Zinc producer Symbol Mining (ASX:SL1) has had to hit up its major shareholder for another loan extension and hand over more of its off-take rights to get it.

On top of that, its major shareholder — Hong Kong-based commodities trader Noble Resources — has said the zinc Symbol is shipping is much lower grade than expected.

This saw the share price slide 12.5 per cent to 1.4c on Friday morning.

Symbol told investors today that Noble had agreed to extend the loan repayment period by a further three months to December 30, 2019.

In turn, Symbol has agreed to give Noble more of the zinc supply from its Macy mine in Nigeria.

The company shipped the first zinc concentrate from the mine to China in late November last year.

But Symbol has faced some operational issues that has meant it needs additional funding.

Symbol Mining (ASX:SL1) shares over the past year.
Symbol Mining (ASX:SL1) shares over the past year.

And Noble has now said the shipment zinc grades are lower – “ranging up to a 25 per cent error” – than the grades reported by the lab contractor.

This means it won’t get as much cash for that zinc.

But Symbol says it has undertaken remediation of the analytical discrepancy by its lab contractor and “several actions are underway”.

Symbol says it has re-verified analytical tests from several independent certified labs, which confirms that it can produce a saleable product of between 40 to 45 per cent zinc.

“This obviously has been disappointing, as we were hitting all our targets with the given facts from a reputable service provider,” chief Tim Wither told Stockhead.

“If we knew then, what we know now, we would of made different decisions in the blending of the shipments.

“The shipment grade issue has been rectified and once we receive results from the current shipment we will be able to advise the market accordingly.”

Symbol made no money in the December quarter, had just $15,000 cash in the bank and $4.3m in outstanding loans.

The company had been working to secure a previously announced $1.1m convertible note.

At the same time Symbol announced the convertible note deal, the company revealed that Noble had agreed to increase its loan by $US2m ($2.8m) to $US5m and extend the repayment period by three months.

Stockhead reported in January that investors were getting restless because there had been no news on what was happening with the convertible note funding.

Mr Wither told Stockhead at the time that the convertible note was just to “give us some contingency and a bit of breathing space” and there was no need for Symbol to “rush into anything”.

With this latest three-month extension, Symbol has also agreed to give Noble 20 million unlisted options that can be converted to shares at 2c apiece within two years.

But shareholders still have to approve that transaction.

Symbol will also allow Noble to participate in any capital raisings over the next 12 months, granting it the right to acquire 15.5 per cent of the number of shares offered under any raising during that time.

High-grades, no worries

The company said in August last year when it released an updated scoping study that despite the low zinc price at the time, the Macy project was expected to be cash flow positive because it produced a high-grade product.

The zinc price has increased 20.5 per cent since mid-August and is trading at about $US2800.

In January, Symbol was achieving a grade of 20 per cent through its processing plant, which was delivering “really good” recoveries.

Zinc grades over 12 per cent are considered high-grade.

Mr Wither said if the company didn’t finalise the convertible note deal, it would just continue to deliver on its production schedule.

Symbol has been working with its logistics partner, GMT Nigeria, to optimise the Macy operations and has established longer term contracts with its shipping companies to cut its costs.

The company says reduction in its logistics costs is particularly important because it represents nearly half the total operational costs.

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