| Fri 15 Mar 2002, 0:00 | | Zci Audited Financial Statements For The Year End |
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ZAMBIA COPPER INVESTMENTS LIMITED
JSE Code: ZCI
ISIN Code: BMG988431240
(Registered in Bermuda)
("ZCI" or the "Company")
Audited financial statements for the year ended December 31, 2001
Basis of preparation of consolidated financial statements
On January 24, 2002 the Company issued an announcement to the effect that,
following advice from Anglo American plc, it would not be in a position to
provide funding to its principal subsidiary, Konkola Copper Mines plc
("KCM"), beyond its obligations under the Subscription and Shareholders Loan
Agreement ("SSLA"). Furthermore, the Announcement stated that KCM's
financial projections, that are based on current metal prices, indicate that
in order to sustain its operations KCM will require funding, over and above
that pledged under the SSLA, from around the end of the first quarter of
2002.
A KCM Shareholders' Steering Committee has been established on which are
represented KCM, ZCCM Investments Holdings plc, the Company, International
Finance Corporation, CDC Group plc and the Government of the Republic of
Zambia. Financial and technical advisors have been appointed and
restructuring proposals are being considered which, if successful, could
lead to KCM being better able to attract additional finance in the form of
new equity or debt, to finance its future operations. The continued
operation of the Company is dependent on KCM continuing to operate on a
going concern basis.
The financial statements have been prepared on a going concern basis in
accordance with International Accounting Standards on a basis consistent
with the previous year. If further financing does not, however, become
available for KCM from around the end of the first quarter of 2002, it is
likely that the Company will not be able to continue as a going concern and
that the assets reflected in the Consolidated statement of financial
position will be significantly impaired. The Audit Report contains a
disclaimer with regard to the Company's ability to continue as a going
concern.
Consolidated statement of earnings 2001 2000
for the year ended December 31, 2001
in thousands of US dollars
Turnover 370,689 229,004
Operating costs (454,137) (238,160)
Operating loss before interest and taxation (83,448) (9,156)
Interest and other financial income 6,300 1,886
Interest expense (21,916) (9,676)
Commitment fee on loan facility (1,680) (1,676)
General and administration expenses (1,638) (1,163)
Share of Konkola Project consortium expenses - (2,878)
Loss before tax (102,382) (22,663)
Taxation (3,883) 3,522
Loss after taxation (106,265) (19,141)
Loss attributable to minority interests 20,296 3,329
Net loss (85,969) (15,812)
per ordinary share in US cents
Headline loss before exceptional
items and amortisation of goodwill (69.68) (12.56)
Net loss (70.14) (12.90)
Consolidated statement of retained earnings 2001 2000
for the year ended December 31, 2001
in thousands of US dollars
Accumulated deficit at beginning of the year (21,793) (5,981)
Net loss (85,969) (15,812)
Accumulated deficit at end of the year (107,762) (21,793)
No dividends were paid or proposed by the Company in respect of the year
ended December 31, 2001.
Consolidated statement of financial position 2001 2000
as at December 31, 2001
in thousands of US dollars
Fixed assets
Intangible assets 8,265 5,998
Deferred tax asset - 3,794
Tangible fixed assets 260,756 174,623
269,021 184,415
Investments and advances 45,932 35,879
314,953 220,294
Current assets
Stocks 105,462 112,887
Accounts receivable 68,924 26,435
Cash and short-term investments 4,772 28,314
179,158 167,636
Current liabilities
Short term loans and bank overdrafts (98,566) (17,859)
Accounts payable and accrued liabilities (62,172) (65,584)
(160,738) (83,443)
Net current assets 18,420 84,193
Total assets less current liabilities 333,373 304,487
Long term liabilities
Long term loans (263,346) (120,091)
Provisions (69,451) (79,112)
Deferred purchase consideration (61,557) (60,000)
Minority interest - (20,296)
Net (liabilities) / assets (60,981) 24,988
Capital and reserves
Capital 46,781 46,781
Accumulated deficit (107,762) (21,793)
Shareholders' (deficit) / equity (60,981) 24,988
Consolidated statement of cash flow 2001 2000
for the year ended December 31, 2001
in thousands of US dollars
Cash flow from operating activities
Cash received from customers 361,945 213,990
Cash paid to suppliers and employees (465,756) (229,000)
Cash absorbed by operations (103,811) (15,010)
Interest received 356 1,461
Interest paid (5,314) (583)
Income tax paid (351) (28)
Net cash absorbed by operating activities (109,120) (14,160)
Cash flow from investing activities
Investment in KCM (2,832) (4,594)
Acquisition of assets from ZCCM - (30,000)
Capital expenditure (107,297) (71,185)
Cash absorbed by investing activities (110,129) (105,779)
Cash flow from financing activities
Proceeds from external borrowings 154,000 96,000
Advances by minority shareholders in KCM 21,000 11,250
Equity subscriptions by minority
shareholders - 11,250
Net cash from financing activities 175,000 118,500
Net decrease in cash (44,249) (1,439)
Cash at the beginning of the year 10,333 11,772
Net (debt) / cash at the end of the year (33,916) 10,333
Cash deposits and cash at bank 4,650 28,192
Bank overdraft - unsecured (38,566) (17,859)
Net (debt) / cash at the end of the year (33,916) 10,333
Chairman's Statement
On October 12, 2001, ZCI issued a press release stating that, in view of the
outlook for the copper and cobalt price and the inability to raise the
required limited recourse project finance, its operating subsidiary KCM had
advised the Zambian Government that it was unable to proceed with the
Konkola Deep Mining Project. As stated in ZCI's press release dated January
24, 2002, Anglo American plc, ZCI's 50.9% shareholder, subsequently advised
the Company that in the absence of the Konkola Deep Mining Project, it could
not justify providing funding to ZCI beyond that committed at the time of
vesting of the former Zambia Consolidated Copper Mines Limited assets.
Given KCM's requirement for additional funding during 2002, the future of
both ZCI and KCM as going concerns is currently unclear. A KCM Shareholders'
Steering Committee has been established with representatives from ZCI, the
International Finance Corporation, the CDC Group plc, ZCCM Investments
Holdings PLC and the Zambian Government to evaluate all options. ZCI has
engaged NM Rothschild & Sons as financial advisors and MRDI as technical
advisors to assist with this process.
During 2001, ZCI incurred a net loss of US$86 million due to low copper and
cobalt prices and operational difficulties at KCM. The copper price declined
for much of the year reaching a low of 59.9 US cents per pound in November
following the terrorist attack in New York. This is the lowest price for 15
years in nominal terms and the average price for the year of 71.6 US cents
is the second lowest in real terms in the last one hundred years. The low
prices coincided with a time when the benefits of the refurbishment
programme at KCM had still not been fully realised, and operating costs
remained high. Although cash operating costs have reduced from over 100 US
cents per pound of copper at the time of vesting to an average level of 85
US cents per pound during 2001, KCM is, and without the Konkola Deep Mine
will remain, a high cost producer.
During the year ended December 31, 2001, KCM continued with the
refurbishment of the assets. By year end, some US$178 million had been spent
on the programme which was designed to address the severe under-investment
which had occurred over many years. KCM committed in the Development
Agreement to capital expenditure in the first three years post acquisition
of US$208 million in January 2000 money terms. That commitment will shortly
be fulfilled.
Copper production for the year was 196,805 tonnes, 18% higher than in 2000
on an annualised basis but still below target, principally due to problems
at the toll smelting facility at Nkana, delays in underground development at
Konkola and the impact of the Nchanga open pit slope failure.
The Nkana smelter was shut down during July and August for a major overhaul
but there continued to be intermittent problems with the oxygen plant, which
constrained output. At Konkola, deteriorating ground conditions have given
rise to the requirement for additional support and development work has
fallen behind schedule. As a consequence, Konkola has not achieved the
expected increase in production.
The catastrophic slope failure at the Nchanga open pit with the tragic
death of ten employees was reported in detail in the Interim Report. A
further eight employees suffered fatal accidents in unrelated incidents
during the course of the year. Despite this unacceptable record on
fatalities, safety standards and safety risk awareness amongst employees and
contractors have improved. The Lost Time Injury Frequency Rate fell
considerably during the year to average 0.47 per 200,000 man hours in the
last quarter of 2001, down from 2.14 for the quarter following vesting. KCM
also made significant progress on the community health campaigns initiated
in 2000 to combat malaria and HIV/AIDS.
As at December 31, 2001 ZCI had provided US$190 million to KCM under its
US$310 million share of the US$370 million shareholder facilities. Since
year end ZCI has provided a further US$94 million to KCM of which US$70
million has been used by KCM to repay bank loans. Absent new financial
facilities, KCM will fully exhaust its cash resources around the end of the
first quarter of this year. ZCI will in turn have fully drawn down its loan
facility from Anglo American plc, which Anglo American has advised it will
not increase.
Negotiations with all stakeholders are currently taking place through the
KCM Shareholders' Steering Committee with the objective of putting each of
ZCI and KCM on a sound financial footing with KCM maintaining operations on
a going concern basis. However, there can be no assurance that such
negotiations will lead to new financial facilities being made available to
KCM.
I wish to record my appreciation of the continued efforts of all the
employees of KCM in extremely difficult circumstances and pay particular
tribute to Tim Wadeson, who was Chief Executive of KCM from the time of
vesting until his retirement at the end of 2001.
S R Thompson
Chairman
Operating statistics for KCM for the year ended December 31, 2001
Year ended Nine months ended
December 31, 2001 December 31, 2000
Ore processing
Copper ore milled (t) 9,227,000 6,465,000
Cobalt ore milled (t) 794,000 789,000
Metal in concentrate
Copper (t) 138,310 93,711
Cobalt (t) 3,272 3,129
Finished production
Copper (t) 196,805 125,385
Cobalt (t) 2,422 1,659
Metal sales
Copper (t) 196,231 107,607
Cobalt (t) 2,678 1,114
Average price realised
Copper c/lb 75 84
Cobalt US$/lb 8 11
The Company's annual report at December 31, 2001 will be posted to
shareholders on or about March 21, 2002. Copies may be obtained
from the transfer agents, Computershare Services Limited, Second Floor,
Edura, 41 Fox Street, Johannesburg 2001 (PO Box 61051,
Marshalltown 2107) South Africa and Computershare Investor Services PLC, PO
Box 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH
or from the Company's French Listing Agents, Euro Emetteurs Finance, 48
boulevard des Batignolles, 75850 Paris, Cedex 17, France.
Bermuda Registered Office:
Clarendon House
2 Church Street
Hamilton, Bermuda
Website: www.zci.lu
March 15, 2002
