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ZCI
ZCI
ZCI - ZCI Limited - Chairman`s statement on the results for the six months ended
30 September 2010
ZCI Limited
(formerly Zambia Copper Investments Limited)
(Registered in Bermuda)
(South African registration number 1970/000023/10)
JSE share code: ZCI
ISIN: BMG9887P1068
Euronext share code: BMG9887P1068
("ZCI" or "the Company")
CHAIRMAN`S STATEMENT ON THE RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2010
I am pleased to present the Group`s condensed reviewed consolidated interim
results for the six months ended 30 September 2010. The Group returned an
operating loss of USD6.7 million from activities for the six months to 30
September 2010, compared to a loss of USD4.9 million for the same period in the
previous year. The Group commenced the financial period with a net asset value
per share ("NAV") of USD2.14 and closed it on a NAV of USD2.11.
The financial results for the interim period ended 30 September 2009, as
previously published, have been restated. These results were previously
presented as unconsolidated and unreviewed as the reporting frameworks that the
group is subject to, does not require reviewed results. Following finalisation
of the purchase price allocation and the acquisition of ACU, it was concluded
that these results should have been consolidated results, incorporating the
results of operations of ACU from 1 July 2009. The financial information
presented for the period ended 30 September 2009 has therefore been restated
accordingly.
Overall, the Group`s financial position has changed significantly from year end
with the period under review being the first in which the mine has been in
commercial production over the entire period.
The operating result must be seen against the background of the solid progress
being made towards achieving full commercial production at the open-pit Mowana
Mine. With the additional investment in mobile crushing equipment after 31 March
2010, production increased during the first five months of the financial year
with the crushed and milled tonnage, as well as recoveries for August 2010,
being the highest ever achieved in the history of the mine. This resulted in the
highest copper sales to date, with this success being further accentuated by the
buoyant copper price during the period. September production was predominantly
down due to trial processing of Thadaku ore, which provided valuable operational
parameters for the processing of this ore at the Mowana plant.
Mechanical faults also impacted on September production but appropriate systems
are being implemented by mine management to reduce down time, with production
levels expected to ramp up to budget levels by the end of the year.
During the six months ended 30 September 2010 the Group received approval for
the Thakadu Environmental Impact Assessment ("EIA") and the receipt of a
Development Permit for its Thakadu copper-silver deposit some 70 km from the
Mowana Mine. This allowed trial mining to start during the period, in line with
the approved EIA (including the Archaeological Impact Assessment), ahead of the
grant of a full Mining Licence from the Botswana Government. The environmental
rehabilitation provision increased as a result of recognising the required
provisions for this site.
Important steps were taken during the first half of the financial year to
advance the Group`s growth projects. These growth projects include:
- Exploration of the highly prospective Matsitama Schist Belt, aimed at a new
exploration strategy that intends to shift focus onto high quality targets. The
ongoing expenditure is also aimed at the retention of the existing prospecting
licences that run to June 2011;
- The extension of the Mowana Mine ore resources north of the current Mowana
open-pit mine through an infill and exploration drilling programme;
- Resource definition of the Makala copper deposit which lies along strike to
the north-west in close proximity of Thakadu. The viability of Makala could have
significant impact on the life of mining activity at Thakadu/Makala.
In order to fund the growth projects the ZCI Board approved a Loan Facility to
the mine of USD7.5 million at market-related rates, with an initial drawdown of
2.5 million USD being made subsequent to the end of the period.
In accordance with its business plan, the Group continued to explore diverse
investment opportunities and has subsequent to period end approved an additional
USD4 million short-term loan facility to the Ndola Lime Company at favourable
interest rates.
The Group, mindful of the enhanced responsibilities in terms of the King III
Report on Corporate Governance, is taking the necessary steps to review its code
of corporate governance. The ZCI board will report on the implementation and
application thereof in its annual financial statements for the year ending 31
March 2011.
It is therefore on a note of cautious optimism that the Group welcomes in the
New Year in the firm belief that it has the requisite resources and skill to
meet the challenge of achieving positive cash flows across the Group.
Thomas Kamwendo
Chairman
Bermuda
3 December 2010
Condensed Consolidated Interim Financial Statements
ZCI Limited
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2010
Reviewed Unreviewed Audited
Six months Six months Twelve months
ended ended ended
30 September 2010 30 September 2009 31 March 2010
USD`000 USD`000 USD`000
Note
Revenue 11,583 - 7,392
Cost of sales (16,504) - (17,714)
Gross loss from
mining activities (4,921) - (10,322)
Administrative expenses (918) (1,236) (1,531)
Other operating expenses (846) (1,465) (4,439)
Selling and distribution
expenses - (18) (18)
Foreign exchange losses (61) (2,145) (2,250)
Operating loss (6,746) (4,864) (18,560)
Negative goodwill - 33,905 33,905
(Loss)/profit before
net finance income and tax (6,746) 29,041 15,345
Finance income 463 240 509
Finance expense - (45) (64)
(Loss)/profit
before tax (6,283) 29,236 15,790
Income tax 201 - 970
(Loss)/profit for the period (6,082) 29,236 16,760
Other comprehensive income:
Exchange differences on
translation of
foreign operations 3,726 1,482 (2,611)
Total comprehensive
income for the period (2,356) 30,718 14,149
Profit attributable to:
Equity holders of the parent (5,049) 30,069 18,651
Non-controlling interest (1,033) (833) (1,891)
Total comprehensive
income attributable to:
Equity holders of the parent (1,988) 31,287 16,506
Non-controlling interest (368) (569) (2,357)
Basic (loss)/earnings
per ordinary
share (US cents) 5 (9.07) 54.01 33.50
Diluted
(loss)/earnings
per ordinary
share (US cents) 5 (9.82) 54.01 32.13
Condensed Consolidated Statement of Financial Position
For the six months ended 30 September 2010
Reviewed Audited
30 September 31 March
2010 2010
USD`000 USD`000
Note
ASSETS
Property, plant and equipment 40,531 33,044
Intangible assets 50,923 50,923
Other financial assets 335 327
Long-term receivable - 3,000
Total non-current assets 91,789 87,294
Inventory 7 6,748 1,780
Trade and other receivables 1,856 984
Current portion of long-term
receivable 6,051 3,000
Cash and cash equivalents 40,253 48,430
Total current assets 54,908 54,194
TOTAL ASSETS 146,697 141,488
EQUITY
Share capital 102,688 102,688
Foreign currency translation reserve 916 (2,145)
Retained earnings 13,602 18,651
Equity attributable to equity
holders of the parent 117,206 119,194
Non-controlling interest 5,918 6,286
Total equity 123,124 125,480
LIABILITIES
Deferred tax 6,329 6,530
Environmental rehabilitation provision 8 5,762 4,051
Total non-current liabilities 12,091 10,581
Trade and other payables 11,482 5,427
Total current liabilities 11,482 5,427
TOTAL EQUITY AND
LIABILITIES 146,697 141,488
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 September 2010
Foreign
currency
Share translation Retained
capital reserve earnings
USD`000 USD`000 USD`000`
Balance as at 31 March 2009 102,688 - -
Arising on business acquisition
Profit/(loss) for the period - - 30,069
Other comprehensive income 1,218
Foreign exchange income for the period - 1,218 -
Total comprehensive income for the period 1,218 30,069
Balance as at 30 September 2009 102,688 1,218 30,069
Balance as at 31 March 2010
Total comprehensive income for the period
Loss for the period - - (5,049)
Other comprehensive income - 3,061 -
Foreign exchange loss for the period - 3,061 -
Total comprehensive income for the period - 3,061 (5,049)
Balance as at 30 September 2010 102,688 916 13,602
Attributable to Non-
equity holders controlling
of the parent interest Total equity
USD`000 USD`000 USD`000`
Balance as at 31 March 2009 102,688 - 102,688
Arising on business acquisition 8,643 8,643
Profit/(loss) for the period 30,069 (833) 29,236
Other comprehensive income 1,218 264 1,482
Foreign exchange income for
the period 1,218 264 1,482
Total comprehensive income
for the period 31,287 (569) 30,718
Balance as at 30 September 2009 133,975 8,074 142,049
Balance as at 31 March 2010
Total comprehensive income
for the period
Loss for the period (5,049) (1,033) (6,082)
Other comprehensive income 3,061 665 3,726
Foreign exchange loss for the period 3,061 665 3,726
Total comprehensive income
for the period (1,988) (368) (2,356)
Balance as at 30 September 2010 117,206 5,918 123,124
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 September 2010
Reviewed Unreviewed
Six months Six months
ended ended
30 September 30 September
2010 2009
USD`000 USD`000
Cash flow from operating activities
Cash utilised by operations (3,744) (5,287)
Interest received 412 240
Interest paid - (45)
Cash outflow from operating activities (3,332) (5,092)
Cash flow from investing activities
Additions to maintain property, plant and equipment (4,558) -
Acquisition of subsidiary (net of cash acquired) - (1,438)
Proceeds of disposal of property, plant and equipment 65 -
Repayment of interest bearing borrowings - (34,414)
Cash outflow from investing activities (4,493) (35,852)
Cash flow from financing activities
Effect of foreign currency translation (352) 146
Net decrease in cash and cash equivalents (8,177) (40,798)
Cash and cash equivalents at the beginning of
the period 48,430 102,939
Cash and cash equivalents at the end of the period 40,253 62,141
Commentary on the results for the six months ended 30 September 2010
1. General information
ZCI ("the Company") is a public company incorporated and domiciled in Bermuda.
It has a primary listing on the Johannesburg stock exchange and a secondary
listing on the Euronext.
The Company`s business is not affected by any Government protection or
investment encouragement laws.
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.
The address of ZCI`s registered office is Clarendon House, 2 Church Street,
Hamilton, Bermuda.
These condensed consolidated interim financial statements were approved for
issue on 29 November 2010 by the board of directors.
The financial results for the six months ended 30 September 2010, have been
reviewed by the group`s auditors, KPMG Inc., in accordance with ISRE 2410
"Review of Interim Financial Information Performed by the Independent Auditor of
the Entity", and their unmodified review opinion is available for inspection at
the company`s registered office. As there is no requirement to present reviewed
results for 2009, the restated 2009 financial results are unreviewed.
2. Basis of preparation
The condensed consolidated interim financial statements for the six months ended
30 September 2010 have been prepared in accordance with International Financial
Reporting Standards (IFRS), which include IAS 34 Interim Financial Reporting and
the AC 500 series issued by the Accounting Practices Board, and in compliance
with the Listings Requirements of the JSE Limited. They do not include all of
the information required for full annual financial statements, and should be
read in conjunction with the Group`s audited consolidated financial statements
and notes for the year ended 31 March 2010.
The condensed consolidated interim financial statements are presented in United
States Dollars ("USD"), which is the Company`s functional currency. All
financial information presented in USD has been rounded to the nearest thousand.
3. Significant accounting policies
The condensed consolidated interim financial statements have been prepared on
the historical cost basis, except where fair valuing of assets and liabilities
applies.
The same accounting policies, presentation and methods of computation have been
followed in these consolidated interim financial statements as were applied in
the preparation of the Group`s consolidated financial statements for the year
ended 31 March 2010, except as noted below:
During the period the following accounting pronouncements, that apply to the
group, became effective:
Amendments to IAS 27 Consolidated and Separate Financial Statements
Amendments to IFRS 2 Group Cash settled Share-based Payments
These pronouncements had no material impact on the accounting of transactions or
the disclosure thereof.
4. Segment information
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.
5. (Loss)/earnings per share
Six months Six months Twelve months
ended ended ended
30 September 30 September 31 March
2010 2009 2010
Basic (loss)/earnings per
ordinary share (US cents) (9.07) 54.01 33.50
Diluted (loss)/earnings per
ordinary share (US cents) (9.82) 54.01 32.13
Headline (loss)/earnings
per ordinary share (US cents) (9.07) (6.89) (27.40)
Diluted headline
(loss)/earnings per
ordinary share (9.82) (7.49) (28.77)
(US cents)
Number of ordinary shares
in issue 55,677,643 55,677,643 55,677,643
Basic and diluted weighted
average number of
ordinary shares in issue 55,677,643 55,677,643 55,677,643
USD`000 USD`000 USD`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 (5,049) 30,069 18,651
Increase in shareholding in
subsidiary with respect to
convertible portion of debt (417) (336) (763)
Diluted (loss)/profit
attributable to equity
holders of the parent (5,466) 29,733 17,888
The following adjustments
to profit attributable to
ordinary shareholders were
taken into account in the
calculation of headline and
diluted headline earnings
per share:
Attributable to equity
holders of the parent (5,049) 30,069 18,651
- Negative goodwill - (33,905) (33,905)
Headline loss attributable
to equity holders of the
parent (5,049) (3,836) (15,254)
Increase in shareholding in
subsidiary with respect to
convertible portion of debt (417) (336) (763)
Diluted headline loss
attributable to equity
holders of
the parent (5,466) (4,172) (16,017)
6. Mineral Resources and Mineral Reserves
The group`s Mineral Resources and Ore Reserves are under review to provide
updated estimations for 2011, however no material changes to the Mineral
Resources and Ore Reserves disclosed in the ZCI annual report for the year ended
31 March 2010 are expected other than depletion, due to continued mining
activities.
7. Inventory
Inventories include ore stockpiles, copper concentrate and supplies and spares
and are measured at the lower of cost or net realisable value. As at 31 March
2010 inventory of concentrates were being valued at net realisable value (due to
cost being in excess of this as the plant was operating sub- optimally) and ore
was valued at USDnil, on the presumption that further production costs exceed
the current sales value. As at 30 September 2010 the Group believes the
processing of the stockpiles will have a future economic benefit and accordingly
values these stockpiles at the lower of cost and net realisable value. The cost
of ore stockpiles and copper produced is determined principally by the weighted
average cost method using related production costs. Net realisable value is
determined with reference to current market prices. Approximately USD5.2 million
of the increase in the inventory value, is as a result of the valuation of the
ore stockpiles.
8. Environmental rehabilitation provision
During the six months ended 30 September 2010 the Group received approval of the
Thakadu Environmental Impact Assessment and the receipt of a Development Permit
for its Thakadu copper- silver deposit some 70 km from the Mowana Mine. This
allowed mining to start during the period, in line with the approved
Archaeological Impact Assessment, in anticipation of the grant of a full Mining
License from the Botswana Government.
USD`000
Opening balance 1 April 2010 - Mowana Mine 4,051
Additional provision - Thakadu 1,290
Foreign exchange on translation 421
Closing balance 5,762
9. Events after the reporting period
On 19 November 2010, ZCI entered into a new facility agreement with Ndola Lime
Company Limited to the value of USD4,000,000. This loan bears interest at 12%
per annum and will be repaid within a period of 26 months.
On 23 September 2010, ZCI resolved to enter into a facility agreement with
Messina Copper (Botswana) (Pty) Limited ("Messina") to the value of USD7,500,000
to fund further exploration costs that the Group intends to incur. Subsequent to
the end of the period, ZCI agreed to pay the first draw down amount of
USD2,500,000. This loan bears interest at 12% per annum with terms substantially
the same as previous loans extended to Messina.
10. Commitments
The commitments and contingencies are consistent with those reported in the 31
March 2010 annual financial report. There were no significant changes to the
commitments and contingencies during the six months ended 30 September 2010.
11. Dividends
No dividends were declared for the period under review.
12. Review opinion
The provisional condensed consolidated statement of financial position at 30
September 2010 and the related provisional condensed consolidated statement of
comprehensive income, statement of changes in equity and statement of cash flows
for the period 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.
3 December 2010
Sponsor
Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, Illovo
Boulevard, Illovo, 2196 South Africa
Date: 03/12/2010 09:00:01 Produced by the JSE SENS Department.
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