Interim Results

RNS Number:1188Q
Zeehan Zinc Limited
14 March 2008


                              Zeehan Zinc Limited
                        ("Zeehan Zinc" or the "Company)

            Interim Report for the six months ended 31 December 2007


Managing Director's Statement

Introduction

The financial half year that ended on 31 December 2007 has seen the Company make
solid progress towards realising the value inherent in its mining and
exploration tenements in Western Tasmania.

A major step forward was announced in December 2007, when the Company raised
£4,275,000 (A$9.5 million) by way of convertible loan notes (the "Notes")
entered with subsidiaries of Chinese investment group Creat Group Company
Limited ("Creat Group"), and the proceeds of such Notes to be paid in two
tranches. The Company received the first payment in mid February and will
receive the second payment, in accordance with the terms of the convertible
notes, on 15 April 2008. The proceeds will primarily be put towards a financial
feasibility study in relation to the construction of a flotation plant at the
Company's Comstock mine in addition to the Company's general working capital
requirements.

In January 2008, Mr Xiaojian Ren, a founding member and the CEO of Creat Group,
was appointed to the Board as a non-executive director. The Board welcomes Mr
Ren, and looks forward to further developing a close working relationship with
him and with Creat Group in its capacity as strategic partner to Zeehan Zinc as
their financial support and management resources will enable the Company to
embark on a new phase of growth.

Progress Year-to-date

Despite experiencing a number of short term delays during the commissioning of
the gravity plant at its Comstock mine due to the necessary fine-tuning of the
final set up, aimed at ensuring maximum metal recovery, the plant is now
operational.

Limited production at Comstock commenced in the first quarter of 2008 to provide
sample batches to potential customers.

Negotiations continue with various interested parties for an offtake agreement
for the sale of a zinc/lead bulk concentrate, which should enable the Company to
begin to generate revenues in the near term.

The Company has applied for permission to alter conditions of its Mining Permit
to increase production at the Comstock site from 200,000 tonnes per annum to
400,000 tonnes per annum. The Company considers it has met all the necessary
conditions to secure the necessary approval, which it believes is imminent.

Results

During the period under review, the Company was in the exploration and
development phase of its projects and therefore received no operating income.
The Company made a loss in the half-year to 31 December 2007 of A$4.67 million
(GBP 2.1 million). The result reflects a number of one-off expenses associated
with further business establishment and the cost of administering operations.

Prospects

With the recent funding and investment made by Creat Group, alongside
commencement of production at Comstock mine, the prospects for the Company are
positive. It is well positioned to achieve its stated goal of becoming a major
producer of lead and zinc in Tasmania.


Ralph Rossouw
Managing Director and CEO

14 March 2008


REVIEW OF OPERATIONS

RESOURCES SUMMARY

The Company announced a 1.3 Mt increase in its resources in December 2007,
following the discovery of a new deposit at its Comstock mine site. This
discovery followed an extensive drilling programme undertaken by the Company
during 2007.

In December 2007, the company engaged AMC Consultants Pty Ltd, a mining
consultancy, to carry out an independent technical audit/technical due diligence
of the Company's exploration strategy and resource geology evaluation. This
assessment is still in progress.

COMSTOCK SITE

Tenement

On 22 August 2007 the Minister of Resources granted the Company a consolidated
mining lease (5M/2007) for a term expiring on 31 March 2009 over 247 Ha
described as Comstock mine, which neighbours the Zeehan township in Western
Tasmania.

This mining lease consolidates four previous mining leases, owned by the
Company, numbered 123M/1947, 9M/2002, 19M/1995 and 43M/1985.

Progress Report

Over the last six months, the Company concentrated on recruiting and building
the skills required to commence full scale commercial production. Extraction has
commenced from the Main Lode JORC resource (South Comstock pit), 150m from the
gravity separation plant.

Between 5,000 and 10,000 tonnes of ore has now been stockpiled (including
several high-grade pods, some weighing over 10 tonnes at grades of up to 50%
zinc/lead). The stripping of waste material at the Allison's lode is currently
underway (March 2008) using mining contractor Hoare Brothers.

Approvals have been granted to increase the capacity of the current ore
stockpile from 12,000 tonnes to 65,000 tonnes. The Company acknowledges that the
400,000tpa operating permit application process underwent several delays during
2007; however, the Company believes this will be approved before production
rates surpass the current 200,000tpa extraction limit.

Additionally, the construction of a new haulage road to the tailings dam will
better regulate traffic and the site's water management works are nearing
completion.

The gravity plant's crushing circuit and container farm are now operational and
the jig circuit has completed first stage commissioning. Limited operations have
commenced, initially as a single shift to provide sample batches for potential
customers. External technical expertise is currently being engaged to assist in
the preliminary feasibility study of the flotation plant, which has a minimum
design processing capacity of 40tph (upgradeable to 100tph).

Routine environmental monitoring and rehabilitation is also being undertaken at
the Comstock site.

Current Status

The Company has produced several samples of pre-concentrate product through its
gravity plant that have been sent to interested purchasers. The Company has been
contacted by a number of Australian and overseas purchasers and is currently
discussing sales opportunities with them. The Company has not yet executed any
sales or off-take agreements.

When production commenced, the Company ascertained that the gravity plant was
delivering lower than expected recoveries when processing high grade ore. This
is a common "teething problem" with a new plant and the Company is confident of
improving this to limit the metal lost to tailings. As a result the Company has
decided to maintain a low rate of production until the plant is ready to operate
at optimal levels.

OCEANA

A scoping study is currently being undertaken by AMC Consultants to identify the
potential of the Oceana deposit and the work required to gather suitable data
for a pre-feasibility study.

A Development Proposal and Environmental Management Plan is currently being
prepared for submission to Government in March 2008 with an expected response
within six months.

MARIPOSA

A two year retention licence application covering 240Ha over the Mariposa site
was submitted to Mineral Resources Tasmania on 29 January 2008. The application
has been given the reference number RL 1/2008 and replaces mining lease
application 7M/2007.

EXPLORATION LICENCES

The Company currently holds three exploration licences (EL20/2002, EL30/2002 and
EL18/2003) covering 93km2 in the Zeehan region. Two of these exploration
licences (EL30/2002 and EL20/2002) were due to expire on 31 January 2008 (due to
reaching their five year term) and applications for extensions of term for 100%
of these two licence areas were submitted to Government on 15 January 2008. The
company has been advised by MRT that the tenement areas remain in force whilst
the renewal applications are being considered and that there is a recommendation
to the Minister of Resources that they be extended for a further 12 months. The
EL18/2003 licence does not expire until 2010.

Exploration activity during 2007 included a major regional seismic programme,
gravity survey, local magnetic surveys, soil surveys and old working surveys.
Annual Reports for the three exploration licence areas, EL30/2002, EL20/2002 &
EL18/2003, were submitted to MRT in the first quarter of 2008 (15/01/08, 15/01/
08 and 08/02/08 respectively).

Exploration will continue in 2008 as per the company and MRT requirements.


Contacts:

Zeehan Zinc                     c/o Bankside Consultants
Ralph Rossouw, Managing Director and CEO       Tel: [phone]  

Libertas Capital                               Tel: [phone]
Jakob Kinde, Aamir Quraishi

Bankside Consultants                           Tel: [phone]
Simon Rothschild/Oliver Winters 




                 ZEEHAN ZINC LIMITED AND CONTROLLED ENTITIES

                        CONSOLIDATED INCOME STATEMENT
                   FOR THE HALF-YEAR ENDED 31 DECEMBER 2007


                                  Half Year          Half Year       Year Ended
                                    Ended              Ended
                                31 Dec 2007        31 Dec 2006     30 June 2007
                                      A$                 A$              A$

Revenue                            412,425             80,854          339,050

Exploration and Evaluation       (352,212)          (283,808)      (3,003,039)
Costs Expensed

Depreciation Expense              (88,359)            (8,882)         (37,411)

Other Expenses                 (4,620,297)        (1,139,720)      (5,229,508)

Finance Costs                     (18,447)           (32,367)         (51,672)

Loss before Income Tax         (4,666,890)        (1,383,923)      (7,982,580)

Income Tax Expense                       -                  -               -

Net Loss Attributable to       (4,666,890)        (1,383,923)      (7,982,580)
Members of Parent Entity

Earnings per share for the loss attributable
to the ordinary equity holders of the company
                                Cents              Cents             Cents

Basic loss per share            (3.27)             (3.19)           (9.29)

Diluted loss per share          (3.27)             (3.19)           (9.29)


                      CONSOLIDATED BALANCE SHEET
                        AS AT 31 DECEMBER 2007

                            31 Dec 2007      31 Dec 2006     30 June 2007
Assets                           A$               A$               A$
Current Assets
Cash at Bank                1,211,599        4,131,798        9,260,758
Receivables                   149,678          516,913          271,982
Other Current Assets          444,279        2,657,344          970,027

Total Current Assets        1,805,556        7,306,055       10,502,767

Non-Current Assets
Receivables                         -                -                -
Property, Plant and        18,788,160        4,162,090       12,077,196
Equipment
Intangible Assets               3,721            3,721            3,721
Other Financial Assets              -                -                -

Total Non-Current          18,791,881        4,165,811       12,080,917
Assets

Total Assets               20,597,437       11,471,866       22,583,684

Liabilities
Current Liabilities
Trade and Other             1,222,404        8,129,073        3,237,273
Payables
Other Liabilities              88,601                -           59,409
Provisions                     61,264           34,784           77,088

Total Current               1,372,269        8,163,857        3,373,770
Liabilities

Non-Current Liabilities
Payables                            -          283,011                -
Deferred Tax                   48,000           48,000           48,000
Liabilities
Other Liabilities             209,624                -          177,251
Provisions                          -          500,000                -

Total Non-Current             257,624          831,011          225,251
Liabilities

Total Liabilities           1,629,893        8,994,868        3,599,021

Net Assets                 18,967,544        2,476,998       18,984,663

Equity
Issued Capital             45,650,215       18,010,573       41,024,975
Reserves                      228,455          112,000          203,924
Accumulated Losses       (26,911,126)     (15,645,575)     (22,244,236)

Total Equity               18,967,544        2,476,998       18,984,663



                        CONSOLIDATED CASH FLOW STATEMENT
                    FOR THE HALF-YEAR ENDED 31 DECEMBER 2007


                                 Half Year Ended      Half Year        Year Ended
                                                        Ended
                                  31 Dec 2007       31 Dec 2006      30 June 2007
                                      A$                 A$               A$
Cash Flows from Operating Activities

Receipts from Customers                 694,027            80,854         174,440
Interest Received                       310,659                 -         164,610
Payments to Suppliers and           (7,067,835)       (4,132,717)    (12,631,606)
Employees
Exploration Expenditure                       -                 -               -
Borrowing Costs                        (18,447)                 -        (51,672)

Net Cash used in Operating          (6,081,596)       (4,051,863)    (12,344,228)
Activities

Cash Flows from Investing
Activities

Purchase of Property, Plant &       (6,756,432)       (1,145,106)     (9,773,282)
Equipment
Proceeds from Property, Plant &               -                 -               -
Equipment
Payment for Controlled Entities               -             (100)           (200)

Net Cash used in Investment         (6,756,432)       (1,145,206)     (9,773,482)
Activities

Cash Flows from Financing Activities

Net Movement from Borrowings             61,564         3,607,726       3,292,026
Proceeds from Issue of Shares         4,727,305         5,722,349      28,087,649

Net Cash Provided by Financing        4,788,869         9,330,075      31,379,675
Activities

Net Increase/(Decrease) in Cash     (8,049,159)         4,133,006       9,261,966
Held
Cash at Beginning of the              9,260,758           (1,208)         (1,208)
Half-Year

Cash at the End of the                1,211,599         4,131,798       9,260,758
Half-Year


                          STATEMENT OF CHANGES IN EQUITY
                     FOR THE HALF-YEAR ENDED 31 DECEMBER 2007

                                 Issued        Retained      Other        Total
                                 Capital       Earning      Reserves
                                   A$             A$           A$          A$

Consolidated

Total Equity at 1 July 2006     11,266,424   (14,261,651)    112,000   (2,883,227)
Total Income/(Expense) for the           -    (1,383,923)          -   (1,383,923)
Period
Revaluation of Land and                  -              -          -             -
Buildings
Issue of Share Capital           6,744,149              -          -     6,744,149

Total Equity at 31 December     18,010,573   (15,645,574)    112,000     2,476,999
2006

Total Equity at 1 July 2006     11,266,424   (14,261,656)    112,000   (2,883,232)
Total Income/(Expense) for the           -    (7,982,580)          -   (7,982,580)
Period
Share Option Reserve                     -              -     91,924        91,924
Less: Capital Raising Costs    (5,140,648)              -          -   (5,140,648)
Issue of Share Capital          34,899,199              -          -    34,899,199

Total Equity at 30 June 2007    41,024,975   (22,244,236)    203,924    18,984,663

Total Equity at 1 July 2007     41,024,975   (22,244,236)    203,924    18,984,663
Total Income/(Expense) for the           -    (4,666,890)          -   (4,666,890)
Period
Share Option Reserve                     -              -     24,531        24,531
Less: Capital Raising Costs      (102,065)              -          -     (102,065)
Issue of Share Capital           4,727,305              -          -     4,727,305

Total Equity at 31 December     45,650,215   (26,911,126)    228,455    18,967,544
2007


Note 1: Statement of Significant Accounting Policies

This general purpose financial report for the interim half year reporting period
ended 31 December 2007 has been prepared in accordance with Accounting Standard
AASB 134: Interim Financial Reporting and the Corporations Act 2001.

The interim financial report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the year ended 30 June 2007 and the
public announcements made by Zeehan Zinc Limited during the interim reporting
period in accordance with the continuous disclosure requirements of the
Corporations Act 2001.

The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.

Basis of Preparation - Going Concern

In the six months ended 31 December 2007 the Economic Entity continued to
complete development of the Comstock Mine site and progress commissioning of the
gravity plant. This resulted in negative cash outflows from operations. The
continued viability of the Economic Entity and its ability to continue as a
going concern and meet its debts as and when they fall due are dependent upon
the Company successfully implementing its business plan and effecting
commercially profitable sales transactions for its products.

As a result of these matters, uncertainties exist in terms of the Company's
ability to generate cash flows in the future considering that full commercial
production operations have not yet commenced, although are expected to do so in
the very near future, which could cast doubt upon the Economic Entity's ability
to continue as a going concern.

As a result of these matters, there is uncertainty as to whether the Company and
its controlled entities will continue as going concerns, and therefore, whether
assets will be realised and liabilities and commitments settled in the normal
course of business and at the amounts stated in the financial report. However,
the Directors believe that the Economic Entity will be successful in the above
matters and, accordingly, have prepared the financial report on a going concern
basis. The Directors regularly monitor the Company's cash position and on an
on-going basis consider a number of strategic and operational plans and
initiatives to ensure that adequate funding continues to be available for the
Company to meet its business objectives.

At this time, the Directors are of the opinion that no asset is likely to be
realised for an amount less than the amount at which it is recorded in the
financial report at 31 December 2007. Provisions have been made in the financial
report relating to the recoverability of the asset carrying amounts. No other
adjustments have been made to the financial report relating to the
recoverability and classification of the asset carrying amounts or the amounts
and classification of liabilities that might be necessary should the
consolidated entity not continue as a going concern.

Note 2: Contingent Liabilities

A claim on behalf of Atlantic Law Llp was received late December 2007 alleging
that Zeehan Zinc Ltd is liable to offer them options (representing 2% of shares
at time of listing) and 5% commission on funds raised by the Company from
investors (ie Libertas) introduced by Atlantic Law, pursuant to the terms of a
retainer entered into in December 2005. Based on preliminary advice, the Company
believes it has good grounds to defend this claim and is proceeding accordingly.

Note 3: Earnings Per Share

Basic and diluted earnings per share amounts are calculated by dividing loss
attributable to the ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the financial year.

The following reflects the information used in the basic and diluted earnings
per share computations:

                                                    Economic Entity

                                    Half Year Ended     Half Year     Year Ended
                                                           Ended
                                      31 Dec 2007      31 Dec 2006      30 June
                                                                          2007
                                            $                $              $
(a) Basic and Diluted earnings per
    share
    Loss attributable to the
    ordinary
    equity holders of the Company         (0.03)          (0.03)        (0.09)

(b) Earnings used in calculating earnings

    per share
    Loss attributable to the
    ordinary
    equity holders of the Company      (4,666,890)     (1,383,923)   (7,982,580)

(c) Weighted average number of
    shares used as the denominator
    Weighted average number of
    ordinary shares used as the
    denominator in calculating
    diluted earnings per share         142,780,841      43,349,307    85,886,946

Note 4: Subsequent Events

Related Party Transaction

An unsecured loan of US$300,000 was provided through Wind City Inc and repaid in
full during February 2008. The loan was provided on normal commercial terms and
condition. Mr Brian Caffyn, a non-executive director of the Company, is the
founder of Wind City Inc.

No other event has occurred subsequent to 31 December 2007 requiring disclosure
in, or amendment to, these financial statements.

Fund Raising

On 13 December 2007, the Company announced it had entered into an agreement with
Creat Group Company Limited ("Creat Group") through subsidiaries of Creat Group,
to raise GBP£4.275 million by way of a convertible loan. The Convertible Loan is
in the form of two convertible loan notes (of GBP£2.1375 million each) which
have a term of five years and carry a coupon of 6% per annum. The first Note has
a maturity date of 15 February 2013 and the second Note has a maturity date of
15 April 2013. Funds from the first Note were received in full in February 2008.




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