TIDMZOX
RNS Number : 9162S
ZincOx Resources PLC
30 September 2014
ZincOx Resources plc
("ZincOx", the "Company" or the "Group")
Half Yearly Results for the six months ended 30 June 2014
ZincOx Resources plc (AIM Ticker: ZOX), the developer and
operator of one of the world's largest zinc recycling plants, is
pleased to announce its half yearly results for the six months
ended 30 June 2014, a period of increasing production and revenue
from its Korean Recycling Plant ("KRP").
Highlights
Korean Recycling Plant
-- Revenues increased by 28% to US$17.8 million (2013: US$13.9 million)
-- Continuing improvement to operating performance at KRP
-- Zinc recovery over 90%
-- Development Loan repayment extended to February 2016
-- Guaranteed offtake extended to 840,000 tonnes
Other
-- Appointment of Dr Rod Beddows as Chairman
-- Overhead expenses reduced
-- Average LME zinc price for 6 months increased by 6% to US$2,050 per tonne (2013: US$1,936)
-- Loss per ordinary share 5.09 cents (2013: 17.05 cents)
-- Cash of US$3.3 million at 30 June 2014
Commenting on the half yearly results, Dr Rod Beddows,
non-executive Chairman said "There has been significant progress in
increasing the reliability of KRP. In particular, since the major
remediation work in August all aspects of the performance of the
plant have shown improvement. The major problems that have affected
our production in the past have now been addressed and this,
together with the increasing zinc price, is most encouraging. We
are confident that full production can be achieved by the year
end."
For further information, please go to: www.zincox.com or
contact:
ZincOx Resources plc Tel: +44 (0) 1276
450 100
Peel Hunt LLP (Nominated Adviser Tel: +44 (0) 207
and Joint Broker) 418 8900
Richard Kauffer
Daniel Harris
finnCap Limited (Joint Broker) Tel: +44 (0) 207
Matthew Robinson 220 0500
Joanna Weaving
Tavistock Communications (Financial Tel: +44 (0) 207
PR) 920 3150
Simon Hudson
Nuala Gallagher
Operations Review
Korean Recycling Plant ("KRP")
ZincOx is pleased to announce continuing improvements in the
operating performance at its wholly owned Korean Recycling Plant,
where Electric Arc Furnace Dust ("EAFD"), a waste generated by the
recycling of galvanised steel scrap, is processed for the recovery
of a zinc concentrate and an intermediate iron product.
During the first six months of the year, 60,555 tonnes of EAFD
have been processed (H1 2013: 53,280 tonnes). The record month of
production was in May 2014 when 13,826 tonnes of EAFD was processed
producing revenue of US$3.7 million. Production in June 2014,
(9,569 tonnes of EAFD; revenue of US$3.2 million) fell as a result
of a short suspension of operation to carry out modifications that
required a cooling of the furnace. However, the underlying
performance of the plant has continued to improve. The inspection
and maintenance closure, originally planned for September 2014, was
brought forward to the end of July 2014 and extended to 24(th)
August. This resulted in 11,788 tonnes of EAFD being processed
during July producing revenue of US$3.8 million and an adjusted
EBITDA(1) , excluding foreign exchange fluctuations, of US$0.6
million.
Since the beginning of the year, as a result of various
modifications, plant performance has improved steadily although
this has been masked by stoppages required to repair the heat
exchangers and refractory failures.
As production rose, however, we found that an increasing
proportion of the zinc product settles in the central part of the
drop-boxes and was inaccessible to cleaning through the existing
access doors. This build-up reduced offgas flow and so impacted on
plant capacity. A short closure was required in June to make new
access points which allow these areas to be cleared.
Before the maintenance closure in August, falling refractory
caused a number of issues that constrained production in July
resulting in 2,976 tonnes of zinc in concentrate being treated.
During the maintenance closure, the heat exchangers were lined with
refractory material which provides a physical barrier to the
corrosive offgas but which still allows an efficient heat transfer.
Modifications have also been made to the evaporative cooler and
cleaning system of the filter bags. The refractory in several high
temperature parts of the process had been badly affected by the
numerous stoppages over the past two years, and several areas which
appeared to be at risk were rebuilt. Finally, we replaced the outer
curb of the hearth and the hearth bed.
The maintenance undertaken during the closure had an immediate
and positive effect on performance with lower gas consumption, a
more stable operation, better availability, increased recovery
(>92%) and higher throughput (90% of target). Following the
closure, however, it was necessary to carry out a full cleaning of
the bags while in operation, which required reduced throughput for
ten days in September. In spite of this reduction, the plant still
produced about 3,000 tonnes of zinc in concentrate for the month.
Following the bag cleaning, it has been possible, for the first
time, to operate the plant at the full feed. These recent results
are most encouraging and October is expected to set a new monthly
production record. Further improvements and modifications are
planned which should enable the plant to reach full production by
the year end.
As part of the financing of the project a Development Loan for
US$15 million was provided by Korea Zinc Company Ltd ("Korea
Zinc"). As KRP would not have generated sufficient cash to repay
the loan scheduled for repayment in February 2015, Korea Zinc, in
September 2014, agreed to extend the repayment date by one year so
that it will now fall due in February 2016. This extension should
allow KRP to generate sufficient cash to repay the Development Loan
by this date.
In return for the loan extension, ZincOx has agreed to increase
the overall tonnage of zinc oxide to be supplied to Korea Zinc to
840,000 tonnes, an increase of 70,000 tonnes; the effect of which
is to extend the life of the Offtake Agreement by about one year.
In all other respects the agreements remain unchanged.
Other Activities
While the principal efforts of the executives and staff are
focused almost entirely on ensuring KRP reaches full production as
rapidly as possible, other activities are being undertaken. The
plant has consistently
(1) Earnings before interest, tax, depreciation and amortisation
(adjusted to exclude foreign exchange gains and losses)
produced a zinc concentrate of exceptional quality. The Company
has successfully completed testwork that demonstrated that our
product can be simply and cheaply upgraded to a zinc oxide of
industrial purity. This material would benefit terminal markets in
a significantly more valuable fashion than its sale to smelters.
The upgrading process results in the production of a clean brine
suitable for marine discharge, so processing plants will need to be
situated at the coast. However, this brine removal can also be
carried out at Big River Zinc, the Company's plant in St Louis,
USA, which is already permitted for this type of discharge and
where it is planned, using existing equipment, to run a short
commercial trial. This will demonstrate the cost and effectiveness
of this upgrading, and provide samples for test marketing.
It remains our intention to roll out the Company's rotary hearth
furnace ("RHF") technology around the world and progress is being
made in a number of countries, most particularly in Thailand.
In Thailand, we have identified an excellent site, which is
adjacent to a container and bulk handling port, with the full range
of services and utilities. Planning for a Thai plant has commenced
and negotiations for dust supply are underway. The Thai plant is
likely to have a capacity of 100,000 tonnes of dust per annum but
would include upgrading facilities for the production of an
industrial grade zinc oxide chemical. The value of the upgraded
product would be about twice that of zinc concentrate.
Corporate
In July 2014, Dr Rod Beddows was appointed to be the Chairman of
the Group thereby separating the roles of Chairman and Chief
Executive Officer in line with the undertaking given to the
International Finance Corporation following its investment in the
Company at the end of 2013. Andrew Woollett remains as the
Company's Chief Executive Officer.
As a result of repair work, the ramp-up to full production has
been slower and more costly than planned; it was therefore
necessary for further funds to be raised. In April, GBP3.1 million
was raised by way of an equity Placing and Open Offer in order to
see the Group through to a time when its ongoing costs will be
covered by revenues generated from KRP.
Financial Results
The Group loss after tax, attributable to shareholders of the
parent company, was US$7.6 million for the six months (period to 30
June 2013: loss of US$17.6 million, year to 31 December 2013: loss
of US$26.3 million). This represents a loss per ordinary share of
5.09 cents (period to 30 June 2013: loss per share 17.05 cents,
year to 31 December 2013: adjusted loss per share 24.75 cents).
The Group revenue includes sales of zinc oxide from KRP
totalling US$17.5 million in the six months (period to 30 June
2013: US$13.8 million, year to 31 December 2013: US$27.1 million).
The revenue for the Group improved by 28% for the six months to 30
June 2014 compared to the first half of 2013. It is worth noting
that the zinc price fluctuated during the period within the range
of US$1,942 to US$2,204 per tonne of zinc. The market analysts
covering the zinc sector continue to talk of a shortage of zinc due
to mine closures in the next twelve to eighteen months. The global
inventory of zinc fell by 263,225 tonnes (28%), in the six month
period from 931,175 tonnes at the start of January to 667,950 at
the end of June. The closing price on the 26 September was US$2,270
per tonne.
The directors have reviewed the future forecasts and funding
requirements of the Group based on an underlying set of assumptions
for the ramp-up at KRP and zinc price. They will continue to keep
under review the availability of funds and assess if further
capital is required. For these reasons they continue to adopt the
going concern basis in preparing these financial statements.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group have not
changed from those disclosed in the Annual Report 2013.
Outlook
The key focus of the Group remains the completion of the ramp-up
to full production of KRP so that the cashflow from it will be able
to repay the loans when they fall due and to provide a cashflow to
the Group.
Dr Rod Beddows
Chairman
30 September 2014
Forward Looking Statements
The Operations Review contains 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 Interim Income Statement
for the period ended 30 June 2014
6 months 6 months Year ended
to 30 to 30 31 Dec
Jun 2014 Jun 2013 2013
unaudited unaudited audited
------------------------------ ------ ------------ ------------ -------------
Notes $'000 $'000 $'000
------------------------------ ------ ------------ ------------ -------------
Revenue 17,775 13,935 27,522
Cost of sales (21,100) (20,770) (40,292)
------------------------------ ------ ------------ ------------ -------------
Gross loss
(3,325) (6,835) (12,770)
Administrative expenses
(net of gains) (1,685) (8,567) (8,912)
Operating Loss (5,010) (15,402) (21,682)
------------------------------ ------ ------------ ------------ -------------
Analysed as:
Gross loss (3,325) (6,835) (12,770)
Administrative costs (4,520) (5,316) (10,219)
Foreign exchange gain
/ (loss) 2,070 (3,902) 676
------------------------------ ------ ------------ ------------ -------------
Underlying Operating
Loss 4 (5,775) (16,053) (22,313)
Other gains and losses 765 735 1,228
Impairment provisions - (84) (597)
------------------------------ ------ ------------ ------------ -------------
Operating Loss (5,010) (15,402) (21,682)
------------------------------ ------ ------------ ------------ -------------
Finance income 1 6 10
Finance costs (2,546) (2,244) (4,661)
------------------------------ ------ ------------ ------------ -------------
Loss before tax (7,555) (17,640) (26,333)
Taxation - - 2
------------------------------ ------ ------------ ------------ -------------
Net Loss (7,555) (17,640) (26,331)
============================== ====== ============ ============ =============
Basic and diluted loss
per ordinary share (cents) 5 (5.09) (17.05) (24.75)
------------------------------ ------ ------------ ------------ -------------
ZincOx Resources plc
Consolidated Interim Statement of Comprehensive Income
for the period ended 30 June 2014
6 months 6 months Year ended
to 30 to 30 31 Dec
Jun 2014 Jun 2013 2013
unaudited unaudited audited
----------------------------------- ----------- ----------- -----------
$'000 $'000 $'000
----------------------------------- ----------- ----------- -----------
Loss for the period
Other comprehensive income (7,555) (17,640) (26,331)
Items that will be subsequently
reclassified to profit
or loss
Exchange differences
on translating foreign
operations 2,345 (5,278) (289)
----------------------------------- ----------- ----------- -----------
Total comprehensive income
for the period (5,210) (22,918) (26,620)
=================================== =========== =========== ===========
ZincOx Resources plc
Consolidated Interim Balance Sheet
at 30 June 2014
as at as at as at
30 Jun 30 Jun 31 Dec
2014 unaudited 2013 unaudited 2013
audited
------------------------------- ---- ---------------- ---------------- ------------
$'000 $'000 $'000
------------------------------- ---- ---------------- ---------------- ------------
ASSETS
Non-Current Assets
Intangible assets 16,983 14,748 16,352
Property, plant and
equipment 136,380 126,541 134,078
Investments 109 - 106
Trade and Other receivables 11 - -
------------------------------------- ---------------- ---------------- ------------
153,483 141,289 150,536
------------------------------------ ---------------- ---------------- ------------
Current Assets
Inventories 1,822 1,636 1,403
Trade and other receivables 5,557 4,068 3,540
Restricted cash 1,457 - 667
Cash and cash equivalents 3,303 1,829 4,752
------------------------------------- ---------------- ---------------- ------------
12,139 7,533 10,362
------------------------------------ ---------------- ---------------- ------------
Assets held for sale 843 1,982 1,484
TOTAL ASSETS 166,465 150,804 162,382
------------------------------------- ---------------- ---------------- ------------
LIABILITIES
Current Liabilities
Trade and other payables (14,428) (12,973) (13,640)
Loans and borrowings (4,487) (1,004) (2,026)
------------------------------------- ---------------- ---------------- ------------
(18,915) (13,977) (15,666)
------------------------------------ ---------------- ---------------- ------------
Non-Current Liabilities
Trade and other payables (4,242) (3,130) (3,730)
Loans and borrowings (59,909) (54,487) (59,664)
------------------------------------- ---------------- ---------------- ------------
(64,151) (57,617) (63,394)
------------------------------------ ---------------- ---------------- ------------
TOTAL LIABILITIES (83,066) (71,594) (79,060)
------------------------------------- ---------------- ---------------- ------------
NET ASSETS 83,399 79,210 83,322
===================================== ================ ================ ============
EQUITY
Share capital 46,310 45,271 45,795
Share premium 181,371 169,985 176,944
Retained losses (127,802) (112,232) (120,592)
Foreign currency reserve (16,480) (23,814) (18,825)
------------------------------------- ---------------- ---------------- ------------
TOTAL EQUITY 83,399 79,210 83,322
===================================== ================ ================ ============
ZincOx Resources plc
Consolidated Interim Cash Flow Statement
for the period ended 30 June 2014
6 months 6 months Year ended
to 30 to 30 31 Dec
Jun 2014 Jun 2013 2013
unaudited unaudited audited
--------------------------------- --- ----------- ----------- -----------
$'000 $'000 $'000
--------------------------------- --- ----------- ----------- -----------
Loss before taxation
Adjustments for:
Depreciation and amortisation
Interest received
Interest expense
Impairment of intangible
assets (7,555) (17,640) (26,333)
Impairment of trade and
other receivables
Loss on disposal of property, 3,897 3,844 7,623
plant and equipment (1) (6) (10)
Share based payments 2,546 2,244 4,661
Increase / (decrease) in - - 513
trade and other payables - 84 84
(Increase) / decrease in - 49 39
trade and other receivables 345 46 377
(Increase) / decrease in 822 (2,607) (1,340)
inventories (2,028) 1,047 1,575
Foreign exchange (gains) (419) 375 608
/ losses (2,070) 3,902 (676)
Other gains and losses (765) (735) (1,228)
-------------------------------------- ----------- ----------- -----------
Cash utilised in operations (5,228) (9,397) (14,107)
Interest paid (1,652) (1,435) (3,932)
Taxation - - 2
-------------------------------------- ----------- ----------- -----------
Net cash flow from operating
activities (6,880) (10,832) (18,037)
-------------------------------------- ----------- ----------- -----------
Investing activities
Net proceeds from disposal
of assets 1,424 2,082 2,688
Net proceeds from disposal
of scrapped assets 10 - 69
Purchase of intangible
assets (268) (450) (1,694)
Purchase of property, plant
and equipment (1,446) (1,807) (3,233)
Investment in Russian joint
venture - - (106)
Interest received 1 6 10
Net cash used in investing
activities (279) (169) (2,266)
-------------------------------------- ----------- ----------- -----------
Financing activities
Proceeds from borrowings 1,507 1,762 7,967
Restriction of cash (790) - (667)
Net proceeds from issue
of ordinary shares 4,942 - 7,483
-------------------------------------- ----------- ----------- -----------
Net cash received from
financing activities 5,659 1,762 14,783
-------------------------------------- ----------- ----------- -----------
Net decrease in cash and
cash equivalents (1,500) (9,239) (5,520)
Cash and cash equivalents
at start of period 4,752 10,617 10,617
Exchange differences on
cash and cash equivalents 51 451 (345)
-------------------------------------- ----------- ----------- -----------
Cash and cash equivalents
at end of period 3,303 1,829 4,752
====================================== =========== =========== ===========
ZincOx Resources plc
Consolidated Statement of Changes in Shareholders' Equity
at 30 June 2014
Share Share FX Retained
capital premium reserve losses Total equity
$'000s $'000s $'000s $'000s $'000s
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Balance at 1 January 2013 45,271 169,985 (18,536) (94,638) 102,082
Share based payments - - - 46 46
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Transactions with owners - - - 46 46
Loss for the period
Other comprehensive income
Items that will be subsequently - - - (17,640) (17,640)
reclassified to profit or loss
Exchange differences on translating
foreign operations - - (5,278) - (5,278)
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Total comprehensive income for
the period - - (5,278) (17,640) (22,918)
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Balance at 30 June 2013- unaudited 45,271 169,985 (23,814) (112,232) 79,210
====================================== ========== ========== =========== =========== ===============
Share based payments - - - 331 331
Issue of share capital 524 6,959 - - 7,483
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Transactions with owners 524 6,959 - 331 7,814
Loss for the period - - - (8,691) (8,691)
Other comprehensive income
Items that will be subsequently
reclassified to profit or loss
Exchange differences on translating
foreign operations - - 4,989 - 4,989
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Total comprehensive income for
the period - - 4,989 (8,691) (3,702)
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Balance at 31 December 2013 -
audited 45,795 176,944 (18,825) (120,592) 83,322
====================================== ========== ========== =========== =========== ===============
Share based payments - - - 345 345
Issue of share capital 515 4,427 - - 4,942
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Transactions with owners 515 4,427 - 345 5,287
Loss for the period - - - (7,555) (7,555)
Other comprehensive income
Items that will be subsequently
reclassified to profit or loss
Exchange differences on translating
foreign operations - - 2,345 - 2,345
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Total comprehensive income for
the period - - 2,345 (7,555) (5,210)
-------------------------------------- ---------- ---------- ----------- ----------- ---------------
Balance at 30 June 2014 - unaudited 46,310 181,371 (16,480) (127,802) 83,399
====================================== ========== ========== =========== =========== ===============
Notes to the Consolidated Financial Interim Statements
1. Basis of Preparation
These interim condensed consolidated financial statements are
the unaudited Consolidated Financial Statements of ZincOx Resources
plc, for the six months ended 30 June 2014. They have been prepared
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the EU and the Companies Act 2006,
applicable to companies reporting under IFRS. They do not include
all of the information required in annual financial statements in
accordance with IFRS, and should be read in conjunction with the
consolidated financial statements of the Group for the year ended
31 December 2013.
These interim financial statements were approved by the Board on
29 September 2014. The financial information set out in this
interim report does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The Group's statutory
financial statements for the year ended 31 December 2013, prepared
under IFRS, have been filed with the Registrar of Companies. The
auditor's report on those financial statements was unqualified and
did not contain statements under Section 498(2) or Section 498(3)
of the Companies Act 2006.
These financial statements have been prepared under the
historical cost convention and the consolidated financial
statements incorporate the financial statements of the Company and
its subsidiary companies.
The financial information for the six months ended 30 June 2014
and 30 June 2013 is unaudited.
2. Significant Accounting Policies
The accounting policies and presentation followed in the
preparation of this interim report have been consistently applied
to all periods in these financial statements and are the same as
those applied by the Group in the preparation of its Annual Report
for the year ended 31 December 2013.
3. Critical Accounting Estimates and Judgements
The Group performs an annual assessment of the recoverability of
assets to see whether any of the projects have suffered impairment.
This assessment is only done at the end of each year unless there
are indicators of impairment apparent in the period.
4. Underlying Operating Loss
The underlying operating loss is stated before exceptional items
including impairment provisions but after any foreign exchange
gains or losses.
5. Loss per Share
The calculation of basic and diluted loss per ordinary share is
based on the loss attributable to ordinary shareholders of
US$7,555k (period to 30 June 2013: US$17,640k, year to 31 December
2013: US$26,331k) divided by the weighted average number of shares
in issue during the year of 148,324,222 (period to 30 June 2013:
103,466,716, year to 31 December 2013: 106,370,166).
There is no dilutive effect of the share options in issue.
6. Post Balance Sheet Events
On 7 July 2014, Dr Rod Beddows was appointed as the Chairman of
the Company with Andrew Woollett remaining as Chief Executive
Officer.
On 3 September 2014, the Company agreed with Korea Zinc
(Company) Ltd to extend the repayment date for the US$15m
Development Loan by one year to February 2016.
7. Further copies of this statement
Copies of this statement are available for download from the
Company's website at www.zincox.com or on request from the Company
Secretary, ZincOx Resources plc, Knightway House, Park Street,
Bagshot, Surrey, GU19 5AQ, United Kingdom.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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