Production start date at Jabal Salab mine in Yemen on track, ZincOx Resources

ZincOx Resources PLC (AIM: ZOX) said it remains on track to commence production at the Jabal Salab mine in Yemen during the first half of 2010, as it reported results for the full year from December 31, 2008.

The development work at Jabali is progressing well. The site leveling is complete and the laying of the foundations is expected imminently. All of the major processing equipment has been ordered and some is already manufactured and awaiting transportation to site. The project remains within budget.

The company, which specializes in the low cost recovery of high grade zinc compounds from unconventional sources, made a pre-tax profit of 6.4 million, compared with 15.4 million a year earlier, while it recorded sales of 262,000, as opposed to zero in 2007.

ZincOx said it is in a strong financial position, having approximately 64.5 million in cash, almost no liabilities, and no debt at the corporate level.

Chairman Andrew Woollett commented: “Having significant cash reserves means we remain in a strong and flexible position to progress our recycling strategy as the global economic environment improves.”

The giant investment project was built by the Jabal Salab Company (Yemen) Limited that consists of three partners: ZincOx British Company, which owns 60 percent of the company’s shares; Anglo American Company, with 20 percent; and the ANSAN Yemeni Company, which owns the remaining 20 percent of shares. 

As the first project of its kind in Yemen, the Jabal Salab Company will begin to extract deposits of zinc, lead and silver in the Nehim area, 110 kilometers northeast of Sana’a. The project, which has been established with a total budget of $200 million, was inaugurated by the Yemeni Prime Minister Ali Mohammed Mujawar on February 23, 2009.

Plans for the preliminary infrastructure of the project included the construction of accommodations for mine employees, an electricity station, and a treatment factory. 

The initially proposed timeline for the project is 12 years, but the duration of the contract between the Jabal Salab Company and the Geological Survey and Mineral Resources Board is 20 years due to the probability of extension.

The benefits of the project to Yemen, according to estimates of an economic feasibility study submitted by the Zincox company, include profits (the world price of zinc is US$1900 per ton), tax proceeds estimated at about US$58 million, and an estimated US$12 million in taxes and social security contributions from the salaries of company staff. The project will provide employment opportunities for approximately 370 Yemeni workers. A report issued by the Ministry of Oil and Minerals confirmed that Yemeni employees in this project will constitute 95 percent of all employees after the initial four years.  

According to the Yemeni officials at the ministry of oil and mineral resources, investment in the field of mineral wealth is one of the most important and effective means to diversify into non-oil resources and create financial tributaries to strengthen the national economy. 

Officials added that during the past ten years the mining industry in Yemen has undergone remarkable improvements, attracting a number of international companies to invest here. Currently there are more than 11 companies working in this field.

Ismail al-Janad, the Head of the Yemen Geological Survey and Mineral Resources Board, said that the general reserves of zinc, lead, and silver in the project area are estimated at 12.6 million tons. “This project will prove that Yemen is serious about developing its mining industry and is confident about its ability to expand its non-oil sources of income,” said al-Janad.

Al-Janad added that feasibility studies confirmed the existence of more than 678,000 tons of raw gold reserves in the valley of Hadramout province. In Hajja governorate, there is a probable 16 million tons and a possible further 40 million tons of raw gold reserves.

Mr. Brett Grist, the manager of ZincOx Resources PLC in Yemen expected exports to commence in the first half of 2010 with the mines first shipment of Yemeni Zinc.

In reference to the benefits this project will provide for the country, Mr. Grist stated that the project is likely to create 400 jobs, and more than 1,000 indirect employment opportunities, through related businesses. He added that Yemeni employees will be properly trained, and amount to 95% of the projects employees. He went on to say that equipment used to search for zinc will be transferred over to the country, allowing Yemeni’s to benefit in the future, through the use of the equipment to search for gold.

In August 2007, the Parliament approved a contract which was signed by the Jabal Salab Company and the Geological Survey and Mineral Resources Board as a representative of the Ministry of Oil and Minerals, for exploiting and developing deposits of zinc, lead, and silver. The Parliament recommended that the government deal seriously with the contract and take care of the mineral sector as it has the potential to produce a great deal of revenue for the public budget. The government must work to complete strategic studies of the sector, which will help in setting up local industries based on raw mineral resources.

Plans are set to develop the infrastructure and social services of the project area. The area will receive water, electricity, better roads, education for local children, and better health care, among other benefits.  The project would provide a steady source of foreign currency to the country, as a result of the export and sale of zinc to international markets, said Taha al-Foseil, professor of economics at Sana’a University.  This project’s greatest benefit to Yemen is that it could pave the way for further mining developments.

The predicted success of this initiative will serve to encourage and attract other foreign companies to invest in the mining sector in Yemen, just as the success which Yemen witnessed in the oil industry in the early 1980s encouraged foreign entities to invest in Yemen’s oil, said Mohammed Salah, Member of the Board of Directors of the Sana’a Chamber of Commerce.

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