New Projects

Report
ZincOx Resources plc
Investor Presentation
November 2013
“ubi est squales est ære”
Disclaimer
This document is for informational purposes only and must not be used or relied upon for the purposes of making any
investment decision or engaging in any investment activity. No reliance may be placed for any purpose whatsoever
on the information contained in this Presentation, nor on assumptions made as to its completeness. No
representation or warranty, express or implied, is given by ZincOx Resources plc or any of its advisers, directors,
officers, employees or agents, as to the accuracy, fairness or completeness of the information or opinions contained
in this Presentation and no liability is accepted for any such information or opinions (which should not be relied upon)
or for any loss howsoever arising, directly or indirectly, from any use of this document or its contents or information
expressed in the Presentation. The information contained in this Presentation is subject to amendment, revision and
updating in any way without any notice or liability to any party.
Certain statements in this document relate to the future, including forward looking statements including but not limited
to those with respect to the financial position and strategy of the Company, the price of zinc, the estimation of mineral
resources and reserves, the realisation of mineral reserve estimates, the timing and amount of estimated future
production, costs of production, capital expenditures, costs and timing of development of new deposits, success of
exploration activities, permitting time lines, currency fluctuations, requirements for additional capital, government
regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and
limitations on insurance coverage and the timing and possible outcome of pending litigation. These forward looking
statements involve known and unknown risks, uncertainties, assumptions and other important factors that could
cause the actual results, performance or achievements to be materially different from future results, performance or
achievements expressed or implied by such statements. Such risks, uncertainties, assumptions and other important
factors include, among other things, general economic conditions, exchange rates, interest rates, the regulatory
environment, structural changes in the industries in which the Company operates, competitive pressures, selling
price and market demand. The forward looking statements in this document reflect views held only as of the date of
this document and the Company expressly disclaims any intention or obligation to update or revise any forward
looking statements, whether as a result of new information, future events or otherwise, except in accordance with
applicable securities laws.
Contents
Part 1 General
Risk Factors
Corporate Overview
Part 2 Korean Recycling Plant
Ramp-Up
Revised Economics
Part 3 Growth
New projects
Added Value
Part 4 Fund raising
Appendices: Zinc price, stock, share price
3
Risk Factors
Financial
Fall in zinc price
Adverse exchange rate movement
Korean Recycling Plant
Delay in reaching full capacity
Equipment failure and cost of replacement
Ramp-up may create further complications including
known issues and unforeseen ones
Inability to realize value of iron product
Future Projects
Inability to enter into EAFD supply contracts
Development of a more economically attractive
technology by competitors
4
Introduction
•
British zinc recycling company
•
Taking hazardous waste generated by the recycling of steel scrap
•
Operating zinc recycling plant – South Korea
•
Cleaner more efficient technology
•
Producing zinc concentrate and intermediate iron product
•
Global roll out potential
•
Slower than expected production ramp-up to full production
•
Major problems resolved
•
Ongoing improvements to ramp-up to full production
•
Production at 65% of full production and rising
•
Placing of new shares to take company through to sustained cashflow
•
International Finance Corporation intend to support the placing
5
Vision
The technology employed by ZincOx transforms a
global hazardous waste problem into a global
zinc resource opportunity
The key technology is the Rotary Hearth Furnace (RHF)
The RHF creates intermediate zinc and iron products and No Waste
Considerable additional value would be created by further processing of
the intermediate products into industrial raw materials
6
Corporate Overview
Experienced team of metallurgists and resources professionals
- Andrew Woollett: Executive Chairman (57)
Geologist: MSc, ex: Rio Tinto, Cluff Resources. Founder of Reunion Mining plc which designed the
Skorpion Mine/smelter taken over by Anglo American. Founded ZincOx in 1999.
-
Simon Hall: Finance Director (44)
Accountant: BSc Eng., ACA. Initially worked with Hanson plc in UK, India and China, before joining
British Telecom where he worked in property, BT Openworld, the corporate division and BT Mobile
He joined ZincOx in 2006.
-
Jacques Dewalens: Technical and Production Director (66)
Metallurgical engineer: PhD in Sciences. Until joining ZincOx in 2008, he worked for in the zinc
industry for Union Miniere in several roles, including General Manager of the Balen smelter and
Metallurgical Process Director for Umicore Engineering.
ZincOx was originally set up to repeat the success of Skorpion
To develop unconventional (“oxide”) zinc resources
Mining sold off, entirely focused on recycling
AIM quoted, 103 million shares in issue
Debt: Corporate - US$6.3 million, KRP – US$52.7 million
Head Office in UK, Technical Office in Belgium, Main operation in South Korea
82 employees
7
Background
A thin layer of zinc is used to protect (galvanise) steel from corrosion
At the end of its life, a steel object is commonly scrapped and recycled
1/3 of steel is produced by recycling in Electric Arc Furnaces (EAF)
EAF generates a waste dust, EAFD, which contains the zinc (20%-30%)
ZincOx modified the Rotary Hearth Furnace to recover the zinc and an
iron rich by-product - so no waste
The first plant is the Korean Recycling Plant, KRP
First production April 2012
Other potential projects in:
Turkey
Thailand
Russia (51% JV)
SEE FILM
8
Korean Recycling Project
Development Cost: US$ 134 million
(Equity: US$60mil., Inter-company loan; US$21mil., Debt: US$53mil.)
Experienced Korean management team
Technical support from Belgian office
Workforce: 61
Supply contracts: 9 years
Sales contracts: Exclusive offtake agreement with Korea Zinc, 9 years
Full Capacity
tonnes per annum
EAFD, tonnes pa
200,000
Zinc in concentrate
48,000
Iron product (ZHBI)
100,000
9
KRP Full Production, Actual and Forecast
10
KRP Production, Actual and Forecast
Oct. 2013, 2,963t zinc
contained
11
Key Indicators: 1. Availability (running time)
12
Key Indicators: 2. Recovery
13
Key Indicators: 3 Feed Rate
14
Products
ZINC CONCENTRATE
Approximately 90% of expected total revenue
Higher grade than envisaged, >64% zinc (expected 59%)
All sold to Korea Zinc
85% paid within 30 days, balance after 40 days
Sales price based on LME price in line with standard industry practice
IRON PRODUCT
Presently lower quality than expected when at full production due to:
- less iron in feed,
- lower metallisation, more oxide
- less removal of volatile elements
Quality will improve with full fuming efficiency
Investigating overseas and local markets
Potential to install melter  pig iron and slag for cement industry
15
KRP: Cash Generation At Full Production
Assumes availability, recovery and feed rate at target levels
80
70
50
40
30
20
10
3000
2900
2800
2700
2600
2500
2400
2300
2200
2100
2000
1900
1800
1700
1600
0
1500
US$ Million
60
Zinc Price (US$/tonne)
Base EBITDA
EBITDA (inc ZHBI @ $30/t)
KZ Debt Service
16
New Projects – KRP Expansion (KRP2)
KRP site laid out to accommodate doubling of capacity
Currently, insufficient EAFD generated to fill expanded plant
Potential to import EAFD
EAFD grade for expansion lower than for existing operation
17
New Projects - Thailand
ASEAN regional facility, 200,000 tpa
Site near Rayong under negotiation
Thai mills generate up to 90,000tpa
(zinc grade approx. 27%)
Mostly within 80km of site
Rayong
City
Other ASEAN 290,000 tpa
Close to port
Site well suited to:
Melting
Zinc concentrate upgrading
Proposed site
for ZincOx plant
18
New Projects - Turkey
Over 350,000 tpa EAFD generated in Turkey
Approx. 5 hectare site in the Aliaga Heavy Industrial Zone
Within 3 km of over 120,000tpa EAFD
Potential for:
200,000 tpa plant
46,000 tpa of zinc in concentrate
PLANT SITE
19
New Projects - Russia
Joint venture, 51% ZincOx, 49% Ural Recycling LLC (Magnezit subsidiary)
Magnezit Group
Major magnesite mine, at Satka (since 1901)
Largest refractory producer in Russia
1.5 million tonnes per annum
76% to steel industry, of which 24% to Electric Arc Furnaces
Joint Venture
Magnezit approached ZincOx to form JV
Visited KRP in May 2012, CEO plus senior management team
Work Programme
2012/14 Project Definition
2014
Feasibility
2015
Construction
2016
Production
20
Value Added Products
ZINC CONCENTRATE UPGRADING
Exceptional quality
Simple washing up-grades to 95% zinc oxide
Second proprietary step up-grades to industrial quality (>99% zinc oxide)
Not an option for KRP due to long term offtake agreements
Industrial quality zinc oxide is an end market of over 1,000,000 tpa
Most industrial quality zinc oxide sells at a premium to the zinc it contains
ZHBI MELTING
KRP originally conceived with ZHBI melter to realize full value
Preferred method is Submerged Arc Furnace
Testwork and feasibility planned for next year
 Pig Iron: Scrap substitute for foundries and EAFs
 Slag: Raw material for the manufacture of cement
Potential to double gross revenues
21
International Finance Corporation
Private sector arm of the World Bank
Mandate to invest in less developed countries
Can provide up to 25% of development finance (debt and direct equity)
Concerned with:
Technology
Environmental
Corporate governance
Global roll-out
Discussions with ZincOx over past 18 months
Due diligence; financial, technical, governance and environmental
Interested in ZincOx’s new projects in Turkey, Thailand and Russia
22
Use of Proceeds
Korean Recycling Plant
Capital items
US$1 mil.
New Projects
New plant basic engineering
(including improvements)
Environmental studies
Melter testwork and feasibility study US$3 mil. - US$5 mil.
Corporate Working Capital
US$3 mil.
=================
Total US$7.1 mil. – US$9 mil.
23
Structure and Timetable
STRUCTURE
Placing (inc.IFC subscription)
Open Offer to Shareholders
US$7.1 mil.
up to US$1.9 mil.
TIMINGS
Placing Roadshow
October 29th – November 8th
Announcement
November 12th
Open Offer
November 12th to November 22nd
General Meeting
November 29th
Share Admission
December 2nd
24
Appendix 1 Zinc: Price and Stocks
5000
4500
LME Zinc stocks - tonnes (right axis)
1400
1200
4000
3500
3000
Thousands
LME Zinc price - USD/tonne (left axis)
1000
800
2500
2000
1500
600
400
1000
500
0
200
0
25
Appendix 2. Zinc Price Predictions
Lowest
Consensus
Highest
3000
2500
2250
2000
1750
Source: Metal Bulletin
16Q4
16Q3
16Q2
16Q1
15Q4
15Q3
15Q2
15Q1
14Q4
14Q3
14Q2
14Q1
13Q4
1500
13Q3
Forecast price (USD/tonne)
2750
26

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