Small Talk: Resourceful ZincOx aims for recycling money-spinner

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The Independent Online

As a general rule, mining is bad news for the environment. It upsets local eco-systems and digging holes in the ground generates plenty of carbon emissions. Then there's the carbon cost of moving the recovered bounty around the world.

The AIM-listed ZincOx Resources has plans to make a mess of its own when it starts production at Yemen's biggest mine next year, but nevertheless claims to be a little different. The group has developed a rather clever technology that is both green and, the company hopes, potentially extremely lucrative.

When galvanised steel is recycled, the process leaves behind a by-product known as electric arc furnace dust, which contains nasty elements such as cadmium. Ordinarily, the dust is buried in land-fills at great financial and environmental cost, but ZincOx has devised a process that allows it to extract high-grade zinc from the dust, which it will then be able to sell to steel producers. They use the recovered zinc in the galvanisation process – and, when that steel is recycled once more, ZincOx can start the whole process over again.

Sceptics note the technology will take some time to perfect, but the company has more than one string to its bow. Announcing an £11.4m profit today, its chairman Andrew Woollett, says ZincOx is now one of the most profitable companies on AIM.

The company makes most of its money from royalty payments on a zinc mine it used to own in Kazakhstan, and, while Mr Woollett accepts last year's numbers look especially good because of the soaring price of zinc, he says the price of zinc futures suggests 2008 will also be fruitful.

And while it is developing the environmental process, ZincOx expects to be extracting the metal from its mine in Yemen, in which it has a 52 per cent stake. Financing for the project has been secured through a $220m (£111m) project finance bond.

A collapse in the price of zinc is the biggest risk for the group. Any such slump would see the share price fall from its Friday close of 184.5p. However, a price retrenchment does not appear to be on the cards any time soon, and, even if the price of zinc does eventually decline, the recycling project should by then be off the ground.

AIM misfires

Getting a listing on AIM may be less onerous than floating on the main market, but it is still expensive and time-consuming. That, coupled with investors' flight to quality blue-chip groups, may explain why fewer companies coming to AIM are raising cash. Research published last week by the accountancy group Deloitte shows fewer than 10 per cent of funds raised on AIM between January and the end of March came via new IPOs; half of the 32 groups that floated in the first quarter did so without raising any money at all.

The outlook is not expected to improve any time soon. "We expect admissions with no fundraising will continue to form a significant proportion of new IPOs on AIM whilst the wider turmoil in the economy remains unresolved," said Deloitte's capital markets director Richard Thornhill.

Funding is often the point of listing, and with AIM administration costing about £150,000 a year to maintain, companies hoping to bide their time could be in for an uncomfortable few months.

It's all systems Go for world's largest auctioneer of surplus industrial assets

Ever decided your house is so full of unwanted junk that it's worth climbing out of bed at some unearthly hour on a Sunday morning to secure a pitch at your local car boot sale? Well, GoIndustry does pretty much the same thing for industry.

The AIM-listed group acts as an auctioneer to business, either selling off unwanted assets or managing a fire sale for administrators of failed groups. The company's clients include the likes of the food group Kraft and BAE Systems.

The turning point for GoIndustry came earlier this year when it bought its main US rival, DoveBid for £17m. Analysts at Oriel Securities say: "The deal transforms the group in our view and creates the world's largest auctioneer of surplus industrial assets by revenue. The enlarged entity benefits from gaining critical mass as well as providing significant opportunities to reduce costs."

The group will announce today it has won the contract to auction off unwanted boats and apparel from the 32nd Americas Cup. The sale will be held online.

And while it will soon begin selling off yachting equipment for the wealthy, the company has also benefited from the sub-prime crisis by getting its hands dirty in the US real estate auction business. A good time to be in that business as the rate of foreclosures rises.

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