ZincOx Resources (LON:ZOX) has revised the terms of its short term debt to give it extra cash headroom.
Andrew Woollett, chairman, said it would put the business on a sustainable footing on an "ongoing basis".
The firm produces zinc by running EAFD (electric arc furnace dust) through its KRP plant in South Korea and has an off-take agreement with Korea Zinc, to which it has agreed to sell all production at market prices for ten years.
Korea Zinc also provides the group with two loans - a long term off-take deal and a short term development facility - the subject of today's restructuring.
The short term loan of US$15mln bore interest at 15% and was repayable in one shot in February, 2016.
This interest has been reduced to 9.5% while the accrued interest of US$3.9mln will now be added to the principal outstanding, making it US$18.9mln.
This US$18.9mln debt will be spread over six equal payments of around US$3.1mln every six months starting next February, ZincOx said.
The longer term off-take loan of US$37.8mln bears interest at 5% over LIBOR and is repayable from 50% of free cash flow with the balance repayable, as before, in 2022.
In return, the firm has agreed to provide Korea Zinc with off-take of 1.05mln tonnes from 840,000 tonnes, of which, so far around 100,000 tonnes have been delivered and should be fulfilled in 2027.
After the restructuring, ZincOx will owe Korea Zinc US$56.7mln with a weighted average interest rate of 6.2%, based on current LIBOR, which Woollett described as "unbelievably good for a company of our size".
He added it means the firm can operate "well within" its means now the plant is running and the spectre of what to do with the short term debt has been removed.
KRP is not running at full pelt but is at 90%, said the company boss, and was doing enough to make "good money".
As far as he's concerned, he said, the blots on the horizon have now been removed.
"We've now got a business which is sustainable on an ongoing basis," he told Proactive.
He added: "This restructuring increases our cash headroom over the next couple of years and gives us an overall interest rate considerably lower than alternative commercial sources.”
House broker finnCap described the statement as "good news".
"The group had faced a significant repayment of the development loan in a single bullet in February 2016, which would have been problematic given the group’s operational difficulties and cash flow," said analyst David Buxton.
"This has now been substantially reduced to an amount that is manageable and realistic. The group is expected to make an announcement on operational progress shortly, with hopes that no further problems have been encountered and operational profitability at the EBITDA level has been achieved. If so, then the shares could start to see a recovery."
ZincOx shares slipped 17.72% to 8.125p.
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