Revised Economics for the Korean Recycling Project (4034J)
30 June 2011 - 4:00PM
UK Regulatory
TIDMZOX
RNS Number : 4034J
ZincOx Resources PLC
30 June 2011
ZincOx Resources plc
("ZincOx" or "the Company")
Revised Economics for the Korean Recycling Project
Development cost for Phase 2 has been reforecast enabling a
reassessment of its economics:
-- Development cost of Phase 2 reduced by 32% to approximately
US$100 million
-- EBITDA, on current assumptions, for the combined phases is
approximately US$53 million p.a.
ZincOx Resources plc, which specialises in the recovery of zinc
from steel industry waste, is pleased to announce revised project
economics for the full development (comprising phase 1 and phase 2)
of its wholly owned Korean Recycling Plant ("KRP"). Following a
detailed review of the development expenditure required for Phase 2
("KRP 2"), costs have been reduced by 32% to US$100 million
including contingency; US$46 million below the estimate previously
reported. This review has been conducted in light of the actual
costings being experienced by the Company in Phase 1 of the KRP
("KRP 1").
Commenting on the revised costs, Andrew Woollett, ZincOx's
Chairman, said: "The experience we have gained by having the actual
costs of developing KRP 1, has helped us to make a very accurate
estimate of the cost of developing KRP 2, and resulted in a
substantial reduction compared to our previous estimate. This more
accurate estimate has enabled us to start serious discussions with
potential lenders for the development of KRP 2"
KRP Phases 1 & 2
The KRP is being developed in two phases; KRP 1 and KRP 2. KRP 1
is fully funded and approximately half way through development. It
remains within budget (US$110 million) and on schedule for
production in the first quarter of 2012.
A detailed reappraisal of the cost of developing KRP 2 has
recently been undertaken using the actual costs of developing KRP
1. The development cost for KRP 2 is, including contingency, now
expected to be about US$100 million, which is US$46 million below
the previous estimate.
Part of this reduction is due to the interest from zinc smelters
in obtaining unwashed zinc oxide concentrate. As a consequence, and
in line with the practice to be employed in KRP 1, the Company does
not feel it will be necessary to wash the product itself. The
exclusion of a washing plant for KRP 2 has saved US$18 million of
capital expenditure. Other savings are due to the design of various
parts of KRP 1 having been sized for the expanded operation, the
use of actual Korean costs rather than costs derived from the USA
and the decision to make KRP 2 an exact copy of KRP 1, thereby
greatly reducing engineering costs.
The scheduling of EAFD delivery for KRP 1 is being optimised
with the suppliers and based on the latest costs of transport,
consumables and utilities, KRP 1 is expected to generate
approximately US$31 million of EBITDA per annum (based on a zinc
price of US$2,250 per tonne and a pig iron price of US$450 per
tonne). The development of KRP 2 is expected to commence in July
2012, with first production approximately 12 months thereafter. By
the end of 2013 the full plant is expected to be in operation and
will, using the same price assumptions as above, generate
approximately US$53 million of EBITDA annually.
KRP 2 Financing
Discussions with banks regarding the financing of KRP 2, have
commenced. Since KRP 2 will only be developed once KRP 1 has
demonstrated its profitability, the Company is considering
structuring the loan as a corporate facility to ZincOx Korea,
rather than as a conventional project finance instrument.
Discussions to date have indicated that this will have the benefits
of both a lower cost of borrowing and higher gearing, meaning that
the equity requirement for KRP 2 from the Company is expected to be
significantly less than for the development of KRP 1.
Plant Site
Work at the plant site is progressing according to schedule. The
first shipment of the Rotary Hearth Components has been delivered
to site and erection is scheduled to commence next week. The
erection of other equipment has commenced with the Gas Handling
System. The next milestone for development is the installation of
the main power line scheduled for mid-August.
For more information please contact:
ZincOx Resources plc Andrew Woollett, Executive Chairman +44 (0)
1276 450100
Nominated Adviser and Broker Ambrian Partners Limited Andrew
Craig / Jen Boorer +44 (0) 20 7634 4700
Tavistock Communications Paul Youens/Simon Hudson +44 (0) 20 7
920 3150
This information is provided by RNS
The company news service from the London Stock Exchange
END
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