9 January 2014
ZincOx Resources plc
("ZincOx" or the "Company")
Production Update
ZincOx Resources plc, (AIM: ZOX), the developer of Asia's largest zinc recycling project, is pleased to report the latest progress at its wholly owned Korean Recycling Plant (KRP). The KRP is in the final months of ramp-up to full production which remains on target for Q2, 2014.
Since the start of 2014, having dealt with numerous maintenance and repair issues during 2013, production has ramped up steadily towards the target. Our efforts, together with improvement in the zinc price, ought to result in 2014 becoming a turnaround year for the Company. The average LME zinc price for 2013 was US$1,909 and we have recently seen this price averaging US$2,050 which can have a significant impact on the Company's earnings profile.
In November, corrosion to some of the welds at KRP caused us to close one line of heat exchangers. The line was isolated using the blind flange concept which ZincOx had successfully demonstrated in September, and enabled production to recommence using one line. The welds affected within the corroded unit highlighted the complexity of making completely reliable welds while making major repairs in situ. To avoid this, the corroded unit was moved to a workshop where an entirely new inner tube was inserted and subsequently reinstalled in December. Following the fundraising in November, a special grade of stainless steel was ordered and is expected to arrive in Korea before the end of January. This metal will be used to create new inner shells that are expected to have an operational life of at least 18 months.
The use of pure oxygen, to enrich the concentration in the combustion air injected into the furnace, has had a number of very beneficial consequences. As a result, the oxygen plant is being enlarged to maximise these benefits; this work should be completed next month. Combustion air will be gradually further enriched through the course of January and February, which is expected to enhance the production ramp-up.
The steel shell of all high temperature furnaces is protected by an internal insulating lining of refractory material. This solid concrete-like material expands as the furnace heats up and contracts as it cools. Furnaces will periodically require small repairs in areas that experience high strain as a result of thermal expansion, such as protruding corner points. During December, three such areas began to shed small amounts of refractory and lumps were detected on the hearth. All the refractory in areas most susceptible to high strain have been replaced.
As a result of these repairs, production was limited during November and December 2013 with the production and sale of 2,289 and 1,145 tonnes of zinc in concentrate respectively in that period bringing the full year's production to 24,577 tonnes, resulting in revenues in Korea for the year in excess of US$26 million. January and February are planned to be full operating months, while in March there will be a planned short stoppage for maintenance.
Registered in England, company number: 3800208
Commenting on the announcement, Andrew Woollett, ZincOx's Executive Chairman, said:
"We are very satisfied with the recent performance of the blind flange concept which enabled production to continue while one line of heat exchangers was repaired. The timing of the refractory repair in December was unfortunate as it stalled our ramp-up momentum, but this has already been re-established and we remain confident of achieving targeted full capacity. We are looking forward to a very productive 2014 and also to a firmer zinc price, which recently seems to be responding to the planned closure of major zinc mines."
For further information, please contact:
ZincOx Resources plc Tel: +44 (0) 1276 45 0100
Andrew Woollett, Executive Chairman
Peel Hunt LLP (Nominated Adviser and Joint Broker) Tel: +44 (0) 207 418 8900
Richard Kauffer
Daniel Harris
Matthew Brooke-Hitching
finnCap Limited (Joint Broker) Tel: +44 (0) 207 220 0500
Matthew Robinson
Joanna Weaving
Tavistock Communications (Financial PR) Tel: +44 (0) 207 920 3150
Simon Hudson
Nuala Gallagher