Zincox Share Discussion Threads

[johnrowlands46] 15/2/2014 20:10

Drewz

I think Rapier is a clever guy but he is a safe player seeing this stock through a narrow tunnel & needs to look outside of this. He is right about the risk but you need to look at the risk / reward ratio and it is this that makes this stock so appealing.

Lets look at his points one by one.

Although you may find their plan of having many plants rather grand they used to be an international zinc mining company making $22 million dollars a year profit at their height in 2007 with a share price of £4.00. If you read up on the history of the company you will see it has the management structure in place to deal with the international expansion and the reason its administrative costs are so high is because there have been a lot of additional administrative overheads in connection to setting up the plants in America, Turkey and Thailand and Russia. From what I can understand the majority of the ground work has been completed the permits planning permission architectural plans the projects are ready to go they just need to prove the technology and the IFC will provide the funding and the markets will be re-rating this stock on its future earnings.

The link to Zincox's history is below it definitely shows the pedigree of the management and their ability to take this company through to the final stages of its international development.

hxxp://www.zincox.com/about/history.asp

In a recent news article the company made the following statements
"An initial throughput target of 175,000 tonnes a year should be achieved at the end of 2013, with full production, namely, 200,000 tonnes of material per year going through the plant being reached thereafter."

"Last month (October), the company set a new record for the furnace dust treated at 11,800 tonnes, which enabled it to sell 2,963 tonnes of zinc in concentrate to Korea Zinc and generate a modest positive underlying profit (EBITDA) for the month." Doing some simple maths it takes approximately 4 tonnes of material to create 1 tonne of Zinc during 2013 the plant only produced 24,577 tonnes of zinc just shy of 50% throughput for the year. This information is already out there and therefore it is already reflected in the share price so I can't see the release of the 2013 accounts upsetting the markets too much.

What is important is the potential future earnings, the stainless steel sleeves being installed during the March closure will resolve the majority of the unplanned closures I do not see it being too optimistic to see 80% -90% + throughput during 2014 and improvements on that for 2015

In 2013 the average price of Zinc was $1909 but over the last few months it has been $2050. In 2013 the company produced 24,577 tonnes of Zinc that equals an extra $3.46 million profit if it was sold at todays prices. If you check my previous posts the probability is zinc will not stop here and looks likely to rise a lot further.

Now lets look at the potential 2014 numbers

Zinc Price Average $2050 with % plant operational time
80% 40,000 tonnes x $2050 Zinc Price = $82 million US for 2014 Minimum turnover
90% 45,000 tonnes x $2050 Zinc Price = $92 million US

Zinc Price Average $2150
80% 40,000 tonnes x $2150 Zinc Price = $86 million US
90% 45,000 tonnes x $2150 Zinc Price = $96.7 million US

I think zinc will take us a lot higher than that especially towards the end of this year and into 2015

Compared to a turnover of only $26million in 2013 it looks like this could be Zinc ox's year of turnaround just like Andrew Woollett has been saying.

Sorry I have to repeat this section of text again but in regards to your posts about the current cash burn it does not stand to reason as the company issued this statement recently "Last month (October), the company set a new record for the furnace dust treated at 11,800 tonnes, which enabled it to sell 2,963 tonnes of zinc in concentrate to Korea Zinc and generate a modest positive underlying profit (EBITDA) for the month." Also Novembers figures were similar to Octobers, there would have been a cash burn in December but we are unaware of the throughput figures for January February so I can't see where you are getting your figures from.

Lets hope we have a record breaking throughput during the months of February and March. Before the plant overhaul. I would expect another RNS statement early March updating the markets of the January and February figures.

It is quite bizarre but the only thing from this company being worth £30 million or potentially £300 million is the proof that the metal sleeves in the heat exchanger will improve reliability. Once it has proved its reliability and throughput the share price will fly!

[drewz] 15/2/2014 04:34

Rapier, stop pretending you are 'oh so clever' with your cod bearish analysis and made up numbers; you give the game away when you are too dim to be able even to spell 'grandiose' correctly. There is no such word as 'grandious'. Dimwit.

[rapier686] 13/2/2014 11:19

I don't know what the shares will be priced at if I ever find myself happy with the risks. Will cross that bridge when I come to it, and do I care if I miss an opportunity? They're not rare.

I don't disagree with the upside if it does all come together, though I find their current pursuit of multiple plants rather grandious and unrealistic before they've even got the first one paying its way.

But they're running on fumes, and I expect at least one more fund raising required before any upside materialises. Those who put up the funds will hold all the cards and I expect it to be lower than the last 15.5p. The 2013 results will be gruesome and I will review my position when I see them and the reaction to them.

The following annual model models are fitted to the recently given data points
Plant EBITDA($m) = EAFD(kt) * Zn ($/tonne) / 7000 - 36.3
Or
Plant EBITDA($m) = Zn(kt) * Zn ($/tonne) / 1750 - 36.3

This gives a $2.1m EBITDA deficit for Nov/Dec.
Interest is a real expense - circa $400k/month, and admin costs of $1.4m/month.

Even if Jan/Feb is back to October's "record", that comes to ~$9m burnt since the November fundraising. More than was raised.

[johnrowlands46] 12/2/2014 05:56

Rapier

Thank you for your alternative view, I can appreciate why you and the market has lost patience with this company but that is what has created this excellent opportunity. The risks are minimised every time the zinc price goes up and minimised further as ZOX understand their plants capabilities better so they can put together planned shutdowns when they will correct the potential issues.

Why I am very optimistic for the future net worth of ZOX
1 From the articles I have posted previously the odds are looking very favourable in regards to an increased zinc price and I think 2015 & 2016 will see even stronger zinc prices.

2 The directors have purchased a lot of shares Andrew Wollett purchased £100,000 when they dropped to 16p last may, and most directors oversubscribed to the share placing at 15p. A few weeks ago the directors took performance related share options over a 3 year period at 25p. Also Mr Wollett purchased a small amount of shares around Xmas for a family member, you could read that this was for a child and could have been done as a lesson to teach the benefits of investing money. If that is why he made the purchase it shows a lot of faith in the future direction of company.

3 During his video interview he is very specific that there have only been 2 reasons for the majority of plant closures and these will be corrected by A) inserting stainless steel sleeves in the heat exchangers will stop what has caused the majority of stoppages, they will be inserted during the March closure B) The minor problem of blockages in the hearth will not cause future issues as they have created a system of detecting this before it happens. C) It is unfortunate that the hearth needed to be overhauled in December, this is not an ongoing problem and was caused by the constant cooling and reheating of the plant which should not happen so often now the stainless steel sleeves are inserted into the heat exchangers. Also they can monitor this area in future and ensure it is always overhauled during planned shutdowns.

4) The IFC have invested heavily in the operation with the intention to fund the operation in other parts of the world but in the process helping to ensure the group to profitability in my eyes that de-risks the investment substantially. "The business plan is to roll out plants in other parts of the world, which is where the IFC comes in"

Surely the above de-risks this stock and it is not yet reflected in the price like yourself Rapier the market is waiting for concrete proof that the technology works. By the time ZOX offers the market concrete proof you won't be picking these shares up for 24p that is for certain.

[rapier686] 11/2/2014 22:28

Rather overexcitable, aren't we.
If everything suddenly goes right with the plant, then of course the shares will do well.

But for some time, ZOX has been 'about' to ramp up to full production and then some 'unexpected' hiccup intervenes. It's a bit of a leap of faith to believe that this really will be the last time.

Taking some quotes from your article:
Quote: "because although the firm's making money at project level"
Reality: In October (a record month) "the project generated a modest positive EBITDA for the month"

Quote: "Woollett is also now confident that problems during the ramp up at KRP1, which led to lower throughput than targeted, are a thing of the past."
Reality: As he was speaking, November production was dipping to 77% of Octobers.

Quote: "Blockages in the system won't occur again"
Reality: "During December, three such areas began to shed small amounts of refractory and lumps were detected on the hearth"

Quote: "An initial throughput target of 175,000 tonnes a year should be achieved at the end of 2013"
Reality: December throughput annualises to 55kt.

We are currently invited to believe that better steel will sort the issues. But trusting Mr Woollett's predictions looks quite courageous to me.

[johnrowlands46] 11/2/2014 21:07

Unfortunately it is not letting me show the video link but you will find it on the Proactive Investors Website

[johnrowlands46] 11/2/2014 21:06

Video link with chairman Andrew Wollett

[...]

[cestnous] 11/2/2014 16:53

All the info is welcome John.

[johnrowlands46] 11/2/2014 16:51

Future Zinc Prices

Although this article was written in 2012 it makes really interesting reading as you can see how accurate the authors predictions are to date. However the really interesting part of it is what might happen in the next two years.


hxxp://www.richriver.bc.ca/attachments/ZINC_PRICES_ARE_GOING_TO_EXPLODE.pdf


Sorry for all the posts but thought all this information should be shared

[johnrowlands46] 11/2/2014 16:28

10% up on the day, maybe the market is finally waking up to the potential?

[cestnous] 11/2/2014 16:09

Somethings afoot and its not my....

[johnrowlands46] 11/2/2014 16:01

For all you chartists out there this makes really interesting reading for future zinc prices and the depletion of the worlds mined zinc stocks. With several of the world biggest mines set to close in 2015 and 2016 and the price of zinc currently to inexpensive to attract new mines to open Zincox is looking ever more attractive especially at its current valuation.

[johnrowlands46] 10/2/2014 15:06

I would expect an RNS statement during the first couple of weeks in March to confirm the success of the last two months production ramp up. In March there is the planned plant closure to change the heat exchangers to stainless steel these have an eighteen month shelf life and will resolve the majority of the reasons as to why the plant had to keep closing. With the price of zinc going up and the high probability that production issues will be resolved this year, like yourself I am hoping the share price will fly.

[cestnous] 10/2/2014 08:05

Thanks John. Macro situation looking much better. Now if they can just iron out the last few production problems, we could be on our way. This is my 'flyer' in this months stock challenge. Here's hoping. :¬)

[johnrowlands46] 09/2/2014 20:57

ZINC MARKET NEWS Return to Zinc Market News Directory
Dundee Capital Still Bullish on Zinc
Dundee Capital Still Bullish on Zinc

Wednesday February 5, 2014, 4:39pm PST
In a sector outlook piece released today, Dundee Capital Markets said that its "positive zinc thesis is unchanged." Put simply, the firm believes that major zinc mine closures in addition to "structural issues in the zinc industry" will begin to push prices for the metal up at the end of the year.

As quoted in the market news:

We estimate that roughly 1.6 million tonnes of zinc in concentrate production (representing about 15% of global supply) will be shut down over the next four years. This waning of supply began in the middle of last year with the closing of Xstrata's (now Glencore's) Brunswick Mine in New Brunswick. Important pending mine shutdowns include, Minmetal's Century Mine in Australia (2014), and Vedanta's Skorpion Mine in Namibia (2014).

[loganair] 03/2/2014 16:35

Shares Magazine: More Zinc production is coming off line, mines closing down then any other of the metals which will help keep the price of Zinc moving in an upwards direction.

The price of Zinc for this year expected to be around $2,000 per ton and $2,250 per ton for 2015.

As Zincox has had a few problems that seem to now be sorted out, give it a few quarters to see if all's going well with the company. If all's still going well then time to invest.

[etarip] 30/1/2014 17:10

29/01/14 granted options to subscribe for ordinary shares of 1 pence each in the Company ("Ordinary Shares") at a subscription price of 24.50 pence per Ordinary Share.

I hope the directors are looking to make substatial profits on that price. They might have granted them sub 15p.

[etarip] 28/1/2014 11:55

Tensile strength which was demonstrated is not the same as compressive strength and the values can be quite different.