www.zincox.com
ZincOx Resources' principal priority is the creation of value by the development of mining and recycling operations that benefit from low cost processing of unconventional zinc bearing materials. Secondarily and where financing is available, added value will be created by the development of refining operations. The company's objective is to become a major low cost zinc producer.
ZincOx Resources story gaining traction with investors as shares enjoy strong rally
The ZincOx Resources (LON:ZOX) story finally seems to be gaining some traction with investors as the recycling firm gears up for first zinc production in the early part of next year.
At 62 pence, the stock is in territory last seen two years ago.
It is up almost 60 per cent in the past year and for those who bought in with the directors a month ago, there has been a 20 per cent gain.
Chairman Andrew Woollett shelled out just short of £100,000 for 187,662 shares at 53 pence each, while finance director Simon Hall joined him acquiring 10,000 shares at the same price.
Non-executive director Gautam Delal paid 54 pence each for his 100,000 shares.
City broker Ambrian reckons the trio bagged a bargain. It rates the stock a buy with a price target of 104 pence.
“Whilst one would commonly expect developing metals producers to trade at a discount to net present value during the construction phase of project, reflecting commissioning risk, etc, we think the risk is now strongly to the upside,” Ambrian said in a recent note to clients.
“The project is on budget, on time, and has been co-designed and is being built by Xmetech, formerly the in-house engineering firm for Korea Zinc, the second largest zinc refiner in the world.
“The next milestone in the project’s development will be the installation of the major processing hardware at site from July this year.”
The director purchases underline the board’s confidence in the company as it prepares to produce its first recycled zinc from its plant in Pohang, Korea, in quarter one of next year.
ZincOx has found a way of processing the zinc rich dust from arc furnaces that is using a piece of equipment called a rotary hearth furnace.
This is a piece of equipment that has been around for 10 years and is traditionally used to treat waste from giant steel mills.
Obviously the company has modified it to extract zinc from the dust, but in doing so has come up with a remarkably efficient and effective recycling process.
And unlike the other technology on the market such as the Waelz Kiln it can process this potentially hazardous by-product without the need of a subsidy.
This is crucial because it means the ZincOx business model is self-sustaining.
The recovery of zinc is high – upwards of 97 per cent – and the fine, white zinc oxide powder created is of much better quality than that produced from the conventional recycling process.
And there is zero waste as there is also a passable iron ore product that can be fed back into arc furnaces.
The decision to set up its first full-scale production facility in Korea is down exclusively to a tie-up with Korea Zinc, which is providing loans that will help finance the Pohang plant.
This is phase one of a two-part roll-out, which could be the prelude to similar operations in Thailand, Turkey and the US. The latter was expected to be the base for the company’s first zinc re-processing plant.
In April ZincOx revealed it had formally completed an off-take agreement with Korea Zinc, which will take all of the group’s production from the first phase of its recycling plant in the country.
Pricing of the zinc under the 10-year agreement will be based on the international formula for valuing concentrates, though ZincOx will also receive a fee for removing fluorides and chlorides from the finished product.
“This is a significant boost to Zincox plans to be a significant player in reclaiming zinc from blast furnace waste and steel scrap,” said Simon Miller of City research house Northland.
“The plant will be the only domestic source of zinc in Korea. Zinc remains a strategic metal for the steel industry and the proportion of galvanising in steel has a long way to catch up in Asia and especially China compared to the west. Demand for zinc should continue to grow strongly in the region.”
The revolutionary recycling plant is due for completion in the first quarter of next year, and will cost US$110 million to build.
ZincOx is meeting $60 million of that figure from its own cash resources, while Korea Zinc is stumping up the remainder in two tranches. The first is a $15 million development facility being charged at a rate of 15 per cent a year, and the second is a $35 million off-take loan at five percentage points over the London interbank rate.
