Zincox Share Discussion Threads

[rougepierre] 13/11/2013 13:57

From TOPS

"Time for a rerate at ZOX...

major funding completed yesterday, including the World Bank.

Full production expected by the year end means at least breakeven.

Global zinc stocks falling and prices expected to rise over the next couple of years due to burgeoning Chinese demand.

Significant recent Directors buys at 15.525 and 16.84.

Recent borrowings carry attached warrants at 40p.

DYOR"

[etarip] 12/11/2013 09:27

GingerPlant:

My opinion exactly.

"October set a new record for EAFD treated, 11,800 tonnes which enabled us to sell 2,963 tonnes of zinc in concentrate to Korea Zinc, at which level the project generated a modest positive EBITDA for the month"

Gives me hope along with the very low discount on the placing.

[gingerplant] 12/11/2013 07:35

Raising £5.59m at 15.5p to:

o fund the final stages and improvements to the Company's Korean Recycling Plant;

o provide working capital for the Company; and

o continue pursuing the Company's projects in Thailand, Turkey and Russia.

It's a small discount and we PIs get chance to participate in a very small way at 1 for 14 shares held.

I suppose there are two possibilities; good money after bad or a sensible and inevitable thing to do to move things forward as Korea proves its efficacy - glass half empty / glass half full. I prefer to remain optimistic and no-one could accuse the Chairman of not putting is money where his mouth is.

[cyfran101] 22/10/2013 23:14

Previously our break even was stated to be $1000 with lead and $1200 without lead.

[cestnous] 21/10/2013 15:01

See Mineste article on other thread

[steffyloveshares] 21/10/2013 14:39

video interview

ZincOx 'ramping back-up' with an eye on full production

Andrew Woollet, CEO of ZincOx (LON:ZOX), tells Proactiveinvestors that after a frustrating period the company is now working towards full production. Andrew explains that there were two issues; the first was with the heat-exchangers, which has been resolved, while the second was blockages on the hearth. That, he says, is more difficult, but there are now systems in place to highlight the problem before it occurs and correcting it can be done without any downtime.

[...]

[etarip] 15/10/2013 10:17

cestnous

Thanks for sharing the Minesite article with us.

Very quiet on the ZOX bulletin board at the moment.

[cestnous] 14/10/2013 17:09

Etarip; you may be right; From Minesite. (I don't hold at the moment.)

October 08, 2013
ZincOx Looks Forward To Ramping Up To Full Production, At Long Last
By Alastair Ford
It's been a tough twelve months for shareholders in ZincOx. The company's new Korea Recycling Plant has been beset with teething problems on start-up, the equity markets have been in unforgiving mood, and the zinc price has been going nowhere fast.
The Korea Recycling Plant
The Korea Recycling Plant
But there is a bright side.

Problems with the heat exchangers have now been addressed – these will be replaced once a year - and a proprietary solution has been devised to address problems with blockages in the roof handling systems that occurred again in September.

The net result was that performance over the past few months was patchy, but allowing for the glitch in September, there's every chance the company is at last on a smooth path to growth.

"We had a good August", says executive chairman Andrew Woollett.

"I hope October will be a decent month, and November and December. The thing that makes me feel we're over the hump now is that we have solutions to both the problems, which between them have accounted for 90 per cent of the stoppages.

The indicators are already to some extent visible in the most recent set of company accounts, for the six months to June. The company took the opportunity to update on some post-period developments too.

Thus, KRP is now processing electric arc furnace dust feed at the rate of around 11,500 tonnes per month, recovery is running at upwards of 90%, and the feed is richer in zinc than had previously been anticipated.

That's all to the good, and there was also news that overheads have been cut, £4.2 million in new finance has been arranged through loans from directors, and tests undertaken the results of which appear to show that the product can be upgraded to a higher purity zinc oxide.

"There's some fine tuning t do between recovery and throughput", says Andrew, "and we've got some interesting ideas on that. But Korea zinc are very pleased with the concentrate as it is."

The plan is to take production up to 15,500 tonnes per month and hold it there while the company at last turns cash flow positive.

"In terms of costs, when you're not in full production it makes a big difference", says Andrew. There are calculations to be made regarding how much coal is used per tonne of dust, how much gas, and so forth.

And then there's the processing itself.

At the moment, one specific issue is affecting costs in quite a big way. "The fly in the ointment is the iron", says Andrew.

"The zinc grade has gone up and the iron has gone down. The grade is a bit lower than the mills want to see. So without the iron, our breakeven zinc price is US$1,450 per tonne. With the iron it drops to US$1,300."

Either way, the company is still making margin on the current zinc price, lacklustre that it is, at US$1,831.

Andrew remains cautiously optimistic that the zinc price will hold up and even improve, though he doesn't adopt the overly shrill promotional attitude towards zinc of some of the more desperate explorers.

Stocks in warehouses have been falling, he concedes. But that means a lot less than it used to, because a lot of the stock is held by investors.

"The general sentiment", says Andrew, "is that the zinc price will be higher next year. There are very few people out there looking for zinc. There are very few big projects, and what big projects there are, are at least three years away from production."

Whether or not that means the price will actually rise is moot, though. "It's difficult to say that with any confidence", says Andrew.

But ZincOx doesn't necessarily need a higher price. What it needs is for KRP to work properly, to demonstrate the viability of the business model to jaded investors.

Once it's up and running properly, the company can then start to think about growth, about upgrading the quality of the product, and ultimately about KRP 2, which is very much in the pipeline, but which has been rejigged lately to take account of the recent delays.

[etarip] 28/9/2013 11:29

It looks like they are finally getting the problems fixed and hopefully will stop making losses and make a profit.

Reading between the lines I think the may already be close to that. I base my thoughts on the following:

From the ZOX website section headed 'Background' they gave the designed through put of 200,00 tonnes pa of EAFD containing an average grade of about 23% zinc with an output of 49,000tpa of zinc concentrate ie about 4 in 1 out.

In August they say they processed 11,500 tonnes of EAFD (with a richer input than originally expected) which on a 4 in 1 out basis should have produced 2,875 tonnes. The price range for sales was given as US$1,829 to US$2,129 per tonne. Taking a lower than average of say US$1,900 times 2,875 we get a revenue of $5,462K for the month.

The accounts show a Cost of Sales for six months as US$20,770K. Taking say a current monthly average of US$ 4,000K would give Gross profit of US$1.462K for the month. The Admin Expense was US$8,567 for six months or US$1,428K per month. Ignoring that this is said to be being reduced by 35% a break even looks possible.

11,500 tonnes of EAFD they say is producing 77% of target output production ie an annual input target of 179,220 tonnes compared with designed throughput of 200,000 tonnes. So they are using 9% less EAFD than origanally thought would be required to produce a given amount of output.

Assuming Cost of Sales and Admin Expense do not need to rise at all to increase production, Profits could rise US$475K pm (US$1,900/4) with every extra 1,000 tonnes pm input. A maximum extra 5,000 tonnes pm (16,500pm - 198,000pa.)
gives a profit of US$2,375Kpm (US$28,500Kpa.) At US$1.60=£1 this is £17.8M, about the present market value of the company!

I am aware that the above is a "back of an envelope" type of calculation but without more information from the company it is the best I can do. Any comments and corrections would be appreciated.

Of course there are worries about the cash resources of the company and there may be new problems arise I am hopeful that the future is better than the past.

[giant steps] 26/9/2013 08:09

ZOX startup phase has been a big disappointment, and created tight cashflow

A positive is that directors seem open and willing to support company

(watching)

[gingerplant] 26/9/2013 08:01

NAV 47.5p per share, forward P/E around 3.25 - falling further still further out (though will need fresh cash for roll-out to Turkey, Thailand etc).

It's exceedingly cheap if they're being truthful about production - and they've been open all the way so far re teething problems.

[drewz] 26/9/2013 07:07

All systems go!

[etarip] 12/8/2013 16:01

Mostyn:

That they were buys is a possibility. The data we get is not always accurate.
However, if they were buys someone else presumeably sold at a lower figure or the shares came from the MM stock.

[bam bam rubble] 12/8/2013 15:57

I see the 40p warrants as an irrelevance. The loan won't necessarily be repaid in cash as ZOX can elect to transfer the secured assets to the lenders at the end of the loan period;

Cash inflow from secured loan $6.3m
Loan liability inc. interest -$7.75m
Secured assets (cash / land): $9.2m (2013 NAV) - transferrable in lieu of repayment

[grahamburn] 12/8/2013 15:33

The loan note arrangement, together with warrants, is encouraging and especially so as it ensures that Woollett et al have more skin in the game, as well as apparently being happy to have that extra commitment. The announcement states that the funds will be used for ramping up production, general working capital and, possibly, for KRP2.

However, this raises a query, especially as today's announcement didn't mention an important previous announcement. In the annual results, the following paragraph was reasonably explicit:

"The construction of KRP2 will, however, have to await full targeted production at KRP1 and financing. The latter is likely to involve Standard Chartered Bank ("SCB"), which in July 2012 was mandated to arrange project finance for the expansion. Draw down of project finance will require the successful operation of KRP1 over a three month test period ("Performance Test") which has yet to commence and is subject to satisfactory due diligence and Bank credit approval typical for a project of this nature. We hope this will begin within the next couple of months."

Now, maybe, today's announcement effectively confirms that the loan note funds will get the company to the point where the Standard Chartered facility can be released. If so, I would have expected the announcement to confirm it. But it doesn't mention it and even makes a reference to some of the funds being used for KRP2 development. So, does that mean that the Standard Chartered facility has fallen by the wayside? Maybe not? It would be good to know one way or the other, especially as the loan note funds cannot be used twice (ie for resolving the current issues AND the full development of KRP2).

One final query. The loan notes have a relatively short lifespan. Will the company be sufficiently cash-generative within two years to repay the loan notes? Or is it expected that the funds from the warrants will do that? If so, will those warrants be taken up if the share price isn't at or above 40p?

[mostyn] 12/8/2013 13:25

etarip,

re your 1550: Given the trade time they look more like buys. The price at that time was 16p-17.5p so 17p above mid price. This is what likely gave the stock a good push early on.

The chart looks interesting at the current price. It looks as though the price has either broken the 18 month downtrend or is just about to do so.

If they get the production right, and it looks like they are on the way, this could have plenty of mileage left.

[etarip] 12/8/2013 12:44

BAM BAM:
Agreed it is dilutive if the net asset value is more than 40p. According to ADVFN Net tangible assets = 83.87p per share; Gross assets = 98.66p per share.
Right now I would be happy to see the price at 40p which would indicated the company had a future.

[bam bam rubble] 12/8/2013 12:39

In terms of the loan commitment by the directors it looks risk-free as they'll likely have priority on the security which has £1.2m escrowed cash with more to come. At 10% interest the Chairman will make £205,000, the other director £105,000, a decent return compared to savings rates, and if ZOX eventually elects to waive the security to repay the loan (the likely scenario) they stand to make much more if the land is later sold at book value.

[granitetim] 12/8/2013 12:22

With Standard Life taking 3% of the company and the Large personal holdings increased by Andrew Woollett to o 3.65% and taking part in todays announcement there seems very little doubt about them succeeding!
Sit back and watch as the instis take stock.

[bam bam rubble] 12/8/2013 12:07

The price is up so it must be good news.. However picking apart the deal shows it is less material than it may first appear.

The subsidiary has $1.8m cash and unsold land worth $7.5m. In other words $9.3m potential funding, with 75% unavailable until those future sales are carried out. To get around the timing issue they've granted security over the subsidiary to certain lenders, effectively swapping the longer-term $9.3m for $6.3m upfront. Provided the book value for the land is fair, this is potentially dilutive to net asset value.

[etarip] 12/8/2013 11:43

250,000 of the sales recorded were timed at 08.09.55 and at 17.00p which looks like the order/s to sell was/were in without reference to today's RNS.

[propercharlie] 12/8/2013 11:14

the lenders must be convinced that all is OK, and that is a massive commmitment by management. All in all good news!

[granitetim] 12/8/2013 10:47

Beginning to wake up to the RNS this morning now !

[granitetim] 12/8/2013 08:25

Some sleepy folk out there this Monday morning ;0)

[etarip] 12/8/2013 08:21

If they were having more/serious problems I presume they would have had to report them in the current RNS. Perhaps we can assume all is going in the right direction with production.