BACKGROUND

In 1999, following the successful takeover of Reunion Mining PLC by Anglo American, Andrew Woollett and other key members of Reunion's management team joined ZincOx full time. This team, including Noel Masson, had been responsible for completing a feasibility study on the Skorpion zinc oxide deposit in Namibia. The study demonstrated that the deposit, which had hitherto been undeveloped because of its complex metallurgy, had the potential to become one of the lowest cost producers of zinc in the world. Anglo American developed the deposit at a production rate of 150,000 tonnes per annum of zinc metal, at a cost of US$450 million, and has proved to be one of the lowest cost producers in the world.

ZincOx's strategy is to reassess known zinc oxide deposits located throughout the world, rather than carry out relatively high-risk early stage exploration. Over its first five years the company investigated all the major zinc oxide deposits, work has been carried out on all the major zinc oxide deposits. As a result of this work, ZincOx acquired an interest in the Jabali zinc oxide deposit in Yemen and the Shaimerden zinc oxide deposit in Kazakhstan.

ZincOx completed a feasibility study into the development of the Jabali deposit in March 2005 and in October of that year a Mining Contract was signed with the Government of Yemen. This contract was ratified by the Yemen Parliament and the President of Yemen in August 2007, and was the first such contract to be ratified in Yemen, representing a major success. Subject to the successful raising of project finance, construction of the project is planned to commence in early 2008.

After successfully completing work on the deposit, the company's interest in Shaimerden was sold at a substantial profit at the end of 2003 for US$7.5 million in cash and a deferred payment related to the price of zinc, payable between 2007 and 2011. These payments are providing the company with a substantial early cash flow, commencing from January 2007.

The successful metallurgical research carried out by the management of ZincOx into the treatment of primary zinc oxide deposits, has enabled the Company to develop a strategy for the recovery of zinc from secondary and waste materials (See Projects: EAFD). These include zinc contained in the waste derived from the recycling of steel, such as electric arc furnace dust (EAFD).

In May 2006, the Big River smelter in Illinois was purchased, with the intention to convert part of the capacity to treatment of EAFD by installing a new leach and purification circuit but using the existing electrowinning and melting and casting facilities.