Companies: ZOX   

Deferred disposal payments on a Kazakh zinc mine enabled ZincOx Resources to treble annual pre-tax profits to £15.5 million.

The AIM-quoted company, which uses innovative technology to produce ‘low-cost, high-grade’ zinc, incurred a £5.6 million operating loss last year. However, the latest instalment payments from the Kazzinc group for ZincOx’s former Shaimerden mine helped generate ‘other gains’ of £20 million.

Chairman Andrew Woollett says the Shaimerden payments should continue until 2011. By then, he predicts the company’s 52 per cent-owned Jabali mine in Yemen will be producing 70,000 tonnes of high-grade zinc oxide a year and its Ohio zinc recycling project should be in full production.

ZincOx hopes to produce 47,000 tonnes of zinc oxide concentrate as well as pig iron from its Aliaga recycling plant in Turkey, and estimates that an investment of nearly £90 million into the Ohio recycling project should generate annual earnings of almost £12 million. In February, the company, which plans another recycling plant, in Thailand, arranged a £108 million financing package for the Jabali mine, including a £60 million high-yielding bond linked to the price of zinc.

After raising £20.4 million in January in a placing at 262p handled by broker Numis, ZincOx now has more than £20 million cash, says Woollett. Floated seven years ago at 120p, ZincOx’s shares hit 427.5p last July, but have fallen heavily since then, partly on concerns about its financing needs.

Woollett has argued that the funding arrangements the company has made and the prospect of achieving significant operating cash flow cash by the time Shaimerden payments run out should allay those concerns. All the same, he has also suggested that greater discipline among major zinc producers could reduce the metal’s price volatility.

At 188p, up 3.5p this morning, the shares have speculative recovery possibilities.

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ZincOx	AIM	£35.69m	46.00p	-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