Zincox Resources Plc Regulatory News (ZOX)

25 June 2013

ZincOx Resources plc

("ZincOx" or the "Company")

AGM Statement

ZincOx Resources plc (symbol: ZOX-L) will be holding its Annual General Meeting today. At the meeting, the Group's Executive Chairman, Andrew Woollett, will provide the following statement:

"We are pleased to announce continuing progress at our Korean Recycling Plant ("KRP") in South Korea. 

Over the past few months, both the recovery and reliability of the plant have improved significantly and the feed rate is now being increased while the operating parameters are optimised so as to maintain a high recovery. Unfortunately, these improvements have been masked by continuing repairs required by the inner tubes of the heat exchangers. These repairs have been caused by failure of the welds due to very poor workmanship. The failure of the welds and the resultant ingress of air has accelerated corrosion. The air ingress limits throughput and ultimately results in stoppages for repairs of up to ten days at a time. 

The heat exchangers were self contained units fabricated in Germany, for which the supplier has recognised its responsibility, and will be responsible for making good the units at no cost to the Company. Over the next two weeks the faulty tubes will be re-welded and several of the corroded sections will be replaced. Following recently completed material trials, the tubes will be replaced with ones made in a significantly more resistant alloy, this material has to be specially manufactured and so the new tubes will only be installed later in the year. Meanwhile, the offgas flow will be modified so that, as required, one side of the heat exchanger equipment can be isolated and repaired while the other continues to operate. Since these units were designed with excess capacity, we expect to be able to operate the plant at 80-85% of production during any periods of isolation but the remainder of the time we expect to be operating at full capacity so that monthly throughput should be over 95%. Thus, while the corrosion has compromised output over the past six months there is a clear plan to overcome this problem and in the short term maintain a high level of production.

Zinc concentrate output is a function of three things: the reliability of the equipment, i.e. the amount of hours per week that the plant is running, or availability, the hourly feed rate and the zinc recovery. Each of these has shown a steady improvement when the stoppages required to repair the heat exchangers are ignored. Following a major review of the maintenance requirements of the plant in March, a more systematic approach has been adopted and this has resulted in a greatly improved reliability of equipment. Excluding the time required for repairing the heat exchangers, the plant is now operating at or above its target availability (92%). Optimisation of the operating conditions in the Rotary Hearth Furnace ("RHF") and particularly greater focus on the equal distribution of briquettes, has enabled zinc recovery to rise to 94% (target 97%). The throughput is currently at about 83% of target and will continue to be increased steadily over the next few months. As throughput is increased we expect recovery to fall slightly, but we will be modifying the plant to enable oxygen enrichment of the combustion air which will increase the temperature in the furnace and thus zinc recovery.

Towards the end of the year we expect to take the throughput to full design capacity by enlarging the size of the briquettes, the optimum dimensions of which are still to be determined by specific testwork. 

The zinc grade of KRP's feed material has risen by about 10% over the past year. The grade of the zinc in its principal product, a zinc oxide concentrate, continues to exceed expectations and is currently running at about 64% zinc. The design modifications required in the circuit that produces KRP's iron by-product, ZHBI, has only recently been completed and commercial test marketing is underway.

Operating costs are mainly all in line with expectations and when at full capacity should all be close to the original forecast.

The stoppages and reduced throughput caused by the problems with the heat exchangers has severely reduced zinc concentrate production which has been limited to about 45% of target capacity over the past three months. In order to cover the cost of repairs, the heat exchanger by-pass and the fabrication of new inner tubes, the Company is in the process of finalising a loan for up to US$7 million, which will be secured against the Company's land in Turkey, details of which will be announced in due course".

Commenting on the announcement, Andrew Woollett, ZincOx's Executive Chairman said "We have a clear plan to overcome the heat exchanger issues that have held back our production and we are looking forward to achieving target capacity this autumn."

For further information please visit www.zincox.com or contact:

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