26th Sep 2006 07:03
ZincOx Resources PLC26 September 2006 ZincOx Resources plc ("ZincOx") (AIM:ZOX) Interim Results for the Six Months ended 30th June 2006 •Production commences at Kazzinc's Shaimerden zinc deposit triggering deferred payments and cash flow stream to Zincox •At current zinc price, payments due in January 2007 and January 2008 would be US$7.2m and US$37.5m respectively •Shaimerden payments expected to continue until January 2010 •Engineering design work progressing well at Big River Zinc project in USA - operating and capital cost estimates expected by year end •Debt finance mandate awarded for Jabali project in the Yemen •First production from Aliaga project in Turkey, expected in 2008 •Electric Arc Furnace Dust supply option agreement signed with two major steel producers in Thailand as part of new project evaluation in that area "As part of our global recycling strategy, we have for some time beeninvestigating other EAFD producing countries and are delighted that we havesigned up agreements with two major steel producers in Thailand for what amountsto about 35,000 tonnes per annum of EAFD, having an average grade in excess of20% zinc. We are therefore hopeful that we may soon have enough EAFD underoption to be able to consider a new project in Thailand and that this could bethe first of a number new locations to be announced over the next year or so"said Chairman Andrew Woollett today. Contacts: Conduit PR: Tel: +44 20 7429 6666Leesa Peters Mob: +44 (0) 7812 159 885Ed Portman Mob: +44 (0) 7733 363 501 ZincOx Resources plc Tel: +44 1276 450100 Chairman's Statement I am delighted to report that production commenced at Kazzinc's Shaimerden zincdeposit in Kazakhstan on September 17th, and that we have started to accrue thedeferred payments due under the sale agreement. This marks the commencement of acash flow stream for the Company that is likely to be spread over the next fiveyears. The amount of the deferred payment is based on the amount of zinc minedand the average zinc price for the year, and is payable by the 30th of Januaryof the following year. If the zinc price from the 17th of September through tothe end of the year was to average the price today, US$3,430 per tonne, thefirst payment, due on 30th January 2007, will be US$7.2 million dollars, basedon 11,507 tonnes of zinc being mined. If the average zinc price were to remainthe same for 2007, the payment for next year, payable in January 2008, would beUS$37.5 million. The deferred payment is due on only the first 200,000 tonnes of zinc mined atthe rate of US$0.2375 for every dollar that the price of zinc is above US$800per tonne. The 2006 payment is based on a deemed minimum production of 40,000tonnes per annum but reduced prorata for the period 17th September to the yearend. Independent consulting mining engineers, Orelogy Pty Ltd, have recentlycarried out a review of Kazzinc's mine plan for Shaimerden. Orelogy haveconfirmed that the mine plan is reasonable and achievable and that mining of200,000 tonnes of zinc should be achieved by September 2007. We can, therefore,expect our deferred payments to be based on 60,000 tonnes of zinc per annum for2007, 2008 and 2009 and 8,493 tonnes for 2010. The Shaimerden deferred payments create the equivalent of a short term cash flowthat would be similar to having a medium sized zinc producer of our own, butwithout having suffered the dilution in shareholder equity normally associatedwith the cost of developing a new mine. Elsewhere the first half of 2006 saw the completion of our acquisition of theBig River zinc smelter, in Illinois, the advancement of the Aliaga recyclingproject, in Turkey along with solid progress at our Jabali mine project in Yemen The acquisition of Big River has been a major leap forward for the company. TheBig River smelter has a capacity of 100,000 tonnes of zinc per annum and wouldcost in the order of £220 million to build today, following what would likelyinvolve several years of environmental permitting. Our purchase cost amounted to£8.1 million and this represents an exceptional opportunity for us to enter theUS market both quickly and cost effectively. By installing new equipment in the first half of the process we will be able toconvert the plant to treat EAFD, a waste material produced by the recycling ofgalvanised scrap. This sort of material is plentiful in the eastern half of theUSA and Big River is therefore well placed for sourcing this new feed in starkcontrast to the previous operation which relied on local zinc mines that are allnow closed and concentrate from Doe Run. It was the recent mine closures and the limitations on the type of feed that canbe treated by the equipment at Big River which forced the smelter to source highpurity zinc concentrate on the international spot market at a time when suchmaterial was exceptionally expensive. This led to the decision by the previousowners to suspend operations temporarily. ZincOx was keen to restart theoperation but the refusal by Doe Run to continue the supply of concentrate onthe existing contractual terms meant this was not possible. However, in thefuture, we believe the relative price of appropriate concentrates is likely toreturn to historical levels, and at such a time it may be attractive to restartproduction based on the existing equipment which would then supplement the feedfrom the new EAFD operation. The use of EAFD at Big River is made possible by zinc solvent extractionpurification technology, the largest application of which has been the Skorpionproject in Namibia. SNC Lavalin, Montreal, the engineering company responsiblefor the development of the Skorpion project have been appointed as leadengineers for the Big River Zinc redevelopment. Engineering design work isprogressing well and operating and capital cost estimates will be completed thebefore the end of this year with first production expected at the end of 2007. At Jabali our cost review is ongoing in parallel with the debt financing of theproject. In respect of the latter Jabal Salab, our Yemeni resident subsidiarycompany, has recently mandated Exotix Ltd, a subsidiary of the London basedICAP, to arrange debt finance for the development. Exotix are a specialist bondfinancing team experienced in emerging markets. We are hoping to have debtfinance in place, subject to documentation, by the start of next year. Progress on the Aliaga Recycling Project has been disappointing due to a delayin the approval for planning permission in respect of the plant and residuedisposal site. This now falls on the critical path for the development of theproject and the current delays are likely to preclude first production beforethe end of 2007. As part of our global recycling strategy, we have for some time beeninvestigating other EAFD producing countries. I am delighted to report that wehave signed EAFD supply option agreements with two major steel producers inThailand for what amounts to about 35,000 tonnes per annum of EAFD, having anaverage grade in excess of 20% zinc. We are therefore hopeful that we may soonhave enough EAFD under option to be able to consider a new project in Thailandand that this could be the first of a number new locations to be announced overthe next year or so. To date, 2006 has been an intense period of activity for everyone in the companyand on behalf of the shareholders I would like to thank all of the staff fortheir tremendous efforts during this period. Andrew WoollettChairman 26 September 2006 ZINCOX RESOURCES PLCCONSOLIDATED PROFIT & LOSS ACCOUNTFor the six months ended 30 June 2006 6 months 6 months 12 months to 30 June to 30 June to 31 December 2006 2005 2005 unaudited unaudited audited £ £ £Turnover - - -Cost of Sales - - - --------- --------- ----------Gross Profit - - - Exploration Costs (38,476) - (155,194)Administrative Expenses (876,793) (325,237) (820,357) --------- --------- ---------- Operating Loss (915,269) (325,237) (975,551)Share of Profit/(Losses) of Associate 7,941 (2,973) (7,775)Profit on Disposal ofFixed Assets 236 - - --------- --------- ---------- (Loss) on OrdinaryActivities before Interest (907,092) (328,210) (983,326) Net Interest receivable andsimilar Income 284,815 111,897 225,965Loss on sale ofInvestments (2,811) - (34,822) Amounts writtenoff Investments - - 4,058 --------- --------- ---------- (Loss) on OrdinaryActivities (625,088) (216,313) (788,125)Taxation - - (6,196) --------- --------- ----------(Loss) for thePeriod taken to Reserves (625,088) (216,313) (794,321) ========= ========= ========== Profit/(Loss) per OrdinaryShare - Basic (1.67)p (0.78)p (2.74)p ========= ========= ========== CONSOLIDATED BALANCE SHEETFor the six months ended 30 June 2006 6 months 6 months 12 months to 30 June to 30 June to 31 December 2006 2005 2005 unaudited unaudited audited Note £ £ £FIXED ASSETSIntangible assets 7,811,667 4,859,984 6,136,310Tangible Assets 9,436,791 472,359 509,956Investments 12,643 423,632 225,737 ---------- ---------- ---------- 17,261,101 5,755,975 6,872,003 ---------- ---------- ----------CURRENT ASSETSDebtors 4 19,958,282 115,463 171,341Debtors due afterone year 221,791 151,091 196,779Cash at bank andin hand 7,311,883 5,554,672 3,935,045 ---------- ---------- ---------- 27,491,956 5,821,226 4,303,165Creditors - amounts falling due within one year (5,674,080) (265,272) (438,481) ---------- ---------- ----------NET CURRENT ASSETS 21,817,876 5,555,954 3,864,684 -------- -------- --------- Creditors - amounts fallingdue after one year (759,591) - - ---------- ---------- ----------NET ASSETS 38,319,386 11,311,929 10,736,687 ========== ========== ========== CAPITAL AND RESERVESCalled up share capital 11,592,204 7,243,522 7,243,522Share premium 32,325,929 8,555,220 8,555,221Other reserves (913,577) (1,004,740) (1,001,974)Profit & loss account (4,685,170) (3,482,073) (4,060,082) ---------- ---------- ----------EQUITY SHAREHOLDERS' FUNDS 38,319,386 11,311,929 10,736,687 ========== ========== ========== CONSOLIDATED CASH FLOW STATEMENTFor the six months ended 30 June 2006 6 months 6 months 12 months to 30 June to 30 June to 31 December 2006 2005 2005 unaudited unaudited audited £ £ £ NET CASH (OUTFLOW) FROM OPERATING ACTIVITIES 1,079,571 (419,550) (824,329) RETURNS ON INVESTMENTS ANDSERVICING ON FINANCEInterest received 284,565 111,897 225,965 CAPITAL EXPENDITURE ANDFINANCIAL INVESTMENTPurchase of IntangibleFixed Assets (1,713,833) (901,987) (2,333,507)Sale of Investments 218,224 - 162,329Purchase of TangibleFixed Assets (8,961,512) (463,037) (522,763) ----------- ---------- -----------Net cash outflow from CapitalExpenditure andFinancial Investment (10,457,121) (1,365,024) (2,693,941) ----------- ---------- ----------- MANAGEMENT OF LIQUID RESOURCES(Purchase) ofShort Term Deposits (2,722,323) (741,937) (1,312,923) FINANCINGIssue of shares paid 13,731,931 4,986,665 4,986,665Expenses paid inconnection with share issue (1,262,108) (283,713) (283,713) ----------- ---------- ----------- Net cash inflowfrom financing 12,469,823 4,702,952 4,702,952 ----------- ---------- -----------INCREASE IN CASH 654,515 2,288,338 97,724 =========== ========== =========== OTHER PRIMARY STATEMENTSFor the six months ended 30 June 2006 Consolidated Statement of Total Recognised Gains and Losses 6 months 6 months 12 months to to 30 June to 30 June 31 December 2006 2005 2005 unaudited unaudited audited Note £ £ £ (Loss) for the period taken to reserves (625,088) (216,313) (794,321) Currency Translationdifferences 88,397 (634) 2,132 -------- -------- --------Total RecognisedGains and Losses forthe Period (536,691) (216,947) (792,189) ======== ======== ======== Reconciliation of Movements in Consolidated Shareholders' Funds 6 months 6 months 12 months to 30 June to 30 June to 31 December 2006 2005 2005 unaudited unaudited audited £ £ £ (Loss) for the Period (625,088) (216,313) (794,321) Other RecognisedGains/(Losses) 88,397 (634) 2,132New Share Capitaland Related SharePremium receivable 4 15,649,567 - -New Share Capitaland Related SharePremium received 12,469,823 4,702,952 4,702,952 ---------- ---------- ---------- Net movement inShareholders' Funds 27,582,699 4,486,005 3,910,763Opening Shareholders' Funds 10,736,687 6,825,924 6,825,924 ---------- ---------- ----------Closing Shareholders' Funds 38,319,386 11,311,929 10,736,687 ========== ========== ========== NOTES TO THE ACCOUNTSFor the six months ended 30 June 2006 1 Basis of Preparation of the Financial Statements The interim information has been prepared on the same basis and using the same accounting policies as were applied in drawing up the financial information contained in the Group Accounts for the year ended 31 December 2005. The financial information for the six months ended 30 June 2006 is unaudited. In the opinion of the directors, the financial information for these periods presents fairly the financial position, results of operations and cash flows for the period, in conformity with generally accepted accounting principles. The financial information for the 12 months ended 31 December 2005 has been derived from the Group's audited financial statements for that period as filed with the Registrar of Companies and does not constitute the Group's statutory accounts for that period. The auditors' report on the statutory accounts for the year ended 31 December 2005 was not qualified. 2 Loss per Share 6 months 6 months 12 months to to 30 June to 30 June 31 December 2006 2005 2005 unaudited unaudited audited £ £ £ (Loss) (625,088) (216,313) (794,321) Weighted average number of shares 37,519,569 27,649,970 28,313,843 Loss per Ordinary Share - Basic (1.67)p (0.78)p (2.74)p 3 Net Cash Flow from Operating Activities 6 months 6 months 12 months to to 30 June to 30 June 31 December 2006 2005 2005 unaudited unaudited audited £ £ £ Operating Loss (915,269) (325,237) (975,551) Depreciation 35,163 2,709 24,838 Deferred Exploration costs written off 38,476 - 155,194 Losses/(Gains) on foreign exchange transactions 88,397 (634) 2,132 (Decrease)/Increase in Creditors 5,995,190 (28,989) 138,023 (Increase)/ in Debtors (4,162,386) (67,399) (168,965) --------- --------- --------- 1,079,571 (419,550) (824,329) ========= ========= ========= Reconciliation of Net Cash Flow to Movement in Funds 6 months 6 months 12 months to to 30 June to 30 June 31 December 2006 2005 2005 unaudited unaudited audited £ £ £ Increase in Cash in the Period 654,515 2,288,337 97,724 Cash inflow from increase in liquid resources 2,722,323 741,937 1,312,923 -------- -------- --------- Movement in net funds in the period 3,376,838 3,030,274 1,410,647 Opening net funds 3,935,045 2,524,398 2,524,398 -------- -------- --------- Closing net funds 7,311,883 5,554,672 3,935,045 ======== ======== ========= Analysis of Change in Net Funds At Purchase of At 1 January Cashflow short term 31 December 2005 deposits 2005 £ £ £ £ Cash in Hand and at Bank 266,335 97,724 - 364,059 Short Term Deposits 2,258,063 - 1,312,923 3,570,986 ---------- -------- --------- --------- 2,524,398 97,724 1,312,923 3,935,045 ========== ======== ========= ========= At Purchase of At 1 January Cashflow short term 30 June 2006 deposits 2006 £ £ £ £ Cash in Hand and at Bank 364,059 654,515 - 1,018,574 Short Term Deposits 3,570,986 - 2,722,323 6,293,309 ---------- -------- --------- --------- 3,935,045 654,515 2,722,323 7,311,883 ========== ======== ========= ========= 4 Debtors The Debtors shown include an amount of £15,649,567 (2005: £Nil) in respect of the Public Placing done by the company on 26th June 2006. These funds were received after the end of the Period. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Zincox Resources Plc