| Thu 1 Jul 2010, 7:16 | | ZCI - ZCI Limited - Provisional Report |
|
ZCI
ZCI - ZCI Limited - Provisional Report
ZCI Limited
(Formerly Zambia Copper Investments Limited)
(Registered in Bermuda)
(Bermudian registration number 661:1969)
(South African registration number 1970/000023/10)
JSE code: ZCI ISIN: BMG9887P1068
Euronext share code: BMG9887P1068
("ZCI" or "the Company")
Provisional Report
I am pleased to present the reviewed provisional condensed
consolidated annual results for the year ended 31 March 2010.
Shareholders will observe that the Company returned a profit
of USD US$19.4 million (2009: US$0.5 million). The results are
a reflection of the effect of the acquisition of African Copper
Limited ("ACU"). The Company commenced the financial year with a
Net Asset Value ("NAV") of US$1.85 and closed the financial year
with a NAV of US$2.67.
The year under review was marked by significant change. On 21 May
2009, ZCI subscribed for and acquired 686,570,543 ordinary shares
in African Copper Plc ("ACU"), a public limited Company
incorporated and domiciled in England, listed on the AIM market of
the London Stock Exchange as well as the Botswana Stock Exchange,
effectively obtaining control of this group. The financing
transaction, which was approved by the Company`s shareholders at an
extraordinary meeting held on 11 January 2010 effectively ended
the Company`s classification as a cash shell on the JSE Ltd
("JSE"). The investment became the basis for the Company`s
relisting on the non-ferrous metal section of the JSE`s main
board, which was finalised on 15 January 2010. To mark this new
era in its history, the Company finalised its name change in May
2010 and is now trading on both its primary and secondary listings
under its new name, ZCI Limited, and with a new share code,
BMG9887P1068.
The Company`s newly acquired subsidiary is the focus of ZCI`s
business plan, as published in the Company`s Circular to
Shareholders dated 2 September 2008, and it is an investment of
which the Group is justifiably proud. ACU holds exclusive rights
for the exploration and development of copper deposits in an
extensive area of Botswana. As a prerequisite to its relisting on
the JSE, the Company commissioned the preparation of a Competent
Persons Report ("CPR") from Read, Swatman & Voigt (Pty) Ltd
("RSV"), in South Africa on ACU`s mining and exploration assets.
An executive summary of the CPR was included in a Circular
to Shareholders dated 17 December 2009 and is one of the many
factors engendering an optimistic outlook for the future of the
investment.
The year was not without its difficulties however, not least of
which was the adverse economic climate in which the Company did
business.
Against this background the Company concentrated its investment
focus on bringing the newly acquired subsidiary to achieving full
commercial production at its open-pit Mowana mine, which had been
placed under care and maintenance since January 2009. Production
recommenced in late August 2009 and ZCI is confident that
significant progress has been made towards achieving sustainable
optimum production levels. The subsidiary has turned its attention
to exploiting and developing the Thakadu - Makala deposit,
situated on the Matsitama belt and conserving its prospecting
licences in the areas believed by management to be the most
promising (or already hosting known mineralization) based on
exploration work completed in and prior to 2008.
The Company continues to review other investment opportunities
in accordance with its business plan. In the last quarter of the
financial year the Company advanced a loan of US$6 million at
attractive rates of return to the Zambia-based Ndola Lime Company,
which is the leading supplier of quicklime to the mining industry
in the Zambian/Congolese Copperbelt.
In conclusion, significant progress has been made in implementing
the Company`s business plan and achieving long-term optimal
production at ACU.
I take this opportunity of welcoming Kathryn Bergkoetter as
financial director of the Company with effect from 8 September
2009. I can confirm that Ms Bergkoetter`s expertise and in-depth
knowledge of ZCI has made significant contributions to the Company
during a time of considerable change and activity, confirming that
the shareholders` faith in her is well-placed.
In accordance with the JSE listing requirements and the
recommendations of the King Report on Governance for South Africa
2009, the Company appointed Professor Stephen Simukanga as the
Lead Independent non-Executive Director with effect from 8 April
2010. I am confident that Professor Simukanga`s integrity and
diligence will be of invaluable assistance to the Company in
meeting the expectations of the new era of corporate governance.
The Company is in the process of complying with the JSE`s Listing
Requirements to appoint a Chief Executive Officer. In accordance
with a temporary dispensation granted by the JSE, ZCI will settle
this issue by 31 March 2011.
It is thus on a note of determination and with a certain measure
of optimism that ZCI looks to the year ahead in the belief that
it is both strategically and financially placed to aggressively
pursue its business plan for the coming year.
Thomas Kamwendo
Chairman,
Bermuda
1 July 2010
Consolidated Statement of comprehensive income
Reviewed Audited
For year ended For year ended
31 March 31 March
2010 2009
US$`000 US$`000
Revenue 7 392 -
Cost of sales (15 319) -
Operating loss from mining
activities (7 927) -
Administrative expenses (1 531) (2 177)
Other expenses (4 275) (737)
Selling and distribution expenses (18) -
Foreign exchange losses (2 250) -
Operating loss (16 001) (2 914)
Negative goodwill 34 621 -
Profit/(loss) before net
finance income 18 620 (2 914)
Finance income 509 3 652
Finance expense (64) (150)
Profit before tax 19 065 588
Income tax 297 (72)
Profit for the year 19 362 516
Other comprehensive income:
Exchange differences on translation of
foreign operations 1 188 -
Total comprehensive income for the
year 20 550 516
Profit attributable to:
Equity holders of the parent 21 253 516
Non-controlling interest (1 891) -
Total comprehensive income attributable to:
Equity holders of the parent 22 229 516
Non-controlling interest (1 679) -
Basic earnings per ordinary share
(US cents) 38.17 0.56
Diluted earnings per ordinary share
(US cents) 36.80 0.56
Consolidated Statement of financial position
Reviewed Audited
31 March 31 March
2010 2009
US$`000 US$`000
ASSETS
Property, plant and equipment 35 744 -
Intangible assets 55 628 -
Other financial assets 327 -
Long term receivables 6 000 -
Total non-current assets 97 699 -
Other receivables and prepayments 984 76
Inventories 1 780 -
Cash and cash equivalents 48 430 102 939
Total current assets 51 194 103 015
Total assets 148 893 103 015
EQUITY
Share capital and Share premium 102 688 102 688
Foreign currency translation reserve 976 -
Retained earning
Foreign currency sranslation reserve 21 253 -
Equity attributable to equity holders
of the parent 124 917 102 688
Non-controlling interest 7 119 -
Total equity 132 036 102 688
LIABILITIES
Deferred tax 7 542 -
Asset retirement provision 4 051 -
Total non-current liabilities 11 593 -
Trade and other payables 5 264 327
Total current liabilities 5 264 327
Total equity and liabilities 148 893 103 015
Statement of changes in equity
Share Revaluation
capital and reserve of
Share available for
premium sale reserves
US$`000 US$`000
Balance as at 1 April 2008 334 547 702
Total comprehensive income for the year
Profit for the year - -
Other comprehensive income - (702)
Transfer from hedging reserve - -
Revaluation on available for
sale investment - (702)
Total comprehensive income for the year - -
Transactions with owners,
recorded directly in equity
Share buyback and reduction (131 505) -
Transfer from share capital (100 354) -
Total contributions by and
distributions to owners (231 859) -
Balance as at 31 March 2009 102 688 -
Arising on business acquisition - -
Total comprehensive income for the year
Profit/(loss) for the year - -
Other comprehensive income - -
Foreign currency translation differences - -
Total comprehensive income for the year - -
Balance as at 31 March 2010 102 688
Foreign Assets
currency classified
translation as held for
reserve sale
US$`000 US$`000
Balance as at 1 April 2008 - (12 113)
Total comprehensive income for the year
Profit for the year - -
Other comprehensive income - 12 113
Transfer from hedging reserve - 12 113
Revaluation on available for
sale investment - -
Total comprehensive income for the year - -
Transactions with owners, recorded
directly in equity
Share buyback and reduction - -
Transfer from share capital - 100 354
Total contributions by and
distributions to owners - -
Balance as at 31 March 2009 - -
Arising on business acquisition - -
Total comprehensive income for the year
Profit/(loss) for the year - -
Other comprehensive income 976 -
Foreign currency translation
differences 976 -
Total comprehensive income
for the year 976 -
Balance as at 31 March 2010 976 -
Retained Attributable
earnings/ to equity
(Accumulated holders of the
losses) parent
US$`000 US$`000
Balance as at 1 April 2008 (100 870) 222 266
Total comprehensive income
for the year
Profit for the year 516 516
Other comprehensive income - 11 411
Transfer from hedging reserve - 12 113
Revaluation on available for
sale investment - (702)
Total comprehensive income for the year 516 11 927
Transactions with owners, recorded
directly in equity
Share buyback and reduction - (131 505)
Transfer from share capital - -
Total contributions by and distributions to
owners 100 354 (131 505)
Balance as at 31 March 2009 - 102 688
Arising on business acquisition - -
Total comprehensive income for the year
Profit/(loss) for the year 21 253 21 253
Other comprehensive income - 976
Foreign currency translation differences - 976
Total comprehensive income
for the year 21 253 22 229
Balance as at 31 March 2010 21 253 124 917
Non- Total
controlling equity
interest
US$`000 US$`000
Balance as at 1 April 2008 - 222 266
Total comprehensive income for the year
Profit for the year - 516
Other comprehensive income 11 411
Transfer from hedging reserve - 12 113
Revaluation on available for
sale investment - (702)
Total comprehensive income for the year - 11 927
Transactions with owners, recorded
directly in equity
Share buyback and reduction - (131 505)
Transfer from share capital - -
Total contributions by and
distributions to owners - (131 505)
Balance as at 31 March 2009 - 102 688
Arising on business acquisition 8 798 8 798
Total comprehensive income for the year
Profit/(loss) for the year (1 891) 19 362
Other comprehensive income 212 1 188
Foreign currency translation
differences 212 1 188
Total comprehensive income
for the year (1 679) 20 550
Balance as at 31 March 2010 7 119 132 036
Consolidated Statement of cash flows
Reviewed Audited
31 March 31 March
2010 2009
US$`000 US$`000
Cash flows from operating activities
Cash utilised by operations (10 798) (1 126)
Interest received 509 3,652
Interest paid (64) (150)
Income tax paid - (72)
Cash (outflow)/inflow from
operating activities (10 353) 2 304
Cash flow from investing activities
Additions to property, plant
and equipment (3 492) -
Acquisition of subsidiary
(net of cash acquired) (1 438) -
Repayment of interest
bearing borrowings (34 414) -
Realised gain on investment - 213 234
Long term receivable advanced (6 000) -
Cash (outflow)/inflow from
investing activities (45 344) 213 234
Cash flow from financing
activities
Repurchase own shares - (131 505)
Cash outflow from financing activities - (131 505)
Effect of foreign currency translation 1 188 -
Net (decrease)/increase in cash and cash
equivalents (54 509) 84,033
Cash and cash equivalents at
beginning of the year 102 939 18 906
Cash and cash equivalents at
the end of the year 48 430 102 939
Notes to the financial statements
1. General information
ZCI Limited ("ZCI" or the "Company") is a public company incorporated and
domiciled in Bermuda with a primary listing on the JSE and a secondary listing
on the Euronext.
ZCI is a holding company of a copper producing and mineral exploration and
development group of companies (the "Group"). The Group`s main project is the
copper producing open pit Mowana mine. The Group also owns the rights to the
adjacent Thakadu-Makala deposits and holds permits in exploration properties at
the Matsitama Project. The Mowana Mine is located in the north eastern portion
of Botswana and the Matsitama Project is contiguous to the southern boundary of
the Mowana Mine.
2. Basis of preparation
The provisional condensed consolidated financial results for the year ended 31
March 2010 have been prepared in accordance with the recognition and measurement
criteria of IFRS, its interpretations adopted by the International Accounting
Standards Board (IASB), the presentation as well as the disclosure requirements
of IAS 34 - Interim Financial Reporting and the Listings Requirements of the JSE
Limited and the AC500 series issued by SAICA.
3. Accounting policies
The accounting policies applied in the presentation of the provisional condensed
consolidated financial results are consistent with those applied for the year
ended 31 March 2009, with the exception of the following standards and
interpretations, effective for the first time for the current financial year,
that has been applied from 1 April 2009:
- IFRS 8 Operating Segments - the application of the new standard has not
impacted the way management reports segmented information as the group has only
one operating segment.
- IAS 1 (Revised) Presentation of financial statements - the revised standard
has changed the way the Group`s primary financial statements have been
presented. The revision required information to be aggregated on the basis of
shared characteristics and introduce a "statement of comprehensive income" to
enable readers to analyse changes in an entity`s equity resulting from
transactions with owners separately from "non-owner" changes. Comparative
information has been re-presented so that it also is in conformity with the
revised standard.
- IAS 23 (Amendment) Borrowing Costs - the amendment has not impacted the
Group`s results to date.
- IFRS 2 (Amendment) Share based payments - the adoption of this amendment has
not had any material impact on the Group financial statements as the Group
already applied these principles when accounting for share-based payments in the
past.
- IFRS 7 (Amendment) Financial instruments: Disclosures - the amendment
introduced a three-level hierarchy for fair value measurement disclosures and
required entities to provide additional disclosures about the reliability of
those fair value measurements. These additional disclosures will be provided in
the in the notes to the annual financial statements.
The Group did not early adopt IFRS 3 (2008) to account for the ACU transaction,
but applied IFRS 3 (2004).
4. Group segment reporting
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group`s other
components. The Group`s only operating segment is the exploration for, and the
development of copper and other base metal deposits. All the Group`s activities
are related to the exploration for, and the development of copper and other base
metals in Botswana with the support provided from the Company and it is reviewed
as a whole by the Board (who is considered the chief operating decision maker)
to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. All
mining revenue derives from a single customer.
As such, no segmental report has been prepared.
5. Business acquisition
As at 21 May 2009, ZCI Limited acquired 82.16% of the issued share capital of
African Copper PLC and its subsidiaries for a purchase consideration of GBP 6
765 705.
The purpose of the transaction was to achieve the Company`s objective of
enhancing meaningful value to shareholders. Prior to the transaction, the
Company`s assets comprised of cash and the offer to ACU was one of the steps
being taken by the board of ZCI in implementing the Company`s new business plan.
The ACU group required funding to continue their operations. As a result of the
financial position of ZCI, it was able to provide such funding and could
negotiate a favourable purchase price.
The following summarises the amounts of assets acquired and liabilities assumed
at the acquisition date:
Carrying value Fair value
US$`000 US$`000
Property, plant and equipment 62 564 33 156
Intangible assets (mineral property interest) - 57 309
Other financial assets 319 319
Trade and other receivables 1 296 1 296
Inventories 1 453 1 453
Cash and cash equivalents 10 029 10 029
Deferred taxation - (7 839)
Asset retirement obligation (3 762) (3 762)
Interest bearing borrowings (39 249) (34 414)
Trade and other payables (3 394) (2 661)
Total identifiable net assets 29 256 54 886
Total purchase consideration (11 467)
Non-controlling interest arising on
acquisition of business (8 798)
Negative goodwill arising on acquisition 34 621
Transaction costs amounting to $0.9 million associated with finalising the
transaction were incurred, all of which relating to the acquisition, was
capitalised as part of the investment. The year end of ACU was 31 December but
was changed to correspond to that of the holding company.
The contributions to revenue and operating loss since acquisition had the
acquisition occurred on 1 April 2009, respectively, are as follows:
Since For the full
acquisition year to date
US$`000 US$`000
Revenue 7 392 7 293
Loss before income tax 10 600 12 393
6. Financing of mining activities
On 31 January 2010 ZCI and ACU completed the refinancing of the US$32.4 million
bridge loan facilities that the Company provided to ACU in May 2009 with a four
year secured credit facility (the "Facility"). The Facility places African
Copper`s borrowings from ZCI on a more permanent footing and comprises a
convertible Tranche A of US$8.4 million with a coupon of 12% per annum and
Tranche B that is not convertible of US$22.8 million with a coupon of 14% per
annum.
On 31 March 2010 the Company completed a US$10 million loan with Messina (the
"March Facility"). The terms of the March Facility include an interest rate of
6% per annum payable quarterly, repayment on or before 31st March 2011 and a
renewal option. The March Facility is secured under the Facility which includes
security over African Copper and all other African Copper Group companies`
assets, including the Mowana Mine and a guarantee by African Copper. As part of
securing the March Facility, the Company also agreed to the deferral of the US$
209 478 Facility interest payment that was due on 31 March 2010.
The Group remains in a cash positive position with no external long term debt.
7. Capital commitments
Contractual Obligations Total 2010 2011 2012
US$`000 US$`000 US$`000 US$`000
Goods, services and
equipment (a) 3,436 3,330 106 -
Exploration
licences (b) 1,014 - 1 1,014
Mining licence 6 1 1 4
Lease agreements (c) 277 143 124 9
4,733 3,474 232 1,027
a) The subsidiaries have a number of agreements with arms-length third parties
who provide a wide range of goods and services and equipment.
b) Under the terms of the Group`s prospecting licences, one of the subsidiaries
is obliged to incur certain minimum expenditures.
c) The Group has entered into agreements to lease premises for various periods
until 5 November 2010.
This expenditure will be funded internally, and if necessary, from borrowings.
8. Earnings per share information
2010 2009
Headline earnings per share (US cents) (24.01) (0.20)
Diluted headline earnings per share
(US cents) (25.38) (0.20)
Number of ordinary shares in issue 55 677 643 55 677 643
Weighted average and diluted number of shares in
issue 55 677 643 55 677 643
US$`000 US$`000
The following adjustments to profit attributable
to ordinary shareholders were taken into account
in the calculation of diluted earnings per share:
Attributable to equity holders
of the parent 21 253 516
Increase in shareholding in subsidiary
with respect to convertible portion of debt (763) -
Diluted profit attributable to equity holders
of the parent 20 490 516
The following adjustments to profit attributable
to ordinary shareholders were taken into
account in the calculation of headline
earnings per share:
Attributable to equity holders of
the parent 21 253 516
- Negative goodwill (34 621) -
- Tax effect - -
Headline (loss)/earnings attributable
to equity holders of the parent (13 368) 516
Increase in shareholding in subsidiary with
respect to convertible portion of debt (763) -
Diluted headline earnings attributable
to equity holders of the parent (14 131) 516
9. Share bonus options
During the year a share appreciation bonus plan was approved for the benefit of
directors of ZCI. In terms of the scheme, the directors have the right to
receive a cash payment on the vesting date equalling the increase in a deemed
value per share.
1 095 000 qualifying shares were granted during July 2009 at a price of US1.85
per share. The shares vest in equal amounts over a three year period. The first
tranche, equalling 365 000 shares vested on 31 March 2010 at an exercise price
of US$2.3 per share. No shares expired in or were any of these share options
exercised during the current year.
Another 1 095 000 shares were granted on 31 March 2010 at US$2.30.
10. Related party transactions
The Group, in the ordinary course of business and similar to last year entered,
into various consulting arrangements with related parties on an arm`s length
basis at market related rates. The only change from the previous year is the
funding provided to the subsidiaries, all of which is also at arm`s length and
at market related rates.
11. Financial risk management
The Group`s exposure to financial instruments risks has changed following the
acquisition of ACU. The Group now also has exposure to the following risks:
foreign currency risk commodity price risk
As a result of the Group`s main assets and subsidiaries being held in Botswana
and having a functional currency different to the presentation currency, the
Group`s balance sheet can be affected significantly by the movements in the US
Dollar and the Botswana Pula.
The Group is exposed to commodity price risk as its future revenues will be
derived based on a contract with a physical off-take partner at prices that will
be determined by reference to market prices of copper at the delivery date.
From time to time the Group may manage its exposure to commodity price risk by
entering into put contracts or metal forward sales contracts with the goal of
preserving its future revenue streams.
The use of derivatives is based on established practices and parameters which
are subject to the oversight of the Board of Directors. The board of directors
determines, as required, the degree to which it is appropriate to use financial
instruments, commodity contracts or other hedging contracts or techniques to
mitigate risks.
12. Mineral resources and reserves
There have been no material changes to the resources and reserves as disclosed
in the Executive Summary of the Competent Persons Report ("CPR") prepared by
Read, Swatman & Voigt (Pty) Ltd ("RSV") of South Africa, in respect of African
Copper Plc`s ("ACU") mining and exploration assets. The Executive Summary of the
CPR was included in a Circular to Shareholders dated 17 December 2009 and
will be attached to the Company`s Annual Report.
13. Post balance sheet events
There have been no events that have occurred after balance sheet date that would
have a material impact on the reported results.
14. Review opinion
The provisional condensed consolidated statement of financial position at 31
March 2010 and the related provisional condensed consolidated statement of
comprehensive income, statement of changes in equity and statement of cash flows
for the year then ended have been reviewed by our auditors, KPMG Inc. Their
unmodified review report is available for inspection at the registered office of
the Company (Clarendon House, 2 Church Street, Hamilton, Bermuda) and the
offices of the sponsor.
Notice of annual general meeting
Notice is hereby given that the annual general meeting of the
shareholders of the Company will be held in Luxembourg, on
Thursday 23 September 2010 at 14h30 CET to transact the business
as stated in the notice of annual general meeting, which shall be
included in the annual report, together with venue details.
Thomas Kamwendo
Chairman
Bermuda, 1 July 2010
Company Secretary
John Kleynhans
Registered office
Clarendon House, 2 Church Street, Hamilton, Bermuda
Transfer Secretaries
Computershare Investor Services 2004 (Pty) Limited, 70 Marshall
Street, Johannesburg, 2001 South Africa
Sponsor
Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, Illovo
Boulevard, Illovo, 2196 South Africa
Auditors
KPMG Inc., KPMG Crescent, 85 Empire Road, Parktown, 2193, Private
Page X9, Parkview
Website: www.zci.lu
Date: 01/07/2010 07:16:32 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
