| Wed 30 Apr 2003, 17:17 | | Provisional results |
|
Zambia Copper Investments Limited ("the Company") -
Zambia Copper Investments Limited
Incorporated in Bermuda and registered in the Republic of South Africa as an
external company. Registration no. EC 1626)
Share code: ZCI
ISIN : BMG988431240
(All figures expressed in thousands of US Dollars, unless stated otherwise)
Consolidated statement of earnings
2002 2001
(USD"000) (USD"000)
Turnover 394,096 370,689
Cost of sales (344,463) (406,788)
------ ------
Gross Profit / 49,633 (36,099)
(Loss)
Other operating (68,986) (27,106)
expenses
Depreciation (30,272) (20,243)
Impairment of (240,369) -
tangible fixed
assets
------ ------
(289,994) (83,448)
------ ------
Other income 4,696 4,711
Interest income 17 1,589
Interest expense (9,516) (21,916)
Commitment fees on (102) (1,680)
loan facility
General and (784) (1,073)
administration
expenses
Amortisation of - (565)
goodwill
Impairment of (66,066) -
goodwill
Contributions to 16,876 -
finance
restructuring
Restructuring costs (4,687) -
------ ------
Loss before taxation (349,560) (102,382)
Taxation (193) (3,883)
------ ------
Loss after taxation (349,753) (106,265)
Loss attributable to - 20,296
minority interest
------ ------
Net Loss (349,753) (85,969)
------ ------
per
ordinary
share in
US cents
Headline loss before (44.90) (69.68)
exceptional items
and amortisation and
impairment of
goodwill
Net loss (282.94) (70.14)
Consolidated statement of financial position
2002 2001
(USD"000) (USD"000)
Fixed Assets
Intangible assets - 8,265
Tangible fixed assets 100,195 260,756
------ ------
100,195 269,021
Investments and advances - 45,932
------ ------
100,195 314,953
------ ------
Current assets
Stocks 88,308 105,462
Accounts receivable 46,658 68,924
Cash and cash equivalents 39,126 4,772
------ ------
174,092 179,158
Current liabilities
Short term loans and bank 5,824 98,566
overdrafts
Accounts payable and 53,171 62,172
accrued liabilities
------ ------
58,995 160,738
------ ------
Net current assets 115,097 18,420
------ ------
Total assets less current 215,292 333,373
liabilities
Long term liabilities
Long term loans (35,033) (263,346)
Provisions (92,632) (69,451)
Deferred purchase - (61,557)
consideration
Minority interest (36,335) -
------ ------
Net assets / (liabilities) 51,292 (60,981)
------ ------
Capital and reserves
Capital 508,807 46,781
Accumulated deficit (457,515) (107,762)
------ ------
Shareholders" 51,292 (60,981)
equity/(deficit)
------ ------
Consolidated statement of changes to equity
Share Contribu Accumulat
ted ed
capital surplus deficit Total
(USD"00 (USD"000 (USD"000) (USD"00
0) ) 0)
Balance at 31 29,426 17,355 (21,793) 24,988
December 2000
Loss for the year - - (85,969) (85,969
)
----- ----- ----- -----
Balance at 31 29,426 17,355 (107,762) (60,981
December 2001 )
Shares issued 873 - - 873
Contributed on - 461,153 - 461,153
restructuring
Loss for the year - - (349,753) (349,75
3)
----- ----- ----- -----
Balance at 31 30,299 478,508 (457,515) 51,292
December 2002
----- ----- ----- -----
Consolidated statement of cash flows
2002 2001
(USD"000 (USD"000
) )
Cash flow from operating activities
Cash received from customers 398,559 361,945
Cash paid to suppliers and employees (378,425 (465,756
) )
------ ------
Cash generated / (absorbed) by 20,134 (103,811
operations )
Interest received - 356
Interest paid (1,343) (5,314)
Income tax paid (80) (351)
------ ------
Net cash generated / (absorbed) by 18,711 (109,120
operating activities )
------ ------
Cash flow from investing activities
Investment in KCM - (2,832)
Proceeds from disposal of tangible 334 -
fixed assets
Capital expenditure (58,277) (107,297
)
------ ------
Cash absorbed by investing (57,943) (110,129
activities )
------ ------
Cash flow from financing activities
Proceeds from external borrowings - 154,000
Advances by minority shareholders in - 21,000
KCM
Shareholders long-term loans 97,813 -
received
Other loans received 35,000 -
Contributions received to finance 33,637 -
restructuring
Short term loans repaid (60,000) -
------ ------
Cash generated by financing 106,450 175,000
activities
------ ------
Net increase / (decrease) in cash 67,218 (44,249)
Net (debt) / cash at the beginning (33,916) 10,333
of the year
------ ------
Net cash / (debt) at the end of the 33,302 (33,916)
year
------ ------
Cash deposits and cash at bank 39,126 4,650
Bank overdraft - unsecured (5,824) (38,566)
------ ------
Net cash / (debt) at the end of the 33,302 (33,916)
year
------ ------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statement presentation
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, 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 and it was decided to restructure KCM.
Following the announcement on January 24, 2002 a KCM Shareholders" Steering
Committee had been established on which was represented all the shareholders
including the GRZ, to explore all options available to the Company following
ZCI"s announcement. Negotiations took place between the shareholders, which
culminated in Agreements to restructure KCM, which were signed on 16 August 2002
and became effective on 17 September 2002.
Following the restructuring, the directors are of the view that the Company is a
going concern and the financial statements have been prepared on this basis.
The financial statements are prepared in accordance with International Financial
Reporting Standards. The preparation of financial statements in conformity with
International Financial Reporting Standards requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities and the reported
amount of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
These financial statements are presented in United States Dollars since that is
the currency in which the majority of the operations of the Company are
denominated.
The financial statements have been prepared on the historical cost basis. The
accounting policies applied are consistent with the previous year. The financial
information has been audited by the Company"s auditors, Deloitte & Touche,
(Bermuda), whose unqualified audit opinion is available for inspection at the
offices of the Company"s administrators, Maitland Management Services SA, 6 rue
Adolphe Fischer,L-1520, Luxembourg.
Principal activity and segmental information
The principal activity of the Group is the mining and production of copper and
cobalt, and toll treatment of copper concentrates. The sales revenue can be
analysed as follows:
2002 2001
(USD"000
(USD"00 )
0)
Copper 355,591 325,132
Cobalt 30,603 44,511
Other 7,902 1,046
------ ------
394,096 370,689
------ ------
The Group has one reportable segment, its principal activity.
Geographical segments
The Group mining operations are located in Zambia. The following table provides
an analysis of the Group"s sales by geographical market:
2002 2001
(USD"00
(USD"000 0)
)
Sales
revenues
Asia 321,556 257,870
Europe 63,416 60,652
Rest of 7,653 52,167
Africa
America 1,471 -
------ ------
394,096 370,689
------ ------
Contributions to finance restructuring
A surplus of USD 16,875,662 resulted from the restructuring effective 17
September 2002. This represents the ZCI share of the USD 30 million exit
settlement received by KCM and other amounts received from Anglo American for
working capital requirements.
Loss per share
2002 2001
(USD"000) (USD"000)
Net loss attributable to 349,753 85,969
shareholders (USD `000)
Add exceptional income:
Contributions to finance 16,876 -
restructuring
Less exceptional expenses:
Impairment of tangible (240,369) -
fixed assets
Amortisation of goodwill - (565)
Impairment of goodwill (66,066) -
Restructuring costs (4,687) -
------ ------
Headline loss before 55,507 85,404
exceptional items and
amortisation and impairment of
goodwill
------ ------
Weighted average number of 123,616 122,560
shares in issue (thousands)
Headline loss per share (US 44.90 69.68
cents per share)
Basic net loss per share (US 282.94 70.14
cents per share)
Basic loss per share is calculated by dividing the net loss attributable to the
shareholders by the weighted average number of shares in issue during the year.
Impairment adjustment
Impairment adjustments are a result of changes in economic circumstances,
including the fall in market prices of KCM"s products and the suspension of the
Konkola Deep Mining project resulting in a reduction of the economic life of the
business. As a result, the directors consider that the carrying amounts of the
Group"s tangible and intangible fixed assets may not be recoverable.
Accordingly, a provision in the amount of USD 248,634,000.00 for impairment of
those assets was recorded in the consolidated financial statements at June 30,
2002 in accordance with the requirements of IAS 36: Impairments of Assets.
The impairment adjustment represents the amount by which the carrying amount of
the tangible and intangible assets of the Group at June 30, 2002 exceed their
estimated recoverable amount. The Group has been considered as a single cash-
generating unit for the purpose of the review. The recoverable amount is the
value in use, which was determined at a discount rate of 15%.
Due to the historical operating losses within KCM (SmelterCo) and the
uncertainty of future profits, the directors consider it prudent to reduce the
carrying amounts of the goodwill that arose on the acquisition of KCM
(SmelterCo). Accordingly, a provision in the amount of USD 57,801,000.00 for
impairment of the goodwill has been raised in accordance with the requirements
of IAS 36: Impairment of Assets.
Long term loans
2002 2001
(USD"000 (USD"000
) )
Loan from A.R.H. Limited S.A. - 190,000
to ZCI
Capitalised interest and - 23,706
commitment fee thereon
------ ------
Amount due to A.R.H Limited - 213,706
S.A.
Loans from minority
shareholders to KCM,
including capitalised interest - 49,640
------ ------
- 263,346
------ ------
Loans received during the year 35,000 -
by KCM
Capitalised interest 33 -
------ ------
35,033 263,346
------ ------
As part of the restructuring process, Anglo American injected USD 286,892,675
contributed surplus into ZCI, the majority of which was used to repay in full
the amount owed by ZCI to ARH under the Revolving Credit Facility Agreement. On
completion of the restructuring, the ZCI Group repaid its loan to ARH and the
Revolving Credit Facility was terminated.
The loans to KCM from its minority shareholders were also extinguished as part
of the restructuring.
Report to shareholders
The year under review was one of difficulty and uncertainty for the company but
the Board is pleased to report that, as a result of a successful restructuring,
the company was able both to strengthen the Balance Sheet and set a new and more
positive course for the future.
As you will be aware, the company was faced in January of 2002 with an
announcement by Anglo American plc (Anglo American) that after less than two
years involvement as a majority shareholder, it had decided to withdraw from its
investment and that it would make no additional funding available to the
company"s subsidiary, Konkola Copper Mines plc (KCM) beyond its existing
commitments at the time of its original investment in March 2000.
Anglo American also set a deadline for the withdrawal of its management team and
certain essential services and stated that a managed closure of KCM"s operations
was its `preferred option". This would have had predictably negative and serious
consequences both for the company"s shareholders and for the economy of Zambia.
A lengthy period of negotiation followed as a result of which agreement was
reached in August 2002 with the shareholders of KCM and The Government of the
Republic of Zambia (GRZ) upon a restructuring whereby Anglo American agreed to
relinquish control of the company and to:
transfer a shareholding of 41.4% in the company without consideration to the
newly formed Copperbelt Development Foundation (CDF), whose objectives are,
inter alia, to promote diversification of the economy of the Copperbelt Province
of Zambia and to promote the social development, relieve poverty and contribute
to the provision of health, education and other social services in the
Copperbelt Province and Mumbwa District of the Central Province of Zambia, and
to
transfer the balance of its shareholding totalling 8% in the company without
consideration to an Employee Share Ownership Trust (ESOT).
In addition and as part of the overall restructuring agreement, Anglo American
undertook, inter alia, to:
facilitate the repayment of the loan extended to ZCI by the Anglo American
group;
make an exit payment of USD 30 million to KCM; and
provide USD 26.5 million as loans to KCM on favourable terms,
and at the same time:
CDC Financial Services (Mauritius) Limited (CDC) and International Finance
Corporation (IFC) agreed to exchange their respective shares in KCM for new
shares in ZCI and transfer these new ZCI shares (2.9% of ZCI) to the CDF;
the Government of the Republic of Zambia agreed to provide USD 8.5 million as a
loan to KCM;
KCM exercised an option to acquire ZCCM (SmelterCo) Limited; and
all loan amounts owed to shareholders of KCM were converted to KCM equity.
As a consequence of this restructuring, the company is now owned 47.7% by public
shareholders, 44.3% by the CDF and 8% by the ESOT. The exit of Anglo American
and the connected withdrawal of CDC and IFC as shareholders of KCM, results in
KCM now being owned 58% by the company and 42% by ZCCM Investment Holdings PLC.
The Government of the Republic of Zambia continues to retain its golden share in
KCM.
The restructuring has had the effect of considerably strengthening the company"s
Balance Sheet. KCM"s Balance Sheet was also strengthened as a result and
provided thereafter a basis for its continued operation pending the introduction
of new management, the development of a new business plan and the introduction
of additional finance.
As a further consequence of this restructuring, there has been a fundamental
reorganisation of the Board.
Mr Barrie Ireton was appointed as a director of the company on 27th September
2002 and as Chairman following the completion of the restructuring agreement. Mr
Ireton also serves as Chairman of KCM and as a representative of the United
Kingdom Department for International Development on the Board of the CDF. Mr
David Rodier, who was appointed to the Board of CDF by the International Centre
for Mining and Metallurgy, was also appointed as a director of the company and
of KCM. Mr Steven Georgala was appointed as an independent director. Mr Robin
Mills, who has now returned to Anglo American, served as a director during the
latter part of the year and was replaced by Mr Russell Alley the newly appointed
Chief Executive Officer of KCM on 1 February 2003. Russell has long experience
of the international mining business having previously served, inter alia, with
Cyprus Amax, Phelps Dodge and Southern Peru Copper.
During 2002, ZCI incurred a net loss of USD 350 million due to depressed metal
prices throughout the year and a combination of negative impairment adjustments
and restructuring costs. Annual production of copper was up over 12%. In spite
of this creditable performance in production terms, market conditions continue
to be difficult as the average price for copper was US cents 71.5 per pound
(2001: US cents 71.6 per pound).
Over recent months, the Board has undertaken a strategic review of the future
prospects for the group in order to establish a basis for continued viable
commercial operations by development of credible business plans.
In order to ameliorate the risks of current market conditions, the Board is in
the process of seeking a strategic equity partner in KCM to replace Anglo
American and to provide further technical assistance and financial support in
the longer term.
Since the completion of the restructuring just six months ago, KCM:
has undertaken a complete technical and strategic review;
is putting in place a new twenty year life of mine plan and related business
plans;
successfully recruited a new Chief Executive Officer and management team; and
has undertaken an extensive international review of potential strategic equity
partners.
In recent weeks, the Board of KCM has made good progress in its review of
potential strategic equity partners which involved discussions with 47 companies
world-wide and elicited expressions of interest from nearly 20 companies.
Following completion of a pre-qualification process, 8 companies who met all of
the criteria set were invited to participate. Bidders were subsequently involved
in an extensive due diligence process following which competing bids were
submitted to shareholders of KCM. These proposals are now under consideration by
shareholders of KCM. The company will keep shareholders informed of developments
in this connection and if proposals are forthcoming which meet the company"s
requirements and acceptable commercial terms are agreed, proposals will be
submitted to shareholders for approval. The Board is satisfied that the steps
which have been taken to restructure and stabilise the business in recent months
together with the adoption of coherent long term plans for the future of KCM and
the introduction of new management offer the prospect of a positive future for
the company.
The year ahead will not be without its challenges but the Board believes that
the measures which it has put in place will begin to show results in the year
ahead and provide a realistic platform from which the business can be developed.
The Board expects that the company"s audited financial statements will be posted
to shareholders within the next two weeks.
On behalf of the Board of Directors
R Alley S Georgala
Director Director
Luxembourg
30 April 2003
