Zincox Resources Plc Regulatory News (ZOX)

7 Dec 2005 07:01

ZincOx Resources PLC07 December 2005 Press Release 6 December 2005 ZincOx Raises £13.2 million for the Development of the Aliaga Recycling Project ZincOx Resources plc ("ZincOx" or the "Company") (Symbol ZOX) has raisedapproximately £12.7 million net of expenses in a placing (the "Placing")arranged by Numis Securities Limited ("Numis"). The Placing, which isconditional inter alia on the passing of certain shareholder resolutions,involves the issue of 8,787,333 new ordinary shares in the Company at a price of150p per share. Immediately following the Placing the total number of shares inissue will be 37,761,422. The proceeds from the Placing will be used principallyto fund the equity component of the development of the Aliaga Zinc RecyclingProject in Turkey ("Aliaga"). On 23rd November 2005, ZincOx announced that it had entered into a mandate withInvestec Bank (UK) Limited ("Investec") to arrange and conditionally underwriteproject debt for the development of the Aliaga Project. This project finance isintended to provide approximately two thirds of the funding required to bringthe Aliaga plant up to operational capability, with the £12.7 million raised bythe Placing intended to provide the remainder and general working capital. Commenting on the announcement, Andrew Woollett, ZincOx's managing director,said "Raising these funds more than covers our equity component of the Aliagaproject and enables us to start development early in the new year. This marksthe start of our transition to a producing company." ZincOx specialises in the recovery of zinc from non-sulphide zinc bearingmaterials. The Aliaga project envisages the production of high quality zincoxide from waste material (Electric Arc Furnace Dust - EAFD) generated by thesteel recycling industry. On 11th November 2005, ZincOx announced the completion of the first part of thefeasibility study for the Aliaga project undertaken by S.A. SNC-Lavalin EuropeN.V. ("SNC"), which includes a technical review of the process, plant layout,engineering design and an estimation of capital and operating costs to anaccuracy of +/-15%. The plant is initially being designed to produce 20,000 tonnes per annum ("tpa")of high quality zinc oxide generated from the EAFD produced by the steel millsat Aliaga, although, in due course, the Company expects to be able to increaseproduction up to 30,000 tpa zinc oxide by obtaining EAFD from steel millslocated elsewhere in Turkey. The 20,000 tpa plant has also been designed sothat it may be expanded to 30,000tpa for a reduced additional expenditure pertonne. Although this adds to the initial capital cost of the 20,000tpa plant,it reduces the overall capital cost of the expanded project. The cost of thisexpanded capacity provision and the increase in the initial production rate to20,000tpa has led to a revised capital cost of US$39 million for the initialcapacity of the plant. Based on SNC's cost estimates, ZincOx has revised its previous cash flow models.For the initial 20,000 tpa capacity without further expansion, using a zincprice of US$1,150 per tonne (price as at 5 December 2005 - US$1,731 per tonne),the project is estimated to have a post tax net present value of £19 million, ata 10% discount rate, and an internal rate of return of 23%. It is intended thatthe expansion to 30,000 tpa will be financed largely out of the cash flowgenerated in the first full year of production. A preliminary financial modelbased on an expanded project, using a zinc price of US$1,150 per tonne, has apost tax net present value of £28 million, at a 10% discount rate, and aninternal rate of return of 26%. The full SNC feasibility study is expected by the end of March 2006, but toavoid any unnecessary delay in the development of the Aliaga plant, the Companyis raising funds at this stage. In addition to the development of the Aliaga project, the Company has completeda feasibility study on the Jabali zinc deposit in Yemen and will shortly becommencing a feasibility study in the Mid West of the United States for therecovery of zinc oxide from EAFD similar to the Aliaga project. ZincOx is alsocontinuing its research into other potential recycling projects includingtestwork on the viability of the Polykiln technology for the potentialre-processing of slag. Following completion of the sale of the Shaimerden deposit in Kazakhstan forUS$7.5 million in 2004, ZincOx is entitled to receive, subject to the zinc pricebeing above US$800 per tonne, further deferred receipts relating to the first200,000 tonnes of zinc mined. These payments will be at a rate equivalent toUS$0.2375 per tonne for every dollar that the LME zinc price is above US$800 pertonne. At a zinc price of US$1,600 per tonne (price as at 5 December 2005 -US$1,731 per tonne), the further deferred receipts would amount to approximatelyUS$38.0 million. Providing the zinc price remains above US$800 per tonne,further deferred receipts are anticipated to be received between 2007 and 2010. Under the Placing, the Company has conditionally placed 8,787,333 new ordinaryshares of 25p each (the "New Shares") at a placing price of 150p per share toraise approximately £13.2 million before expenses (approximately £12.7 millionafter expenses). The Placing has been arranged by Numis who have alsounderwritten the issue. The Placing is conditional, inter alia, upon theplacing agreement between ZincOx and Numis becoming unconditional and not beingterminated prior to 6 January 2006, the expected date of admission, or suchlater date (being no later than 13 January 2006) which the Company and Numis mayagree. The New Shares will rank pari passu in all respects with the existingordinary shares of 25 pence each in issue. It is expected that dealings in theNew Shares will commence on AiM on 6 January 2006. Conditional on the completion of the Placing, the directors intend, pursuant tothe terms of the Company's Unapproved Executive Share Option Scheme previouslyapproved by the shareholders ("the Scheme"), to grant options over 878,333ordinary shares in the capital of the Company at the same exercise price as theNew Shares. For the purposes inter alia of giving the directors authority to allot and issuethe New Shares and to disapply statutory pre-emption rights in respect of suchNew Shares, an extraordinary general meeting of the Company will be convened forThursday 5 January 2006 at 11.00 am. The Placing is conditional upon thoseresolutions being duly passed. For more information please contact: Andrew Woollett David Poutney / Leesa Peters / Pam Spooner Chris WilkinsonZincOx Resources plc Numis Securities Ltd Conduit PRTel: +44 (0) 1276 455 700 Tel : +44(0)207 776 1500 Tel: +44 (0) 207 618 8708awoollett@zincox.com d.poutney@numiscorp.com leesa@conduitpr.com This information is provided by RNS The company news service from the London Stock Exchange