| Thu 6 Mar 2008, 17:31 | | ZCI - Zambia Copper Investments - Update On Call O |
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ZCI
ZAKK
ZCI - Zambia Copper Investments - Update On Call Option And Unaudited
Projected NAV
Zambia Copper Investments Limited
(Registered in Bermuda)
JSE code: ZCI
ISIN: BMG988431240
("ZCI")
UPDATE ON CALL OPTION AND UNAUDITED PROJECTED NAV
The Board of ZCI wishes to respond to shareholders requests for additional
information on the status of the call option process and to dispel unfounded
rumours relative to the Company and its affairs. The Board has, in addition,
noticed that despite the information released to the market by the Company, the
share continues to trade at a discount to the projected and expected NAV and,
for this reason, felt it prudent to provide shareholders with an unaudited
current and projected net asset value figure for ZCI in order that shareholders
and investors are fully informed in their decision making process.
Starting with the call option, shareholders will recall that the Company
recently announced to the market that Vedanta Resources Plc ("Vedanta") had
indicated its intention to complete the acquisition of ZCI`s remaining shares in
Konkola Copper Mines ("KCM") and effect payment of the purchase price as
determined by the Independent Bank. To date, the payment price has not been
transferred and the shares remain in ZCI`s hands. The reason for the delay
relates to the Zambian Competition Commission ("ZCC") having indicated that it
was exercising jurisdiction over the transaction. While the ZCC initially
granted Vedanta interim authorisation for the transaction, it has subsequently
withdrawn this, citing a failure by Vedanta to comply with an understanding on
notification that had been reached with the ZCC. While the Company has been kept
informed of interactions between the ZCC and KCM, ZCI, as the seller, has had no
direct formal interaction with the ZCC and the Company has no direct influence
on the negotiations between KCM and the ZCC or their ultimate outcome. Based on
assurances received from KCM and Vedanta, the Board has been advised that that
the ZCC`s present concerns are purely procedural and will in all likelihood be
resolved shortly. Further, indications we have received from KCM and Vedanta are
that the prospects of the ZCC not granting final approval for the transaction
are remote. A further issue being dealt with in parallel to the above is the
conclusion of a suitable termination agreement relating to the New Shareholders
Agreement concluded between the shareholders of KCM in November 2004.
Given the history of the matter, the Board naturally desires to complete this
transaction with a minimum of further delay and uncertainty and is, together
with its advisors, working towards this goal as a priority. Be assured that
every effort is being made to conclude the transaction as soon as is practical
and on the best possible terms for the Company. Vedanta has been requested to
pay interest on the Option Exercise Price pending completion of the transaction.
Turning to the issue of the NAV, you will see below the unaudited projected NAV
both before and after receipt of the payment from Vedanta. These figures have
not been reviewed by the Company`s auditors. The figures in the "pre-
transaction" column are current figures, updated from those contained in the
reviewed September 2007 interim results, with the main differences being that
ZCI received a further deferred payment from Vedanta in December of $5.2 million
and also received an interim dividend from KCM of $1.6 million. The "post-
transaction" column provides the projected position once ZCI receives payment
from Vedanta. This calculation does not include provision for any interest that
may be receivable on the payment, nor any contingencies for additional costs
that may be incurred once the payment has been received, such as the costs of
the restructuring of the Company, or the costs of the partial or total
distribution of assets to shareholders.
A further announcement will be made as soon as the transaction is formally
completed.
Thomas Kamwendo
Chairman
Bermuda
06 March 2008
UNAUDITED PRO FORMA INCOME STATEMENT AND BALANCE SHEET
Unaudited Pro Forma Consolidated Income Statement for the eleven months ended
February 29, 2008
expressed in thousands of US Dollars
Unaudited pro Unaudited
forma actual
Post Pre
Transaction Transaction
Finance income 345 345
General and administration expenses (5,807) (5,807)
Income from associated companies 36,268 36,268
Dividend income 1,629 1,629
Profit from operations 32,435 32,435
Gain on disposal of KCM 7,752 -
Profit before taxation 40,187 32,435
Taxation (62) (62)
Profit for the period 40,125 32,373
Headline earnings per ordinary share 31.80 25.65
in US cents
Net profit per ordinary share in US 31.80 25.65
Cents
Number of ordinary shares in issue 126,197,362 126,197,362
Unaudited Pro Forma Consolidated Balance Sheet as at February 29, 2008 expressed
in thousands of US Dollars
Unaudited pro Unaudited
forma actual
Post Pre
Transaction Transaction
Current assets
Available for sale investment 12,567 12,567
Accounts receivable 5,115 5,115
Cash and cash equivalents 219,802 6,652
Assets classified as held for - 205,398
sale
237,484 229,732
Current liabilities
Accounts payable and accrued (2,826) (2,826)
liabilities
Net current assets 234,658 226,906
Net assets 234,658 226,906
Capital and reserves
Capital 334,547 334,547
Revaluation reserve 947 947
Deficit on hedging reserve - (12,113)
Accumulated deficit (100,836) (96,475)
Total Equity 234,658 226,906
Number of ordinary shares in 126,197,362 126,197,362
issue
Net asset value (per ordinary 185.95 179.80
share) in USD cents
Notes to the pro forma financial statements for the eleven months ended February
29, 2008 expressed in thousands of US Dollars
1. ACCOUNTING POLICIES
The pro forma financial statement and balance sheet set out above are based
on the following assumptions:
a. the earnings, headline earnings and tangible NAV per ordinary share
reflected in the actual Pre Transaction column were extracted from the
Company`s unaudited results for the eleven months ended 29 February
2007
b. the "Transaction" is the sale of the 28.4% investment in KCM to
Vedanta for USD 213,150,000
c. the effect on earnings, headline earnings and tangible NAV per
ordinary share reflected in the "Pro forma Post Transaction" column
assumes that the transaction was effective on 29 February 2008
d. the deferred consideration to be received in December 2008 was
discounted to a net present value at 29 February using a discount rate
of 2.46% per annum
e. no contingencies for possible exceptional future costs have been
accrued in the accounts
2. 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.
3. ACCOUNTS RECEIVABLE
Resulting from the Vedanta transaction in 2004, 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. 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 was discontinued as
from that date.
5. GENERAL AND ADMINISTRATIVE EXPENSES
This includes the equivalent of USD 5,015,000 for costs relating to the
possible sale of KCM, including arbitration, valuation, cost of valuation,
legal, and technical consulting. Also included is the equivalent of USD
792,000 for ordinary operating costs, including, but not limited to,
director fees and costs, administration, audit, printing, publication, and
currency exchange losses.
Date: 06/03/2008 17:31:16 Produced by the JSE SENS Department.
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