Placing

ZincOx Resources plc

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

£6.5 million to be raised pursuant to a conditional placing

ZincOx Resources plc (AIM: ZOX.L) is pleased to announce a conditional placing of 14.36 million new Ordinary Shares at a price of 45 pence per share to raise approximately £6.5 million before expenses (the "Placing").

Highlights

·; £6.5 million to be raised pursuant to a conditional placing at a price of 45 pence per share;

·; The Company anticipates that the Placing proceeds will enable the Company to complete the ramp-up of its first recycling plant, KRP1, to begin to progress the expansion of the KRP2 and projects in other parts of the world, and to provide working capital; and

·; The Placing is conditional, inter alia, on a resolution being passed at a general meeting of the Company to dis-apply pre-emption rights in connection with the allotment of the Placing Shares.

Andrew Woollett, Executive Chairman of ZincOx, said:

"We anticipate that the funds to be raised in this placing will enable us to bring our first recycling plant to full production and then move forward with work on the second plant at the same site in Korea and take first mover advantage to other territories around the world."

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1. Details of the Placing

On behalf of the Company, Peel Hunt LLP ("Peel Hunt"), Arden Partners plc ("Arden Partners") and finnCap Limited ("finnCap") have jointly raised approximately £6.5 million (before expenses) by the proposed issue of 14.36 million Ordinary Shares (the "Placing Shares") at a price of 45 pence per share. The Placing Price represents a discount of approximately 5.51 per cent. to the closing mid-market share price of 47.625 pence per Ordinary Share on 31 October 2012. The 14,360,725 Placing Shares will represent approximately 16.12 per cent. of the issued share capital of the Company prior to the issue of the Placing Shares.

Application has been made for the Placing Shares, which will rank pari passu in all respects with the existing Ordinary Shares, to be admitted to trading on the AIM Market of the London Stock Exchange ("Admission"). It is expected that dealings in the Placing Shares will commence on 22 November 2012. Following the issue of the Placing Shares, there will be a total of 103. 47 million Ordinary Shares in issue.

The Placing is conditional upon, inter alia, approval by shareholders of the Company ("Shareholders"). It is expected that a circular will be posted to Shareholders on 2 November 2012 setting out the details of the Placing and convening a general meeting (the "General Meeting") to approve a resolution to dis-apply pre-emption rights (the "Resolution").

The Placing Shares are not being offered to Shareholders on a pre-emptive basis because the Board has concluded, having taken appropriate advice, that it is not in the best interests of the Company to make such a pre-emptive offer due to the time and cost involved. The making of a pre-emptive offer would require the production of a prospectus which would have to comply with the Prospectus Rules and be pre-vetted and approved by the UK Listing Authority.

2. Background to the Placing and Use of Proceeds

In April 2012 the Company finished the construction of the first phase of development of its wholly-owned Korean Recycling Plant ("KRP1"), in the Cheonbuk Industrial Complex in South Korea.

The KRP1 uses mostly conventional equipment configured as a novel flowsheet designed specifically for the recovery of zinc and iron into intermediate products. The rotary hearth furnace ("RHF") is the core equipment in the KRP1. The RHF has been used to process steel industry waste dusts for the removal of zinc oxide and reduction of iron oxide for a number of years. Following completion of the KRP1, however, it has been demonstrated for the first time that the RHF can process the zinc rich waste generated by recycling galvanised scrap in Electric Arc Furnaces. In addition, the process enables the use of radiant heat recovery equipment that has not been used previously in the zinc industry. The innovation represented by the new applications of the RHF and radiant heat exchangers has now been demonstrated at the KRP1.

The breakthrough in the recycling of EAFD at KRP1 draws together existing process equipment and new process technology and represents an important development in zinc metallurgy and waste treatment. In novel developments of this type, however, operators can only gain their experience and equipment can only be optimised while the plant is in production and so attaining full productive capacity is inevitably slower than when well known technology is used. The operator's skills and knowledge of equipment utilisation is obtained during the initial production period, initially at low material throughput and ultimately at full production, and this gradual increase in production is known as the "ramp-up period".

While the construction of the KRP1 was undertaken within budget and on the original timescale, as previously announced, the actual operation of the plant has been delayed by the requirement to modify and upgrade large parts of the combustion system for the rotary hearth furnace. Additional delays have been caused by the requirement to upgrade parts of the circuit that makes the hot briquetted iron product, ZHBI. There have also been delays caused by the reliability of a number of pieces of standard equipment such as conveyors and screens. The contractors responsible for the supply and installation of this standard equipment have been on site resolving these issues. In some cases, the materials handling equipment has been found to be too lightweight for the task for which it was designed and its reliability has been poor. Such equipment will be strengthened or replaced over the coming months. These delays have both prevented the project generating the cashflow that was foreseen and led to additional costs of repair and upgrading. In addition, movements in currency exchange rates during the development period impacted negatively on the project. During the ramp-up period, however, most of the operating costs have been found to broadly be in line with expectations, so that at full production the project should generate the expected cash flow.

The Company anticipates that the proceeds from the current Placing will enable the Company to continue to ramp-up to full production at KRP, and provide general working capital for the Company. As the ramp-up approaches full production these funds may also be used to progress the expansion phase of the KRP ("KRP2") and projects in other parts of the world.

3. Current Trading and Prospects

KRP1 was the first phase of a two phase development that the Company expects will be capable of treating 400,000 tonnes of EAFD per annum.

The KRP1 represents the Company's only productive asset and output has increased over the past six months. The ramp-up to full production is expected to be completed towards the year end. Following the ramp-up period, during the first full year of production the project is scheduled to treat 175,000 tonnes of EAFD rising to full capacity (200,000 tonnes of EAFD per annum) during the second year.

The development work for the expansion of KRP2 has already commenced with detailed engineering and procurement activities. Standard Chartered Bank has been mandated to arrange project finance for the development. In addition, the Company is seeking to obtain loans from purchasers of the zinc concentrate to be produced from KRP2, in the same way that loans were made in respect of KRP1. The provision of project finance from Standard Chartered Bank will require a hedge programme to be implemented over approximately 50 per cent. of the KRP1's output. The zinc price at which this hedge programme can be put in place will determine the debt capacity of the project which will in turn determine the amount of funding required from offtaker loans and other sources. The provision of project finance will require the performance of KRP1 to be monitored over a 90 day period.

The Board believes that the KRP concept can be replicated in other countries and regions where there is substantial generation of EAFD. The definition of new projects is being progressed in a number of countries with a view to having two further projects identified by the middle of 2013. In addition, the Company has recently announced entering into a joint venture agreement to evaluate the construction of such a plant in Russia.

4. Directors' participation in the Placing

It is proposed that certain Directors of ZincOx will subscribe for the following Placing Shares:

1 800,000 of the shares of Andrew Woollett are registered in the name of EFG Trust Company Limited

5. Placing Agreement

Within the terms of the placing agreement entered into between Peel Hunt, Arden Partners, finnCap and the Company, Peel Hunt, Arden Partners and finnCap have conditionally placed the Placing Shares with investors at a price of 45 pence per share. It is anticipated that dealings in the Placing Shares will commence at 8:00 a.m. on 22 November 2012. The Placing is conditional, inter alia, upon the passing of the Resolution and Admission becoming effective and the Placing Agreement becoming unconditional in all respects by no later than 8:00 a.m. on 22 November 2012 or such later date (being not later than 8:00 a.m. on 6 December 2012) as the Company, Peel Hunt, Arden Partners and finnCap may agree.

6. Risk Factors

The risks and uncertainties described below are some of the material risk factors facing the Company which are currently known to the Directors. These risks are not the only ones facing the Company and additional risks and uncertainties not presently known or currently deemed immaterial may also have a material adverse effect on the Company's financial position and prospects. If any or a combination of the following risks materialise, the Company's financial position and prospects could be materially and adversely affected to the detriment of the Company and the Shareholders.

Therefore, before voting in respect of the Resolution, Shareholders should carefully consider the risk factors described below. Please note that the risks are not presented in any order of priority and are not intended to be exhaustive.

Financial

·; As a majority of the Group's sales are derived from the sale of zinc concentrate, a material fall in the zinc price for a sustained period will affect the Group's earnings and the Company's ability to finance future projects.

·; As a majority of the Group's sales are denominated in United States Dollars whereas most of its expenditure and operating costs are denominated in Korean Won, exchange rate movements may have a negative impact on the Group's earnings.

·; There is no certainty that the funds raised in the Placing will be sufficient to satisfy the funding requirements of the Company over the next 12 months, which may include any unforeseen adverse developments relating to equipment, operations, currency or the price of zinc.

KRP1

·; The Company's earnings will be detrimentally affected in the event that the gradual increase in production (known as the "ramp-up") is delayed.

·; Equipment failure could lead to operational delays and increased costs of repairing or replacing such equipment.

·; An offtake agreement has been entered into in respect of the zinc product. However, as no definitive agreement has yet been entered into in respect of the iron product, these sales cannot be guaranteed. Inability to realise value of the iron product will have a negative impact on the Company's earnings.

KRP2

·; The development of KRP2 is dependent upon finalising bank and/or other financing for this purpose. In the event that the required funds are not available at the appropriate time, the development of KRP2 and completion of the construction would be delayed. This would have an adverse effect on the Company's profits.

Future growth

·; The development of future projects outside Korea depends on the Group obtaining contracts from steel mills for the supply of EAFD. Should these not be forthcoming, it will prevent the Group from developing such further projects.

·; The development of future projects also depends upon the Company arranging for bank and/or other financing for this purpose. In the event that such financing is not available at the appropriate time, the development of future projects would be delayed.

·; There is a risk that a potential competitor may design a technology for the treatment of EAFD which could be economically more attractive than the technology used by the Company and, hence, restrict the number of new plants that might be constructed by the Group.

7. General Meeting

A General Meeting of the Company will be held at the offices of Eversheds LLP, One Wood Street, London EC2V 7WS at 1:00 p.m. on 21 November 2012, to consider and, if thought appropriate, pass the Resolution as a special resolution to dis-apply pre-emption rights in connection with the allotment of the Placing Shares.

Shareholders should be aware that if the Resolution is not approved by Shareholders at the General Meeting, the Company will be unable to complete the Placing and will be required to seek alternative sources of finance which may or may not be forthcoming.

8. Timetable

Each of the times and dates in the table below is indicative only and may be subject to change.