| Fri 10 Sep 2004, 9:06 | | Interim Report |
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Zambia Copper Investments Limited - Unaudited Interim Report
ZAMBIA COPPER INVESTMENTS LIMITED
(Registered in Bermuda)
(Registration number 1970/000023/01)
(`ZCI` or `the Company`)
UNAUDITED INTERIM REPORT
Consolidated statement of earnings
for the six months ended June 30, 2004
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
June 30 June 30 December 31
2004 2003 2003
Turnover 237,500 177,569 356,308
Cost of sales (141,489) (157,004) (286,251)
Gross Profit 96,011 20,565 70,057
Other operating expenses (36,017) (34,357) (75,282)
Depreciation (5,761) (8,186) (9,840)
Profit/(Loss) from operations 54,233 (21,978) (15,065)
Other income/(loss) (866) 647 2,011
Interest income 5 7 11
Interest expense (832) (596) (1,121)
General and administration
expenses (353) (135) (479)
Profit/(Loss) before taxation 52,187 (22,055) (14,643)
Taxation (37) (139) (166)
Profit/(Loss) after taxation 52,150 (22,194) (14,809)
(Profit)/Loss attributable to
minority interest (21,657) 9,256 6,001
Net Profit/(Loss) 30,493 (12,938) (8,808)
per ordinary share in US cents
Headline profit/loss before
exceptional item and
amortisation
of goodwill 24.16 (10.25) (6.98)
Exceptional income (none) - - -
Exceptional expenses (none) - - -
Net profit/(loss) 24.16 (10.25) (6.98)
Number of ordinary shares in
issue 126,197,362 126,197,362 126,197,362
Consolidated statement of financial position
as at June 30, 2004
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
June 30 June 30 December 31
2004 2003 2003
Fixed assets
Tangible fixed assets 142,894 83,102 116,011
Deferred Secondary Expenditure 31,521 28,029 25,771
174,415 111,131 141,782
Current assets
Stocks 85,965 75,891 87,648
Accounts receivable 51,424 43,033 46,924
Cash and short-term investments 15,083 17,803 4,761
152,472 136,727 139,549
Current liabilities
Short term loans and
bank overdrafts (9,158) (13,805) (25,933)
Accounts payable and
accrued liabilities (70,613) (42,684) (59,778)
(79,771) (56,489) (85,711)
Net current assets 72,701 80,238 53,838
Total assets less
current liabilities 247,116 191,369 195,620
Long term liabilities
Long term loans (35,195) (35,093) (35,142)
Provisions (86,953) (90,843) (89,429)
Minority interest (51,991) (27,079) (29,079)
Net assets 72,977 38,354 41,970
Capital and reserves
Capital 508,807 508,807 508,807
Revaluation reserves - - 1,220
Hedging reserves - - (1,734)
Accumulated deficit (435,830) (470,453) (466,323)
72,977 38,354 41,970
Number of ordinary shares in
issue 126,197,362 126,197,362 126,197,362
Net asset value
(per ordinary share) in USD
cents 57.83 30.39 33.26
Consolidated statement of changes to equity
for the six months ended June 30, 2004
expressed in thousands of US Dollars
Contri- Accum- Reval-
Share buted ulated uation Hedging
capital surplus deficit reserve reserves Total
Balance at
December 31, 2002 30,299 478,508 (457,515) - - 51,292
Net loss on
Cash flow hedges - - - - (2,989) (2,989)
Minority Interest
on Cash flow 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
Released on
maturity
of Cash flow hedges - - - - 2,989 2,989
Released Minority
Interest on maturity
of Cash flow Hedges - - - - (1,255) (1,255)
Released on disposal
of Equity Fund
Investment - - - (1,220) - (1,220)
Profit for
the period - - 30,493 - - 30,493
Balance at
June 30, 2004 30,299 478,508 (435,830) - - 72,977
Consolidated statement of cash flow
for the six months ended June 30, 2004
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
June 30 June 30 December 31
2004 2003 2003
Cash flow from operating
activities
Cash received from customers 234,935 180,188 355,792
Cash paid to suppliers
and employees (181,583) (188,358) (355,253)
Cash generated/(utilised) by
operations 53,352 (8,170) 539
Interest received 5 7 -
Interest paid (780) (692) (1,150)
Income tax paid (41) (170) (256)
Net cash generated/(utilised)
by operating activities 52,536 (9,025) (867)
Cash flow from investing
activities
Proceeds from disposal of
tangible fixed assets - 3 11
Proceeds from sale of short
term investment 981 - -
Capital expenditure (32,644) (20,282) (54,838)
Cash absorbed by
investing activities (31,663) (20,279) (54,827)
Cash flow from
financing activities
Lease financing received 7,775 - -
Lease financing repaid (331) - -
Cash generated by
financing activities 7,444 - -
Net increase/(decrease) in cash 28,317 (29,304) (55,694)
Net cash/(debt) at the beginning
of the year (22,392) 33,302 33,302
Net cash/(debt) at the
end of the year 5,925 3,998 (22,392)
Cash deposits and cash at bank 15,083 17,803 3,541
Short term loans and bank
overdraft - unsecured (9,158) (13,805) (25,933)
Net cash/(debt) at the end
of the year 5,925 3,998 (22,392)
The financial statements were prepared in accordance with International
Financial Reporting Standards and in terms of the same accounting policies
applied during the previous financial period.
CHAIRMAN`S STATEMENT
As you will be aware, your Board together with the Board of KCM and KCM`s other
shareholders, namely the Government of the Republic of Zambia (GRZ) and ZCCM
Investments Holdings plc (ZCCM-IH), have been actively involved in the search
for a strategic equity partner for our subsidiary, Konkola Copper Mines (`KCM`).
The purpose of this was to introduce a partner capable of providing strong
technical assistance and financial support to ensure KCM`s long-term future.
After extensive and careful negotiations, I am pleased to tell you that
agreement has been reached on the terms of the proposed partnership with Vedanta
Resources plc.
The transaction is subject to the approval of the shareholders of ZCI at a
general meeting of the Company, which will be convened for this purpose.
A circular informing shareholders of the details of the terms and the actions
required to be taken, will accompany the notice of general meeting which will be
circulated in due course.
Under the terms of the agreement Vedanta would subscribe for new KCM shares and
obtain a 51% interest in KCM. In return, Vedanta would inject US$25 million
into KCM, pay ZCI US$23.2 million as deferred consideration payable over four
years and be obliged, should the free cash flow of KCM be 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 would be reduced from 58% to 28.4% and ZCCM
Investments Holdings plc`s stake in KCM would be reduced from 48% to 20.6%.
The proposed subscription for new shares in KCM by Vedanta would considerably
strengthen the balance sheet of KCM and the payment of US$23.2 million directly
to ZCI would significantly improve ZCI`s financial position.
By retaining a 28.4% stake, ZCI shareholders would benefit from the added value
that Vedanta would bring. Vedanta has previously demonstrated its ability to
turn round under-performing assets. The 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 exercise price.
On completion of the Vedanta agreement, it is intended that the Board of KCM
will be reconstituted so as to comprise five Vedanta appointed directors, two
ZCI appointed directors, two ZCCM-IH appointed directors and one GRZ appointed
director (with limited voting rights).
The financial effects of the Vedanta investment are in the process of being
finalised. Full disclosure of the financial effects, including the effect on net
asset value per share, net tangible asset value per share and headline loss per
share, will be published shortly. Accordingly, shareholders are advised to
continue to exercise caution when dealing in the securities of the company until
such time as a further announcement is made containing the financial effects of
the Vedanta investment.
I turn now to the Company`s results for the period ended 30 June 2004.
Due largely to the consistently strong demand for copper and the related higher
price levels when compared to the same period last year, the Company was able to
record a consolidated net profit of US$30.5 million. The average price for
copper was US cents 121.1 per pound (December 2003: US cents 78 per pound).
Cobalt sales for the period were at 48 tonnes at a realized price of US$25.60
per pound. However, production of copper at KCM remained relatively low at
92,566 tonnes. This was due to a number of factors including a compressor
problem at KCM during April 2004, the mining of significant ore tonnages at the
Nchanga Open Pit mine that were not treatable by either the concentrator or the
Nchanga Tailings Leach Plant (NTLP) in May 2004 and, low acid soluble copper
feed into the NTLP in the first half of June 2004.
As always, the directors of ZCI wish to record their appreciation of the efforts
made by all employees of KCM during this busy period, and at a time of great
change and uncertainty for the Company, but which as a result of this new
strategic partnership, promises to be the foundation for renewed stability,
development and progress for the years ahead.
B Ireton Bermuda Registered Office
Chairman September 09, 2004 Clarendon House
2, Church Street
Hamilton, Bermuda
Website: www.zci.lu
