TIDMZOX
RNS Number : 1830T
ZincOx Resources PLC
16 July 2015
16 July 2015
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")
Fundraising through a conditional placing
to raise GBP2.1m and Open Offer to raise up to GBP1.1m
ZincOx (AIM: ZOX) announce a fundraising by way of a conditional
Placing of approximately 16.1 million new Ordinary Shares at a
price of 13 pence per share with institutional and other investors
to raise approximately GBP2.1 million before expenses and an Open
Offer to all qualifying Shareholders to raise up to approximately
GBP1.1 million before expenses.
Capitalised terms and expressions used in this Announcement are
defined in paragraph 7, unless stated otherwise.
Highlights
-- 16,116,563 million new Ordinary Shares conditionally placed
with institutional and other investors to raise approximately
GBP2.1 million before expenses.
-- Placing price of 13 pence per share represents a discount of
1.9 per cent. to the closing mid-market price of 13.25 on 15 July
2015 (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 of up to approximately
GBP1.1m at the Placing Price of 13 pence per share.
-- Proceeds of the Placing are anticipated to be used for:
o accelerating the debottlenecking of KRP including replacement
of heat exchangers; and
o to progress work on the next recycling project.
-- The Placing is conditional only on Admission.
Commenting on the proposals, Andrew Woollett, Chief Executive of
ZincOx, said:
"The Placing enables us to debottleneck the plant this year
which will dramatically reduce downtime and improve the annual
EBITDA of KRP. The additional funds to be raised in the Open Offer
will allow us to press ahead with the pre-development work for the
next project and so begin to unlock the full potential of the
rotary hearth furnace technology".
For further information, please visit www.zincox.com or
contact:
ZincOx Resources plc Tel: +44 (0) 127 645 0100
Andrew Woollett, CEO
Peel Hunt LLP (Nominated Adviser and Broker)
Daniel Harris
Euan Brown Tel: +44 (0) 207 418 8900
Tavistock Communications (Financial PR) Tel: +44 (0) 207 920 3150
Simon Hudson
Nuala Gallagher
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 GBP2.1m and Open Offer to raise up to GBP1.1m
1. Details of the Placing
On behalf of the Company, Peel Hunt LLP ("Peel Hunt") has,
conditional only on Admission, raised approximately GBP2.1 million
(before expenses) by the proposed issue of 16,116,563 Ordinary
Shares (the "Placing Shares") at a price of 13 pence per share.
The Placing Price represents a discount of approximately 1.9 per
cent. to the closing mid-market price of 13.25 pence per Ordinary
Share on 15 July 2015, being the latest practicable date prior to
the publication of the Announcement. The 16,116,563 Placing Shares
will represent approximately 9.7 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
182,422,341 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 8.00am on 17 July 2015 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 GBP1.1 million by way of an Open Offer at the Placing
Price. The terms and procedure will be similar to the open offer
undertaken by the Company in April 2014.
3. Background to the Placing and Use of Proceeds
The current fundraising is to accelerate the debottlenecking of
KRP and to provide funds to progress work on the next recycling
project.
The performance of the Korean Recycling Plant (KRP) has improved
steadily. During much of April and May the plant ran at close to
full nameplate daily throughput but the feed rate was subsequently
reduced due to a lack of domestic EAFD, our feedstock, an issue
that management is addressing by arranging its importation.
The coating of the inner shells of the heat exchangers in August
2014, had a very positive impact on the reliability of the plant,
but this troublesome equipment still requires routine maintenance
every three to four months, resulting in the annual throughput of
the plant being limited to 180,000 tpa of EAFD. Assuming full
target performance, current utility costs and a zinc price of
US$2,250 per tonne, this has the impact of reducing EBITDA by about
US$2 million per annum. In addition to this reduction in EBITDA the
annual cost of maintaining the heat exchangers is also significant,
amounting to about US$2.5 million per annum.
The heat exchangers were designed to reduce gas consumption in
the furnace by recovering heat from the offgasses and heating the
combustion air that is used in the furnace. Their removal will
necessitate the use of additional energy. A recent trial, however,
has demonstrated that gas may be replaced by the injection of coal
of the type that is currently being used in the making of
briquettes. Since the cost of energy from coal is about one quarter
that from gas, the cost of the additional energy required by the
heat exchanger removal will be more than compensated for by the
substitution of some of the gas by coal. Taking account of the
additional energy requirement, the substitution with coal is
expected to amount to a benefit of at least US$880,000 per
annum.
The cost of removing the heat exchangers and installation of
coal injection is estimated to be US$2.2 million, but this
debottlenecking is expected to have annual benefits of over US$5
million. Work on the detailed design and fabrication of the new
system to replace the heat exchangers is already underway and is
expected to be in place and operating in Q4 2015 so the benefits of
the new system are expected to accrue in full in the 2016 financial
year.
In addition to the above, there are other capital projects
amounting to about US$800,000 such as the installation of a more
efficient briquette feeding system, that would benefit the
operation, either through a reduction in cost or improved
reliability.
Whilst additional debottlenecking and fine tuning of the RHF is
planned over the next four months, the Company believes the
efficiency of the RHF and the consistent quality of the zinc
concentrate has now been demonstrated. This together with the
successful upgrading testwork and zinc oxide product quality
confirmation, makes us confident that the Full Cycle configuration,
involving the upgrading of both the zinc and the iron bearing
products of the RHF, will be very economically attractive.
Preliminary evaluation of a 100,000 tpa EAFD treatment plant using
the Full Cycle approach would have the potential to generate about
US$40 million of annual EBITDA (assuming a price for zinc and pig
iron of US$2,250 and US$350 respectively per tonne). This level of
profitability is largely as a result of the higher value obtained
for the zinc oxide product when compared to the concentrate
produced at KRP.
A rise in the zinc price next year is forecast by analysts and
the Company believes this will encourage significant further
competition for the EAFD. In order not to lose opportunities to
build new plants around the world to competitors, we are keen to
press ahead with our roll out plans.
We believe that third party project finance should be available
for the development of the next project at the end of the first
quarter of 2016, once the track record of operation will have
sufficiently demonstrated the RHF technology. In order to obtain
this finance, certain Pre-Development work will need to be
undertaken. Pilot or commercial trials will be required for the
upgrading of the RHF's iron product and the market appetite for our
zinc oxide chemical produced from the RHF's zinc concentrate will
need to have been demonstrated. This demonstration will require the
distribution of commercial scale samples to potential customers for
commercial trials. Such samples can be generated in a pilot
operation. There will also have to be engineering work taking
account of the capacity of the plant and the many lessons learnt
during the development and operation of KRP.
In order not to delay the construction of the next plant,
Pre-Development work will need to begin immediately. The funds
raised in addition to those required to execute capital projects at
KRP will be used to Pre-Development work on the next project.
4. Directors' participation in the Placing
The Directors whose names are listed below have expressed
commitment to subscribe for the following numbers of the new
Ordinary Shares as part of the Placing:
Name of the Director No. of Placing
Shares
---------------------- ---------------
Andrew Woollett 992,556
Gautam Dalal 468,920
Total 1,461,476
---------------------- ---------------
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 Existing % of Existing No. of New % of Enlarged
Ordinary Issued Share Ordinary Issued Share Total No. of
Name Shares Capital Shares Capital Ordinary Shares
Andrew Woollett 5,294,223 3.18% 992,556 3.45% 6,286,779
Gautam Dalal 710,000 0.43% 468,920 0.65% 1,178,920
5. Placing Agreement
Pursuant to the Placing Agreement, Peel Hunt has conditionally
placed the Placing Shares with placees at a price of 13 pence per
Placing Share to raise approximately GBP2.1 million before
expenses. It is anticipated that dealings in the Placing Shares
will commence at 8:00 a.m. on 17 July 2015. 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 17 July 2015 or such later date (being not later than
8:00 a.m. on 31 July 2015) 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.
6. 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 repay its debts and finance future projects.
-- 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.
KRP
-- Equipment failure could lead to operational delays and
increased costs of repairing or replacing such equipment.
-- The replacement of the heat exchangers and the new coal
injection system may suffer delays or be less efficient than
expected. As a result, their financial impact may be lower than
expected.
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 when required, 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.
7. 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
"EAFD" Electric Arc Furnace Dust
"EBITDA" Earnings before interest, tax, depreciation
and amortisation (in accordance with the revenue
recognition policy of the Company and adjusted
to exclude foreign exchange gains and losses)
"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
the 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 the Announcement
"Peel Hunt" or "Broker" Peel Hunt LLP, the Company's nominated adviser
and Joint 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 the Joint Brokers on
behalf of the Company
"Placing Agreement" the conditional placing agreement made between
the Company and Peel Hunt on 15 July 2015
"Placing Price" 13 pence per Placing Share
"Placing Share(s)" the 16,116,563 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
"Regulation S" Regulation S under the Securities Act
"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 document 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 document.
Peel Hunt LLP makes no representation, express or implied, with
respect to the accuracy or completeness of any information
contained in this document and accepts no responsibility for, nor
does it authorise, the contents of, or the issue of this document,
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 document 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 document 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 these documents 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 document 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 document 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.
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 document. 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 document 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 document 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
document speak only as of the date of this document. 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
END
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