Half Yearly Report

27 September 2012

ZincOx Resources plc

("ZincOx", the "Company" or the "Group")

Half Yearly Results for the six months ended 30 June 2012

ZincOx Resources plc (AIM Ticker: ZOX), the developer of Asia's largest zinc recycling project, today announces its results for the six months ended 30 June 2012.

Highlights

Korean Recycling Plant ("KRP")

·; Construction of the Korean Recycling Plant completed on time and on budget

·; Zinc product of target quality obtained

·; All zinc product sold

Highlights post the period-end

·; Main process targets achieved:

o Zinc recovery 94%-99%

o Iron metallization 80%-85%

o High heat recovery

·; Ramp-up to target production expected by year end

·; Operation at over 70% of target

·; Operation started to generate positive EBITDA1

·; Plant resumes production

1 earnings before interest, tax, depreciation and amortisation

Commenting on the half yearly results, Andrew Woollett, Chairman said,

"The Company is now a producer with a world beating technology that we will roll out globally. The Korean Recycling Plant has demonstrated the technology, is generating a positive EBITDA and will steadily ramp-up to target production before the year end"

For further information, please go to: www.zincox.com

Chairman's Statement

With the commencement of production at ZincOx's first recycling plant, the Company has, after many years of Research and Development, been transformed into a producer. In the first six months of this year we were focussed almost entirely on bringing the first phase ("KRP1") of development of the Korean Recycling Plant on stream as safely and as quickly as possible. Having demonstrated the process, we are now building up production to our targeted throughput and beginning to work on the development of the second phase ("KRP2") expansion of the project. The plant represents a new standard in the recycling of a waste, Electric Arc Furnace Dust, ("EAFD") generated by the re-melting of galvanised scrap in electric arc furnaces, a process which represents about one third of steel produced across the world today.

KRP1

The construction of KRP1 was finished on schedule and on budget in March. First production, however, was delayed by some weeks as a number of teething problems with the combustion system in the Rotary Hearth Furnace ("RHF") needed to be resolved. The initial production test occurred at the end of April since which time hourly throughput and plant reliability has been increasing in a step wise fashion. Since the core process requires temperatures in excess of 1,000°C there are large parts of the plant that are inaccessible during production operations. Several pieces of equipment are insulated from these high temperatures by refractory bricks that take two days to heat up and a further two days to cool down. As a result of which numerous remedial tasks are grouped together for attention in as few downtime periods as possible. Whilst remedial actions have taken longer than originally expected there has been a growing improvement in plant performance following each shut down.

Although the process employed at KRP1 involves a new application of well-established technologies, the principal risk of the development was in the operation of the process. The process has worked extremely well from the very first run of the plant, as evidenced by the excellent quality of our principal product, HZO, a zinc oxide concentrate containing about 62% zinc, sold to Korea Zinc under a long term offtake agreement linked to the provision of development loans (US$50 million). In addition to zinc oxide recovery, iron oxide is reduced giving a by-product (ZHBI) containing metallic iron.

It became apparent during the early production runs that the hot briquetting circuit that produces the ZHBI, was not working efficiently. This required extensive remediation work that was completed in September so that equipment could be run at design capacity. Achievement of the target quality of ZHBI will need to wait for the installation of additional monitoring equipment scheduled for delivery in October.

In the second week of September the plant was closed for a routine inspection which revealed corrosion in the base of the main heat exchangers. This problem has been resolved by effecting a minor, but significant, design modification with production now resumed. Prior to this inspection, the plant was running at over 70% of target throughput. The throughput is expected to increase to 85% by the end of October with target production by the year end.

With the exception of gas, a unit which can only be measured when the plant is operating at target capacity, operating costs have been confirmed and are in line with expectations, so that immediately before the September inspection the plant was generating a positive EBITDA from zinc sales alone.

KRP2

As production builds up so our technical team and contractors are able to increasingly focus on the development of KRP2, and in line with our agreement with the steel mills, we have recently confirmed our intention to expand the project.

Xmetech, the Korean engineering company that undertook the Engineering, Procurement and Construction Management ("EPCM") contract for KRP1, has been awarded the contract for the construction of KRP2. The procurement of long lead items is underway including the fabrication of the RHF, for which bids are currently being evaluated.

During the summer Xmetech started the detailed engineering work that is the first element of the construction schedule. This has enabled us to issue tenders for the foundation and other civil engineering works.

Since the end of last year we have been working with Standard Chartered Bank on the financing of KRP2 and in July, Standard Chartered Bank were formally mandated to raise project finance for the development. In addition to this, the Company intends to raise subordinated debt finance, possibly through an offtake arrangement similar to that used for KRP1.

Other Projects

Now that the process has been demonstrated at KRP1 we are confident that finance will be available for the development of new projects elsewhere in the world. This may be from international banks, as is planned for KRP2, HZO offtakers, and potentially, domestic and international partners. We are keen to press ahead as quickly as possible with the development of new projects in order to maximise the first mover advantage we have with our breakthrough technology.

We have, for several years, been interested in developing recycling plants in Thailand and Turkey, but our activities in these areas had been on hold pending the demonstration of the process. Now that this has been achieved, we have recently resumed work on these projects.

Thailand

We continue to see Thailand as a base for an important regional recycling facility that will be able to treat all the EAFD generated there, both now and in the future. We have obtained a site centrally located among the Thai steel mills and close to Thailand's largest container port. Having hosted a successful visit to KRP by a number of Thai steel mills and government officials in April, we expect to be able to build on that success and enter into long term supply contracts over the coming months.

Turkey

Turkey is the largest importer of scrap in the world and has a thriving and expanding scrap recycling industry. As a result of a recent rationalisation of land in the Aliaga Heavy Industrial Zone, our two plots have been combined into a single rectangular site. This lies within three kilometres of five mills that together produce over 120,000 tonnes of EAFD per annum, representing about 30% of the EAFD generated in Turkey. We have recently re-engaged with some Turkish mills with a view to entering into long term supply agreements.

General

KRP has had a number of visitors over the past few months including Britain's Ambassador to Korea, Scott Wightman whose blog (http://blogs.fco.gov.uk/scottwightman/2012/09/04/great-british-innovation/), aptly summarises the status of the operation. For those unable to visit the plant, we have had a short film made about the operation which is on the home page of our website, and I would thoroughly recommend it to all shareholders. The quality of the project has also been recognised by a wider audience, as it was shortlisted by The Financial Times and International Finance Corporation for their Sustainable Investment of the Year Award in June this year.

Financial Results

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 will receive future sales revenues predominantly in US Dollars and, for these reasons, the directors have decided that the Group should now report its financial results in US Dollars and has opted to change its presentational currency from Pounds Sterling to US Dollars with effect from 1 January 2012. The effect of this change on the financial statements is explained in note 3 below.

The adjusted Group loss after tax, attributable to the shareholders of the parent, is US$9.5m for the period generating an adjusted loss per share of 10.63 cents. The reported Group profit after tax of US$1.0m for the period (period to 30 June 2011: loss of US$3.5m, year to 31 December 2011: loss of US$9.8m) has been adjusted to remove a one-off accounting gain of US$10.5m, following a deemed loss of control of Jabal Salab and its subsequent deconsolidation (from the consolidated financial statements). The Group is no longer required to fully consolidate the assets, liabilities, profits or losses of Jabal Salab into its financial results because there has been a shift in the management and control of the project away from the Group, with our Yemeni partner continuing to fund the project and taking effective management control of the operation on a day to day basis. This has given rise to this one-off accounting gain in the Group (see note 5 below for full details).

Until the end of April, operating costs associated with KRP1 were capitalised and after that, began being charged through the income statement. The revenue raised in the half year in respect of Korea was US$0.5m. In these early stages of ramp-up the operating costs were high due to the lower throughput in the plant which meant a lower efficiency, particularly on gas consumption, leading to a loss on the Korean operation in May and June.

Principal Risks and Uncertainties

The principal risks and uncertainties facing the Group have not changed from those stated in the Annual Report 2011.

Outlook

The main focus of the Group in the immediate short term is to continue to ramp-up the Korean plant and to generate cash consistently from this operation and at the same time take forward the development and financing of KRP2.

Andrew Woollett

Executive Chairman

27 September 2012

Forward Looking Statements

The Chairman's Statement contains 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.

ZincOx Resources plc

Consolidated Interim Income Statement

 for the period ended 30 June 2012

# the adjusted loss per share calculation excludes the one-off gain in the period of US$10,463,000 following the deemed loss of control of Jabal Salab at 31 May 2012 and its subsequent deconsolidation from these financial statements.

ZincOx Resources plc

Consolidated Interim Statement of Comprehensive Income

for the period ended 30 June 2012

ZincOx Resources plc

Consolidated Interim Balance Sheet

at 30 June 2012

ZincOx Resources plc

Consolidated Interim Cash Flow Statement

for the period ended 30 June 2012

ZincOx Resources plc

Consolidated Statement of Changes in Shareholders' Equity

at 30 June 2012

Notes to the Consolidated Financial Interim Statements

1. Basis of preparation

These interim condensed consolidated financial statements are the unaudited Consolidated Financial Statements of ZincOx Resources plc, for the six months ended 30 June 2012. They have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU and the Companies Act 2006, applicable to companies reporting under IFRS. They do not include all of the information required in annual financial statements in accordance with IFRS, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2011.

These interim financial statements were approved by the Board on 26 September 2012. The financial information set out in this interim report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2011, prepared under IFRS, have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498(2) or Section 498(3) of the Companies Act 2006.

These financial statements have been prepared under the historical cost convention and the consolidated financial statements incorporate the financial statements of the Company and its subsidiary companies.

The financial information for the six months ended 30 June 2012 and 30 June 2011 is unaudited.

2. Significant accounting policies 

The accounting policies and presentation followed in the preparation of this interim report have been consistently applied to all periods in these financial statements and are the same as those applied by the Group in the preparation of its Annual Report for the year ended 31 December 2011. The one exception to this is that the presentational currency of the Group has changed from Pounds Sterling to US Dollars. This is discussed in more detail in note 3 below.

3. Change in presentational currency

Following the commissioning and start of production at KRP1, the directors reviewed the Group's activities to determine an appropriate reporting currency for the Group.

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 will receive sales revenues predominantly in US Dollars. It is also anticipated that a change to US Dollar reporting will reduce the impact of any foreign exchange fluctuations for the Group in the future. For these reasons, the directors have decided that the Group should now report its financial results in US Dollars and has opted to change its presentational currency from Pounds Sterling to US Dollars with effect from 1 January 2012.

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 elected to translate its Income Statement at average exchange rates for the period and to translate its assets and liabilities at period end exchange rates. Share capital and share premium reserves 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.

The biggest impact on the re-presented US Dollar statements has been on the valuations of the share capital reserve, the share premium reserve, the retained losses reserve and the foreign exchange translation reserve. Capital has been raised in the past at an average historic exchange rate of US$1.85/£1 compared to a current exchange rate of US$1.56/£1. Furthermore, the retained losses reserve has now been translated at average historic exchange rates rather than period end rates as was previously the case.

 4. Critical accounting estimates and judgments

The Group performs an assessment of the recoverability of assets to see whether any of the projects have suffered impairment. In order to assess the recoverable amount of an individual project, a cash flow model is run over 20 years or the life of the asset, whichever is shorter, with appropriate assumptions for zinc price, operating and capital development costs. Any project that doesn't return a sufficient positive net present value ("NPV") as a result of this assessment is impaired accordingly. Assets under the course of development are tested in the same way. It should be noted that the zinc price and the discount rate have the most significant impact on the NPV calculation.

Jabali project

Due to the conditions reported in the 2011 Annual Report regarding the political situation in Yemen and the lack of funding for the Jabali project, there remains the continuing existence of a material uncertainty which may cast doubt on the carrying value of the assets relating to the Jabali project.

For this reason, an impairment provision of US$1.8m against property, plant and equipment has been made in the period prior to the deemed loss of control of Jabal Salab on 31 May 2012 (see note 5 below). This corresponds to critical expenditure in the period which Jabal Salab has incurred to maintain the value in the Jabali project. Jabal Salab had, with the assistance of its Yemen based partner, managed to secure a limited recourse credit facility with the International Bank of Yemen ("IBY") which has enabled this critical expenditure in Yemen to be funded in the short term (see note 9 below).

Property, plant and equipment relating to the Rubber Grade Plant ("RGP") in Belgium were reviewed for impairment following the decision to market the asset for sale (see note 8 below). This resulted in an impairment provision of US$1.0m (EUR 0.8m) in the period.

5. Deemed loss of control of Jabal Salab Company (Yemen) Limited

The status of the Jabali project and its future financing in Yemen remains compromised by the political situation in the country. As a result, the project remains fully impaired by the Group (see note 4 above). The Group has continued efforts to finance or sell its share in the project and as reported at the end of 2011, our Yemeni partner has continued to fund the project and at the end of May, it had taken the leading role in the day to day management and control of the operation. Effective management control has deemed to pass to our Yemeni partner and, as a result, the Group is no longer required to fully consolidate the assets, liabilities, profits or losses of Jabal Salab into its financial results. This has led to a change in accounting treatment for Jabal Salab, meaning that it no longer qualifies as a subsidiary undertaking within the Group but has now been reclassified as an associate undertaking with effect from 31 May 2012.

The one-off accounting gain to the Group of US$10.5m, as a result of a deemed loss of control of Jabal Salab, is reconciled in the table below which also shows the effect of the deemed loss of control on the assets and liabilities of the Group and of the non-controlling interest in the Group.

There was no consideration received at the point where effective management control was changed and the fair value of the retained investment in Jabal Salab has been marked down to US$1. Furthermore this investment has been reclassified as an 'asset held for sale' (see note 8 below).

In the Consolidated Interim Cash Flow Statement, the increase in trade and other payables of US$5,866,000 for the period excludes trade and other payables of US$12,830,000 that are attributable to Jabal Salab and which were removed when there was a deemed loss of control of Jabal Salab.

6. Earnings / (loss) per share

The calculation of basic and diluted earnings / (loss) per ordinary share is summarised in the table below. An adjusted loss per ordinary share for the period has been calculated, excluding the one-off gain of US$10,463,000 on the deemed loss of control of Jabal Salab at 31 May 2012 and is presented.

At 30 June 2012, there were 932,557 share options (period to 30 June 2011 and year to 31 December 2011: nil) in issue which may have a dilutive effect on the basic earnings / (loss) per share in the future.

7. Trade and other payables

Within current liabilities, the trade and other payables amount for the period includes accruals of US$8.3m relating to outstanding purchase order commitments in Korea for the construction of KRP1. These amounts will be invoiced and become payable once individual completion certificates have been finalised against the work of each supplier.

8. Assets held for sale

Following the recent rationalisation of land in Turkey, a plot of land outside the Aliaga Heavy Industrial Zone, originally purchased in 2006 and now surplus to requirement, had been split into smaller plots to facilitate its sale. At 30 June 2012, in total, 10 of the 43 plots have been sold for US$0.9m generating a profit of US$0.5m. The Group is now actively marketing these plots which has led the directors to consider these assets as held for sale under the provisions of IFRS 5 'Non-Current Assets Held for Sale and Discontinued Operations'. In view of the uncertainty concerning the price that can be obtained for future sales of the land, the historic cost of US$2.7m (Turkish Lira 4.8m) has been applied as a realisable value.

The retained interest in the Jabali project has been fair valued at US$1.

Since January 2012, the property, plant and equipment relating to the RGP at Pearl Zinc SA in Belgium has been marketed with a view to selling it in the following twelve months. The directors hold the view that this asset should be reclassified as an asset held for sale at the period ending 30 June 2012 under the provisions of IFRS 5. A realisable value of US$3.0m (EUR 2.4m) has been applied to the RGP as at 30 June 2012.

9. Borrowings

Jabali project

An unsecured loan was taken out with the International Bank of Yemen by Jabal Salab in March 2011. The facility was initially for US$5.5m at an interest rate of 6% but was extended into 2012 to provide continuing finance for the Jabali project whilst a more appropriate long-term funding was pursued. The outstanding loan at 31 May 2012, including accrued interest, was US$6.0m and as of 30 June 2012 (see note 5 above), this has been deconsolidated.

Korean Recycling Plant

Two separate loans that were taken out with Korea Zinc Company Limited ("Korea Zinc") in 2011, to provide US$50m of the US$110m funding for KRP1, were fully drawn in the period.

A long term 'Offtake Loan' was agreed for US$35m and is repayable on 30 June 2022. Interest is chargeable at USD 6 month LIBOR plus a 5% margin and becomes payable from June 2013, two years from first drawdown. A shorter term 'Development Loan' was agreed for US$15m and is repayable three years from first drawdown being February 2015. Interest is chargeable at 15% and becomes payable immediately from first drawdown in line with the agreed interest periods. Both loans with Korea Zinc are secured by a debenture over the assets of KRP and a corporate guarantee.

10. Further copies of this statement

Copies of this statement are available for download from the Company's website at www.zincox.com or on request from the Company Secretary, ZincOx Resources plc, Knightway House, Park Street, Bagshot, Surrey, GU19 5AQ.