Zincox Share Discussion Threads

[cestnous] 18/7/2015 12:52

I'm afraid that I will be waiting to see if the new heat ex-changers are any better than the old system before I get back into this.

[loganair] 18/7/2015 10:01

To put this week in a nut-shell:

It was a busy week for, among others, zinc recycling specialist ZincOx (LON:ZOX).

On Thursday, it revealed it was to raise funds to invest in equipment upgrades at its flagship plant that should dramatically enhance the economics of its production process.

The company conditionally raised in the region of £2.1mln through a placing of 16.1mln shares at 13p.

The shares have been placed with institutional and other investors, but ZincOx shareholders will get the chance to buy new shares at the same price through an open offer, raising an additional £1.1mln, ZincOx said.

The company, which produces zinc concentrate from EAFD (electric arc furnace dust), is planning to replace the often troublesome heat exchangers at its KRP facility.

Meanwhile, earlier in the week, it unveiled what it called a "dramatic turnaround" in the performance of its Korean recycling plant and said it expects further improvements soon.

The flagship plant has only been running at about 80% capacity for much of the first half due to a reduced amount of EAFD (electric arc furnace dust) being produced in Korea, which can be fed into the company's plant.

But, as Andrew Woollett, chief executive, explained, all that is about to change with EAFD imports, which will improve the group's profitability.

KRP treated 77,485 tonnes of EAFD in the first half compared to 58,569 in the second half of 2014. Meanwhile, zinc concentrate sold was 18,291 tonnes against 14,103 tonnes in the previous period.

Revenues came in at US$22.2mln compared to US$20mln as the zinc price fell to US$ 2.136 per tonne compared to US$2.278 per tonne. ZincOx noted that this zinc price fall of 7% meant zinc revenue increased by only 11%.

[loganair] 17/7/2015 12:06

Ex - Depends on the reason for the dilution. This is so the plant operates with out the troublesome heat exchangers and makes the plant more efficient with down time for maintenance once a year instead of the 4 times a year with the heat exchangers and using coal instead of gas thereby saving £5mln per year.

The Open Offer finance will be used to develop a small scale version of what Zincox are going to build in Thailand to show to prospective investors.

o Expansion: Development of a second facility in a location with greater EAFD supply of better grade zinc should enable potential for a significant increase in margins and very much better returns for investors.

[extrader] 17/7/2015 11:52

Hi loganair,

Dilution is never welcome, but I reckon in this case it's preferable to loading the co with more debt and being in hock to the banksters.....;-<<br />
ATB

[loganair] 17/7/2015 11:16

Placing and Open Offer means financing through equity rather than debt.

[proactivest] 17/7/2015 10:50

Video interview with Chairman Andrew Woollett

The chairman of ZincOx (LON:ZOX), Andrew Woollett, discusses the next steps at the company’s Korean Recyling Plant.

ZincOx produces zinc concentrate from EAFD (electric arc furnace dust), is planning to replace the often troublesome heat exchangers at its KRP facility.

This should dramatically enhance the economics of its production process.

Today the company said it has conditionally raised in the region of £2.1mln through a placing of 16.1mln shares at 13p a throw.

[loganair] 16/7/2015 11:55

Unlike the other Open Offers and Placing, no discount really being offered by Zincox seems to me tells oodles about the reasoning behind this latest fund raising.

[loganair] 16/7/2015 11:34

• ZincOx is raising £2.1m from institutional investors plus £1.1m by way of an offer to all qualifying shareholders.

• The placing price is 13p.

• “Proceeds of the Placing are anticipated to be used for:

o accelerating the debottlenecking of KRP including replacement of heat exchangers; and to progress work on the next recycling project.”

o Debt: ZincOx reported that it would have some $56.7m of net debt post its debt restructuring on 31st March. The weighted average cost of this debt is 6.2% based on current LIBOR with the restructuring cutting the company’s interest bill by around $0.5mpa.

o Offtake: The unfortunate side of the restructuring was an increase in the Korea Zinc offtake facility to 1,050,000t from 840,000t. While the terms of the offtake are undisclosed we believe the terms are sufficiently onerous to suggest that ZincOx should do very much better out of the development of a second facility once all elements of the design are settled and the commissioning of the Korean plant are complete.

o Expansion: Development of a second facility in a location with greater EAFD supply of better grade zinc should enable potential for a significant increase in margins and very much better returns for investors.

o Korea zinc’s offtake terms might be onerous but the Korea Zinc did take risk on the project and has supported ZincOx through an extended commissioning period.

Conclusion: ZincOx is now close to finally proving the operation of its EAFD recycling process. Validating its process and showing that modifications to the plant are working should enable the company to raise capital debt for the development of a second plant. This maybe in the form for a joint venture combined with bank debt. We look forward to news on the location of the company’s next site.

[cestnous] 16/7/2015 11:31

Also out last week. Difficult to gauge where it will go from here, but any substantial rises seem out of sight for now. Typical AIM tactics; price rise followed by a fundraising.

[rapier686] 16/7/2015 11:24

Well my absence didn't last long.
Am impressed at the placing price, I was expecting far worse - below the 10p of last time.

[rivaldo] 08/7/2015 13:49

Agreed, I'm out too and happy to have taken substantial profits from 10p or so.

I can't see any production updates for a while yet, and with zinc prices sinking fast and unlikely to move up for a few months at the least it's possible - especially with weak markets, summer hiatus etc - that ZOC could fall quite a bit further.

On the watchlist now for a return dependent on timing, zinc prices etc.

[rapier686] 08/7/2015 12:10

I'm now on the sidelines with ZOX.
It's the zinc price that's made my decision, the spot price is well down and the invisible hand of the market increasing supply seems to be winning over the mine closures bull argument.
$1m plant EBITDA was very nice for May, but i) That was at Zn pricing 15% above current levels and ii) company overheads and interest are very real costs which chew this up. I am concerned that yet another fundraising may well be required to get current operations cash-flow positive, never mind how the next plant gets financed.

[loganair] 08/7/2015 11:51

While the world worries about China, Europe worries about Greece and the UK worries about Osborne’s budget, today here at Money Morning we turn our heads to something more useful – industrial metals.

Although at the moment, judging by their price, there aren’t so many who want to use them.

We’re talking copper, zinc, and iron…

The commodity bear market is in its fifth year

The commodity bear market is now in its fifth year. Yet it seems like only yesterday that we were in a commodity supercycle.

Years of under-investment, a failure to make significant new discoveries, and insatiable Asian demand for raw materials meant that the price of any metal would just ‘go up’. Precious metal, industrial metal, rare earth metal – the market was indiscriminate.

It remains so – only in reverse. Name your metal; it’s up the proverbial creek.

Copper made new lows yesterday, lows not seen since the financial crisis of 2008. $2.40 per pound was the intraday low – $4.65 was the high back in early 2011.

Iron ore has descended beneath its 2008 nadir, and is now at eight-year lows, having fallen below $50 a tonne. $187 was the supercycle high.

Zinc is rather out of sync with the others. Having been $1.10 a pound few weeks ago, zinc fell below 90c a pound yesterday. But the five-year low is 80c. And zinc’s supercycle-high anticipated those of the other metals. It came in 2006, at close to $2 a pound. It didn’t enjoy the post-2008 bounce seen by other metals.

The companies that mine for these metals – BHP Billiton, Rio Tinto, and others – were all, as you would expect, completely hammered.

The sell-off in China is what is causing this latest rout, of course. There’s no telling, not by me at least, when that will end. But I suspect the implications for the global economy are rather more significant than those of Greek default, which is more political than anything else.

They call copper ‘Dr Copper’ – the metal with a PhD in economics. It’s supposed to be a good forecaster. Copper is used extensively in construction and industry, so people buying copper is a sign of economic growth – and people shunning it is a sign of contraction.

I’m not so sure about its record, but its current message, if you chose to heed it, is very clear: run away.

I’m going to give you price predictions now on these metals. Let’s revisit this in a few months and see if I got it right.

I can see a lot of support for copper in the $2.35-$2.40 area, but I’m going to look into my crystal ball and say that this area will not hold, and that we’ll go down to about $2.20-$2.25 before rallying to about $2.75-$2.80. That is an educated guess. Let’s see if I nail it.

Iron ore’s going to around $35 a tonne over the next 12 months.

Zinc – that’s only going to 80c. At which point it goes sideways and people lose interest altogether.

Who knows? Another five years or so and things might be so bad that we’ll get another commodity supercycle.

We are closer to the bottom than the top.

The bottom line is that commodities – and, in particular, metals – are frustratingly cyclical. And the way the industry works – especially the way mining companies finance themselves – exacerbates it all. We got a boom, which leads to over production, hype, speculative excess and misinformation.

Then you get a bust. Everybody – except those that have been there before – loses their shirt. Then they lose several layers of skin as well. By the time it’s over, nobody ever wants to hear the words ‘mine’ or ‘metal’ again. There’s no investment, little production, shortfalls occur, the price starts rising and we’re just about ready for the next cycle to get going.

In terms of where we are in this cycle, I think most have lost their shirt and we’re a layer or two into the skin stage. But we need mines and metals to be completely shunned for a few years to the point of being forgotten, before the next cycle can start.

The way this market works makes you crave the government props that finance and housing both enjoy. Can you imagine? But I digress.

The elephant in the room with all of this is China. It had a huge stock market boom, followed by a huge correction. Is that correction going to morph into anything more significant?

Now there’s a question. But I don’t think so. I come back to zinc – Dr Zinc (I see it as a better forecaster than copper). It boomed and busted before all the others, now it trades sideways within a range.

There’s chronic under-investment, which will lead to a shortage of supply a few years. But every time it rallies, everyone gets over-optimistic, and every time it pulls back, everyone gets excessively negative. But, really, it doesn’t go anywhere.

I don’t think that’s such a bad metaphor for the global economy over the next 12 months – false dawns and false busts, when the underlying reality is sideways action.

[rivaldo] 06/7/2015 15:10

Chartist Zak Mir sees 24p for ZOX:

http ://www.shareprophets.com/views/13337/zak-mir-s-great-request-show-galantas-gold-tek-capital-zincox-resources

"We have seen quite active price action at Zincox Resources, with the show so far this year verging on the spectacular if you are someone who has been banking on this situation being a recovery play. Indeed, there have been two key points here in the recovery. The first was the break above the 200 day moving average in February, while the second was ironically the bear trap rebound from below the 200 day line then at 10p in April. Indeed, at one point it actually seemed as though Zincox was delivering a painful false dawn recovery. Instead, this temporary trap looks to have set the seal on the new bull run, especially given that the March floor at 7.5p proved to be a major higher low for the shares. Since then we have been treated to accelerating progress within a rising trend channel from as long ago as November. The floor of the channel currently runs at 14p, just below the present level of the 50 day moving average at 14.77p. The impression given is that provided there is no end of day close back below the late 2014 support line we could see a target of 24p hit as soon as the end of August."

[cestnous] 18/6/2015 08:35

Cheers Riv.

[rivaldo] 18/6/2015 08:20

I saw ZOX present last night at Finncap in London and was impressed.

AW (the Chairman) came across as extremely knowledgeable and presentable. Management are usually the most important element in the success of a business, and AW and his team have done it all before and know what they're doing.

Most significantly, AW now believes that, after a long wait, ZOX finally have a good story to tell given terrific EBITDA combined with the recent loan refinancing, and he's ready to convey that to the City.

More detail later if there's time (OT : IDEA also presented and came across very well - I also hold shares in them).

[cestnous] 17/6/2015 15:55

New highs again :¬)

[rivaldo] 15/6/2015 09:59

Cheers rathkum. 35p would be nice...

[rathkum] 13/6/2015 15:41

Zincox (ZOX): 35p Price Channel Target

"The one that got away" is one of the least useful phrases from both those in the fishing game and of course if you are angling in the stock market for recovery situations. In the case of Zincox Resources it can be seen how the latest post April rally for the shares may have taken some traders off guard given its speed and near vertical progress, effectively ending what had been a miserable breakdown from the shares from the start of 2014.

The current situation is that we have seen a flourish towards the end of last week through former February resistance at 14p, with the message being provided there is no sustained price action back below the present level of the 20 day moving average of 15.48p we would be looking for significant further upside even though near-term the shares are overbought. The favoured destination over the next 2 to 3 months is as high as the top of January 2014 price channel at 35p, a prospect which receives extra backing from the way that the post May consolidation here has been well above former February resistance.

[cestnous] 12/6/2015 17:51

Nice find Loganair. May I ask what the source is?

[loganair] 12/6/2015 17:18

By Andy Home - All mining activities at the giant Century zinc mine in Australia will have ceased by the end of this month.

News that will be greeted with relief by believers in the zinc deficit story, who have had to watch Century's operator MMG push back the fateful closure date many times in the past.

Century has become totemic of zinc's bull narrative of looming shortfall as some of the world's biggest mines come to the end of their natural lives without obvious like-for-like replacements.

The resulting raw materials crunch, the bull argument runs, will force prices up to a level needed to incentivise new supply.

It's a tantalising prospect for a market that has seen only fleeting rallies based on the unreliable signals coming from stock movements on the London Metal Exchange (LME).

Right now the price for three-month delivery on the LME is trading just above $2,100 per tonne, bang in the middle of the broad $1,800-2,400 range in which zinc has been trapped for the last three years.

One day, zinc bulls hope, the price might recapture the dizzy heights of 2010, when the galvanising metal traded above $2,700, or even 2007, when it soared above $4,000 per tonne.

Century's closure, it follows, will bring that day just a little bit closer.

Except that MMG has sprung a last little surprise on the market, pushing the day just a little bit further into the future.

Other producers have recently come up with bigger surprises, once again stretching what appears to be an infinitely flexible deficit timeline.


GOING, GOING...GONE?

Mining activities may be stopping at Century this month but the mill will continue operating into the third quarter, processing stockpiled ore.

This was expected. Largely unexpected was MMG's announcement in April it will then mill another 450,000 tonnes of ore from trial mining activities at the nearby Dugald River project.

That ore grades 13.3 percent zinc, implying almost another 60,000 tonnes of contained metal. It will take between four and six weeks to process that ore, meaning the Century mill might still be producing concentrates into the fourth quarter of this year.

That tonnage windfall is not included in MMG's 2015 production guidance of 320,000-370,000 tonnes for Century, because Century is now, er, closed.

It's only a small deferral in the grand scheme of things but just as the Century closure is totemic of the zinc bull story, so the latest push-back is symptomatic of that story's curiously elastic narrative.

So too is MMG's development work at Dugald River. The mine was originally due to ramp up as Century wound down but the company delayed the start date after encountering more complex ore than anticipated.

Here writ small was the flip side of the deficit story, namely the problem of replacing big established mining operations such as Century with a new generation of replacement capacity.

Worth noting, therefore, is the fact that MMG hasn't given up on Dugald River. Pre-mining activities are continuing and the company is working on a new mining plan, which would extend mine life but with lower annual output.

A decision on whether to commit to Dugald River is pencilled in for the third quarter of this year.


DEFICIT WILL EAT ITSELF?

Well, at least the Lisheen mine in Ireland is going to close pretty much on schedule in the coming months.

But operator Vedanta Resources has sprung its own surprise on the zinc market.

Its Skorpion mine in Namibia was scheduled to close next year but a new mining plan will push that deadline back a couple of years to the company's 2019 financial year (April 2018 to March 2019). Oh, and milling operations will continue into financial 2020 using stockpiled ore.

Skorpion is only a medium-sized producer with capacity of around 150,000 tonnes per year and it is highly unusual in producing zinc metal rather than zinc in concentrates.

It will not therefore offset the loss of Lisheen, which until the last year or so was producing around 175,000 tonnes of contained zinc per year.

That task will fall to Vedanta's new Gamsberg mine, an extension of its existing Black Mountain operations in South Africa. First ore from Gamsberg is expected in 2018 with anticipated long-term production at a rate of 250,000 tonnes per year.

It is proof that producers of any commodity will work to renew their portfolios, particularly when the consensus view is that they will be bringing new capacity on stream in an environment of supply deficit.

And unsurprisingly, the prospect of zinc raw materials deficit and associated higher prices is incentivising others as well.

Take, for example, Energia Minerals, the Australian-listed junior, which is rehabilitating the long-forgotten Gorno mine in northern Italy, precisely to reap the expected zinc bonanza.

It has just announced the purchase of two other historical Italian zinc properties, Predil and Salafossa, last operated in 1991 and 1988 respectively.

Expectations of deficit, in other words, are already generating a supply response and that at a current "incentive" price of a lowly $2,100.


KINKS IN THE ZINC STORY:

Zinc bulls will be unfazed. The numbers, they point out, still point to a shortfall of zinc, albeit one that keeps edging back from imminent to pending.

However, the most important number in the zinc market is not the balance of capacity closures and replacement mines but the current year's zinc concentrate treatment terms.

Treatment terms, paid by smelters to miners for treating their production, are the surest indicator of raw materials market balance.

And this year's benchmark treatment charges have risen to $245 per tonne from last year's $223. And they increased last year too, And the year before that, In fact annual treatment charges have risen every year since 2011.

That signals an increasingly well-supplied market for zinc raw materials.

This is the starting-point for any move to deficit and it is one that promises a slow evolution rather than any dramatic switch.

Stocks of concentrates accumulated over the last few years will initially cushion the market against any evolving shortfall of mined material.

That makes the kinks in zinc's deficit deadline important in terms of attempting to forecast when shortfall, if it ever finally materialises, translates into price reaction, both in the concentrates and the refined metal parts of the market.

And the kinks in the zinc story just keep on multiplying.

[rivaldo] 10/6/2015 08:47

Yep, buying coming in at 17.01p now. Great to see.

[cestnous] 10/6/2015 08:12

Confidence in reliability showing up in the share price this am. :¬)