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: City welcomes £6.25 million placing
Shares in zinc recycling specialist ZincOx Resources (LON:ZOX) were ahead by 5.5 per cent to 60.8 pence each in late-morning trading today after the firm announced a placing to raise £6.25 million.
City analysts welcomed the news, along with the firm’s stated intention to explore projects beyond Korea.
ZincOx will be using the cash raised to fund the initial development costs of the second phase of its waste recovery plant in South Korea, as well as to advance a roll out of its technology to the US, Turkey and Thailand.
Some 11.2 million new shares are being placed at 56 pence each in order to raise the funds.
ZincOx’s Korean recycling plant is intended to produce more than 90,000 tons per annum of zinc in concentrate when it full production – the same capacity as a medium-to-large zinc mine.
The plant is designed to treat 400,000 tons per annum of dust from electric arc furnaces – which are widely used in steelmaking. Sampling projects during the past four years have found that the weighted average grade of this dust is 23 percent zinc and 26 percent iron.
Korea currently generates around 380,000 tons of electric arc furnace dust but this is estimated to rise to 400,000 tons during the Next few years.
"I am delighted to announce this placing which will provide the cornerstone for the company's full development of the Korean Recycling Plant and help to accelerate the roll-out of similar plants elsewhere in the world,” said Andrew Woollett, ZincOx’s executive chairman. “It is particularly pleasing that investors are willing to provide funds in such difficult markets and I am pleased to welcome new institutional shareholders.”
Joint house brokers FinnCap and Peel Hunt both noted the confirmation by ZincOx’s managementthat the first phase of the Korean recycling plant (KRP1) was on track and that the firm is now looking beyond Korea for future projects. “We view it as encouraging that management has started to look forward to the Next projects. The group remains valued at a significant discount to the potential value of KRP1 and KRP2, while construction for KRP1 is well advanced and commissioning started – thus we believe execution risks are diminishing rapidly,” said FinnCap.
The broker said that it expects a “step change” in investor perception once the company announces the start of production, which it said will validate the project and provide proof of concept to the market. “We remain positive on the stock seeing considerable upside once progressive milestones are achieved,” it added.
For the current year, FinnCap expects ZincOx’s sales to be £2 million and the firm to make an adjusted pre-tax loss of £0.9 million. Next year, however it forecasts sales to increase substantially to £36.2 million and a pre-tax profit of £5.9 million to be made.
Peel Hunt has more conservative figures. For 2011 it expects sales of US$2 million with a pre-tax loss of US$4 million, while for 2012 it has pencilled in sales of US$25 million and a loss of US$3.2 million.
FinnCap has set a target price of 185 pence for the shares, while Peel Hunt reckons they should be valued at 134 pence each.
