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ZCI
ZAKK
ZCI - ZCI - Reviewed Interim Report Zambia Copper Investments Limited
Zambia Copper Investments Limited
(Registered in Bermuda)
JSE code: ZCI
ISIN: BMG988431240
("ZCI" or "the Company")
REVIEWED INTERIM REPORT
ZAMBIA COPPER INVESTMENTS LIMITED
Consolidated Income Statement
for the six months ended September 30, 2007
expressed in thousands of US Dollars
Reviewed Audited Reviewed
Six months Year ended Six months
ended ended
September 30, March 31, September 30,
2007 2007 2006
Finance income 221 730 359
General and administration (3,892) (849) (239)
expenses
Income from associated 36,268 85,577 44,869
companies
Profit before taxation 32,597 85,458 44,989
Taxation (32) (60) (30)
Profit for the period / 32,565 85,398 44,959
year
Headline earnings per 25.80 67.67 35.63
ordinary share
in US cents
Net profit per ordinary 25.80 67.67 35.63
share in US Cents
Number of ordinary shares 126,197,362 126,197,362 126,197,362
in issue
Consolidated Balance Sheet
as at September 30, 2007
expressed in thousands of US Dollars
Reviewed Audited
September 30, March 31, 2007
2007
Non-current assets
Long term accounts receivable 5,055 4,890
Investment in associated companies - 170,313
_____________ _____________
5,055 175,313
Current assets
Available for sale investment 12,718 10,593
Accounts receivable 5,252 5,250
Cash and cash equivalents 1,763 2,856
Assets classified as held for sale 205,398 -
225,131 18,699
Current liabilities
Accounts payable and accrued (2,937) (188)
liabilities
Net current assets 222,194 18,511
Total assets less current 227,249 193,714
liabilities
Net assets 227,249 193,714
Capital and reserves
Capital 334,547 334,547
Revaluation reserve 1,098 573
Deficit on hedging reserve (12,113) (12,558)
Accumulated deficit (96,283) (128,848)
Total Equity 227,249 193,714
Number of ordinary shares in issue 126,197,362 126,197,362
Net asset value (per ordinary 180.07 153.50
share) in USD cents
Consolidated statement of changes to equity
for the six months ended September 30, 2007
expressed in thousands of US Dollars
Share Contribute Revaluat Hedging Accumulat Total
capita d surplus ion reserve ed
l reserves deficit
Balance at March 30,299 304,248 42 (14,420) (214,246) 105,923
31, 2006
Revaluation on - - (43) - - (43)
available for
sale
investment
Hedging reserve - - - 4,988 - 4,988
of associated
company
Profit for the - - - - 44,959 44,959
period
Balance at 30,299 304,248 (1) (9,432) (169,287) 155,827
September 30,
2006
Revaluation on - - 574 - - 574
available for
sale
investment
Hedging reserve - - - (3,126) - (3,126)
of associated
company
Profit for the - - - - 40,439 40,439
period
Balance at March 30,299 304,248 573 (12,558) (128,848) 193,714
31, 2007
Revaluation on - - 525 - - 525
available for
sale
investment
Hedging reserve - - - 445 - 445
of associated
company
Profit for the - - - - 32,565 32,565
period
Balance at 30,299 304,248 1,098 (12,113) (96,283) 227,249
September 30,
2007
Consolidated statement of cash flow
for the six months ended September 30, 2007
expressed in thousands of US Dollars
Reviewed Audited Reviewed
Six months Twelve Six months
ended months ended ended
September 30, March 31, September
2007 2007 30,2006
Cash flow from operating
activities
Cash paid to suppliers (1,145) (876) (400)
and employees
Cash absorbed by (1,145) (876) (400)
operations
Interest received 57 114 77
Income tax paid (33) (76) (30)
Net cash absorbed by (1,121) (838) (353)
operating activities
Cash flow from investing
activities
Purchase of available (1,600) (7,220) (2,000)
for sale investments
Proceeds from partial - 5,220 -
disposal of investment
in subsidiary
Dividends received from 1,628 1,628 -
associated company
Cash generated / 28 (372) (2,000)
(absorbed) by investing
activities
Net decrease in cash (1,093) (1,210) (2,353)
Net cash at the 2,856 4,066 4,066
beginning of the period
/ year
Net cash at the end of 1,763 2,856 1,713
the period / year
Notes to the interim financial statements
for the six months ended September 30, 2007
expressed in thousands of US Dollars
1. ACCOUNTING POLICIES
These consolidated interim financial statements have been prepared in
accordance with IAS 34, Interim Financial Reporting. IAS 34 does not require a
full set of disclosures for interim financial statements. These consolidated
interim financial statements are in compliance with IFRSs when users of such
information have access to the most recent IFRS annual financial statements,
which are available on our website.
In its consolidated interim financial statements, Zambia Copper Investments
Limited applied the same accounting policies as described in the consolidated
financial statements for the year ended 31 March 2007. Following the change in
majority ownership of KCM with effect from 31 October 2004, the results of KCM
have been included according to the equity accounting method for associated
companies until 30 September 2007, date at which this investment has been
classified as held for sale in accordance with IFRS 5 (see note 5 below).
The consolidated balance sheet of Zambia Copper Investments Limited and its
subsidiaries (the "Group") for the period ended 30 September 2007 and the
related consolidated statements of income, cash flow, and change to
shareholders equity for the period then ended, have been reviewed by KPMG Audit
S.a.r.l. Luxembourg, in accordance with the International Standard on Review
Engagements (ISRE) 2410, applicable to review engagements, and their review
report is available for inspection at the registered office of the Company.
These consolidated interim financial statements are the responsibility of the
Board of Directors.
2. ASSOCIATED COMPANIES
The Group reduced its shareholding in KCM from 58% to 28.4% in 2004. The
financial information on this associated company was subject to a review by an
external auditor as at 30 September 2007 and 30 September 2006. The review
report is available for inspection at the registered office of the Company.
The majority shareholder of KCM has exercised an option to purchase ZCI`s
shares of KCM. The negotiations relating to the option are nearing completion;
therefore the investment in KCM was reclassified as held for sale at 30
September 2007.
2007 2006
Value at 1 April 170,313 84,502
Share of associated companies` profit 36,268 44,869
Dividends received (1,628) -
Share of equity movements 445 4,988
Value at 30 September 205,398 134,359
3. LONG TERM ACCOUNTS RECEIVABLE
Resulting from the Vedanta transaction, the Company will receive consideration
of USD 23,200,000 for a waiver of their pre-emptive subscription rights to KCM
shares. This amount is receivable over a period from 4 November 2004 to 31
December 2008. The deferred consideration is recorded at its discounted net
present value.
4. AVAILABLE FOR SALE INVESTMENT
The investment represents investments in an equity mutual fund. The fair value
for available for sale investments is based on dealer price quotations. Gains
and losses arising from changes in the fair value are recognized directly in
equity until the security is disposed of or is determined to be impaired, at
which time the cumulative gain or loss previously recognized in equity is
included in the net profit and loss for the period.
5. ASSETS CLASSIFIED AS HELD FOR SALE
As at 30 September 2007, the investment in KCM meets the criteria to be
classified as held for sale. The investment is measured at its carrying value
as of 30 September 2007 and equity accounting is discontinued as from that
date.
CHAIRMAN`S STATEMENT
I am pleased to present the Company`s reviewed interim financial statements for
the six months ended 30 September 2007. Based on a further profitable period
for Konkola Copper Mines ("KCM"), ZCI is showing a net profit figure of USD 33
million, which is in line with expectations. Continuing the positive trend from
last year, KCM declared an interim dividend during October 2007, of which ZCI
will again receive just over USD 1.6 million. While welcoming the fact that KCM
continues to declare dividends, the Directors are firmly of the view that these
are below the levels that KCM`s shareholders should expect and will maintain
pressure on the KCM Board in this respect.
The most significant development that occurred during the period under review,
was the resolution of the arbitration proceedings relating to the material
dispute between ZCI and Vedanta Resources plc ("Vedanta") concerning the
interpretation of the Vedanta Call Option Deed ("the Deed"). Shareholders will
recall that the negotiations between ZCI and Vedanta resulting from the
exercise by Vedanta of its call option in terms of the Deed, over the remaining
28.4% of KCM shares held by ZCI through its wholly owned subsidiary, ZCI
Holdings S.A., had been delayed since the material dispute arose on September
2006. The arbitrator`s decision was delivered in July 2007 and he determined
that the ZCI`s 28.4% stake in KCM is to be valued as at the date on which the
call option was exercised by Vedanta, namely 12 August 2005.
The receipt of the arbitration decision has allowed the parties to finalise the
terms of engagement of the independent investment bank ("the Bank") and the
Bank has commenced with the valuation process. The Bank initially indicated
that its valuation would be delivered to ZCI and Vedanta by mid December 2007,
provided that there are no unforeseen delays in the valuation process. As has
recently been announced however, due to the difficulties inherent in the
production of a valuation as at August 2005, the Bank has requested an
extension for the delivery of the valuation report to mid-January 2008. ZCI
will release a detailed summary of the valuation report once this has been
received from the Bank. Shareholders are reminded that in the event that
Vedanta is unwilling to pay the option exercise price as determined by the
Bank, it shall not be required to proceed with the associated purchase of ZCI`s
KCM shares. In terms of the provisions of the Deed, ZCI shall be bound to
accept the valuation made by the Bank. ZCI will ensure that detailed
announcements are released to shareholders as developments occur in this
process.
It should be noted that, based on the accounting requirements provided for in
IFRS 5, the Directors have decided that it is appropriate that the investment
in KCM be reflected in the accounts as a held-for-sale investment in the
present financial statements, rather than purely as an "investment in an
associated company". This requirement is based on the fact that ZCI and Vedanta
are following a contractually defined process which, with the arbitration now
having been completed and given that the Bank is underway with its valuation,
the call option process is expected to be completed one way or another before
the end of the Company`s present financial year. Should Vedanta elect not to
pay the option exercise price as determined by the Bank, ZCI will revert to
equity accounting for its investment in KCM, which will be retrospectively
applied.
A final point that I wish to highlight is the fact that the Board is actively
considering and evaluating the various options that are open to ZCI and its
shareholders, in the event that Vedanta elects to accept the option exercise
price determined by the Bank and, as a consequence, should the sale complete.
These options will be presented to the shareholders in order that all stake
holders are involved in agreeing the future direction of the Company.
Thomas Kamwendo
Chairman
Bermuda
2 January 2008
Date: 02/01/2008 08:00:01 Produced by the JSE SENS Department.
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