ZincOx Resources PLC Placing (6616D)

TIDMZOX

RNS Number : 6616D

ZincOx Resources PLC

01 April 2014

1 April 2014

Not for release, publication or distribution, directly or indirectly, in whole or in part, in or into the United States of America, Canada, Australia, The Republic of South Africa, Japan, New Zealand or Russia.

ZincOx Resources plc

("ZincOx" or the "Company")

Proposed fundraising through a conditional Placing

to raise approximately GBP1.03 million

ZincOx (AIM: ZOX)announces a proposed fundraising by way of a conditional Placing of approximately 10.3 million new ordinary shares at a price of 10 pence per share with institutional and other investors to raise approximately GBP1.03 million before expenses.

Capitalised terms and expressions used in this Announcement are defined in paragraph 8, unless stated otherwise.

Highlights

-- 10.3 million new ordinary shares conditionally placed with institutional and other investors to raise approximately GBP1.03 million.

-- Placing price of 10 pence per share represents a discount of 37.5 per cent. to the closing mid-market price on 31 March 2014 (being the latest practicable date prior to the date of this Announcement).

-- Intention to raise additional funds by way of an Open Offer to be made to all qualifying shareholders at the Placing Price of 10 pence per share.

   --     Proceeds of the Placing are anticipated to be used for: 

o working capital purposes;

o repairs to the refractory; and

o purchase of equipment to complete the ramp-up of the Company's first recycling plant, KRP.

   --     The Placing is conditional only on Admission. 

Commenting on the proposals, Andrew Woollett, Executive Chairman of ZincOx, said:

" Whilst I regret having to revert to shareholders to seek further support, we are pleased to see a continuing improvement in production. We are in the process of replacing the inner shells of the remaining two heat exchangers which, together with refractory repairs, should greatly improve the reliability of the plant. We are confident of making further progress with the ramp-up over the coming months as we continue to optimise the operation."

For further information, please visit www.zincox.com or contact:

 
 ZincOx Resources plc                           Tel: [phone] 
 Andrew Woollett, Executive Chairman 
 Peel Hunt LLP (Nominated Adviser and Broker)   Tel: [phone] 
 Richard Kauffer 
  Daniel Harris 
 Tavistock Communications (Financial PR)        Tel: [phone] 
 Jessica Fontaine 
  Simon Hudson 
 

Not for release, publication or distribution, directly or indirectly, in whole or in part, in or into the United States of America, Canada, Australia, The Republic of South Africa, Japan, New Zealand or Russia.

ZincOx Resources plc

("ZincOx" or the "Company")

Proposed fundraising through a conditional placing

to raise approximately GBP1.03 million

   1.      Details of the Placing 

On behalf of the Company, Peel Hunt has, conditional only on Admission, raised approximately GBP1.03 million (before expenses) by the proposed issue of approximately 10.3 million new ordinary shares at the Placing Price of 10 pence per share.

The Placing Price represents a discount of approximately 37.5 per cent. to the closing mid-market price of 16 pence per Ordinary Share on 31 March 2014, being the latest practicable date prior to the publication of this Announcement. The 10,346,672 Placing Shares will represent approximately 7.6 per cent. of the current issued share capital of the Company. Following the issuance of the Placing Shares, the Enlarged Issued Share Capital of the Company will be approximately 145.9 million ordinary shares.

Application has been made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. The Placing Shares are expected to commence trading at 8:00 a.m. on 2 April 2014 and will rank pari passu in all respects with the existing Ordinary Shares.

   2.      Proposed Open Offer 

In addition to the Placing, and to enable qualifying shareholders to participate in a fundraising at the Placing Price, the Company will shortly post a circular and accompanying documentation to Shareholders seeking to raise up to approximately a further GBP4 million by way of an open offer at the Placing Price (the "Open Offer"). The terms and procedure will be similar to the open offer undertaken by the Company in November 2013.

   3.      Background to the Placing and Use of Proceeds 

The Directors had anticipated that the fundraising in November last year would have been sufficient to see the Company through the ramp-up to full production. Due to the reduction in cashflow resulting from stoppages required for repairs to the refractory lining, mainly in certain parts of the RHF, the cash reserves that were put in place in November have been critically reduced. In order to provide sufficient funds to see the Company through to full production, we have raised a further GBP1.03 million in order to continue the ramp-up and optimisation of the KRP. As this Placing is being carried out at a considerable discount to the current market price, we will be giving all qualifying shareholders the ability to participate in the Open Offer at the Placing Price.

January 2014 was a record month for production at KRP, with 3,131 tonnes of zinc in concentrate being produced, which generated a positive EBITDA at KRP of over US$200,000 prior to unrealised foreign exchange gains and losses. Production during the month was, however, constrained by a lack of oxygen contracted from the external supplier. The supplier has since increased the capacity of the supply by the addition of a new evaporator which is now in operation. In March, as a result of the increased availability of oxygen, production rose and during the month we have sold 2,596 tonnes of zinc in concentrate. In order to improve the reliability of the plant, the closure to replace the inner tubes in the last two heat exchangers, which we had planned for April, was brought forward to 26 March. While these are being fitted, we will take the opportunity to repair a part of the refractory in the offtake duct above the RHF.

Following the work on the heat exchangers, these units should not require further attention for several months and production should be able to proceed with minimal interruption until August/September when a routine inspection and maintenance stoppage is scheduled in line with the overall operating plan for the plant.

The monies raised through the Placing will be used for further optimisation of the plant and for working capital purposes.

   4.      Financing 

The Company has an outstanding debt facility with Korea Zinc Ltd of $15 million which is due for repayment in February 2015. The Company is currently in discussion with Korea Zinc Ltd and a number of debt providers with respect to the refinancing of this debt.

Whilst the Directors are confident that they will be able to refinance this debt, Shareholders should be aware that there is no certainty that this will be achieved on terms at least as favourable as those in relation to the current debt or at all.

   5.      Directors' Participation in the Placing 

The Directors whose names are listed below have subscribed for the following numbers of the Placing Shares as part of the Placing at the Placing Price:

 
 Name of the Director    No. of Placing Shares 
----------------------  ---------------------- 
 Andrew Woollett                     1,212,000 
 Jacques Dewalens                      182,000 
 Rod Beddows                           300,000 
 Simon Hall                             60,600 
 
  Total                              1,754,600 
----------------------  ---------------------- 
 

The interests (all of which are beneficial, unless otherwise stated) of the Directors and their immediate families and the persons connected with them (within the meaning of section 252 of the Companies Act) in the issued share capital of the Company or the existence of which could, with reasonable diligence, be ascertained by any Director as at the date of this Announcement and as expected to be immediately following Admission, are as follows:

 
           As at the date of this Announcement                    Immediately following Admission 
---------------------------------------------------------  -------------------------------------------- 
                                                                                        No. of Ordinary 
                     No. of existing   % of the Company's    No. of     % of Enlarged     Shares over 
                         Ordinary        existing issued     ordinary    Issued Share    which options 
       Name               Shares          share capital       shares       Capital        are granted 
 Andrew Woollett           4,175,596         3.08%          5,387,596       3.69%             4,515,854 
 Gautam Dalal                560,000         0.41%            560,000       0.38%                     0 
 Jacques Dewalens             71,445         0.05%            253,445       0.17%             1,500,000 
 Rod Beddows                 522,500         0.39%            822,500       0.56%                     0 
 Simon Hall                   85,000         0.06%            145,600       0.10%             1,731,318 
 Guy Lafferty                      0         0.00%                  0       0.00%                     0 
------------------  ----------------  -------------------  ----------  --------------  ---------------- 
 
   6.      Placing Agreement 

Pursuant to the Placing Agreement, Peel Hunt has conditionally placed the Placing Shares with placees at the Placing Price of 10pence per Placing Share to raise approximately GBP1.03 million before expenses. It is anticipated that dealings in the Placing Shares will commence at 8:00 a.m. on 2 April 2014. The Placing is conditional on Admission becoming effective and the Placing Agreement becoming unconditional in all respects by no later than 8:00 a.m. on 2 April 2014 or such later date (being not later than 8:00 a.m. on 22 April 2014) as the Company and Peel Hunt may agree.

The terms and conditions applicable to the Placing are set out in the Placing Agreement. Peel Hunt has agreed to use its reasonable endeavours to procure placees for the Placing Shares. The Placing Agreement contains certain customary warranties. The Company has also agreed to indemnify Peel Hunt against all losses, costs, charges and expenses which Peel Hunt may suffer or incur as a result of, occasioned by or attributable to the carrying out of its duties under the Placing Agreement.

   7.      Risk Factors 

The risks and uncertainties described below are some of the material risk factors facing the Company which are currently known to the Directors. These risks are not the only ones facing the Company and additional risks and uncertainties not presently known or currently deemed immaterial may also have a material adverse effect on the Company's financial position and prospects. If any or a combination of the following risks materialise, the Company's financial position and prospects could be materially and adversely affected to the detriment of the Company and the Shareholders.

Therefore, before investing, Shareholders and other investors should carefully consider the risk factors described below. Please note that the risks are not presented in any order of priority and are not intended to be exhaustive.

Financial

-- As a majority of the Group's sales are derived from the sale of zinc concentrate, a material fall in the zinc price for a sustained period will affect the Group's earnings and the Company's ability to finance future projects and repay its debts.

-- As a majority of the Group's sales are denominated in United States Dollars whereas most of its expenditure and operating costs are denominated in Korean Won, exchange rate movements may have a negative impact on the Group's earnings.

-- There is no certainty that the funds raised in the Placing will be sufficient to satisfy the funding requirements of the Company over the next 12 months, which may include any unforeseen adverse developments relating to equipment, operations, currency or the price of zinc.

-- There is not yet certainty that the cashflow from KRP will be sufficient to repay or enable the refinancing of the outstanding loan, currently amounting to $15 million, which is due for repayment in February 2015. Whilst the Directors are confident that they will be able to refinance this debt, there is no certainty that this will be achieved on terms at least as favourable as those in relation to the current debt or at all.

KRP1

-- The Company's earnings will be detrimentally affected in the event that the gradual increase in production (known as the "ramp-up") is delayed.

-- Equipment failure could lead to operational delays and increased costs of repairing or replacing such equipment.

-- An offtake agreement has been entered into in respect of the zinc product. However, as no definitive agreement has yet been entered into in respect of the iron product, these sales cannot be guaranteed. Inability to realise value of the iron product will have a negative impact on the Company's potential earnings. None of the financial models assume any income from the sale of the iron product so the negative impact is one of reduced upside.

Future growth

-- The development of future projects outside Korea depends on the Group obtaining contracts from steel mills for the supply of EAFD. Should these not be forthcoming, it will prevent the Group from developing such further projects.

-- The development of future projects also depends upon the Company arranging for bank and/or other financing for this purpose. In the event that such financing is not available on appropriate terms at the appropriate time, the development of future projects would be delayed.

-- There is a risk that a potential competitor may design a technology for the treatment of EAFD which could be economically more attractive than the technology used by the Company and, hence, restrict the number of new plants that might be constructed by the Group.

   8.      Definitions 

The following definitions apply throughout this Announcement, unless otherwise stated herein:

 
 "Admission"                    the admission of the Placing Shares to trading 
                                 on AIM becoming effective in accordance with 
                                 Rule 6 of the AIM Rules for Companies 
 "AIM"                          a market of that name operated by the London 
                                 Stock Exchange 
 "AIM Rules"                    the AIM Rules for Companies published by the 
                                 London Stock Exchange governing the admission 
                                 to, and the operation of, AIM 
 "Announcement"                 this announcement 
 "Board of Directors",          the directors of the Company as at the date 
  "Board" or "Directors"         of the Announcement 
 "Business Day(s)"              any day on which banks in London are open for 
                                 business (excluding Saturdays, Sundays and 
                                 public holidays) 
 "Companies Act"                the Companies Act 2006, as amended 
 "Company" or "ZincOx"          ZincOx Resources plc 
 "CREST"                        the computerised settlement system (as defined 
                                 in the Regulations) operated by Euroclear which 
                                 facilitates the transfer of title to shares 
                                 in uncertificated form 
 "EBITDA"                       earnings before interest, tax, depreciation 
                                 and amortisation 
 "EAFD"                         Electric Arc Furnace Dust 
 "Enlarged Issued               the issued ordinary share capital of the Company 
  Share Capital"                 following the issue of the Placing Shares 
 "FCA"                          the Financial Conduct Authority of the United 
                                 Kingdom 
 "FSMA"                         the Financial Services and Markets Act 2000, 
                                 as amended 
 "Group"                        the Company and its subsidiaries and subsidiary 
                                 and associated undertakings at the date of 
                                 this Announcement 
 "KRP"                          the Korean Recycling Plant 
 "London Stock Exchange"        London Stock Exchange plc 
 "Official List"                the Official List maintained by the United 
                                 Kingdom Listing Authority 
 "Open Offer"                   as such term is defined in paragraph 2 of this 
                                 Announcement 
 "Ordinary Share(s)"            the issued ordinary shares of 1p each in the 
                                 capital of the Company at the date of this 
                                 Announcement 
 "Peel Hunt" or "Broker"        Peel Hunt LLP, the Company's nominated adviser 
                                 and broker, a limited liability partnership 
                                 incorporated in England and Wales with registered 
                                 number 0C357088, whose registered office is 
                                 at Moor House, 120 London Wall , London EC2Y 
                                 5ET 
 "Placing"                      the conditional placing of the Placing Shares 
                                 at the Placing Price by Peel Hunt on behalf 
                                 of the Company 
 "Placing Agreement"            the conditional placing agreement dated 31 
                                 March 2014 entered into between the Company 
                                 and Peel Hunt 
 "Placing Price"                10 pence per Placing Share 
 "Placing Share(s)"             the 10,346,672 new ordinary shares of 1p each 
                                 to be issued in the capital of the Company 
                                 pursuant to the Placing 
 "Regulations"                  the Uncertificated Securities Regulations 2001 
                                 (SI 2001/3755), as amended from time to time 
 "Restricted Jurisdiction(s)"   the United States of America, Canada, Australia, 
                                 the Republic of South Africa, Japan, New Zealand 
                                 and/or Russia 
 "RHF"                          rotary hearth furnace 
 "Securities Act"               the U.S. Securities Act of 1933, as amended 
 "Shareholder(s)"               holder(s) of Ordinary Share(s) from time to 
                                 time 
 "stock account"                an account within a member account in CREST 
                                 to which a holding of a particular share or 
                                 other security in CREST is credited 
 "United Kingdom"               the United Kingdom of Great Britain and Northern 
  or "UK"                        Ireland, its territories and possession, and 
                                 all areas subject to its jurisdiction 
 

A reference to "GBP" is to pounds sterling, the lawful currency of the UK.

A reference to "United States Dollars" or "US$" is to United States dollars, the lawful currency of the United States of America.

Peel Hunt LLP, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company as nominated adviser and broker and no one else (including the recipients of this Announcement) in connection with the Placing described in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Peel Hunt LLP or for advising any other person in connection with the matters described in this Announcement. Peel Hunt LLP makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this Announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this Announcement, or any other statement made or purported to be made by the Company, or on its behalf, in connection with the Company or any of the other matters described in this Announcement and, accordingly, to the fullest extent permitted by law disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this Announcement or any other statement.

Important information

The distribution of this Announcement outside the UK may be restricted by law. Persons outside the UK who come into possession of this Announcement should inform themselves about and observe any such restrictions. Failure to comply with such restrictions may constitute a violation of the securities laws of such jurisdictions. This Announcement does not constitute an offer to sell or an invitation to subscribe for, or solicitation of an offer to subscribe or buy, the Placing Shares to any person in any Restricted Jurisdiction. In particular, this Announcement is not for distribution in or into the United States of America, Canada, Australia, The Republic of South Africa, Japan, New Zealand or Russia. Accordingly, the Placing Shares may not, subject to certain exceptions, be offered directly or indirectly in or into the United States of America, Canada, Australia, The Republic of South Africa, Japan, New Zealand or Russia. The Placing Shares have not been and will not be registered under the United States Securities Act of 1933 (as amended) or under the securities legislation of any state of the United States of America, Canada, Australia, the Republic of South Africa, Japan, New Zealand or Russia and they may not be offered or sold directly or indirectly within those Restricted Jurisdictions or to or for the account or benefit of any national, citizen or resident of such jurisdictions.

This Announcement is being distributed in the United Kingdom only and is directed at persons who are (i) investment professionalswithin the meaning of paragraph (5) of Article 19 or high net worth companies or unincorporated associations within the meaning of paragraph (2) of Article 49, of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (S1 2005/1529); and (ii) qualified investors within the meaning of section 86(7) of theFinancial Services and Markets Act 2000 (all such persons together being referred to as "relevant persons"). Any person who is not a relevant person should not act or rely on this Announcement or any of its contents.

AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official List of the United Kingdom Listing Authority. A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. Neither the London Stock Exchange nor the UK Listing Authority have examined or approved the contents of this Announcement. The AIM Rules are less demanding than those of the Official List of the UK Listing Authority.

The directors of the Company accept responsibility for the information contained in this Announcement. To the best of the knowledge and belief of the directors (who have taken reasonable care to ensure that such is the case), the information contained in this Announcement is in accordance with the facts and does not omit anything likely to affect the import of such information.

Forward-looking statements

Certain statements contained in this Announcement are or may constitute "forward-looking statements". These statements may be identified by words such as "expects", "looks forward to", "anticipates", "targets", "aims", "may", "would", "could", "intends", "plans", "believes", "seeks", "estimates", "will", "project" or words of similar meaning. They include all matters that are not historical facts. Such statements are based on the current expectations and certain assumptions of the Directors, and are, therefore, subject to certain risks and uncertainties. Forward-looking statements are not guarantees of future performance and a number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements. The forward-looking statements in this Announcement speak only as of the date of this Announcement. Except as required by law, the Company disclaims any obligation to update any such forward-looking statements to reflect future events or developments.

This information is provided by RNS

The company news service from the London Stock Exchange

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