| Thu 1 Apr 2004, 7:36 | | AUDITED FINANCIAL RESULTS FOR DEC 03 YEAR END |
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ZAMBIA COPPER INVESTMENTS LIMITED - AUDITED CONSOLIDATED FINANCIAL RESULTS FOR
THE YEAR ENDED DECEMBER 31, 2003
ZAMBIA COPPER INVESTMENTS LIMITED
(Registered in Bermuda)
("ZCI")
JSE code: ZCI
ISIN: BMG988431240
AUDITED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2003
Consolidated statement of earnings
for the year ended December 31, 2003
expressed in thousands of US Dollars
Audited Audited
2003 2002
Turnover 356,308 394,096
Cost of sales (286,251) (344,463)
------ ------
Gross Profit 70,057 49,633
Other operating expenses (75,282) (68,986)
Depreciation (9,840) (30,272)
Impairment of tangible fixed assets - (240,369)
------ ------
Loss from operations (15,065) (289,994)
Other income 2,011 4,696
Interest income 11 17
Interest expense (1,121) (9,516)
Commitment fees on loan facility - (102)
General and administration expenses (479) (784)
Impairment of goodwill - (66,066)
Contributions to finance restructuring - 16,876
Restructuring costs - (4,687)
------ ------
Loss before taxation (14,643) (349,560)
Taxation (166) (193)
------ ------
Loss after taxation (14,809) (349,753)
Loss attributable to minority interest 6,001 -
------ ------
Net Loss (8,808) (349,753)
------ ------
per ordinary share in US cents
Headline loss before exceptional items
and amortisation and impairment of goodwill (6.98) (44.90)
Net loss (6.98) (282.94)
Consolidated statement of financial position
for the year ended December 31, 2003
expressed in thousands of US Dollars
Audited Audited
2003 2002
Fixed Assets
Intangible assets
Tangible fixed assets 116,011 71,036
Deferred Secondary Expenditure 25,771 29,159
------ ------
141,782 100,195
Investments and advances - -
------ ------
141,782 100,195
------ ------
Current assets
Stocks 87,864 88,308
Accounts receivable 46,924 46,658
Cash and short-term investments 4,761 39,126
------ ------
139,549 174,092
Current liabilities
Short term loans and bank overdrafts 25,933 5,824
Accounts payable and accrued liabilities 59,778 53,171
------ ------
85,711 58,995
------ ------
Net current assets 53,838 115,097
------ ------
Total assets less current liabilities 195,620 215,292
Long term liabilities
Long term loans (35,142) (35,033)
Provisions (89,429) (92,632)
Minority interest (29,079) (36,335)
------ ------
Net assets 41,970 51,292
------ ------
Capital and reserves
Capital 508,807 508,807
Revaluation reserves 1,220 -
Hedging reserves (1,734) -
Accumulated deficit (466,323) (457,515)
------ ------
Shareholders" equity 41,970 51,292
------ ------
Consolidated statement of changes to equity
for the year ended December 31, 2003
expressed in thousands of US Dollars
Audited
Share Contri- Accumu- Revalua- Hedging Total
capital buted lated tion reserves
surplus deficit reserve
Balance
at December
31, 2001 29,426 17,355 (107,762) - - (60,981)
Shares issued 873 - - - - 873
Contributed
on restruc-
turing - 461,153 - - - 461,153
Loss for
the year - - (349,753) - - (349,753)
----- ----- ------ ----- ---- -----
Balance at
December 31,
2002 30,299 478,508 (457,515) - - 51,292
Net loss on
Cashflow
hedges - - - - (2,989) (2,989)
Minority Interest
on Cashflow
Hedges - - - - 1,255 1,255
Revaluation
on Equity Fund
Investment - - - 1,220 - 1,220
Loss for the
year - - (8,808) - - (8,808)
----- ----- ----- ----- ---- -----
Balance at
December 31,
2003 30,299 478,508 (466,323) 1,220 (1,734) 41,970
----- ----- ----- ----- ----- -----
Consolidated statement of cash flows
for the year ended December 31, 2003
expressed in thousands of US Dollars
Audited Audited
2003 2002
Cash flow from operating activities
Cash received from customers 355,792 398,559
Cash paid to suppliers and employees (355,253) (378,425)
------ ------
Cash generated by operations 539 20,134
Interest paid (1,150) (1,343)
Income tax paid (256) (80)
------ ------
Net cash (absorbed) / generated by
operating activities (867) 18,711
------ ------
Cash flow from investing activities
Proceeds from disposal of tangible fixed assets 11 334
Capital expenditure (54,838) (58,277)
------ ------
Cash absorbed by investing activities (54,827) (57,943)
------ ------
Cash flow from financing activities
Shareholders long-term loans received - 97,813
Other loans received - 35,000
Contributions received to finance restructuring - 33,637
Short term loans repaid - (60,000)
------ ------
Cash generated by financing activities - 106,450
------ ------
Net (decrease) / increase in cash (55,694) 67,218
Net cash / (debt) at the beginning of the year 33,302 (33,916)
------ ------
Net (debt) / cash at the end of the year (22,392) 33,302
------ ------
Cash deposits and cash at bank 3,541 39,126
Short term loans and bank overdrafts (25,933) (5,824)
------ ------
Net (debt) / cash at the end of the year (22,392) 33,302
------ ------
CHAIRMAN"S REPORT
Following the successful restructuring of your company in 2002, the year under
review has been a period of consolidation and measured progress which, with the
benefit of an improvement in the world price of copper, produced markedly
improved financial results.
As we continue to build upon the foundations laid in the restructuring process
and following the strategic review which your Board undertook last year, our
focus has been upon the selection of a suitable strategic equity partner ("SEP")
in Konkola Copper Mines plc (KCM) to provide further financial support,
particularly in the form of equity, as well as technical assistance for the
longer term development of the business.
I am pleased to report that following an extensive international review of
potential strategic equity partners, eight companies completed a pre-
qualification process. Vedanta Resources PLC, (Vedanta), the holding company of
Sterlite Industries Limited, was selected as the bidder most likely to meet the
present needs and long term requirements of KCM. Vedanta was therefore awarded
preferred bidder status in May 2003 and negotiations are underway with a view to
completion in mid 2004.
Our main objective in introducing an SEP is to secure the long term economic
viability of KCM. Your Board believes this can best be achieved through the
coherent development of the wider KCM resources thereby extending the life of
the mine considerably, in line with the technical review which was undertaken by
KCM last year. The negotiations with Vedanta are directed towards securing this
key objective.
Turning to the financial results, it is gratifying to report that the level of
losses for the year were significantly reduced. The consolidated net loss for
2003 was US$8.8m compared to US$349.8m for 2002, a figure which incorporated
both negative impairment adjustments and restructuring costs.
These results reflect the improvement in the world price for copper in the
latter months of 2003, which whilst most welcome, was insufficient to fully
offset the impact of the poor price levels which pertained for the first three
quarters of the year. As a result, the average price achieved during the year
rose only to US$0.78/lb compared to US$0.715/lb in 2002. The benefit of the
higher price was also mitigated by the impact of long term KCM contracts where
prices had been negotiated earlier in the year. Cobalt prices, however, fared
rather better, improving to an average realised price of US$9.08/lb from
US$6.46/lb in 2002.
Gains in metal prices were unfortunately largely negated by a decline in
production at KCM.
KCM produced 188,000 tonnes of copper (222,000 tonnes in 2002) and 1,200 tonnes
of Cobalt (2,000 tonnes in 2002). As a significant portion of KCM"s operating
costs are a fixed nature, this decline in volume resulted in the unit cost of
production of copper increasing from US$0.75/lb in 2002 to US$0.79/lb by the end
of the year. Various factors contributed to the decline in production at KCM,
including the planned downscaling of operations at the Nchanga Open Pit, the
partial shutdown of the Nkana smelter for modernisation works, the local fuel
crisis and an acute shortage of acid supplies.
Plans have however been implemented to compensate for the decline in production
with a capital commitment of US$15 million by the KCM board for the
establishment of a sulphur burner plant at Nkana during 2004 and the revision of
estimates at the Nchanga Open Pit to provide an extension of life of that mine.
I am further happy to report that the Nkana smelter modernisation project was
completed in September 2003 and is expected to reduce copper production costs by
approximately US$0.03/lb. In addition, the Nchanga Tailings Leach Plant CCD
circuit commenced operations in November 2003 and is expected to increase leach
copper recovery by 7%.
As reported last year, Mr. Robin Mills resigned as a director of the Company on
31st January 2003 to be replaced by Mr. Russell Alley who was also appointed
Chief Executive Officer of KCM on 1st February 2003. Mr. Alley provided strong
and experienced leadership to KCM during a critical year of change.
He also made an invaluable contribution to your Board during this period. It was
therefore with considerable regret that we accepted his resignation as a
director at the end of January 2004 at which time he also relinquished his role
at KCM.
Your Board has acted diligently throughout the year to create a realistic
platform from which the business can be developed for the benefit of all the
Company"s stakeholders and in the best interests of shareholders. In the event
that negotiations with Vedanta are concluded satisfactorily your Board will
issue a circular to shareholders for approval.
The year ahead will be a crucial one for the long term success and prosperity of
both KCM and for your Company. In addition, if copper prices stabilise at or
near their present levels then the outlook for 2004 will be much improved.
In the meantime, I would like to place on record your Boards appreciation of the
support given to the industry by the Government of the Republic of Zambia, the
work being undertaken by the Copperbelt Development Foundation and the efforts
made by the unions and all the employees of KCM during what continues to be a
testing period of change.
ACCOUNTING POLICIES
The audited consolidated results for the year ended December 31, 2003 have been
prepared on a basis consistent with the prior year. The principal accounting
policies applied in the preparation of these financial statements are in
accordance with International Financial Reporting Standards. The financial
results have been audited by Deloitte & Touche (Bermuda) and their unqualified
audit opinion is available for inspection at the company"s registered office.
ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the company will be
held at the offices of Maitland Management Services SA, 6 rue Adolphe Fischer,
Luxembourg, on Wednesday May 5, 2004 at 10h00, to transact the business as
stated in the notice of annual general meeting included in the annual report.
B Ireton S Georgala
Chairman Director
Bermuda,
23 March 2004
Registered office:
Clarendon House,
2 Church Street,
Hamilton, Bermuda
Transfer Secretaries:
Computershare Limited,
70 Marshall Street,
Johannesburg, 2001
Website: www.zci.lu
Date: 01/04/2004 07:01:09 AM Produced by the JSE SENS Department
