Shares digital

Metals recycling group ZincOx (ZOX:AIM) has fought tough credit markets to secure a $120 million debt financing to develop a zinc mine in Yemen. The agreement with eight hedge funds and emerging market investors, one year later than planned, is the first of several financing milestones to achieve in coming years.

North American operations involving its first recycling plant in Ohio and refinery in St Louis will cost $169 million. Chairman Andrew Woollett claimed financing would be secured ‘within the next few months’, and could include around $40 million cash from selling the remaining royalty payments on a Kazakhstan mine. ZincOx will then require $231 million to develop a second recycling facility in Aliaga, Turkey.

The company originally planned to ship a concentrate from its recycling plants in Turkey and Ohio to the Big River facility in St Louis. A change in strategy, prompted by a 33% increase in capital cost forecasts announced last October, will see Ohio become the priority, so concentrates can be washed at Big River, then fed into conventional smelters.

ZincOx plans to treat electric arc furnace dust, a form of steel waste, to recover zinc. Thailand should become its third operating region, having found a site suitable to build a recycling plant.

It has already secured 104,000 tonnes of annual dust supply and has identified four Asian steel producers, which could account for another 80,000 tonnes. A minimum 200,000 tonnes is needed for the project to be considered by financiers, said Woollett.

‘Regional smelters have approached us about purchasing the intermediate product from the recycling, which puts us in a stronger position for finance negotiations,’ he added.

The 52%-owned Jabali zinc oxide mine in Yemen should start production in Q4, 2009. It is hoping to fund its share of the remaining $77 million development cost using cash reserves.

Shares says: Financing momentum should be a catalyst to reviving the share price, which has fallen by a third since November.

by: Dan Coatsworth