TIDMZOX
RNS Number : 6513I
ZincOx Resources PLC
03 June 2014
03 June 2014
ZincOx Resources plc
("ZincOx" or the "Company")
Results for the Year Ended 31 December 2013
ZincOx Resources plc (AIM:ZOX) the developer of one of the
largest electric arc furnace dust recycling facilities in the
world, today announces its results for the year ended 31 December
2013.
Highlights
-- Production of 24,577 tonnes of zinc in concentrate in 2013
-- Consistently high quality zinc concentrate
-- International Finance Corporation becomes a major shareholder
-- Inner tubes of heat exchangers replaced
-- Recovery and availability close to target levels
-- May 2014 a record month: 3,406 tonnes of zinc in concentrate,
9% increase on previous best month
Commenting today Andrew Woollett, Executive Chairman said:
"Now that the problems of 2013 have been addressed, the Korean
Recycling Plant has accelerated its ramp-up and we are operating at
record levels of production. We expect this ramp-up to continue
while we fine tune the operating conditions and debottleneck
critical pieces of equipment, so that full production can be
achieved in the fourth quarter of 2014"
For further information, please contact:
ZincOx Resources plc Tel: +44 (0) 127 645 0100
Andrew Woollett, Executive Chairman
Peel Hunt LLP (Nominated Adviser and Tel: +44 (0) 207 418 8900
Joint Broker)
Richard Kauffer
Daniel Harris
finnCap Limited (Joint Broker) Tel: +44 (0) 207 220 0500
Matthew Robinson
Joanna Weaving
Tavistock Communications (Financial Tel: +44 (0) 207 920 3150
PR)
Simon Hudson
Nuala Gallagher
For further information please go to: www.zincox.com
Chairman's Statement
The development of new breakthrough technology is never easy and
2013 demonstrated this very clearly. However, during the year our
flagship development in South Korea produced 24,577 tonnes of zinc
contained in an oxide concentrate resulting in revenues for 2013 of
US$27.1m. The ramp-up is making great progress and a new record for
output was set in May 2014, with the production of 3,406 tonnes of
zinc in concentrate, representing a 9% increase from the previous
best month.
At the Korean Recycling Plant ("KRP") we have demonstrated that
the metallurgical process has worked well but we were beset by a
number of operational and mechanical issues which led to stoppages
that required production to be suspended for several days on each
occasion. As a consequence, in most months, the plant was operating
for less than two thirds of the time and so recorded a loss. In
order to support the Company, new debt and equity was raised during
the course of the year and again in April 2014. In one such funding
in November 2013, the International Finance Corporation ("IFC"),
the private sector arm of the World Bank Group, became our second
largest shareholder. We are delighted to have attracted a
shareholder of such high calibre and its investment is a clear
endorsement not only of our technology but also of our plan to roll
this concept out around the world.
The problems that caused the long stoppages last year have been
addressed and we are now looking forward to a more continuous
operation over the coming months. At current output levels the
operation is generating a positive EBITDA and we expect production
to increase steadily to full capacity in the autumn of 2014.
Korean Recycling Plant ("KRP")
2013 started well at KRP with a new output level in January
continuing the upward trend seen in 2012. In March 2013, however,
we experienced the first major air leakages in the inner tubes of
the heat exchangers. The leakages were the result of corrosion due
to poor manufacture and a minor design fault which required the
full closure of the plant for repair. These holes were patched with
metal plates and production resumed. While the repair itself took
only about four days, repairs to this part of the plant or to the
rotary hearth furnace requires three days of cooling before work
can commence and another two days of heating after the repair to
bring the furnace up to its operating temperature. Thus even quick
repairs involve suspension of production for significant periods
which have a dramatic impact on operation and cashflow.
Throughout the course of 2013, because of the further leakage,
we had to make several repairs to the heat exchangers, each of
which required a major stoppage. In November we decided that
repairs on this equipment were too unreliable and that the four
inner tubes of the heat exchangers should be completely replaced.
These replacements were carried out at the end of the year and in
February and March/April 2014.
In April 2013, a major blockage of direct reduced iron ("DRI")
in the furnace caused the hearth to jam and took several days to
clear. This phenomenon has not, to our knowledge, previously been
experienced in any rotary hearth furnace. A repeat of such a
blockage has been avoided by carefully monitoring the power being
drawn by the motors rotating the hearth and by a radar sensor
continuously checking the end wall of the furnace.
In September and December 2013 and in February 2014, there were
small failures in some of the refractory lining to the furnace and
offtake area. These areas were rebuilt but required long production
stoppages that had a severe impact on our cashflow.
Following the replacement of the last heat exchanger's inner
tube, production recommenced on 12 April 2014 and we do not
anticipate any major stoppages until the planned inspection and
maintenance closure in August 2014.
Since 12 April 2014, the plant has settled into a steady ramp-up
and we expect this trend to continue over the coming months as the
optimisation and debottlenecking continues. The plant should be in
full production by November, generating about 141 tonnes of zinc in
concentrate per day, so that about 40,000 tonnes of zinc in
concentrate should be produced for 2014.
While, as a result of the numerous stoppages, the monthly
production at KRP has failed to show a steadily rising trend over
the past year, when the production is viewed on a weekly basis,
excluding its significant stoppage periods, the underlying progress
of the ramp-up is very evident. Provided there are no significant
stoppages over the coming months, we believe the plant will
continue to increase production.
KRP Weekly Production of Zinc in Concentrate:
http://www.rns-pdf.londonstockexchange.com/rns/6513I_-2014-6-2.pdf
Notwithstanding this progress the Company is reporting a loss of
US$26.3 million for 2013. The main reasons for the losses were due
to the cost of the remediation work, and increased unit operating
cost as a result of the reduced throughput at KRP.
The Company is supplied with dust under long term supply
agreements with all Korea's main steel mills, thereby guaranteeing
sufficient electric arc furnace dust ("EAFD") for many years to
come. Under these exclusive EAFD supply agreements at lower
throughputs, the Company is required to cover the cost of
landfilling EAFD that is in excess to requirements and this led to
US$1.8 million in exceptional costs that would not be incurred when
at full production.
The iron product generated at KRP is unconventional, having a
high proportion of inert slag. During 2013, zinc recovery ran at
about 90% of the target level (95%), which although quite
acceptable for this stage of the ramp up, led to more volatile
elements remaining in the iron product, and in addition reduced
metallisation of the iron. Both these factors reduced its quality
to levels which made it unattractive to the steel mills, and so it
was sent to landfill, further contributing about US$1.7 million to
the loss for the year. We have recently run the plant so as to
generate an iron product in line with the target quality and over
the next few months we will be marketing this to various steel
mills in Korea and elsewhere.
Since April 2014, when the problems caused by the heat exchanger
corrosion and refractory failures were addressed, our staff at KRP
have been able to concentrate on improving throughput, reliability
and zinc recovery and already great progress has been made.
Everyone on site is focused on getting the plant up and running as
quickly as possible but without ever compromising safety.
KRP was conceived as a two phase development and the second
phase was to have commenced operations in October 2013.
Unfortunately the delay in ramping up the first phase to full
production meant that the Company was not in a position to take
EAFD from the steel companies for the second phase on the timescale
originally envisaged.
Under the EAFD supply agreements for the second phase, if ZincOx
was unable to treat the EAFD, it would have been obliged to cover
the cost of the EAFD disposal. The phase two contracts with the
mills, were terminated in September 2013, and there is now no
liability for disposal of the EAFD under these phase two contracts.
It is our belief that we can still offer the Korean steel mills the
most attractive medium and long-term option for disposal of their
EAFD and the Company will re-open discussions with mills once it
has demonstrated that the first phase at KRP is working at its full
capacity.
Other Activities
The principal efforts of the executives and staff remain focused
substantially on getting KRP in to full production, however, other
activities are being undertaken.
After two years of operation, we are very confident as to the
exceptional quality and consistency of our zinc product. During the
year we successfully completed testwork which demonstrated that,
unlike zinc concentrates produced from EAFD by other processes, it
can be simply and cheaply upgraded to a zinc oxide chemical of
industrial purity. This material would enjoy end markets
significantly more valuable than its sale to smelters which treat
it as an intermediate feed for the production of metal. The
production of this chemical will not be possible from KRP in the
short or medium term since its output is already contracted to
Korea Zinc as part of the development loan financing for the plant.
Our plans for projects in other parts of the world can, however,
now include this upgrading, thereby adding substantially to
potential revenue and profits.
The upgrading process results in the production of a clean brine
suitable for marine discharge, so plants will need to be situated
at the coast. In Thailand, therefore, a new site has been reserved
at a coastal industrial estate and environmental permitting will
commence later this year. In Turkey the reorganization and
re-zoning of our land was completed in October and environmental
permitting, the cost of which will be covered by one of the steel
mills, will commence shortly. Our joint venture with the Magnezit
group is making good progress evaluating the availability and
quality of EAFD throughout Russia.
Safety
The safety of our staff remains at the forefront of our
operating philosophy. As a result of the innovative nature of our
plant and the risks involved with any high temperature process, we
have carried out an intensive programme to promote a strong safety
culture.
Outlook
2013 has severely tested our staff and shareholders and I would
like to thank them for their support during this difficult time.
While there have been numerous challenges that have disrupted
cashflow, shareholders should draw considerable comfort from the
fact that these challenges have been overcome and the production at
KRP continues to increase. We are looking forward to a continuous
operation over the coming months so that we can further optimise
the plant and realize the full potential of the operation.
Andrew Woollett
Chairman
2 June 2014
STRATEGIC REPORT
The Directors of the Company and its subsidiary undertakings
(which together comprise "the Group") present their Strategic
Report for the year ended 31 December 2013.
The Strategic Report is a new statutory requirement under the
Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013 and is intended to provide fair and balanced
information that enables the Directors to be satisfied that they
have complied with s172 of the Companies Act 2006 which sets out
the Directors' duty to promote the success of the Company.
Principal Activities
The principal activity of the Group is the production of high
grade zinc concentrate by the recycling of electric arc furnace
dust ("EAFD"). The Company acts as a recycling, development and
holding company. A detailed review of the business and future
developments is included in the Chairman's Statement and the
Operational Review section of the Strategic Report.
Business Model
EAFD is probably the world's largest inorganic hazardous waste.
EAFD is generated by the recycling of steel scrap in electric arc
furnaces. When the scrap is melted the volatile constituents are
driven off and form fine particles that need to be filtered from
the flue gases. Steel is increasingly protected from corrosion by
galvanising, a process whereby a thin coating of zinc is applied to
the surface of the steel. This coating insulates the steel from
reaction with air and so prevents corrosion. Steel scrap is,
therefore, increasingly galvanised, and since zinc is a volatile
element it constitutes part of the EAFD. The zinc content of the
EAFD is generally between 20% and 25%, and it also contains 25%-30%
iron, both of which occur largely as oxides. In addition the EAFD
contains lead, cadmium and arsenic, all these toxic elements are to
some extent soluble in water, which therefore makes EAFD a
hazardous waste.
The steel mills need to dispose of the EAFD either in landfill
or by processing to recover the zinc. Process plants based on
existing technology have never been developed unless a significant
disposal fee has been paid by the steel mills.
The new technology used by ZincOx recovers the zinc using a
rotary hearth furnace. The zinc forms a unique high quality zinc
oxide concentrate, an iron intermediate product that can be further
processed into pig iron and a clean slag that can be used by the
cement industry. This means that there will be no waste.
It has recently been demonstrated that the exceptional quality
of the zinc oxide concentrate should enable it to be upgraded to a
zinc oxide chemical suitable for various industrial applications.
The upgrading would greatly enhance revenue and profitability when
developed with the rotary hearth furnace as an integrated
operation.
Following the resolution of a number of teething problems,
ZincOx's Korean Recycling Plant ("KRP") is ramping up to full
production. Once this has been achieved, ZincOx will roll out the
technology around the world and preliminary work in a number of
countries is well underway. The development of additional plants
should enable ZincOx to realize its ambition of becoming one of the
world's largest zinc recycling companies.
Operational Review
Korean Recycling Plant (KRP)
Since the first production in April 2012, there had been a
steady increase in production. 2013 started with an output in
January of 2,603 tonnes of zinc in concentrate ("ZiC"),
representing about 60% of target production.
In February 2013, there was some exceptionally cold weather
which revealed a requirement for additional insulation for some
water lines and pumps required for cooling. This was easily and
quickly installed but caused some delays due to safety and
reheating procedures.
In March 2013, there were major air leakages in the heat
exchangers caused by corrosion particularly where there had been
the faulty manufacturing. These holes were patched using new
internal plates and production resumed.
In April 2013, there was a major blockage of DRI in the furnace
which caused the hearth to jam. In order to remove the blockage,
the furnace had to be cooled and the solid lump of welded iron and
slag removed by cutting it into smaller pieces that could be
manhandled out of a furnace side door.
During May and June 2013, the previously patched areas of the
heat exchangers failed and new holes appeared. Sections of the heat
exchangers were replaced by cutting out small areas and fitting new
sections. At the end of June 2013, it became clear that even these
sections were unreliable and it was decided to replace entirely the
upper sections of the most corroded units. Following this work the
plant ran almost continuously for the next sixty days, with August
2013 being a record month (2,688t ZiC).
In mid-September 2013, the refractory lining the end wall of the
furnace partially failed. This was probably due to the impact of
the April blockage pressing against the refractory. The refractory
was repaired and the furnace restarted with a consequent increased
production, so that October 2013 set a new record (2,963t ZiC).
Towards the end of the year, it became apparent that the heat
exchangers had been so badly affected by the corrosion caused by
air leakage that the partial replacements and repairs were not
going to provide the necessary reliability. It was decided to
replace all the inner shells with new metal; recognising that the
inner tubes of the heat exchangers have a finite life, the inner
tubes are now considered to be a consumable item. Spare heat
exchangers can be fabricated so that the replacement of any
corroded inner tube could be undertaken offsite, and the new units
could then be installed immediately with the minimum of production
downtime. Having successfully replaced the most corroded of the
heat exchanger inner shells in November 2013, there was a plan to
replace the others in April 2014 and August 2014.
In December 2013, there were refractory failures in three areas
and most of the month was required to rebuild these sections.
2014 started well with another record month in January (3,131t
ZiC). In February, however, there were further refractory failures,
and while repairs were being undertaken, the heat exchangers were
inspected and found to have deteriorated more rapidly than
expected. As the refractory repair was being undertaken, it was
decided to bring forward the replacement of another heat exchanger
inner shell and to schedule the replacement of the other inner
shells as soon as special quality steel ordered in November 2013,
had arrived on site. The plant was restarted in early March 2014
but closed later in the month to make these replacements.
Production is expected to continue without any major stoppages
until the planned inspection and maintenance closure in Q3
2014.
On a weekly basis, ignoring the periods when production was
suspended for repair work, the production has been steadily rising
and the underlying progress of the ramp-up is very evident.
The production is a function of four factors: the grade of the
feed (zinc percentage), the plant running time (hours per week),
the zinc recovery of the process (percentage of zinc recovered into
the final product) and the hourly feed rate (tonnes of EAFD per
hour when running). The grade of the feed has been slightly higher
than expected, the running time of the plant has been at or close
to target, and the recovery is at about 90% of the targeted 95%
recovery. The feed rate, however, has been lower than expected
mainly due to the underperformance of the baghouse. This problem is
being largely overcome by enriching the oxygen content of the
combustion air and so reducing the air required for combustion.
The iron product generated at KRP is unconventional, having a
high proportion of inert slag. This slag is costly to melt and
steel mills are wary of using this as a scrap substitute. In
recognition of this, it is being offered to mills at a price that
fully recognises the cost of melting the contained slag. While the
zinc recovery is less than the targeted level, there will be more
unfumed elements in the iron product and these will effectively
dilute the grade of the iron. Recently the plant has been run at
lower capacity and higher recovery so as to generate iron product
in line with our target. Over the next few months, we will be
marketing this material to various steel mills in Korea and
elsewhere.
Technology
The zinc oxide concentrate produced by KRP ("HZO") is of
exceptional quality, having very low iron (<0.03%) and halides
which are easily removed by washing.
Testwork has demonstrated that there are two routes by which HZO
can be upgraded to a zinc oxide chemical of industrial quality. One
of these routes removes chlorides and other soluble impurities by
water washing, and this creates a brine effluent. After suitable
treatment this effluent may be safely discharged into the sea.
Preliminary economic evaluation of the processes indicate that
the upgrading can be undertaken relatively inexpensively. Since a
large proportion of zinc oxide is made by burning zinc metal, the
price of zinc oxide exceeds that of zinc metal per tonne of zinc
contained. Consequently, upgrading has the potential to double the
revenue per tonne of zinc produced. The relatively low cost of
upgrading and the significant increase in revenue should make it
more profitable than the operation of the rotary hearth furnace
alone. A fully integrated rotary hearth furnace and upgrading
operation has the potential to have a significantly enhanced rate
of return.
Commercial scale testwork of the upgrading using HZO from KRP is
scheduled for the latter half of 2014.
New Projects
In Thailand, a new potential plant site has been identified on
the south eastern seaboard about 2 km from the coast. Discussions
concerning the supply of EAFD from the mills in Thailand and
elsewhere are underway and environmental permitting will commence
shortly.
In Turkey, the Company owns a 4.5 hectare site in the Aliaga
Heavy Industrial Zone which is among the most concentrated areas of
scrap recycling in the world. The site lies less than 1.5 km from
the coast and within 3 km of five steel recycling companies. About
two years ago, ZincOx was asked to consider changing the position
of its land slightly to accommodate the rationalisation of small
plots in the Zone. The reorganization and re-zoning of the land was
completed in October 2013. Outside the Heavy Industrial Zone, there
is further land owned by the subsidiary company and this has been
subdivided and is being gradually sold off for light industrial
usage. Environmental permitting, the cost of which will be covered
by one of the steel mills, will commence shortly.
Our joint venture with the Magnezit group is making good
progress evaluating the availability and quality of EAFD throughout
Russia.
Other
In the USA, the Company's Big River Zinc facility continues to
provide services to third parties distributing sulphuric acid and
diesel emission fluid and it is planned to use the washing plant
for testwork on the upgrading of the HZO produced by KRP.
As reported in last year's annual report, in March 2013, the 52%
interest in the Jabali deposit, in Yemen, was sold to our joint
venture partners. Rather than burden our partners with a
significant upfront payment, the disposal was structured along the
lines of that successfully used for the Shaimerden deposit, in
Kazakhstan, which consisted of a series of deferred payments to be
made once production is underway.
Performance Review
Financial
Group Results
The result for the year attributable to shareholders of the
parent company was a loss of US$26.3 million compared to a loss of
US$9.4 million last year.
The Group has an underlying operating loss of US$22.3 million
compared to an underlying loss of US$17.7 million in 2012.
Administrative costs deducted in arriving at the underlying
operating loss in the year amount to US$10.2 million (2012: US$10.0
million). In addition, a foreign exchange gain of US$0.7 million
(2012: gain of US$3.2 million) has also been included in arriving
at the underlying operating loss.
This Group made an EBITDA loss of US$15.3 million for the year
to 31 December 2013 (2012: EBITDA loss of US$3.4 million). The
result for the Group was affected throughout the year by the
various closures at KRP required to remediate the plant. Every time
the plant closed it had a twofold negative effect on the financial
result in terms of unbudgeted remediation costs and suspension of
production, leading to a reduced contribution.
Key Performance Indicators
With its first full year of operations, the Group produced
24,577 tonnes of zinc contained in concentrate (2012: 8,489 tonnes)
and as a result has now moved from a development company to a
production company. This has
resulted in the continued development of the management
information and key performance indicators ("KPI's") required to
manage KRP.
2013 2012
8 months
---------------------------------------- --------- ----------
Zinc in Concentrate sold (tonnes) 24,577 8,489
Average zinc price (US$/tonne) 1,910 1,945
Zinc revenue billed (US$ millions) 27.1 9.8
Underlying EBITDA loss (US$ millions)* 9.2 9.3
EAFD processed (tonnes) 103,420 43,656
---------------------------------------- --------- ----------
*before any foreign exchange impact
The directors monitor any hazards that are reported on
operational sites and review any accidents and incidents as part of
the ongoing environmental health and safety tracking. During the
year, the total number of man hours worked across the Group was two
hundred and eight thousand, with one lost time incident. The lost
time incident related to an acid burn to the leg of one of our
employees at BRZ.
At the Group level, until a steady state production is achieved
in Korea, the directors continue to monitor the cash requirements
of the business when compared to cash requirements to maintain
development progress on the various projects and any financing
opportunities which need to be pursued.
Funding
The initial development of KRP was funded through equity from
the Group and two external loans from Korea Zinc. At the end of
2013, the Korea Zinc Offtake Loan, which had an initial value of
US$35 million, had increased to US$37.8 million as a result of the
"payment in kind" interest which was rolled into the loan up until
June 2013, after which interest became payable at a rate of USD 6
month LIBOR +5%. The Development Loan has an outstanding balance of
US$15 million at an interest rate of 15%, which was payable
throughout the duration of 2013.
Interest charges for the year, in relation to the Offtake Loan,
were US$2.1 million (8 months to 31 December 2012: US$1.4 million)
and in relation to the Development Loan were US$2.3 million (8
months to 31 December 2012: US$1.5 million). Although this total
interest of US$4.4m has been charged as an expense to the income
statement in accordance withGroup policy, the actual interest paid
in 2013 on both Korea Zinc loans was US$3.4 million.
The Korea Zinc development debt of US$15 million will fall due
in February 2015. Based on the current management projections for
throughput at KRP and zinc price of US$2,000 per tonne,
insufficient cash will be generated to repay the loan and the
directors are pursuing options to make up the shortfall or
refinance the debt as is appropriate. Refinancing options range
from a renegotiation for the date of repayment on the US$15m debt
facility, to a full refinancing of all KRP debt with a project
finance bank or other such institution.
In Korea, the Group makes use of a "receivables purchase
agreement" with Standard Chartered Bank Korea ("SCBK"), whereby it
can receive funds in between the monthly receipts that are made by
Korea Zinc.
In August 2013, the Group completed a loan of GBP4.2 million
which is borrowed using the land assets held in Turkey as
collateral. The income from the land outside the heavy industrial
zone, which has been parcelled and is being gradually sold off, is
being used to fund the interest on the loan, and these funds are
held in escrow for the loan subscribers. At the end of December the
balance in the escrow account was GBP404k. The land inside the
heavy industrial zone is being used as collateral to cover the
capital for the loan. The loan has an interest rate of 10% and a
repayment date of July 2015.
The Group completed a fundraising of GBP4.5 million (equivalent
to US$7.5 million) after expenses in December 2013, which was
principally raised for the purpose of funding additional working
capital, and the Company used this opportunity to bring the
International Finance Corporation ("IFC") onto the Company's share
register. This is particularly encouraging as we look to our new
recycling projects in parts of the developing world. The shares
were issued at a price of 15.5p and resulted in the number of
issued voting shares after the fundraising increasing to 136
million (2012: 103 million). Following the operational difficulties
in December 2013 and February 2104, a further fundraising was
completed in April 2014 for an amount of GBP3.0m after expenses for
the purpose of giving the Group the additional funding expected to
be required to complete the ramp up (note 8).
Liquidity
The cash funds of the Group at 31 December 2013 were US$4.8
million (2012: US$10.6 million). These cash funds were held in a
range of currencies at the year end, the most significant of which
were US Dollars 3.4 million (2012: US$2.1 million), Euro 0.2
million (2012: EUR2.6 million) and Pounds Sterling 0.7 million
(2012: GBP2.7 million).
Going Concern
The directors have considered scenarios in reviewing the budgets
and projections for 2014. These scenarios are centred on the
financial modelling of a ramp up for KRP over the next twelve
months including (but not limited to) sensitivity to the zinc
price, recovery of zinc from EAFD, tonnes of zinc sold and key
operating costs.
The zinc price assumption started with a review of the actual
price since the start of 2014 and adopted a price below this for
the remainder of the year. The market predictions for zinc price
are upward in the second half of 2014 and, as such, the directors
have assumed a conservative price assumption of US$2,000 per tonne
in all projections. The ramp up profile is expected to achieve
target production by the end of 2014 taking into account the
requirement for a key planned maintenance period in Q3 2014 which
will reduce throughput in that quarter. The zinc tonnes sold assume
a rising zinc recovery up to target levels through the remainder of
2014. As throughput rises, so the operating cost metrics (i.e.
measured in consumptions per tonne of EAFD), are expected to fall
through the remainder of the year.
The directors have also considered the requirement to repay the
Korea Zinc development loan of US$15 million in February 2015 and
are pursuing options for the refinance of this debt if available
cash generated from KRP is insufficient. The options include, a
rescheduling of the current due date, traditional debt through both
a traditional bank or the bond market and monetising a proportion
of future zinc production in exchange for upfront payments. The
exact amount of any shortfall will depend on the zinc price and the
ramp up progress in the run up to the repayment date. Other
discretionary spend has been scrutinised and scheduled accordingly
in this important period where the continuing ramp up of KRP is the
critical factor in the future success of the Group.
The directors have assessed the material uncertainties
concerning the future funding requirements of the Group on this
basis, compared them with the levels of expected finance available
at a corporate and project level and, subject to the successful
refinancing of this debt, and in consideration of the expected ramp
up, have a reasonable expectation that the Group has adequate
financial resources to manage its business risks and continue in
operational existence for the next twelve months.
Financial Review of Operations
Korean Recycling Plant (KRP)
KRP made its first sale of commercial HZO product at the end of
May 2012 and, in the year to 31 December 2013, a total of 24,577
tonnes of zinc in concentrate was sold to Korea Zinc. (8 months to
31 December 2012: 8,489 tonnes). All of the material was sold to
Korea Zinc under the offtake agreement which had been signed in
April 2011 as part of the financing of the project. This resulted
in revenues of US$27.1 million (8 months to 31 December 2012:
US$9.8 million). The quality of the product was higher during 2013
with an average zinc grade of 65.0% compared to 63.2% percent
during 2012.
The product sold by KRP is a zinc oxide concentrate sold under
an international formula and as a result, the monthly revenues are
always dependent on the LME zinc price. The LME zinc price can be
volatile and during the year had an average of US$1,910 per tonne,
with a maximum over the same period of US$2,187 per tonne and a
minimum of US$1,784 per tonne.
The sales of zinc concentrate are made in US Dollars and the
majority of costs incurred at KRP are incurred in KRW, the high
point for this exchange rate in the year was 1,170 KRW per USD and
the low point was 1,054 KRW per USD with an average for the year of
1,101 KRW per USD.
The analysts and forecasters who watch the zinc market suggest
that as certain key mines become exhausted over the next 15-18
months then the zinc market will go into a deficit on the supply
side which is expected to have a positive impact on the zinc price.
One key measure for this is the zinc stocks which were 1,220,000
tonnes at the start of 2013 and dropped by 23% to 933,000 tonnes by
the year end. This has continued since the year end such that at
the end of May 2014 the stock has fallen by a further 24% to
712,000 tonnes. The zinc price has also strengthened since the end
of the year with an average price to the end of May 2014 of
US$2,035 per tonne.
As has been noted, the plant had various stoppages through the
year to fix critical equipment. These stoppages meant the ramp up
has been drawn out and the plant did not reach its target capacity
in 2013. The impact of running the KRP at below its capacity is
that certain operating parameters were not yet at the target levels
and additional costs were incurred for remediation. This resulted
in an underlying EBITDA loss, prior to any foreign exchange
movements, of approximately US$9.2 million relating to KRP during
the year (8 months to 31 December 2012: EBITDA loss US$9.3
million).
The remediation and maintenance costs required to fix the issues
amounted to US$5.4 million, (8 months to 31 December 2012: US$2.6
million) and were charged to cost of sales during the year. In
addition landfill costs for EAFD not processed in the year during
the remediation stoppages, amounting to US$1.8 million (8 months to
31 December 2012: US$0.98 million) has been charged to cost of
sales. With stop/start production the quality of the DRI produced
was extremely variable and the DRI which was produced in the year
was landfilled at a cost of US$1.7million (8 months to 31 December
2012: US$0.64 million). The impact of the stoppages at KRP resulted
in the operation not achieving target cost levels for utilities and
other consumables, notably the gas consumption and associated cost
When the plant is operating at full capacity, however the gas
consumption is still expected to be close to planned levels as are
other main operating costs.
Interest of US$4.4 million (8 months to 31 December 2013: US$2.9
million) on Korean debt facilities has been charged as an expense
to the income statement in the year in accordance with Group
policy.
A depreciation charge of US$5.9 million (8 months to 31 December
2012: US$3.5 million) has been included in cost of sales for KRP,
in arriving at the result for the year.
The Group terminated the mandate with Standard Chartered Bank
("SCB") for the financing of the expansion of KRP (KRP2) in
September 2013. Part of the condition of the mandate was that KRP
was subject to a performance test to demonstrate that the plant was
performing consistently and producing regular cashflows. The
ongoing delays to ramp up meant that the plant could not commence
the test in a timely manner and it was felt the most appropriate
route was to cancel the mandate and re-engage with SCB when the
plant was performing as planned.
Other Projects
At the end of 2013 the Group is showing 'assets held for sale'
with a net realisable value of US$1.5 million. This relates to land
held in Turkey (US$1.2 million) and property, plant and equipment
relating to the Rubber Grade Plant ("RGP") now transferred from
Pearl Zinc SA to ZincOx Belgium Sprl (US$0.3 million).
Following a rationalisation of the land which ZincOx has
purchased in Turkey, the plot of land outside the heavy industrial
zone, which ZincOx purchased in 2006 and no longer requires for
development of the project, has been split into smaller plots to
facilitate sales. These plots have been marketed over the last year
or so and this has resulted in the sale of 38 of the plots by the
end of 2013 generating total cash of US$3.2 million (YTL 6.8
million) and a total profit of US$2.0 million (YTL 3.7 million).
The profit generated in the year to 31 December 2013 was US$1.2
million / YTL 2.2 million (2012: US$0.4 million / YTL 0.7 million)
and is shown in other gains and losses in the Group income
statement. In view of the uncertainty over the expected receipts
for the remaining 25 plots, the historic cost of US$1.2 million
(YTL 2.6 million) has been applied as being the lower of fair value
less cost to sell.
The remaining property, plant and equipment reclassified as
asset held for sale consists of two pieces of machinery following
the sale of the RGP building in Pearl Zinc SA, which is being
actively marketed.
Jabal Salab, the mining project in which ZincOx had a 51% share,
was sold to our Yemeni partner on 11 March 2013. Following the
sale, ZincOx will be eligible to receive certain cash payments when
the project goes into production and provided the zinc and silver
prices are above certain thresholds.
Environmental, Health, Safety & Quality
The Group believes that what is good for the planet is good for
business and good for the communities in which ZincOx operates.
There is an overriding commitment to Sustainable Development which
is pursued through the effective management of Environment, Health,
Safety and Quality ("EHSQ") using best practices from ZincOx and
other third parties.
As the projects are progressed internationally, the directors
remain relentless in their pursuit of an injury free environment
for all employees and others who come onto ZincOx sites and the
Group seeks to ensure that its business contributes lasting
benefits to society through the consideration of health, safety,
social, environmental, ethical and economic aspects in all
decisions and activities.
During 2013, some two hundred and eight thousand hours were
worked in ZincOx worldwide, including projects, with no significant
environmental incidents and only one lost time incident involving
one of our employees at BRZ. ZincOx's management believe that all
incidents and injuries are preventable and strives to create a
workplace culture where all employees and contractors share these
beliefs.
Risks
Set out below are certain risks which may affect performance.
Such risks are not intended to be presented in any order of
priority. Although the directors and senior management have
significant experience and take steps continually to mitigate and
review risks as far as possible and reasonably practicable, any of
the risks set out below, as well as any other risks referred to in
this annual report, could have a material adverse effect on
business performance. In addition, the internal and external risks
set out below are not exhaustive and additional risks, not
presently known to the directors, or which the directors currently
deem immaterial, may arise or become material in the future.
Operational risks
-- Failure of equipment or third party services,
-- Unavailable materials and equipment is managed through
regular dialogue with external suppliers and monitoring of
equipment on the site by the maintenance team,
-- Further remediation at KRP which may lead to delays in ramping up to full production,
-- Environmental incidents are managed by routine monitoring and training of staff,
-- Health and safety incidents, and nil returns are reported on a monthly basis,
-- Single project dependence, and
-- Loss of key personnel.
Financial risks
-- Zinc price movements and its associated volatility will
affect the monthly profitability of KRP, as well as the amount of
finance which may be available for the development of other
projects within the Group. Any decline in zinc prices will
therefore have an adverse impact on the business. No hedging is
currently undertaken to mitigate this risk,
-- Loss of production at KRP will impact timing of cash receipts
and payments and further this will impact on generating surplus
cash to fund the Group and repay the debts,
-- Foreign exchange movements, notably between US Dollars and
Korean Won (KRW) has a particular effect on the Group's result as
the revenues are received in US Dollars (matching the borrowings of
the Group) and the critical costs at KRP are in KRW. This is
continuously monitored and no hedging is currently undertaken to
mitigate this risk,
-- Cost inflation is managed by reviewing alternative suppliers where appropriate,
-- Insurances may not cover all liabilities. Insurance policies
are held both at the Group level and at the project level, and are
reviewed annually,
-- Maintaining debt equity ratios in respect of borrowings,
-- Negotiation with authorities regarding spend commitment in Korea,
-- Realisation of iron revenues,
-- Any legal proceedings,
-- Repayment or refinance of Development Loan in Korea which is
currently being reviewed for potential refinancing before February
2015, and
-- Material fall in zinc price.
There is still an ongoing political risk associated with the
tensions between North Korea and the surrounding region including
South Korea where the plant is located.
All of these risks could materially affect the Group, its
business, results of future operations or financial condition.
Uncertainties
Set out below are certain principal uncertainties which may
affect potential growth across the Group.
-- Dependence on the EAFD supply contracts, which is why the
Group is aiming to sign up long term EAFD agreements with target
territories for expansion,
-- Availability of capital to fund other recycling projects. The
directors continue to maintain a good relationship with prospective
suppliers of finance,
-- Ensuring intellectual property and know how is protected,
-- Competitors signing up EAFD supply agreements in the other targeted territories, and
-- Competing technology especially in respect of competitors
copying KRP in other parts of the world.
The Group is further exposed to uncertainty connected with the
political, fiscal and legal systems, including taxation and
currency fluctuations in the territories in which the Group
operates.
On behalf of the Board.
Andrew Woollett
Chairman
2 June 2014
FORWARD LOOKING STATEMENTS
The Chairman's Statement and the Strategic Report contain
discussion of future operations and financial performance by use of
various forward looking words such as "anticipates," "estimates,"
"expects," "projects," "intends," "plans," "believes" and terms of
similar substance. These forward looking statements are based on
management's current expectations and beliefs about future events
but as with any projection or forecast, they are inherently
susceptible to uncertainty and changes in circumstances which could
cause the Group's actual activities and results to differ
materially from those contained in the forward looking
statements.
ZINCOX RESOURCES PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 2012
Notes $'000 $'000
-------------------------------- ------- -------------------- ---------------------
Revenue 27,522 10,823
Cost of sales (40,292) (21,717)
-------------------------------- ------- -------------------- ---------------------
Gross loss (12,770) (10,894)
-------------------------------- ------- -------------------- ---------------------
Administrative expenses (net
of gains) (8,912) 3,697
-------------------------------- ------- -------------------- ---------------------
Operating Loss (21,682) (7,197)
-------------------------------- ------- -------------------- ---------------------
Analysed as:
Gross loss (12,770) (10,894)
Administrative costs (10,219) (9,991)
Foreign exchange gain 676 3,222
-------------------------------- ------- -------------------- ---------------------
Underlying Operating Loss (22,313) (17,663)
Gain on loss of control of
subsidiary - 10,463
Other gains and losses 1,228 3,170
Impairment provisions (597) (3,167)
-------------------------------- ------- -------------------- ---------------------
Operating Loss (21,682) (7,197)
-------------------------------- ------- -------------------- ---------------------
Finance income 3 10 62
Finance costs 3 (4,661) (2,859)
-------------------------------- ------- -------------------- ---------------------
Loss before tax (26,333) (9,994)
Taxation 2 (52)
-------------------------------- ------- -------------------- ---------------------
Net Loss (26,331) (10,046)
-------------------------------- ------- -------------------- ---------------------
Attributable to:
Equity holders of the parent (26,331) (9,406)
Non-controlling interest - (640)
-------------------------------- ------- -------------------- ---------------------
(26,331) (10,046)
-------------------------------- ------- -------------------- ---------------------
Basic and diluted loss per ordinary 4 (24.75) (10.38)
share (cents)
Adjusted loss per ordinary share 4 (24.75) # (21.92)
(cents)
------------------------------------- ---- ---------- -------------
# the adjusted loss per share calculation for 2012 excludes the
one-off gain of US$10,463,000 following the loss of control of
Jabal Salab at 31 May 2012 and its subsequent deconsolidation from
these financial statements.
ZINCOX RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 2012
$'000 $'000
------------------------------------------------- ---------------------- ----------------------
Loss for the year
Other comprehensive income (26,331) (10,046)
Items that will be subsequently reclassified
to profit or loss
Exchange differences on translating foreign
operations (289) 6,743
------------------------------------------------- ---------------------- ----------------------
Total comprehensive income for the year (26,620) (3,303)
Attributable to:
Equity holders of the parent (26,620) (2,663)
Non-controlling interest - (640)
------------------------------------------------- ---------------------- ----------------------
(26,620) (3,303)
------------------------------------------------- ---------------------- ----------------------
ZINCOX RESOURCES PLC
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2013
2013 2012 2011
Notes $'000 $'000 $'000
------------------------------- ------- ------------ ----------- -----------
Assets
Non-Current Assets
Intangible assets 16,352 15,302 14,004
Property, plant & equipment 134,078 137,519 108,828
Investments 106 - -
Trade and other receivables 5 - - 1,012
------------------------------- ------- ------------ ----------- -----------
150,536 152,821 123,844
------------------------------- ------- ------------ ----------- -----------
Current Assets
Inventories 1,403 2,011 586
Trade and other receivables 5 3,540 5,199 3,095
Restricted cash 667 - 22
Cash and cash equivalents 4,752 10,617 18,355
------------------------------- ------- ------------ ----------- -----------
10,362 17,827 22,058
------------------------------- ------- ------------ ----------- -----------
Assets held for sale 1,484 3,138 -
Total Assets 162,382 173,786 145,902
------------------------------- ------- ------------ ----------- -----------
Liabilities
Current Liabilities
Trade and other payables 6 (13,640) (15,959) (20,690)
Loans and borrowings 7 (2,026) (959) (5,715)
------------------------------- ------- ------------ ----------- -----------
(15,666) (16,918) (26,405)
------------------------------- ------- ------------ ----------- -----------
Non-Current Liabilities
Trade and other payables 6 (3,730) (2,751) (1,815)
Loans and borrowings 7 (59,664) (52,035) (31,968)
------------------------------- ------- ------------ ----------- -----------
(63,394) (54,786) (33,783)
------------------------------- ------- ------------ ----------- -----------
Total Liabilities (79,060) (71,704) (60,188)
------------------------------- ------- ------------ ----------- -----------
Net Assets 83,322 102,082 85,714
------------------------------- ------- ------------ ----------- -----------
Equity
Share capital 45,795 45,271 39,525
Share premium 176,944 169,985 165,850
Retained losses (120,592) (94,638) (85,451)
Foreign currency reserve (18,825) (18,536) (25,279)
------------------------------- ------- ------------ ----------- -----------
Equity attributable
to equity holders of
the parent 83,322 102,082 94,645
Non-controlling interest - - (8,931)
------------------------------- ------- ------------ ----------- -----------
Total Equity 83,322 102,082 85,714
------------------------------- ------- ------------ ----------- -----------
ZINCOX RESOURCES PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 2012
Notes $'000 $'000
-------------------------------------------------------- ------- ----------- -----------
Loss before taxation (26,333) (9,994)
Adjustments for:
Depreciation and amortisation 7,623 5,013
Interest received (10) (62)
Interest expense 4,661 2,859
Impairment of intangible assets 513 18
Impairment of property, plant and equipment - 2,788
Impairment of trade and other receivables 84 361
Loss on disposal of property, plant and equipment 39 2
Share based payments 377 219
(Decrease) / increase in trade and other payables (1,340) 8,661
Decrease / (increase) in trade and other receivables 1,575 (1,453)
Decrease / (increase) in inventories 608 (591)
Gain on loss of control of subsidiary - (10,463)
Other gains and losses 5 (1,228) (3,170)
-------------------------------------------------------- ------- ----------- -----------
Cash utilised in operations (13,431) (5,812)
Interest paid (3,932) (1,086)
Taxation 2 (52)
-------------------------------------------------------- ------- ----------- -----------
Net cash flow from operating activities (17,361) (6,950)
-------------------------------------------------------- ------- ----------- -----------
Investing activities
Net proceeds from disposal of assets 2,688 3,196
Net proceeds from disposal of scrapped assets 69 2,752
Purchase of intangible assets (1,694) (686)
Purchase of property, plant and equipment (3,233) (33,921)
Investment in Russian joint venture (106) -
Interest received 10 62
-------------------------------------------------------- ------- ----------- -----------
Net cash used in investing activities (2,266) (28,597)
-------------------------------------------------------- ------- ----------- -----------
Financing activities
Proceeds from borrowings 7,967 18,260
Restriction of cash (667) -
Investment from non-controlling interest - 1,333
Release of restricted cash - 22
Net proceeds from issue of ordinary shares 7,483 9,881
-------------------------------------------------------- ------- ----------- -----------
Net cash received from financing activities 14,783 29,496
-------------------------------------------------------- ------- ----------- -----------
Net decrease in cash and cash equivalents (4,844) (6,051)
Cash and cash equivalents at start of year 10,617 18,355
Exchange differences on cash and cash equivalents (1,021) (1,687)
-------------------------------------------------------- ------- ----------- -----------
Cash and cash equivalents at end of year 4,752 10,617
-------------------------------------------------------- ------- ----------- -----------
ZINCOX RESOURCES PLC
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
Total Non-controlling
Share Share FX Retained attributable interest Total
capital premium reserve losses to equity equity
holders $'000
$'000 $'000 $'000 $'000 of parent $'000
$'000
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 1 January 2011 35,144 160,894 (24,153) (75,922) (95,963) (6,735) 89,228
Share based payments - - - 236 236 - 236
Issue of share capital 4,381 4,956 - - 9,337 - 9,337
Capital increase from non-controlling
interest - - - - - 1,052 1,052
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Transactions with owners
Loss for the year 4,381 4,956 - 236 9,573 1,052 10,625
Other comprehensive income - - - (9,765) (9,765) (3,248) (13,013)
Items that will be subsequently
reclassified to profit or
loss
Exchange differences on translating
foreign operations - - (1,126) - (1,126) - (1,126)
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Total comprehensive income
for the year - - (1,126) (9,765) (10,891) (3,248) (14,139)
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 31 December 2011 39,525 165,850 (25,279) (85,451) 94,645 (8,931) 85,714
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Share based payments - - - 219 219 - 219
Issue of share capital 5,746 4,135 - - 9,881 - 9,881
Capital increase from non-controlling
interest - - - - - 1,333 1,333
Loss of control of subsidiary - - - - - 8,238 8,238
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Transactions with owners
Loss for the year 5,746 4,135 - 219 10,100 9,571 19,671
Other comprehensive income - - - (9,406) (9,406) (640) (10,046)
Items that will be subsequently
reclassified to profit or
loss
Exchange differences on translating
foreign operations - - 6,743 - 6,743 - 6,743
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Total comprehensive income
for the year - - 6,743 (9,406) (2,663) (640) (3,303)
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 31 December 2012 45,271 169,985 (18,536) (94,638) 102,082 - 102,082
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Share based payments - - - 377 377 - 377
Issue of share capital 524 6,959 - - 7,483 - 7,483
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Transactions with owners
Loss for the year 524 6,959 - 377 7,860 - 7,860
Other comprehensive income - - - (26,331) (26,331) - (26,331)
Items that will be subsequently
reclassified to profit or
loss
Exchange differences on translating
foreign operations - - (289) - (289) - (289)
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Total comprehensive income
for the year - - (289) (26,331) (26,620) - (26,620)
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Balance at 31 December 2013 45,795 176,944 (18,825) (120,592) 83,322 - 83,322
----------------------------------------- --------- --------- --------- ---------- ------------- ---------------- ----------
Notes:
1. Preparation of non-statutory accounts
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2013
or 2012 or 2011 but is derived from those accounts. Statutory
accounts for 2012 and 2011 have been delivered to the registrar of
companies, and those for 2013 will be delivered in due course. The
auditors have reported on those accounts; their reports were (i)
unqualified, (ii) included a reference, without qualifying their
report to an emphasis of matter in relation to going concern in
2013 and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
2. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Group makes estimates and assumptions concerning the future,
which by definition will seldom result in actual results that match
the accounting estimate. The estimates and assumptions that have a
significant risk of causing material adjustments to the carrying
amount of assets and liabilities within the next financial year are
discussed below:
Going Concern
The directors have considered scenarios in reviewing the budgets
and projections for 2014. These scenarios are centred on the
financial modelling of a ramp-up for KRP over the next twelve
months including (but not limited to) sensitivity to the zinc
price, recovery of zinc from EAFD, tonnes of zinc sold and key
operating costs.
The zinc price assumption started with a review of the actual
price since the start of 2014 and adopted a price below this for
the remainder of the year. The market predictions for zinc price
are upward in the second half of 2014 and, as such, the directors
have assumed a conservative price assumption of US$2,000 per tonne.
The ramp-up profile is expected to achieve target throughput by the
end of 2014 taking into account the requirement for a key planned
maintenance period in August which will reduce throughput in that
month. The zinc tonnes sold assume a rising zinc recovery up to
target levels through the remainder of 2014. As throughput rises,
so the operating cost metrics (i.e. consumptions per tonne of
EAFD), are expected to fall through the remainder of the year.
The directors have also considered the requirement to repay the
Korea Zinc development loan of US$15 million in February 2015 and
are pursuing options for the refinance of this debt if available
cash generated from KRP is insufficient. The options include, a
rescheduling of the current due date, traditional debt through both
a traditional bank or the bond market and monetising a proportion
of future zinc production in exchange for upfront payments. The
exact amounts of any shortfall will depend on the zinc price and
the ramp-up progress in the run up to the repayment date. Other
discretionary spend has been scrutinised and scheduled accordingly
in this important period where the continuing ramp up of KRP is the
critical factor in the future success of the Group.
The directors have assessed the material uncertainties
concerning the future funding requirements of the Group on this
basis, compared them with the levels of expected finance available
at a corporate and project level and, subject to the successful
refinancing of this debt, and in consideration of the expected ramp
up, have a reasonable expectation that the Group has adequate
financial resources to manage its business risks and continue in
operational existence for the next twelve months.
3. Finance Income / (Costs)
2013 2012
$'000 $'000
-------------------- ---------- ----------
Interest received 10 62
Interest paid (4,661) (2,859)
-------------------- ---------- ----------
(4,651) (2,797)
-------------------- ---------- ----------
4. Loss Per Share
The calculation of the loss per share is based on the loss
attributable to ordinary shareholders of US$26,331k (2012:
US$9,406k) divided by the weighted average number of shares in
issue during the year of 106,370,166 (2012:90,634,426).
An adjusted loss per ordinary share for 2012 has been presented
to exclude the gain of US$10,463,000 on the loss of control of
Jabal Salab at 31 May 2012. It has been calculated based on
adjusted loss attributable to ordinary shareholders of
US$19,869,000 divided by the weighted average number of shares in
issue during 2012 of 90,634,426.
There is no dilutive effect of the share options in issue during
2013 and 2012.
5. Trade and Other Receivables
2013 2012 2011
$'000 $'000 $'000
--------------------- ------- -------- --------
Current
Trade receivables 2,479 3,577 -
Deposits 12 55 54
Other debtors 723 1,368 2,788
Prepayments 326 199 253
--------------------- ------- -------- --------
3,540 5,199 3,095
--------------------- ------- -------- --------
Non-Current
Deposits - - 1,012
--------------------- ------- -------- --------
- - 1,012
--------------------- ------- -------- --------
Impairments of US$84k against an associate loan to the Jabali
project were made in the year (2012: impairment of US$352k, 2011:
reversal of impairment of US$26k).
None of the current receivables are past due.
6. Trade and Other Payables
2013 2012 2011
$'000 $'000 $'000
-------------------------------- -------- -------- --------
Current
Trade payables 7,680 8,146 18,420
Taxation and social security 268 246 202
Accruals 5,104 6,616 1,429
Other payables 566 936 603
Finance lease obligations 22 15 36
-------------------------------- -------- -------- --------
13,640 15,959 20,690
-------------------------------- -------- -------- --------
Non-Current
Accruals 2,795 1,880 912
Employee benefits 10 294 313
Other payables 891 549 548
Finance lease obligations 34 28 42
-------------------------------- -------- -------- --------
3,730 2,751 1,815
-------------------------------- -------- -------- --------
A non-current rent accrual of US$2,795k (2012: US$1,880k, 2011:
US$912k) was made for the lease of the land from the Korean
government authorities in relation to the Korean Recycling
Plant.
At 31 December 2013, the Group made accruals of KRW 2.7bn,
equivalent to US$2.6m (2012: KRW 3.5bn equivalent to US$3.3m). Of
these, KRW 2.3bn, equivalent to US$2.2m, is in respect of disputed
invoices relating to the KRP construction.
7. Loans and Borrowings
2013 2012 2011
$'000 $'000 $'000
---------------------------------------------- -------- -------- --------
Current
Korea Zinc Company Limited secured loans 976 950 -
Standard Chartered Bank Korea Ltd facility 999 - -
International Bank of Yemen unsecured loan - - 5,667
Other bank borrowings 51 9 48
---------------------------------------------- -------- -------- --------
2,026 959 5,715
---------------------------------------------- -------- -------- --------
Non-Current
Korea Zinc Company Limited secured loans 52,739 52,035 31,968
Secured loan notes 6,925 - -
---------------------------------------------- -------- -------- --------
59,664 52,035 31,968
---------------------------------------------- -------- -------- --------
Korea Zinc loans
In 2011, two separate loans were taken out with Korea Zinc
Company Limited ("Korea Zinc") by ZincOx (Korea) Ltd to provide
US$50 million of the required funding for the development of KRP in
Korea.
A long term 'Offtake Loan' was agreed for US$35 million and is
repayable on 30 June 2022. Up to June 2013, interest on this loan
was rolled into the principal amount and thereafter chargeable at
USD 6 month LIBOR plus a 5% margin. A shorter term 'Development
Loan' was agreed for US$15 million and is repayable three years
from first drawdown being February 2015. Interest is chargeable at
15% and became payable immediately from first drawdown in line with
the agreed interest periods.
Interest on both loans was capitalised up to May 2012, the point
at which the plant went into operation. It was capitalised to the
construction in progress account in accordance with Group policy.
Since then interest has been charged to the Group income
statement.
At 31 December 2013 the Offtake Loan balance was US$37.8 million
including rolled up interest (2012: US$37.0 million) and the
Development Loan balance was US$15.0 million (2012: US$15.0
million). Both loans with Korea Zinc are secured by a debenture
over the assets of KRP only.
Standard Chartered Bank Korea Ltd facility
In April 2013, a US$5 million Receivables Services facility was
taken out by ZincOx (Korea) Ltd with Standard Chartered Bank Korea
Ltd ("SCBK"). Interest is chargeable at USD 3 Month LIBOR plus a 4%
margin and is payable immediately.
Secured loan notes
In July 2013, the Company issued loan notes to a value of GBP4.2
million together with four year warrants over 9,450,000 new
ordinary shares of the Company at an exercise price of 40 pence per
share. Interest is 10%, payable immediately on a monthly basis with
repayment due in July 2015.
The loan notes are secured against the shares in ZincOx Anadolu
Cinko SVTAS, the Company's wholly owned subsidiary that owns the
freehold land held at Aliaga, Turkey.
Other loans
An unsecured loan taken with the International Bank of Yemen by
Jabal Salab Company (Yemen) Ltd on 12 March 2011 was deconsolidated
when there was a loss of control of the subsidiary undertaking.
Other bank borrowings represent an unsecured facility taken out
by ZincOx Resources Belgium Sprl to fund short-term working capital
requirements.
8. Post Balance Sheet Events
On 28 January 2014, the Company granted 4,989,760 options over
its ordinary shares at a subscription price of 24.5 pence per
ordinary share and issued a further 5,410,240 options under its
Performance Share Plan at a zero subscription price. At the same
time, the Company cancelled all 5,650,000 outstanding options over
its ordinary shares that had been granted in 2013 (see note 21 for
details).
In March 2014, an agreement was reached with Korea Zinc to defer
the interest payments on both loans for a period of twelve months
in return for additional offtake material as covered by the
separate Offtake Agreement with Korea Zinc.
On 1 April 2014, the Company raised GBP1.0 million (after
deducting expenses) by way of a conditional placing of 10.3 million
new ordinary shares at a price of 10 pence per share.
On 24 April 2014, the Company raised a further GBP1.95 million
(after deducting expenses) by way of an open offer through the
issuance of 20.4 million new ordinary shares at a price of 10 pence
per share.
9. Annual Report
In accordance with AIM Rule 20, copies of the Annual Report
together with the Notice of Annual General Meeting and Proxy Card
will be sent to shareholders on 5 June 2014.
The Annual Report, Notice of General Meeting and Proxy Card will
be available to view on the Company's website at www.zincox.com on
5 June 2014, or from the Company at Knightway House, Park Street,
Bagshot, Surrey, GU19 5AQ. It should be noted that online voting
will be available from 6 June 2014.
10. Annual General Meeting
The Annual General Meeting of the Company will be held at
12.30pm on 30 June 2014 at the offices of Eversheds LLP, One Wood
Street, London EC2V 7WS.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSLFAEFLSESM
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