Zincox Resources Plc Regulatory News (ZOX)

12 Dec 2006 07:02

ZincOx Resources PLC12 December 2006 ZincOx Resources plc 12 December 2006 ("ZincOx" or "the Company")(AIM:ZOX) Teck Cominco Limited supports global recycling strategy and makes GBP5.4mplacing • Teck Cominco Limited increases ZincOx interest to 11.5% from 7.5% and is issued warrants that can increase its holding to 15%• ZincOx's new and enhanced global recycling strategy supported by Teck Cominco - Turkey, USA, Far East Teck Cominco Limited, one of the world's largest zinc miners, has agreed tosubscribe for 2,040,690 new ordinary shares of ZincOx at £2.65 per share,together with the same number of warrants exercisable within one year at £3.30per share. On completion of the placement, Teck Cominco's interest in ZincOxwill increase from 7.5% to 11.5%. If the warrants are exercised, Teck Cominco'sinterest would increase to 15%. Teck Cominco's investment follows an extensive review of ZincOx's processtechnologies and the Company's new and enhanced global recycling strategy, whichis focused on the recovery of zinc from electric arc furnace dust ("EAFD") usinga combination of rotary hearth furnace technology and ZincOx's proprietarysolvent extraction technology. In connection with the placement, ZincOx and TeckCominco are to enter into a technical cooperation agreement, under which TeckCominco will provide technical support to ZincOx with a view to eventual directparticipation in ZincOx recycling projects. ZincOx is employing a two stage process for the recovery of zinc from waste dustproduced by Electric Arc Furnaces (EAFD) when recycling steel scrap. Over4 million tonnes of EAFD is generated annually which due to the galvanised nature of scrap typically contains from 15% to 25% zinc. EAFD is, therefore, significantly richer in zinc than most primary zinc deposits. Due to thehazardous nature of the EAFD, steel producers generally pay to have it disposed. ZincOx intends actively to pursue a global recycling strategy envisages thetreatment of EAFD in a number of rotary hearth furnaces (RHF) spread throughoutthe steel recycling regions of the world, for the production of impure zincconcentrate that would be treated in specially modified zinc electro-refineries,such as ZincOx's Big River Zinc smelter in the USA. This strategy produces nowaste so it has significant environmental advantages over current practices. Commenting on the announcement, Andrew Woollett, ZincOx's Chairman, said "Thisrepresents a quantum leap forward in steel waste treatment with the recovery ofalmost all the zinc and iron and no waste generation. We have an ambitiousprogramme of development over the next few years as we aim to become one of thelargest zinc recycling companies in the world and we are delighted that theseplans are to be supported by a company of the size and strength of TeckCominco". Teck Cominco President and Chief Executive Officer Don Lindsay said: "We arepleased to support ZincOx in the development of this promising technology andlook forward to working closely with Andrew Woollett and his team." Recycling Strategy In addition to the development of primary zinc oxide deposits, the company hasbeen working on the recovery of zinc from certain waste materials, notably dustproduced by Electric Arc Furnaces, EAFD. Over 4 million tonnes of EAFD isgenerated annually from steel mills recycling steel scrap. Due to the galvanisednature of the scrap the EAFD typically contains from 15% to 25% zinc, and 20% to32% iron. ZincOx has developed a number of ways of recovering the zinc in EAFDby direct leaching; however this approach does not recover the iron. Earlier this year the company became aware of RHF equipment that gaveexceptionally high zinc and iron recovery. The process uses a fuming process toproduce an impure zinc oxide concentrate rich in halides (chlorides andfluorides) and , by reduction, metallic iron as a direct reduced iron (DRI)by-product. The DRI product may be melted into pig iron and a clean slag that issuitable for construction purposes. Over the past five months a thorough reviewof this technology has confirmed the metal recoveries and operating costs. Whilethe recovery of zinc using fuming technology, has been known for many years theselected RHF equipment has major savings in energy consumption and also benefitsfrom the revenue generated from the iron by-product. This technology not only maximises the revenue from metals but produces noresidue or effluent. The zinc concentrate fume produced from EAFD treatment contains halides thatpreclude its direct use in zinc electro-refineries. Material of this type may,at some cost, be washed to reduce halides, allowing it to be used in limitedamounts in a conventional zinc electro-refinery. The problems for zincelectro-refineries caused by the halides can be avoided if the conventionalpurification technology is replaced by the solvent extraction process. This isessentially the same process as that designed by ZincOx's management team forthe Skorpion electro-refinery, in Namibia. Aliaga, Turkey Representative blended samples from Turkish steel mills have been tested by thesuppliers of the rotary hearth furnace equipment. This testwork has confirmedthe metal recovery and reagent consumption of the process. A preliminary capitaland operating cost estimate has been made and an economic model has beengenerated for a furnace treating 200,000 tpa EAFD for the production of about40,000 tpa zinc contained in a concentrate. Using a zinc price of US$1,900 pertonne over the short term and a long term average price of US$1,500/t, the newAliaga project is estimated to have a post tax net present value of US$ 62million and an internal rate of return of 21%. As a result of this appraisal, the company has decided to proceed with a rotaryhearth furnace development in Turkey rather than the previously announced LTCproject. The new project will be based inside the Heavy Industrial Zone atAliaga, next to the steel mills and is well serviced by road, rail andutilities. The development programme envisages production commencing in mid2008. Big River Zinc In the United States, ZincOx is in the advanced stages of planning to modify itsBig River Zinc smelter, in Illinois, by the development of a purificationprocess based on solvent extraction. In the initial development phase EAFD alonewas to have been treated directly to produce 30,000 tpa zinc metal. In view ofthe development of the RHF in Turkey, the initial design capacity of the plantwill now be increased to 75,000 tpa of zinc metal. In view of the success of the Turkish test programme and the re-direction of theAliaga project, the Company is examining the possibility of also developing aRHF in the USA. Teck Cominco In view of the number of new recycling projects being generated by ZincOx andtheir approaching development, ZincOx's management has been considering theactive involvement of a substantial strategic partner whose presence wouldsupport the project financings required for the new projects. In light of the above and in view of Teck Cominco's existing 7.5% shareholdingin the company, the two companies decided to undertake a detailed review oftechnologies and the recycling strategy. At the same time Teck Cominco agreed tofollow its rights in the financing in June 2006, designed to cover the cost ofthe acquisition of the Big River Zinc smelter. The joint technology review has confirmed the potential for joint development ofprojects based on the recovery of zinc from waste and secondary material, inparticular those based on the RHF technology and the subsequent recovery of zincmetal using solvent extraction. It is the intention of the companies that Teck Cominco and ZincOx should worktogether as strategic partners and they are now investigating how to best workto advance projects in Turkey, the USA and the Far East. For more information please contact: ZincOx Resources plcAndrew Woollett +44 (0) 1276 450100awoollett@zincox.comwww.zincox.com Conduit PRLeesa Peters/Laurence Read +44 (0) 20 7618 8708leesa@conduitpr.com +44 (0) 781 2159885 This information is provided by RNS The company news service from the London Stock Exchange