Companies: ZOX   

Mining and recycling hopeful ZincOx is partly funding its Jabali mine in Yemen with an instrument linked to the zinc price.

The AIM-quoted company says several emerging market funds and hedge funds are supporting the funding package for Jabali, the company's 52 per cent-owned zinc oxide mine with a nine per cent grade. ZincOx hopes Jabali will yield 56,000 tonnes of zinc a year for 12 years by open-pit mining.

Investment banking 'boutique' Exotix has arranged the US$120 million (£61 million) debt financing for Jabal Salab, the operating company for Jabali, to include a high-yielding 'limited-recourse' 11.5 per cent six-year bond high and an innovative zinc indexed price payment obligation (ZIPPO). The ZIPPO carries a coupon calculated at 16c for every dollar by which the zinc price exceeds $1,300 a tonne on every tonne produced by Jabal Salab for 10 years.

If zinc holds its present price at more than $2,300 a tonne, those terms could imply payments of $160 a tonne to ZIPPO holders. ZincOx, headed by the resourceful Andrew Woollett, is working to increase the reserve at Jabali.

Floated at 120p in 2001 with projects in Kazakhstan and elsewhere, ZincOx shares plunged to 40p and worse, before Woollett switched the focus to Yemen and brought extraction from recycled mine waste into the mix. Highlighted by Growth Company Investor at 129p in 2005, the shares hit 427.56p last July. We suggested partial profit taking at 374p in August, and the shares now stand at 268p, up 10p this morning.

The Jabali finance package is hardly cheap. But if the mine fulfils expectations it could pay off well.

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ZincOx	AIM	£24.05m	31.00p	-0.50p
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Other company articles:
ZincOx boosts profits			28/04/2008
ZincOx wins recycling permit			29/02/2008
ZincOx raises £20 million			21/01/2008
ZincOx clinches £61 million finance deal			14/01/2008
Fund Manager Focus by Pauline McCallion			09/08/2007