Zincox Resources Plc Regulatory News (ZOX)

27 Nov 2006 07:00

ZincOx Resources PLC27 November 2006 ZincOx Resources plc (ZOX) Jabali update and partial sale 27 November 2006 ZincOx Resources (Yemen) Limited, a 100% subsidiary of ZincOx Resources plc(together "ZincOx") is pleased to announce an update on the development of theJabali zinc oxide deposit in Yemen. In line with the policy of the Government of the Republic of Yemen to encouragethe development of the country's mining industry, the Jabali ExploitationContract was signed by the Minister for Oil and Minerals and approved by theCabinet on 7 October 2006. It will now pass to Parliament for approval prior tofinal ratification by the President and incorporation as a law. Assumingapproval by Parliament and financing is secured during the first quarter nextyear, production at Jabali is scheduled to commence in the third quarter of2008. The Contract sets out all the terms and conditions for the development ofthe mine and processing plant over the project's life and includes a royalty toGovernment of 2% of net zinc sales and a six year tax holiday. In a capital restructuring of the Jabali joint venture, ("Jabal Salab"), ZincOxhas agreed to sell 13% to Ansan Wikfs Hadramaut Ltd ("Ansan") for an amount ofUS$7.5 million. A further US$1.0 million is payable to ZincOx by Ansan if it issuccessful in securing high debt leverage for the project (see below). In a subsequent transaction, Anglo American Exploration BV ("AAE"), which held a20% interest in Jabal Salab, has advised ZincOx and Ansan that forecast annualzinc production from the Jabali mine attributable to AAE does not meet itsminimum size threshold and as a result it has decided not to participate in thedevelopment of the project. Under the terms of the joint venture agreement,AAE's interest is assigned as to 5% to ZincOx and 15% to Ansan. Following these transactions, the interests in Jabal Salab are ZincOx with 52%and Ansan with 48%. Jabal Salab has recently signed a mandate with Exotix Limited, a subsidiary ofICAP plc, to arrange US$120 million of debt finance in the form of a highyielding bond with a coupon linked to the zinc price. ICAP is the world'slargest inter-dealer brokerage house and a FTSE 100 company, based in London.Exotix specialises in emerging market debt instruments. The Jabali feasibility study, which was completed in March 2005, is beingupdated jointly by SNC Lavalin Europe ("SNC"), based in Brussels, and MDMEngineering, based in Johannesburg. All basic engineering is scheduled to becomplete by the end of February 2007. The capital cost to develop the mine,processing plant and associated infrastructure at Jabali, will be finalised atthat time. Current estimates indicate costs of US$176.7 million, includingworking capital and financing costs. This is an increase on the 2005 budgetreflecting a number of changes over the last two years including the moredetailed engineering undertaken by SNC on the LTC zinc recovery processdeveloped by ZincOx; the higher quality product to be produced; and the severeworldwide increase in mining related costs over the last few years, particularlyin fuel, labour and construction materials. The Jabali project is based on the mining of 800,000 tonnes per annum ("tpa") ofore and the production of 70,000 tpa of zinc oxide containing 80% zinc. Using aflat zinc price of US$1,500 per tonne over the 12 year life of the mine andassuming no debt, the Jabali project has a post tax NPV (10% discount rate) ofUS$84.8 million and an internal rate of return of 21%. Commenting on the above progress, Andrew Woollett, Chairman of ZincOx Resourcesplc, stated: "Now that the Cabinet has approved the Exploitation Contract welook forward to commencing construction at Jabali as soon as Parliamentary andPresidential approvals have been obtained, estimated by our partners to be earlynext year. Jabali will be Yemen's first large scale base metal mine and we aredelighted to have the active participation of Ansan, such well respected andsubstantial local partners". The shares of ZincOx Resources plc (ticker symbol "ZOX") are listed on the AIMsection on the London Stock Exchange. For more information please contact: Andrew Woollett Leesa Peters/Laurence ReadZincOx Resources plc Conduit PRTel: +44 (0) 1276 450100 Tel: +44 (0) 20 7429 6600 +44 (0) 781 2159885awoollett@zincox.com leesa@conduitpr.com www.zincox.com This information is provided by RNS The company news service from the London Stock Exchange