12th Sep 2005 07:00
ZincOx Resources PLC12 September 2005 ZincOx Resources plc Interim Results - six months ended 30 June 2005 ZincOx Resources plc, a world leader in the design of processes to treatunconventional zinc bearing material, today announced interim results for thesix months ended 30 June 2005. ZincOx's objective is to become a major producer of zinc oxide with operatingcosts among the lowest in the world. The company has an international portfolioof projects: the Aliaga Recycling Project (Turkey), the Mid West RecyclingProject (USA), the Jabali deposit (Yemen) and deferred payment still to beginflowing through from the sale of the Shaimerden deposit (Kazakhstan). Commenting on the results, Andrew Woollett, Managing Director, said: "Solidprogress has been made with all our advanced projects and the Group is expandingrapidly in preparation for the construction and our first production in 2007." Highlights of the results include: • Jabali deposit (Yemen) - completion of 60% earn-in. • Aliaga Recycling Project (Turkey) - Appointment of SNC Lavalin as Project Engineers. • Mid West Recycling Project (USA) - Site identification nearing completion. • Appointment of new staff for project development. • Identification of potential recycling projects. For more information please contact Andrew Woollett Leesa Peters Pam SpoonerZincOx Resources Plc ConduitPR Conduit PRTel: + 44 (0)1276 455 700 Tel: + 44 (0)20 7618 8533Mob 07801 479 [email protected] www.zincox.com Chairman's Statement Over the past six months solid progress has been made with all our existingprojects broadly in line with the targets set at the start of the year. At thesame time we have begun to identify the next generation of recycling projectsthat will underpin our rapid growth strategy. The completion of the feasibility study at Jabali (Yemen) earlier this yearallowed us to commence the next stage of work, comprising three main activities:the confirmation of our earn in by our partners, the approval of our study bythe environmental authorities and the application for a mining lease. We havereceived the approval of the Environmental Protection Agency and this is themost important step relating to the permitting process for the project'sdevelopment. Having completed the feasibility study our partners have confirmedour 60% interest in the project. The Jabali project is the first large scale mining project to be developed inYemen for several decades. Our negotiations with various government departmentsregarding the terms of a mining lease have, therefore, been rather moreprotracted than we had originally envisaged. Our discussions have, however, nowreached a conclusion and we hope to have the Minister's approval of the mininglease shortly and the ratification by Parliament thereafter. We are unwilling to enter into a binding agreement with banks regarding theprovision of project finance until the mining lease has been awarded. Howeverseveral preliminary discussions have been held and we are encouraged by thelevel of interest in the project. The Aliaga (Turkey) and Mid West (USA) recycling projects will essentially havethe same plant design and we are increasingly confident that additional plantswe construct elsewhere in the world will follow the same blueprint. We have,therefore, decided to take on a core engineering contracting company to work onall these projects. This will lead to greater efficiency and constrain thespread of our intellectual property. Furthermore the contractor will be able toprovide guarantees for the process. The engineering company will conduct basicengineering and manage the development of the projects, working closely withlocal companies so as to minimise the cost of construction. The choice of thecore engineering contractor has been a critical decision as it is likely toaffect almost all our future projects. We have recently appointed SNC Lavalin tofulfil this role. SNC Lavalin is a major Canadian engineering contractingcompany with offices throughout the world and a major presence in Brussels.In Turkey, we have submitted our application for environmental approval, andcompleted the geotechnical ground survey work required for plant and landfilldesign. We have completed the water well drilling and have established thatsufficient water for our operation can be sourced from within our land. SNCLavalin is working on the basic engineering and layout of the plant and a shortlist of suitably qualified local engineering contractors has been drawn up. Weexpect the basic feasibility study to be completed at the beginning of the thirdquarter of this year. In the United States we have spent a great deal of time investigating, togetherwith our partners Envirosafe, the best site for our plant. Mannick & Smith, avery experienced firm of local environmental consultants, has been engaged toassist us with site selection. Several sites have been investigated in detailwith particular attention being paid not only to the relative cost of operationat each site but also environmental considerations. Our preferred site is verywell placed for infrastructure and close to a major landfill capable of takingthe residue from our plant. Suitably zoned industrial land amounting to 46 acres(18.4 hectares) has been offered to us. We are awaiting confirmation of theeffluent disposal cost from the local municipality, this is expected shortly.Provided this is in line with the estimates previously given by them we will beable to proceed immediately with the land purchase. Since the development of theTurkish project is ahead of the Mid West project we have decided deliberately torun the latter about three months behind Turkey, this will ensure that thelessons learnt in Turkey can be implemented in the development in the USA. The Polykiln pilot work is continuing to allow us to refine the equipment andimprove our understanding of the process. Results will be reviewed and astrategic plan for the future of the technology drawn up before the year end. In Belgium we have increased our activities at the laboratory where our researchand testwork is carried out. We have successfully piloted every aspect of theLTC process and this work has been used in the design of the plant flow sheetsfor the Turkey and USA projects. Equipment manufacturers have visited the pilotplant and tested their equipment on our materials and solutions so that they areable to provide performance guarantees. We have also constructed andcommissioned a small facility that allows us to produce the quantities of zincoxide product required for test marketing. In addition, by modifying thisfacility we are able to vary the nature of the product so as to be able totailor it to meet the requirements of different industrial users. To run thisprogramme we have recently taken on an experienced product development engineer. The mine development at Shaimerdan, in Kazakhstan, is progressing according toschedule. Open pit mining of overburden started last year and currently 500,000cubic metres per month of waste material is being removed.. The first ore shouldbe mined in the middle of next year and the receipt of our first deferredpayment due under the sale agreement with Kazzinc should be made, as scheduled,in January 2007. The continuing global rise in the consumption of zinc without acorresponding growth in the development of new mine supply has moved the zincprice upwards and the general outlook for next year is very positive. At thecurrent zinc price (US$1,350/tonne) the value to ZincOx of deferred payments forShaimerden amount to US$25.85 million payable over a four year period. The Group will very soon be moving into an entirely new phase of itsdevelopment, that of project construction, which will be followed soonthereafter by the ultimate phase of production. Managing our transition into the construction phase is a difficult challenge forany company and one for which we have been making plans. The cornerstone ofthese plans is to have recruited the right people into key staff positions. Inthis regard we have made some important appointments this year and several morenew members of staff will need to be recruited over the coming months. Centralto our development plans has been the appointment of Ian Stalker as GroupProjects Manger. Ian is a chemical engineer with an outstanding track record inproject development in the mining industry most notably with Goldfields ofAustralia and Ashanti Goldfields. In the same way as SNC Lavalin's appointmentrecognises the similarity between our projects and the synergy to be obtained bythe use of a common development team, Ian will be responsible for thefeasibility studies and development of all our projects.Our vision is to create a global network of plants based upon primary depositsand the recycling of zinc bearing waste materials, particularly those producedby the steel industry. We are confident that the blueprint for Turkey and theUSA can be reproduced elsewhere, and it is our intention to press ahead withfeasibility studies for a number of new projects without delay so that we willhave a second generation of projects ready for development as our existingprojects are brought on stream. Ian's appointment has released strategicmanagement resources that can now be redeployed in the quest for new projects.Several trips have been made to a number of Far Eastern countries and theresponse from steel producers and governments has been very encouraging. We are excited by the challenges facing the company and we are looking forwardto demonstrating our ability to rise to them over the coming months. Noel MassonChairman12 September 2005 CONSOLIDATED PROFIT & LOSS ACCOUNTfor the six months ended 30 June 2005 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £Turnover - - -Cost of sales - - - Gross Profit - - - Exploration costs - (240,354) (463,187) Administrativeexpenses (325,237) (842,354) (1,148,053) ------------- ------------- ------------ Operating loss (325,237) (1,082,708) (1,611,240)Share losses ofAssociate (2,973) - (2,623)Profit ondisposal of fixedassets - 144,493 84,053 ------------- ------------- ----------- (Loss) onordinaryactivities beforeInterest (328,210) (938,215) (1,529,810) Net interestreceivable andsimilar income 111,897 32,238 92,416 Amounts writtenoff investments - - (136,943) ------------- ------------- -----------(Loss) onordinaryactivities beforetax (216,313) (905,977) (1,574,337) Taxation - - (3,844) ------------- ------------- ----------- (Loss) for theperiod taken toreserves (216,313) (905,977) (1,578,181) ------------- ------------- ----------- Profit/(Loss) perordinary sharepence Basic (0.78p) (3.83)p (6.68p) CONSOLIDATED BALANCE SHEETfor the six months ended 30 June 2005 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £FIXED ASSETSIntangible assets 4,859,984 3,499,229 3,957,997Tangible Assets 472,359 12,964 12,031Investments 423,632 703,105 426,605 -------- -------- --------- 5,755,975 4,215,298 4,396,633 -------- -------- --------- CURRENT ASSETSDebtors 115,463 113,369 83,057Debtors due afterone year 151,091 116,098Cash at bank andin hand 5,554,672 3,447,675 2,524,398 -------- -------- --------- 5,821,226 3,561,044 2,723,553Creditors -amounts fallingdue within oneyear (265,273) (270,562) (294,262) -------- --------- NET CURRENTASSETS 5,555,953 3,290,482 2,429,291 -------- -------- --------- NET ASSETS 11,311,928 7,505,780 6,825,924 -------- -------- --------- CAPITAL AND RESERVESCalled up sharecapital 7,243,522 5,906,943 5,906,943Share premium 8,555,220 5,188,848 5,188,848Other reserves (1,004,740) (996,454) (1,004,106)Profit & lossaccount (3,482,074) (2,593,557) (3,265,761) -------- -------- ---------EQUITYSHAREHOLDERS'FUNDS 11,311,928 7,505,780 6,825,924 -------- -------- ---------TOTAL CAPITAL &RESERVES 11,311,928 7,505,780 6,825,924 -------- -------- --------- CONSOLIDATED CASH FLOW STATEMENTfor the six months ended 30 June 2005 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £NET CASH (OUTFLOW) FROMOPERATINGACTIVITIES (419,550) (953,119) (1,306,805) ----------- ----------- ------------- RETURNS ON INVESTMENTSANDSERVICING ON FINANCEInterest received 111,897 32,238 92,416 ----------- ----------- ------------- Net cash inflowfrom returns oninvestments 111,897 32,238 92,416and servicing offinance ------------ ---------- ------------- CAPITAL EXPENDITURE &FINANCIALINVESTMENTPurchase ofintangible fixedassets (901,987) (737,404) (1,454,429)Sale ofInvestments - - 845,330Purchase oftangible fixedassets (463,037) (2,023) (5,579)Investment inAssociate - - (220) ----------- ----------- ------------- Net cash outflow fromcapital expenditureand financialinvestment (1,365,024) (739,427) (614,898) ----------- ----------- ------------- DISPOSALSSale proceeds ondisposal ofsubsidiary - 4,282,812 4,249,075Sale ofInvestment - 719,999 ----------- ----------- ------------- - 5,002,811 4,249,075MANAGEMENT OF LIQUIDRESOURCES(Purchase) ofshort termdeposits (741,937) (3,312,502) (2,258,063) ----------- ----------- -------------Net cash (outflow)/inflowfrom managementof liquidresources (741,937) (3,312,502) (2,258,063) ----------- ----------- -------------FINANCINGIssue of shares 4,986,665 - -Expenses paid inconnection withshare issue (283,714) - - ----------- ----------- ------------- Net cash inflowfrom financing 4,702,951 - - ----------- ----------- ------------- INCREASE IN CASH 2,288,337 30,001 161,725 ----------- ----------- ------------- OTHER PRIMARY STATEMENTSfor the six months ended 30 June 2005 Consolidated statement of recognised gains and losses 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £(Loss) for theperiod taken toreserves (216,313) (905,977) (1,578,181)CurrencyTranslationdifferences (634) 8,128 476 ----------- ----------- -------------Total recognisedgains and lossesfor the period (216,947) (897,849) (1,577,705) ----------- ----------- ------------- Reconciliation of movements in consolidated shareholders' funds 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £ (Loss) for theperiod (216,313) (905,977) (1,578,181) Other recognisedgains/(losses) (634) 8,128 476New share capitaland related sharepremium 4,702,951 - ----------- ----------- ------------- Net movement inshareholders'funds 4,486,004 (897,849) (1,577,705)Openingshareholders'funds 6,825,924 8,403,629 8,403,629 ----------- ----------- -------------Closingshareholders'funds 11,311,928 7,505,780 6,825,924 ----------- ----------- ------------- NOTES TO THE ACCOUNTSfor the six months ended 30 June 2005 1 Basis of preparation of the financial statements The interim information has been prepared on the same basis and using thesame accounting policies as were applied in drawing up the financialinformation contained in the Group accounts for the year ended 31 December 2004. The financial information for the six months ended 30 June 2005 is unaudited.In the opinion of the directors, the financial information for these periods presents fairly the financial position, results of operations and cash flowsfor the period, in conformity with general accepted accounting principles.The financial information for the 12 months ended 31 December 2004 has beenderived from the Group's audited financial statements for that period as filedwith 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 2004 was not qualified. 2 Loss per share 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £ (Loss) (216,313) (905,977) (1,578,181) Weighted average number of shares 27,649,970 23,627,772 23,627,772 Loss per share amount in pence (0.78p) (3.83p) (6.68p) 3 Net cash flow from operating activities 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £ Operating loss (325,237) (1,082,708) (1,611,240) Depreciation 2,709 5,524 10,013 Deferred exploration costs written off - 240,354 463,187 Losses/(Gains) on foreign exchange transactions (634) 8,128 476 (Decrease) in Creditors (28,989) (83,314) (106,085) (Increase)/ in Debtors (67,399) (41,103) (63,156) --------- ---------- -------- (419,550) (953,119) (1,306,805) --------- ---------- -------- Reconciliation of net cash flow to movement in funds 6 months 6 months 12 months to 30 June to 30 June to 31 December 2005 2004 2004 unaudited unaudited audited £ £ £ Increase in cash in the period 2,288,337 30,001 161,725 Deconsolidation of RIF Zinc - - (562) Cash inflow from increase in liquid resources 741,937 3,312,502 2,258,063 --------- ---------- -------- Change in net funds resulting from cash flow 3,030,274 3,342,503 2,419,226 --------- ---------- -------- Movement in net funds in the period 3,030,274 3,342,503 2,419,226 Opening net funds 2,524,398 105,172 105,172 --------- ---------- -------- Closing net funds 5,554,672 3,447,675 2,524,398 --------- ---------- -------- Analysis of change in net funds At Purchase RIF Zinc At 1 short term Deconsolidated 31 January Cashflow deposits December 2004 2004 £ £ £ £ £ Cash in hand and at bank 105,172 161,725 (562) 266,335 Short term deposits - - 2,258,063 - 2,258,063 ------- -------- ---------- -------- -------- 105,172 161,725 2,258,063 (562) 2,524,398 At Purchase At 1 short term 31 January Cashflow deposits December 2005 2005 £ £ £ £ £ Cash in hand and at bank 2,2524,398 2,288,337 - 4,812,735 Short term deposits - - 741,937 - 741,937 ------- -------- ---------- -------- -------- 2,524,398 2,288,337 741,937 - 5,554,672 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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