SHAIMERDEN PROJECT, KAZAKHSTAN

The Shaimerden zinc oxide deposit is situated in northern Kazakhstan, some 300km south west of the city of Kostanai. ZincOx sold its 95% interest in the deposit in December 2003 to Kazzinc, Kazakhstan's largest producer of zinc. The consideration for the sale was $7.5 million in cash and a deferred payment to ZincOx, details of which are set out below.

The Shaimerden mine commenced production on 17th September 2006 and by the end of the year the mine had to make a payment based on production of 11,616 tonnes of contained zinc. The first deferred consideration payment amounted to U$9.04 million and
was paid to ZincOx in January 2007. During the first quarter of 2007, Kazzinc mined almost 30,000 tonnes of contained zinc,
indicating that this year the deemed maximum of 60,000 tonnes of zinc should be applicable for the deferred consideration. If the zinc price were to continue to average $3,548 during the course of the year, an amount of U$39 million would be paid to
ZincOx in January 2008.

Kazzinc's mining schedule envisages the first 200,000 tonnes of zinc in ore, on which our deferred consideration is due, being mined before the end of 2007. The payments, however, will be spread over the next four years due to the deemed maximum rate of mining as described above.

Kazzinc has moved ahead with the development of the Shaimerden open pit mine (see photo gallery, and photo, right). The company is transporting crushed ore from Shaimerden to processing facilities at Ust-Kamenogorsk in the east of the country, where it is treated in waelz kilns and by electrolysis for the production of zinc metal.

Under certain conditions, the deferred payment may be suspended by Kazzinc. Firstly, if the in-situ resource at a 5% cut-off is more than 25% below that reported to Kazzinc of 4.55 Mt at 21.14% zinc; and secondly, if there are certain events, largely of a force majeure nature, that prevent Kazzinc from mining the deposit.

The Shaimerden deposit cost ZincOx a total of $1.7 million being $50,000 in cash, $150,000 worth of ZincOx shares (issued at 71.2p in October 2003) and $1.5 million spent on progressing a feasibility study and the costs of the sale transaction.

Shaimerden is the second example of how the ZincOx management team can bring to account zinc oxide deposits hitherto considered to be uneconomic. The first example was when the team managed Reunion Mining plc and they successfully proved the viability of the Skorpion zinc oxide deposit in Namibia. Reunion Mining was subsequently purchased by Anglo American plc in a transaction worth in excess of $80 million. The ZincOx team will continue to look for similar opportunities elsewhere in the world.

©2001-2008 ZincOx Resources plc