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Revenue £482k
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ZincOx Resources PLC - Final Results - Part 2

Thu 30th March, 2017 7:00am
- Part 2: For the preceding part double click  ID:nRSd9448Aa 

Financial Information 
 
With the exception of certain items noted below, which are carried at fair value, the consolidated financial statements
have been prepared under the historical cost convention. 
 
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December
2016. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee. Generally, there is a presumption
that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority
of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing
whether it has power over an investee. 
 
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year
are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases
to control the subsidiary. 
 
All intra-group assets, liabilities, income and expenses and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation. 
 
(c) Segmental Reporting         
Reported segments are those components of the business where results are regularly reviewed by the Board to assess their
performance and to make resource allocation decisions. The reported segments are identified separately as 'recycling
operations' or 'other segments' due to the similarity of their economic characteristics and not by their geographical area
of operation. 
 
(d) Revenue 
 
The Group recognises revenue for the sale of goods when title and the associated risks and rewards of ownership have passed
to its customers. Revenues are measured at the fair value of the consideration received or receivable, net of applicable
sales taxes. In the case of zinc concentrate sales, any revenue is recognised at the point of delivery and is priced at the
end of each calendar month according to the price at the end of the month of delivery. An adjustment is then subsequently
made between the month end price and the month after month of arrival price using the zinc price as published by the London
Metal Exchange ("LME"). 
 
The Group recognises revenue for the rendering of services when it is probable that the economic benefits associated with
the transaction will flow to the customer and that the stage of completion of any such transaction is clearly measurable. 
 
(e) Property, Plant and Equipment 
 
Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. Property, plant and
equipment is depreciated over their useful life. The major categories of property, plant and equipment which are
depreciated on a straight-line basis down to their residual values are; 
 
Buildings                       -           up to 40 years or life of lease 
 
Computer Equipment      -           3 to 5 years 
 
Fixtures and Fittings      -           3 to 5 years 
 
Plant and Machinery      -           3 to 30 years 
 
Motor Vehicles              -           3 to 5 years 
 
Any gain or loss arising on a disposal of an asset is determined as the difference between the disposal proceeds and the
carrying amount of the asset and is recognised in the income statement. 
 
Residual values, useful economic lives and depreciation methods are assessed annually. 
 
Construction in Progress is an asset class in which project costs incurred during the construction of projects, which may
take an extended period to complete, are capitalised. Upon satisfaction of certain completion tests at the end of the
construction cycle, the construction in progress will be transferred to the asset classes stated above following which
depreciation will commence. 
 
The value of land is only tested when there is an indication of impairment. The carrying values of depreciated property,
plant and equipment are assessed for impairment when indicators of impairment arise with any impairment charged to profit
or loss. 
 
(f) Impairment Reviews of Intangible Assets and Property, Plant and Equipment 
 
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some
are tested at cash-generating unit level. 
 
Other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. 
 
An impairment loss is recognised for the amount by which the assets or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell,
and value in use based on an internal discounted cash flow evaluation where future cash flows are based on expected useful
life, together with estimates of future zinc prices and costs. Any impairment loss is charged to the assets in the
cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised
may no longer exist. 
 
(g) Foreign Currency 
 
The functional currency of the parent company is Pounds Sterling. The amounts in the financial statements and accompanying
notes for the current year have been translated at 1.23016 US$/£ year end rate where they relate to the Company or
consolidated balance sheet and at 1.36548 US$/£ average monthly rate for the year where they relate to the Company or
consolidated income statement. 
 
The comparative amounts in the financial statements and accompanying notes for 2015 have been translated at 1.48236 US$/£
year end rate where they relate to the Company or consolidated balance sheet and at 1.53234 US$/£ average monthly rate for
the year where they relate to the Company or consolidated income statement. 
 
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.
Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate at the
date of the transaction. Non-monetary items that are measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. 
 
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates different
from those at which they were initially recorded are recognised in profit or loss in the period in which they arise.
Exchange differences on non-monetary items are recognised in other comprehensive income to the extent that they relate to a
gain or loss on that non-monetary item taken to other comprehensive income, otherwise such gains and losses are recognised
in profit or loss. 
 
The assets and liabilities in the financial statements of foreign subsidiaries and the parent company are translated at the
rate of exchange ruling at the balance sheet date. Exchange differences that arise from the re-translation of a net
investment in subsidiaries or from re-translating intra-group balances, which are in substance part of the net investment,
are recognised in other comprehensive income and accumulated in the foreign currency reserve in equity. 
 
The Group took advantage of the exemption in IFRS 1 and deemed the cumulative translation differences for all foreign
operations to be nil at the date of transition to IFRS. 
 
(h) Intangible Assets 
 
(i) Computer Software 
 
As per IAS 38, purchased computer software that will generate economic benefit beyond one year is capitalised as an
intangible asset and amortised over its expected useful economic life of four years on a straight line basis. 
 
(ii) Deferred Development Costs and Related Overheads 
 
Development costs incurred on specific projects are only capitalised in accordance with IAS 38 when recoverability can be
assessed with probable economic certainty. The directors review each project on a technical and commercial basis in line
with the impairment testing noted in note 1(f). In the event that it becomes evident that capitalised costs are unlikely to
be recovered from future revenues, they are either written off immediately to the profit or loss, amortised or an
impairment provision is made. 
 
Capitalised development costs relating to the Group in general, and that satisfy the provisions of IAS 38, are amortised
over their useful economic life of 10 years on a straight line basis and subject to the same impairment testing noted in
note 1(f). 
 
(i) Taxation 
 
Income tax expense represents the sum of tax currently payable and deferred tax. 
 
Current tax is the tax currently payable based on taxable profit for the year using tax rates enacted or substantively
enacted at the balance sheet date. 
 
Deferred tax is recognised on the difference between carrying values of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method.
However, deferred tax is not provided on the initial recognition of goodwill or on the initial recognition of an asset or
liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax
liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent it is probable that taxable profits will be available against which deductible temporary differences can be
utilised. 
 
Tax losses which are available to be carried forward as well as other income tax credits to the Group are assessed for
recognition as deferred tax assets. 
 
Deferred tax assets and liabilities are calculated at tax rates that have been enacted or substantively enacted. Deferred
tax is charged or credited to the profit or loss, except when it relates to items charged directly to equity, in which case
the deferred tax is also dealt with in equity. Deferred tax relating to items recognised in other comprehensive income is
recognised in other comprehensive income. 
 
Deferred tax assets relating to brought forward tax losses are not yet recognised by the Group, but they will be recognised
to the extent that taxable profit will be available in the future. 
 
(j) Pensions 
 
The pension costs charged to the profit or loss represent the contributions payable during the period to defined
contribution schemes. 
 
(k) Leased Assets 
 
In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears
substantially all the risks and rewards related to the ownership of an asset. The related asset is recognised at the time
of inception of the lease at the fair value of the leased asset, or, if lower, the present value of the minimum lease
payments to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. 
 
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged
to profit or loss over the period of the lease. 
 
All other leases are regarded as operating leases and the payments made under them are charged to profit or loss on a
straight line basis over the lease term. 
 
(l) Financial Assets 
 
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument.
Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus
transaction costs. Financial assets categorised as at fair value through profit or loss are recognised initially at fair
value with transaction costs expensed in profit or loss. 
 
The Group has also followed the guidance in IAS 39, indicating that the holding interest in KRP should be categorised as a
financial asset within investments. The accounting treatment for this asset is that it should be recognised at its initial
value and then subsequently fair valued with any adjustment booked to the Statement of Comprehensive Income. 
 
Cash and cash equivalents comprise cash on hand, deposits held on call with banks and short term, highly liquid investments
that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
For the purposes of the cash flow statement, cash and cash equivalents are adjusted to reflect bank overdrafts which are
repayable on demand. 
 
Trade receivables and loans are measured subsequent to initial recognition at amortised cost, less provision for
impairment. 
 
(m) Financial Liabilities 
 
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a
party to the contractual process of the instrument. Financial liabilities categorised as at fair value through profit or
loss are recorded initially at fair value, all transaction costs are recognised immediately in profit or loss. 
 
Financial liabilities categorised at fair value through profit or loss are re-measured at each reporting date at fair
value, with changes in fair value being recognised in profit or loss. All other financial liabilities are recorded at
amortised cost, using the effective interest method, with interest-related charges recognised as an expense in finance cost
in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs,
are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying
amount of the instrument to the extent that they are not settled in the period in which they arise. 
 
(n) Share Based Payments 
 
All share based payment arrangements granted after 7 November 2002 are equity-settled transactions that are recognised in
the financial statements. 
 
The fair value of any share options or warrants granted to employees and directors, or in exchange for goods and services,
are recognised as an expense in the income statement with a corresponding entry to retained earnings. This fair value is
appraised at the grant date. 
 
If vesting periods or other non-market performance conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options or warrants expected to vest. Estimates are revised
subsequently if there is any indication that the number expected to vest differs from previous estimates. Any cumulative
adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior
periods if share options or warrants that have vested are not exercised. 
 
Upon exercise of share options or warrants, the proceeds received net of associated transaction costs are credited to share
capital and where appropriate, share premium. 
 
For share options, fair value is measured by use of the Black-Scholes model. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations. For warrants, fair value is measured by either the Monte Carlo method or the Black-Scholes as
appropriate to the circumstances and adjusted in the same way as for the share options. 
 
(o) Borrowing Costs 
 
Borrowing costs directly attributable to the construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets
from the commencement of incurring borrowing costs until such time as the assets are substantially ready for their intended
use. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalisation. 
 
All other borrowing costs are reflected in profit or loss in the period in which they are incurred. 
 
(p) Restricted Cash 
 
Restricted cash is excluded from cash and cash equivalents and is described as current where it is planned to use the cash
in the next twelve months and is non-current for the remaining balance. 
 
(q) Going Concern 
 
The financial statements are prepared on a going concern basis. The directors, having reviewed future forecasts and
commitments combined with the current cash available, believe that the Group has adequate financial resources to manage its
business risks and continue in operational existence for twelve months from the date of this report. 
 
(r) Non-Current Assets Held for Sale 
 
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair
value less costs to sell. 
 
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a
sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly
probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be
committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date
of classification. 
 
2.  Critical Accounting Estimates and Judgements 
 
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. 
 
The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results
that match the accounting estimate. The estimates and assumptions that have a significant risk of causing material
adjustments to the carrying amount of assets and liabilities within the next financial year are discussed below: 
 
(a)  Impairment Reviews 
 
Intangible assets 
 
In accordance with the accounting policy stated above, the Group performs an assessment of the recognition and
recoverability of intangible assets to see whether any of the Group's development expenditures have suffered impairment.
This assessment is dependent on the future viability of the relevant technology and the expectation that the technology can
be monetised in the future. 
 
At the end of 2015, the Group held intangible assets relating to (a) the historic spend incurred on the development of the
RHF technology as a way to treat EAFD, and (b) further development activities aimed at producing a commercial grade zinc
oxide product, following the initial generation of the HZO from the RHF. 
 
With the loss of control of KRP at the end of 2015, the Group was forced into reducing its activities during the first half
of 2016. As a result, it reduced its overhead in order to continue as a going concern, allowing it time to find a new
project. By June 2016, these factors, coupled with the lack of any imminent project opportunities, triggered an impairment
review by the directors resulting in a full impairment of the intangible assets (US$3,635k) through the Group income
statement. 
 
Since the half year, the Group has successfully found a project in Vietnam (see note 21 'Post Balance Sheet Events') to
which the RHF technology and upgrading ability to a commercial grade zinc oxide can now be applied. Furthermore the Group
has generated cash from the sale of its residual interest in KRP, thus allowing the Group to adopt a going concern basis
(see note 2d). 
 
However, neither of these two events occurred before the end of the year, and so the directors feel that, as of 31 December
2016, the full impairment of intangible assets should remain in place. It is hoped that some of this impairment can be
reversed in 2017. 
 
Trade & other receivables 
 
During the year, amounts of US$101k in respect of VAT receivable in Anadolu Cinko SVTAS and US$12k in respect of a trade
receivable in ZincOx Resources plc were impaired and charged to the Group income statement. 
 
Investments 
 
Since 2012, the Group has held a 51% investment in an unincorporated joint operation, with Ural Recycling Ltd, to examine
the potential to develop a zinc recycling plant in Russia. With no activity in the year and no significant progress made on
this project, the directors have valued this investment at US$ nil as at 31 December 2016. The original investment has been
matched by an equivalent project expenditure and no further obligations exist. The resultant change in fair value of US$88k
has been charged in the year to the Group income statement (see note 30). 
 
The table below summarises the impairment provisions made in the year and included in the Group income statement.  For the
year ending 31 December 2016, the Group made total impairments, on continuing operations, of US$3,836k, with no impairments
made against discontinued operations. 
 
 Impact on Group                                        Notes  RHF & Upgrading$'000  MinorProjects$'000  Ural Recycling Joint Operation$'000  TotalImpairment$'000  
 Intangible assetsTrade & other receivablesInvestments  92a30  3,566--               69113-              --88                                 3,63511388            
 2016 provision                                                3,566                 182                 88                                   3,836                 
 
 
(b)  Share Based Payments 
 
In order to calculate the charge for share based payments as required by IFRS 2, the Group makes estimates principally
relating to the assumptions used in its option or warrant pricing model as set out in note 23. The charge made in the year
in respect of options is US$22k (2015: US$57k) and for warrants is US$40k (2015: US$133k). 
 
(c)  Carrying Value of KRP Interest 
 
Following the Group's loss of control over KRP at the end of 2015, the Group adopted a carrying value for its holding in
KRP. This valuation, at the end of 2015 and 2016, uses the "price of recent investment" guidelines as described by the
International Private Equity and Venture Capital Valuation Guidelines. Following the extinguishing of the Development and
Offtake loans with Korea Zinc, an equivalent value for the Group's holding was established at US$6.4 million. 
 
The Group has also followed the guidance in IAS 39, which is that the remaining interest should be categorised as a
financial asset within investments, recognised at its initial value and subsequently fair valued with any adjustment booked
to the Statement of Comprehensive Income. 
 
For the initial valuation at 31 December 2015, a cashflow was prepared, covering a 20 year period and expected future
dividend receipts over that time, using a discount rate of 9%, reflecting the 10 year Korean government bonds and an equity
risk premium. The cashflow also used consensus zinc price forecasts of US$1,793 per tonne for 2016, US$1,990 per tonne in
2017, US$2,296 per tonne in 2018, US$2,497 per tonne in 2019 and a long run zinc price of US$2,218 per tonne thereafter.
The resulting flow of dividends returned an NPV that showed no indication of a material change in value at the end of
2015. 
 
Towards the end of 2016, the directors began negotiations with Korea Zinc to sell the Group's residual 8.74% interest in
KRP. The valuation model and inputs were reviewed at this time and whilst the economics were improved as a result of a
higher zinc price, there was significant uncertainty as to what could be realised in any potential sale of the residual
interest. The discussions with Korea Zinc were concluded only in January and a final Sale and Purchase Agreement was signed
on 11 January 2017. 
 
(d)  Going Concern 
 
As stated in the Strategic Report, the directors, having reviewed future forecasts and commitments combined with the
current cash available, believe that the Group has adequate financial resources to manage its business risks and continue
in operational existence for twelve months from the date of this report report. 
 
3.    (a) Operating Loss 
 
The table states those charges and credits relating to continuing operations only. 
 
                                                                                                                                                                                                                                                                                                                      2016$'000     2015$'000          
 Operating loss on continuing operations is stated after charging:Auditors' remuneration:Fees payable to the Company's auditors for the audit of the Group accountsFees payable to the Company's auditors for other servicesTax servicesFees payable to other external auditors for the audit of subsidiary accounts  22-31         6711251            
 Foreign exchange loss on monetary assetsDepreciation of owned property, plant and equipmentAmortisation of intangible assetsOperating leases And after crediting:Foreign exchange gain on monetary assets                                                                                                            -4927450  30  2,101312,16999  -  
 
 
(b) Directors and Employees 
 
The table below relates to continuing operations only. 
 
                                                                                           2016$'000  2015$'000     
 Wages and salariesSocial security costsPensionsShare based payments on options (note 23)  339321123  1,4421875857  
                                                                                           405        1,744         
 
 
The monthly average number of persons employed by the Group (including directors) on continuing operations during the year
was 6 (2015: 12). 
 
Directors and key management personnel 
 
The directors, which include both executive and non-executive directors, are the key management personnel of the Group. The
table below details directors' emoluments and total remuneration. 
 
In addition, an amount equivalent to US$24k (2015: US$98k) for employers' national insurance was incurred by the Group in
respect of the key management personnel. 
 
The number of directors who participated in defined contribution pension schemes was one (2015: one). 
 
Full details of directors share options are included under Corporate Governance. There were no share options exercised by
the directors in the year (2015: nil). 
 
An amount of US$5k has been charged to the income statement for the year (2015: US$ US$57k) in respect of share based
payments on options for directors. 
 
                       Salary$'000  Bonus$'000  Other Benefits$'000  TotalEmoluments$'000  Pension$'000  2016Total Remuneration$'000  2015Total Remuneration$'000  
 Andrew Woollett       112          -           13                   125                   -             125                          389                          
 Simon Hall ¹          86           -           3                    89                    2             91                           295                          
 Donald McAlister ² ³  15           -           -                    15                    -             15                           -                            
 Jacques Dewalens ³    -            -           -                    -                     -             -                            114                          
 Rod Beddows           -            -           -                    -                     -             -                            66                           
 Gautam Dalal          -            -           -                    -                     -             -                            54                           
 Totals                213          -           16                   229                   2             231                          918                          
 
 
¹ Simon Hall retired as a director on 17 June 2016. 
 
² Donald McAlister was appointed as a director on 11 July 2016. 
 
³ Included above are emoluments paid as related party transactions (see note 3(c) below). 
 
(c) Related Party Transactions 
 
During the year ended 31 December 2016 the Group paid £11k, equivalent to US$15k (2015: nil) for financial consultancy
services to Holbans Consulting Ltd, a company in which Donald McAlister, ZincOx Resources plc's Finance Director from 11
July 2016, has an interest. 
 
During the year ended 31 December 2015 the Group paid E102k, equivalent to US$114k for technical consultancy services to
Zinc Consult Sprl. a company in which Jacques Dewalens, ZincOx Resources plc's Technical and Production Director up until
15 April 2015, has an interest. 
 
Loan notes 
 
In April 2016, the Company issued Andrew Woollett, ZincOx Resources plc's Chief Executive, 2,193,750 warrants with a three
years and ten months life, at an exercise price of 1.6 pence in respect of Loan Notes taken out in 2013. At the same time,
4,026,634 existing warrants at an exercise price of 25 pence were cancelled (see note 23). 
 
During the year ended 31 December 2016, interest (gross of withholding tax) of £37,405 (equivalent to US$51k) was rolled
into the principal amount owing to Andrew Woollett in respect of the Loan Notes, leaving a balance outstanding at 31
December 2016 of £914,905 (2015: £877,500). 
 
Furthermore, the Group paid £51,207, equivalent to US$70k (2015: £105,140, equivalent to US$161k) of interest (gross of
withholding tax) to Andrew Woollett. This cost was charged to the income statement and included within finance costs. 
 
In April 2016, the Company issued Gautam Dalal, a non-executive director of ZincOx Resources plc, 1,125,000 warrants with a
three years and ten months life, at an exercise price of 1.6 pence in respect of Loan Notes taken out in 2013. At the same
time, 2,064,940 existing warrants at an exercise price of 25 pence were cancelled (see note 23). 
 
During the year ended 31 December 2016, interest (gross of withholding tax) of £19,182 (equivalent to US$26k) was rolled
into the principal amount owing to Gautam Dalal in respect of the Loan Notes, leaving a balance outstanding at 31 December
2016 of £469,182 (2015: £450,000). 
 
Furthermore, the Group paid £26,260, equivalent to US$36k (2015: £53,918, equivalent to US$83k) of interest (gross of
withholding tax) to Gautam Dalal. This cost was charged to the income statement and included within finance costs. 
 
Further information concerning the Loan Notes is detailed in note 16 'Loans and Borrowings'. 
 
(d) Operating Costs (net of gains and impairments) 
 
The table below relates to continuing operations only. 
 
                                                                                                                                                                                                                                                       Notes  2016$'000                  2015$'000                       
 Administrative costs (excluding depreciation/amortisation)             Other (losses) / gains                                                                                        Impairment provisionsForeign exchange gain / (loss)Depreciation  42     (1,285)(9)(3,836) 30(278)  (4,865)1,571(2,207) (2,101)(4)  
                                                                                                                                                                                                                                                              (5,378)                    (7,606)                         
 
 
4.   Other (Losses) / Gains 
 
The table below relates to continuing operations only. 
 
                                                                                                                                           2016$'000  2015$'000  
 Gain on disposal of scrap equipment(Loss) / gain on disposal of property, plant and equipmentGain from insurance claim at Big River Zinc  -(9)-      31,268300  
                                                                                                                                           (9)        1,571      
 
 
The loss on disposal of property, plant and equipment in the year relates to small office equipment disposals across the
Group. 
 
5.  Finance Income / (Costs) 
 
The table below relates to continuing operations only. 
 
                                 2016$'000  2015$'000  
 Interest receivedInterest paid  -(521)     1(640)     
                                 (521)      (639)      
 
 
6.  Taxation 
 
The information below relates to continuing operations only. 
 
                                                 2016$'000  2015$'000  
 Taxation on loss for the yearOverseas taxation  -          35         
 Current tax charge for year                     -          35         
 
 
The tax assessed for the year is lower than the standard rate of tax in the UK of 20% (2015: 20%). The differences are
explained as follows: 
 
                                                                                                                                                                                                                                                                         2016$'000                   2015$'000                       
 Loss on ordinary activities before taxLoss on ordinary activities multiplied by weighted standard rate of corporation tax in the UK of 20.00% (2015: 20.25%) Effect of:Disallowed expensesNon-taxable incomeDeferred tax assets not recognisedOther timing differences  (5,838) (1,168)  40-1,1262  (9,826) (1,990)  419(90)1,696-  
 Current tax charge for year                                                                                                                                                                                                                                             -                           35                              
 
 
The Company has accumulated trading losses of US$10.2 million (2015: US$12.0 million) and accelerated capital allowances of
US$26k (2015: US$28k) but doesn't recognise these as deferred tax assets in the financial statements because their value is
uncertain. 
 
The Group still has an open tax enquiry in relation to the deferred capital receipts following the sale of its Shaimerden
zinc mine in 2003. The nature of the enquiry relates to the value of receipts that were expected at the time of disposal
and the availability of double taxation relief in respect of withholding tax which was deducted at source by the purchaser.
The directors have sought extensive tax advice, including advice from leading tax counsel, on the specific tax issues and
remain of the view that, based on this advice, together with their valuation of the future receipts at the time of
disposal, no provision should be required. 
 
7.  Loss Per Share 
 
Continuing and discontinued operations 
 
The calculation of the loss per share is based on the loss attributable to ordinary shareholders of US$5,950k (2015:
US$46,664k) divided by the weighted average number of shares in issue during the year of 224,336,707 (2015: 176,579,687). 
 
An adjusted loss per ordinary share for the year has been presented to exclude the impairment provisions made in the year
of US$3,836k (2015: US$3,521k). It has been calculated based on adjusted loss attributable to ordinary shareholders of
US$2,114k (2015: US$43,143k). 
 
Continuing operations 
 
The calculation of the loss per share from continuing operations is based on the loss attributable to ordinary shareholders
of US$5,838k (2015: US$9,861k) divided by the weighted average number of shares in issue during the year of 224,336,707
(2015: 176,579,687). 
 
An adjusted loss per ordinary share for the year has been presented to exclude the impairment provisions made in the year
of US$3,836k (2015: US$2,207k). It has been calculated based on adjusted loss attributable to ordinary shareholders of
US$2,002k (2015: US$7,654k). 
 
There is no dilutive effect of the share options in issue during 2016 and 2015. 
 
8.    Discontinued Operations 
 
In April 2016, the Group lost effective operational control of ZincOx Belgium Sprl when it was handed over to Belgian
insolvency practitioners for subsequent liquidation. This action was necessary due to the general downturn in the Group's
activities in the year, as discussed in the Performance Review section of the Strategic Report. 
 
In December 2015, following the restructuring of KRP, the Group lost effective operational control of ZincOx Korea. A
formal legal restructuring of ZincOx Korea, including the issuance of shares to Korea Zinc, and the cancellation of the
Offtake and Development Loans made by Korea Zinc, was notified to the Company by Korea Zinc on 29 April 2016. 
 
Analysis of loss for the year from discontinued operations 
 
The combined results of the discontinued operations (i.e. from Belgium and Korea) included in the loss for the year are set
out below. The comparative loss and cash flows from discontinued operations have been re-presented to include those
operations classified as discontinued in the current year. 
 
                                                                                                                         2016$'000  2015$'000               
 RevenueCost of sales                                                                                                    --         36,422(39,266)          
 Gross loss                                                                                                              -          (2,844)                 
 Operating costs (net of gains and impairments)                                                                          (111)      (30,461)                
 Operating Loss                                                                                                          (111)      (33,305)                
 Analysed as:Gross loss Administrative expensesForeign exchange loss                                                     -(96)-     (2,844)(2,328)(4,683)   
 Underlying Operating LossImpairment provisions     Loss due to loss of operational control of subsidiaryOperating Loss  (96)-(15)  (9,855)(1,314)(22,136)  
 (111)                                                                                                                   (33,305)   
 Finance incomeFinance costs                                                                                             -(1)       3(3,500)                
 Loss before tax Attributable income tax expense                                                                         (112) -    (36,802) (1)            
 Net Loss                                                                                                                (112)      (36,803)                
 
 
(36,803) 
 
Cash flows from discontinued operations 
 
                                                                                                                                                2016$'000  2015$'000            
 Net cash outflows from operating activitiesNet cash outflows from investing activitiesNet cash inflows / (outflows) from financing activities  (27)-13    (3,872)(207)(2,135)  
 Net cash outflows                                                                                                                              (14)       (6,214)              
 
 
The residual 8.74% holding in KRP is classified as a financial asset within investments (see note 30) 
 
9.    Intangible Assets 
 
                                                                                                                    Deferred GroupDevelopment Costs$'000  ComputerSoftware$'000  TotalIntangible Assets$'000  
 CostAt 1 January 2015AdditionsImpairment provisionsDe-consolidate ZincOx Korea subsidiaryForeign exchange          9,314613(2,011)(529)(391)             509---(29)             9,823613(2,011)(529)(420)    
 At 1 January 2016DisposalsImpairment provisionsDe-consolidate ZincOx Belgium subsidiaryForeign exchange            6,996-(3,635)-(828)                   480(345)-(68)(67)      7,476(345)(3,635)(68)(895)   
 At 31 December 2016                                                                                                2,533                                 -                      2,533                        
 Accumulated AmortisationAt 1 January 2015Charge for the yearForeign exchange                                       7022,167(115)                         5062(28)               1,2082,169(143)              
 At 1 January 2016Charge for the yearReleased on disposalsDe-consolidate ZincOx Belgium subsidiaryForeign exchange  2,754274--(495)                       480-(345)(68)(67)      3,234274(345)(68)(562)       
 At 31 December 2016                                                                                                2,533                                 -                      2,533                        
 Net Book ValueAt 31 December 2016At 31 December 2015                                                               -4,242                                --                     -4,242                       
 
 
Following an impairment review in the year of the deferred development costs, impairment provisions of US$3,635k have been
made against their carrying value (see note 2(a) for details). 
 
All deferred development costs that have been written off in the year are included in profit or loss in arriving at an
operating loss. 
 
The intangible assets of ZincOx Belgium Sprl were de-consolidated from the Group at 29 April 2016 following loss of control
of the subsidiary. 
 
 10.                                                                                                                                             Property Plant & Equipment                                                                                                Land &Buildings$'000                    Plant &Machinery$'000                       Construction in Progress$'000              Fixtures &Fittings$'000  Computer Equipment$'000  MotorVehicles$'000                          Total$'000                                
                                                                                                                                                 CostAt 1 January 2015AdditionsTransfersDisposals ReclassificationsDe-consolidate ZincOx Korea subsidiaryForeign exchange  20,443--(1,268)(3)(17,578)(1,341)       125,5052,022527(15,962)129(102,874)(7,699)  24,0321,243(527)(19,624)(129)(4,642)(353)  150-----(10)             46415-(42)-(6)(29)       13064-(52)-(14)(13)                         170,7243,344-(36,948)(3)(125,114)(9,445)  
 At 1 January 2016AdditionsDisposals De-consolidate ZincOx Belgium subsidiaryForeign exchange                                                    253-(133)(97)(23)                                                                                                         1,648-(516)(1,070)(62)                  -----                                       140-(80)(45)(15)                           4022(215)(148)(38)       115--(120)5              2,5582(944)(1,480)(133)                     
 At 31 December 2016                                                                                                                             -                                                                                                                         -                                       -                                           -                                          3                        -                        3                                           
 Depreciation and Impairment ProvisionsAt 1 January 2015Charge for the yearImpairment provisionsReleased on disposalsReclassificationsDe         2,800460-(1,268)(3)(1,611)(125)                                                                                           31,7585,586129(15,957)-(18,509)(1,359)  19,795-1,028(19,615)-(1,160)(48)            1413----(9)                                4528-(42)-(5)(28)        972768(51)-(14)(12)      55,0436,0841,225(36,933)(3)(21,299)(1,581)  
 -consolidate ZincOx Korea subsidiaryForeign exchange                                                                                                                                                                                                                                                                                                                                                                                                                                                   
 At 1 January 2016Charge for the yearReleased on disposalsDe-consolidate ZincOx Belgium subsidiaryForeign exchange                               253-(133)(97)(23)                                                                                                         1,648-(516)(1,070)(62)                  -----                                       135-(80)(40)(15)                           3854(206)(147)(35)       115--(120)5              2,5364(935)(1,474)(130)                     
 At 31 December 2016                                                                                                                             -                                                                                                                         -                                       -                                           -                                          1                        -                        1                                           
 Net Book ValueAt 31 December 2016At 31 December 2015                                                                                            --                                                                                                                        --                                      --                                          -5                                         217                      --                       222                                         
 
 
Disposals in the year represent obsolete equipment in ZincOx Resources plc, generating a net loss of US$9k, included in
profit or loss as Other Losses (see note 4). 
 
The property, plant and equipment of ZincOx Belgium Sprl were de-consolidated from the Group as at 29 April 2016, following
the loss of control of the subsidiary. 
 
There is no capitalised depreciation or capitalised interest included within property, plant and equipment. 
 
11.  Finance Lease Liabilities 
 
                                                                                                Minimum Lease Payments 2016$'000  Interest2016$'000  Principal2016$'000  Minimum Lease Payments2015$'000  Interest2015$'000  Principal2015$'000  
 Finance lease liabilities are payable as follows:Less than one yearBetween one and five years  --                                --                 --                  2246                             34                 1942                
                                                                                                -                                 -                  -                   68                               7                  61                  
 
 
Following the de-consolidation of ZincOx Belgium Sprl., there are no assets held under finance leases within the Group at
31 December 2016 (2015: assets held under finance leases with a net book value of US$67k). 
 
12.  Trade and Other Receivables 
 
                                                              2016$'000  2015$'000     
 CurrentTrade receivablesDepositsVATOther debtorsPrepayments  -267-23    148381755493  
                                                              92         508           
 
 
None of the current receivables are past due. 
 
13.  Assets Held for Sale 
 
Following the decision to sell the land inside the Heavy Industrial Zone at Aliaga, Turkey, this asset has now been
classified as an asset held for sale. The carrying cost of US$1.5 million (YTL 5.2 million) has been applied, being the
lower of cost and net realisable value. 
 
The Turkish land forms part of the Group's recycling segment activity and falls within the geographical region called 'Rest
of Europe' (see note 22). 
 
14.  Restricted Cash 
 
                                                                      2016$'000  2015$'000  
 CurrentCash held in escrow against secured Loan Notes (see note 16)  12         389        
                                                                      12         389        
 
 
15.   Trade and Other Payables 
 
                                                                          2016$'000  2015$'000    
 CurrentTrade payablesTaxation and social securityAccrualsOther payables  3275335-   40166199-22  
 Finance lease obligations                                                                        
                                                                          127        688          
 Non-CurrentOther payablesFinance lease obligations                       50-        5046         
                                                                          50         96           
 
 
16.   Loans and Borrowings 
 
                                2016$'000  2015$'000  
 CurrentSecured Loan Notes      --         5,6038     
 Other bank borrowings                                
                                -          5,611      
 Non-CurrentSecured Loan Notes  4,848      -          
                                4,848      -          
 
 
Secured Loan Notes 
 
In July 2013, the Company issued Loan Notes to a value of £4.2 million together with four year warrants over 9,450,000 new
ordinary shares of the Company. During 2015, £420k was repaid to lenders leaving an outstanding balance of £3.78 million
(US$5.6 million) at 31 December 2015. 
 
Interest at 10% was paid during in the year until July 2016, following which, it was rolled up into the principal, leaving
a balance of £3.9 million (translated at the balance sheet rate of 1.23016 to an equivalent US$4.8 million). 
 
The Loan Notes are secured against the shares in ZincOx Anadolu Cinko SVTAS, the Company's wholly owned subsidiary that
owns the freehold land held at Aliaga, Turkey. Any unpaid amounts of interest are secured against the assets of the Company
including cash holdings and the remaining 8.74% interest in KRP. However, in January 2017, the Company repaid the Loan
Notes in full, including interest that had been rolled into the principal amount (see note 21). 
 
The existing warrants associated with these Loan Notes were re-negotiated in April 2016, with the term extended to February
2020 (see note 23). They were not cancelled in January 2017 when the Loan Notes were repaid. 
 
Other bank borrowings 
 
Other bank borrowings represent an unsecured facility taken out by ZincOx Belgium Sprl to fund short-term working capital
requirements. These were de-consolidated in the year. 
 
17.   Share Capital 
 
The shares of the Company are denominated in Pounds Sterling but are retranslated for the Group financial statements at
their historic rate. 
 
                                                                                Number  shares          Share capital$'000  Share premium$'000  Capitalredemption reserve$'000  Total$'000     
 Ordinary shares in issue 1 January 2015                                        166,305,778             46,310              181,371             -                               227,681        
 103,466,716 deferred shares at 24 pence103,466,716 ordinary shares at 1 penny  103,466,716166,305,778  40,5265,784         -181,371            --                              40,526187,155  
 Ordinary shares issued                                                         23,607,641              369                 4,219               -                               4,588          
 Ordinary shares in issue 31 December 2015Ordinary shares issued                189,913,41950,500,000   46,679730           185,590(26)         --                              232,269704     
 Deferred shares at 24 pence cancelled                                          (103,466,716)           (40,526)            -                   40,526                          -              
                                                                                                                                                                                               
 Ordinary shares in issue 31 December 2016                                      240,413,419             6,883               185,564             40,526                          232,973        
 
 
The share capital reserve at 31 December 2016 stated at its historical value in its nominal currency of GBP, is £2,404k
(period to 31 December 2015: £26,731k). 
 
On 30 June 2016, following the cancellation of all existing options and the grant of new options, there were options
available over 24,030,000 ordinary shares in the Company, 13,930,000 available to directors and 10,100,000 to eligible
persons. The exercise price of each option is 1.6 pence, exercisable from 30 June 2019, with an expiry date of 30 June
2026. 
 
At 31 December 2016, there were warrants available over 9,450,000 ordinary shares in the Company, 3,318,750 available to
directors and 6,131,250 to other subscribers of the Loan Notes. The life of the warrants, which were extended in the period
to expire on 20 February 2020, can be exercised immediately at a price of 5p. 
 
The highest and lowest prices of the Company's shares during the period were 1.23p and 0.3p respectively, and the share
price at the end of the period was 0.45p, having been suspended from trading on AIM as at 31 October 2016. 
 
The number of shares which would have been in issue at the end of the period, had all options and warrants been exercised,
was 273,893,419. There were no share options or warrants exercised in the period. 
 
Capital Redemption Reserve 
 
On 1 February 2016, the Company cancelled 103,466,716 Deferred Shares with a nominal value of 24 pence and carrying no
voting rights, resulting in the creation of a Capital Redemption Reserve. 
 
Company Share Options 
 
The Company has a total of 24,030,000 options in issue, all being granted on 30 June 2016 with a 10 year life expiring on
30 June 2026, exercisable after three years from 30 June 2019, at an exercise price of 1.6 pence. 
 
18.   Operating Leases 
 
Non-cancellable operating lease rentals are payable as follows: 
 
                                                                   2016$'000  2015$'000  
 Less than one yearBetween one and five yearsMore than five years  ---        7210-      
                                                                   -          82         
 
 
Following the de-consolidation of ZincOx Belgium Sprl. in April 2016, there are no longer any operating leases held within
the Group. 
 
19.   Financial Instruments 
 
Capital Management Policies and Procedures 
 
The Group's capital management objectives are: 
 
·      to increase the value of the assets of the business, 
 
·      to provide an adequate return to shareholders in the future when assets are taken into production, and 
 
·      to ensure the Group's ability to continue as a going concern. 
 
These objectives will be achieved by identifying the right development recycling projects, adding value to these projects
and ultimately taking them through to production and cash flow, either with partners or by our own means. 
 
The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on
the face of the consolidated balance sheet. 
 
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial
liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in the economic
conditions and the risk characteristics of the underlying assets. Capital for the reporting periods under review is
summarised as follows: 
 
                                              2016$'000   2015$'000   
 Total equityLess: cash and cash equivalents  3,118(167)  7,951(655)  
 Capital                                      2,951       7,296       
 Total equityBorrowings                       3,1184,848  7,9515,611  
 Overall financing                            7,966       13,562      
 Capital to overall financing ratio           0.37        0.54        
 
 
The disclosures detailed below are as required by IFRS 7 'Financial Instruments: Disclosures'. The Company's principal
treasury objective is to provide sufficient liquidity to meet operational cash flow requirements and to allow the Group to
take advantage of new growth opportunities whilst maximising shareholder value. The Company operates controlled treasury
policies which are monitored by the Board to ensure that the needs of the Company are met as they evolve. The impact of the
risks, required to be discussed in accordance with IFRS 7, are detailed below, supported by a specific explanation of these
risks in the Strategic Report. 
 
Liquidity and Funding Risk 
 
The objective of the Group in managing funding risk is to ensure that it can meet its financial obligations as and when
they fall due as shown below: 
 
                           Current          Non-Current     
                           Within 6 months  6 to 12 months  1 to 5 years  Later than 5 years  
 2016$'000                 2015$'000        2016$'000       2015$'000     2016$'000           2015$'000  2016$'000  2015$'000  
 Trade payablesBorrowings  127242           678288          -242          105,650             504,888    96-        --         --  
 Totals                    369              966             242           5,660               4,938      96         -          -   
 
 
Credit Risk 
 
The Group's principal financial assets are bank balances and cash, trade and other receivables, a financial asset
investment and investments in other Group companies, which represent the Group's maximum exposure to credit risk in
relation to financial assets. 
 
The Group's credit risk is primarily attributable to its other receivables. It is the policy of the Group to present the
amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group's management based on prior
experience and the current economic environment. 
 
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by
international credit rating agencies. The Group has no significant concentration of credit risk, with exposure spread over
a large number of counterparties and customers. 
 
Foreign Exchange Risk 
 
The Group's transactional foreign exchange exposure arises from income, expenditure, financial asset investments, and the
purchase and sale of assets denominated in foreign currencies. As each material commitment is made, the risk in relation to
currency 

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