "price of recent investment" guidelines as described by the International Private Equity and Venture Capital Valuation Guidelines.

20. Capital Commitments

At 31 December 2016, the Group had no capital commitments (2015: nil).

21. Post Balance Sheet Events

On 11 January 2017, the Company sold its residual 8.74% interest in Zinc Oxide Corporation (formerly known as ZincOx (Korea) Ltd), to Korea Zinc Company Ltd for a consideration of US$7.95 million. An amount of US$7 million was paid to the Company by the end of January 2017 with the balance of US$0.95 million to be paid within nine months of the sale date.

On 19 January 2017, the Company entered into a Joint Venture Agreement ("JVA") with Korea Zinc Company Ltd ("KZC") for the joint development of a recycling plant in Vietnam, based on the Rotary Hearth Furnace ("RHF") technology developed by the Company in Korea. Under the JVA, KZC will fund 100% of a Definitive Development Study ("DDS"), expected to cost US$2.5 million, with the Company earning a 49% interest in an incorporated special purpose company.

On 25 January 2017, the Company used the proceeds from the sale of its residual interest in Zinc Oxide Corporation, to repay £3,970,282 (equivalent to US$4.85 million) of outstanding Loan Notes (see note 16).

22. Segmental Analysis

Up until the end of 2016, the Group considers that its activities are split into the following segments: its recycling operations (the KRP in Korea up until 30 December 2015 when it was discontinued) which was the main activity and all other segments (mainly recycling development). An operating segment is a component of the Group engaged in one of these activities. In relation to the recycling operations activity, each operating segment is usually signified by a separate geographical location for the purposes of making economic decisions.

In addition, UK Head Office costs are disclosed separately and added to the sector result in arriving at an operating (loss) / profit.

The following table analyses the sector revenue and result from continuing operations and reconciles the sector result to the loss after tax.

The activity split of net assets for the Group is as follows:

The activity split of capital additions and amounts depreciated, impaired or amortised, for the Group, including discontinued operations, is as follows:

Geographic information

The Group also has a global geographical presence which is reflected in the segmental analysis. As the Group develops future recycling facilities then each plant that's subsequently developed will become an operating segment in its own right.

Revenue for the Group, on continuing operations, is generated by ZincOx Thailand Company Ltd (2016: US$0.4 million, 2015: nil), ZincOx Resources plc (2016: US$0.2 million, 2015: nil) and USA (2016: nil, 2015: US$0.2 million).

Within Group revenue, 99.7% is generated from Zinc Oxide Corporation (formerly ZincOx (Korea) Ltd) a customer of both ZincOx Thailand Company Ltd and ZincOx Resources plc and is included within 'other segments'. For 2015, 100% of Group revenue is generated from a single customer of Big River Zinc and is also included within 'other segments'.

The carrying amount of non-current assets, excluding deferred tax assets, analysed by the geographical area in which the assets are located is as follows:

* Rest of Europe includes Turkey and previously Belgium

** Other Asia includes Thailand

23. Share Based Payments

Employee Related Share Option Plans

Share options to employees and other eligible persons are granted on a discretionary basis. The exercise price of the granted options is, at least, equal to the market price of the shares on the date of the grant.

On 30 June 2016, all existing options were cancelled and replaced by 24,030,000 granted options as detailed in the tables below. No options were exercised in either of the years to 31 December 2016 or 31 December 2015.

Movements in the number of employee share options outstanding and their related weighted average exercise prices, as stated in their nominal currency of GBP, are as follows: