News blog

ZincOx Resources

• BY: Andrew Hore |
• POSTED: 25/11/2013 |

Zinc recycler ZincOx Resources believes that it has overcome its problems at its South Korean recycling plant and it is raising up to £5.59m via a placing and open offer in order to finance new projects.

The International Finance Corporation (IFC), which is part of the World Bank, is investing £2.5m at the placing and open offer price of 15.5p a share. the deal has taken more than one year to negotiate. This will give the IFC a stake of nearly 12% giving it the right to a board director. The IFC’s international connections will help ZincOx gain access to new markets.  The IFC insists that the chairman and chief executive roles should be split and the company has to comply with environmental requirements.

The fundraising includes a one-for-14 open offer at 15.5p a share, which will raise up to £1.15m. Shareholders can apply for more than their entitlement although they could be scaled back if the open offer is profitable. The open offer closes on 27 November.

There have been problems with the heat exchangers and blockages in the system. Management believes that these problems have been sorted out and production levels. Zinc grades have been higher than expected and this has offset lower prices. At full production, annual EBITDA could be $18m at a zinc price of $1,900/tonne.

ZincOx started out as a mining business but all of the mining operations have been sold. There is potential deferred consideration but it is best to assume that no cash will be generated from this source.

Net debt was £54.7m at the end of June 2013 with most of the debt relating to the Korea Zinc offtake agreement. The existing cash has nearly run out. The cash raised in the fundraising will finance additional improvements to the Korean plant, provide working capital and leave between £1m and £3m to pursue projects in Thailand, Turkey and Russia.

At 15.5p a share, ZincOx is valued at £16m.

Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFNovember2013_50.pdf