| Mon 23 Aug 2004, 17:25 | | ZAMBIA COPPER INVESTMENTS LIMITED - VEDANTA BECOME |
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ZAMBIA COPPER INVESTMENTS LIMITED - VEDANTA BECOMES A
STRATEGIC EQUITY PARTNER IN KCM
ZAMBIA COPPER INVESTMENTS LIMITED
(Registered in Bermuda)
JSE code: ZCI
ISIN: BMG988431240
(`ZCI`)
VEDANTA BECOMES A STRATEGIC EQUITY PARTNER IN KCM
The Board of Zambian Copper Investments Limited (ZCI) is
pleased to announce that terms have been reached for the
introduction of Vedanta Resources plc (Vedanta) as a strategic
equity partner for Konkola Copper Mines plc (KCM).
Under the terms of the agreement Vedanta will subscribe for
new KCM shares and obtain a 51% interest in KCM. In return,
Vedanta will:
- inject the subscription price of US$25 million as equity
into KCM,
- pay ZCI US$23.2 million as deferred consideration payable
over 4 1/2 years,
- be obliged if the free cash flow of KCM is negative at
any time during a period of nine years after completion of the
transaction, to fund any cash shortfalls up to a cumulative
amount of US$220 million
As a result of the subscription ZCI`s stake in KCM will be
reduced from 58% to 28.4% and ZCCM Investments Holdings plc`s
stake in KCM will be reduced from 48% to 20.6%.
The transaction is subject to the approval of the shareholders
of ZCI at a general meeting of the shareholders of ZCI, which
will be convened for this purpose. The notice of general
meeting will be accompanied by a circular informing
shareholders of the details of the terms and the action
required to be taken.
Vedanta, which has also undertaken not to exit KCM prior to
1st January 2008, has agreed to be contribute towards a
feasibility study on the extension of the Konkola orebody to
be completed by 31st December 2006 and will procure such
funding as would be necessary to carry out any orebody
extension project agreed to by the KCM board.
Commenting on the formal announcement of Terms, Mr. Barrie
Ireton, Chairman of ZCI, said today:
`The proposed subscription for new shares in KCM by Vedanta
will considerably strengthen the balance sheet of KCM and the
payment of US$23.2 million directly to ZCI will significantly
improve ZCI`s financial position. The board is currently
considering how to best utilise the funds in order to develop
the full business potential of ZCI for the benefit of
shareholders.
`We have managed to secure a number of fundamental
obligations from Vedanta, our new strategic partner, which
together with the provision of a US$220 million standby cash
shortfall facility will enable us secure a long term
sustainable and profitable future for KCM.`
`This agreement which has been finalised after many months of
careful negotiation and which has been agreed to by the
Government of the Republic of Zambia represents an excellent
outcome for ZCI shareholders`.
Vedanta, an international metals and mining group, was
selected as the preferred bidder to become a strategic equity
partner because it was able to satisfy two key issues for KCM
- the need for technical expertise and management experience,
and funding support to ensure financial stability. KCM will
also be able to benefit from Vedanta`s marketing and
procurement skills acquired through its copper, zinc and
aluminium operations in India and Australia.
By retaining a 28.4% stake, ZCI shareholders will be able to
benefit from the added value that Vedanta, which already has
demonstrated its ability to turnaround under performing assets
can bring to the business. This remaining stake is subject to
a call option agreement which may be exercised by Vedanta in
circumstances where the underlying value in KCM`s future
development potential would be reflected fully in the
exerciser price
Upon Vedanta becoming the new controlling shareholder of KCM,
the Government of the Republic of Zambia has agreed the terms
of a new development agreement with KCM, which regulates the
legal and fiscal framework under which KCM operates in Zambia.
On completion of the Vedanta investment, it is intended that
the Board of KCM will be reconstituted so as to consist of
five Vedanta appointed directors, two ZCI appointed directors,
two ZCCM-IH appointed directors and one GRZ appointed
directors (with limited voting rights).
- Ends -
For further information please contact:
Alan Mole on 44-(0)207-323-9857
Or
John Kleynhans on 00- 352-402-5051
Note to Editors: English and French versions of the `Terms`
announcement can be accessed via the ZCI web site at
www.zci.lu under the heading of Press Releases.
August 23, 2004
