Zinc recycler ZincOx has agreed to restructure its debts with partner Korea Zinc Company, the first stage of a refinancing that will include raising equity funds. Korea Zinc lent ZincOx US$57 million through offtake and development loans to build its first recycling plant in South Korea.
This money was scheduled to be repaid from cashflow generated by the facility but owing to the slide in the zinc price in the past four months, Zincox warned last week it needed to restructure this debt and raise more money otherwise Korea Zinc would end up owning 90% of the plant.
Korea Zinc has now agreed to roll up interest payments due on both loans until the end of 2016 unless the monthly average zinc price rises above US$2000 per tonne for three months. Principal repayments due on the development loan have also been postponed by a year unless the monthly average price of zinc rises above US$2500 per tonne.
The condition is that ZincOx itself has to raise a further US$5 million by the end of 2015.
Terms of the offtake agreement have also been amended to see a potential release of more concentrate to Zincox once the loan is repaid.
An upgrade to the plant to produce a much more valuable zinc oxide product is also under consideration, though ZincOx said this would cost US$20 million.
The plant processes electric arc furnace dust (EAFD), a by-product of steel-making, to produce zinc and since the sale of zinc concentrate is the only income of the business, the decline in the price has had a material impact on the group’s cash.
In an announcement last week, ZincOx said it was looking to raise at least US$6.5 million via a share placing to provide working capital due to the continuing weakness of the zinc price.
In September this year, the AIM-listed company warned that if there was no material recovery in the zinc price, then at around US$1660 per tonne, it may need to review financing options. Since then, the price has fallen around a further 10% touching a recent low of US$1487 per tonne.