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Zambia Copper Investments Limited - Unaudited interim report
Zambia Copper Investments Limited
(Registered in Bermuda)
(`ZCI` or `the Company`)
Share Code: ZCI
Isins: BMG988431240
UNAUDITED INTERIM REPORT
Consolidated statement of earnings
for the six months ended June 30, 2005
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2005 June 30, 2004 December 31, 2004
(As restated)
Turnover - 237,500 440,649
Cost of sales - (147,239) (300,638)
Gross Profit - 90,261 140,011
Other operating
expenses - (36,017) (62,020)
Depreciation - (5,761) (12,412)
Profit from
operations - 48,483 65,579
Other income /
(loss) - (866) 2,485
Interest income 33 5 30
Interest expense (2) (832) (1,331)
General and
administration
expenses (401) (353) (1,090)
(Loss) on sale
of investment
in subsidiary - - (19)
Income from
associated
companies 13,138 - 25,093
Exceptional item - - (9,763)
Profit before
taxation 12,768 46,437 80,984
Taxation (32) (37) (85)
Profit after
taxation 12,736 46,400 80,899
(Profit)
attributable to
minority
interest - (19,242) (23,510)
Net Profit
per ordinary
share in US
cents 12,736 27,158 57,389
Headline
earnings before
exceptional
item
and
amortisation of
goodwill 10.09 21.52 53.21
Exceptional
expenses - - (7.73)
Earnings per
share (EPS) 10.09 21.52 45.48
Number of
ordinary shares
in issue 126,197,362 126,197,362 126,197,362
Consolidated statement of financial position
as at June 30, 2005
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2005 June 30, 2004 December 31, 2004
(As restated)
Fixed assets
Tangible fixed
assets - 142,894 -
Long term
accounts
receivable 15,660 - 15,660
Investment in
associated
companies 74,421 - 61,282
Current assets
Stocks - 85,965 -
Accounts
receivable 5,226 51,424 5,220
Cash and
short-term
investments 2,570 15,083 3,120
7,796 152,472 8,340
Current
liabilities
Short term
loans and bank
overdrafts - (9,158) -
Accounts
payable and
accrued
liabilities (215) (70,613) (356)
(215) (79,771) (356)
Net current
assets 7,581 72,701 7,984
Total assets
less current
liabilities 97,662 215,595 84,926
Long term
liabilities
Long term loans - (35,195) -
Provisions - (86,953) -
Minority
interest - (38,752) -
Net assets 97,662 54,695 84,926
Capital and
reserves
Capital 334,547 508,807 334,547
Accumulated
deficit (236,885) (454,112) (249,621)
97,662 54,695 84,926
Number of
ordinary shares
in issue 126,197,362 126,197,362 126,197,362
Net asset value
(per ordinary
share) in USD
cents 77.39 43.34 67.30
Consolidated statement of changes to equity
for the six months ended June 30, 2005
expressed in thousands of US Dollars
Share Contributed Accumulated
capital surplus deficit
Balance at December 31, 2003 (As
restated) 30,299 478,508 (481,270)
Released on maturity of Cashflow
hedges - - -
Released Minority Interest on
maturity of Cashflow Hedges - - -
Released on disposal of Equity Fund
Investment - - -
Change in scope of consolidation - (174,260) 174,260
Profit for the year - - 57,389
Balance at December 31, 2004 30,299 304,248 (249,621)
Profit for the period - - 12,736
Balance at June 30, 2005 30,299 304,248 (236,885)
Revaluation Hedging
reserve reserves Total
Balance at December 31, 2003 (As
restated) 1,220 (1,734) 27,023
Released on maturity of Cashflow hedges - 2,989 2,989
Released Minority Interest on maturity
of Cashflow Hedges - (1,255) (1,255)
Released on disposal of Equity Fund
Investment (1,220) - (1,220)
Change in scope of consolidation - - -
Profit for the year - - 57,389
Balance at December 31, 2004 - - 84,926
Profit for the period - - 12,736
Balance at June 30, 2005 - - 97,662
Consolidated statement of cash flow
for the six months ended June 30, 2005
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2005 June 30, 2004 December 31, 2004
(As restated)
Cash flow from
operating
activities
Cash received
from customers - 234,935 425,201
Cash paid to
suppliers and
employees (543) (181,583) (325,967)
Cash generated
/ (utilized) by
operations (543) 53,352 99,234
Interest
received 27 5 30
Interest paid (2) (780) (1,020)
Income tax paid (32) (41) (121)
Net cash
generated /
(utilized) by
operating
activities (550) 52,536 98,123
Cash flow from
investing
activities
Proceeds from
sale of short
term investment - 981 981
Proceeds from
partial
disposal of
investment in
subsidiary - - 2,320
Purchase of
tangible fixed
assets - (32,644) (46,060)
Cash absorbed
by investing
activities - (31,663) (42,759)
Cash flow from
financing
activities
Lease financing
received - 7,775 -
Lease financing
paid - (331) (3,526)
Cash generated
by financing
activities - 7,444 -
Change in scope
of
consolidation - - (26,326)
Net (decrease)
/ increase in
cash (550) 28,317 25,512
Net cash /
(debt) at the
beginning of
the year 3,120 (22,392) (22,392)
Net cash at the
end of the year 2,570 5,925 3,120
Cash deposits
and cash at
bank 2,570 15,083 3,120
Short term
loans and bank
overdraft -
unsecured - (9,158) -
Net cash at the
end of the year 2,570 5,925 3,120
ACCOUNTING POLICIES
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 except that during the year ended
31 December 2004, the Company changed its accounting policy in respect of
secondary development expenditure (details of which can be found in the annual
report for the year ended 31 December 2004 as posted to shareholders on 26
August 2005). Previously, the cost of developing access to mine ore bodies
during the commercial production stage that were deemed significant and
identified as benefiting future years were deferred and expensed in the year
when the related production was achieved. Subsequently, these costs were
expensed as incurred. Also, the consolidated financial statements incorporated
the financial results of the majority owned subsidiary KCM up to 31 October
2004. Following the change in majority ownership of KCM with effect from
31 October 2004, the results of KCM are included according to the equity
accounting method for associated companies.
CHAIRMAN`S STATEMENT
It is with great pleasure, after the trying period of the past few months, that
I present ZCI`s interim results for the 6 months ended 30 June 2005. This is
the first full accounting period, which reflects ZCI`s changed status from
majority to minority shareholder of Konkola Copper Mines plc (`KCM`).
Shareholders will note that the Company`s investment in KCM remains profitable,
returning a net profit of USD 12,7 million for the period. This profit is due
to consistently high copper prices in the first six months of the year. The
Board of ZCI is however concerned that production levels at KCM remain
disappointingly low and accordingly KCM has not been able to maximise its
profitability by taking advantage of the currently strong copper prices. KCM`s
low copper production levels, combined with low acid production which has
forced KCM to purchase acid and therefore increase its operating costs, has
prompted me to write to both KCM and Vedanta Resources plc (`Vedanta`),
recording ZCI`s concerns and requesting an explanation for the production
shortfall and stressing the importance that every effort be made to increase
production levels at KCM to the targeted levels.
ZCI has entered an extremely important phase in its history. As was mentioned
in an announcement on 2 September 2005, Vedanta has given notice that it is
exercising its call option in terms of the Vedanta Call Option Deed (`the
Deed`). Shareholders will recall that the Deed gives Vedanta the right to
purchase the remaining 28.4% of KCM shares held by ZCI through its wholly owned
subsidiary, ZCI Holdings S.A. The key terms of the call option were fully
described in the circular posted to shareholders on 11 October 2004, regarding
the recommended introduction of Vedanta as a strategic equity partner in KCM,
and were repeated in the 2004 ZCI annual report.
The terms of the Deed stipulate that the parties shall have an initial period
within which to attempt to reach agreement on the option exercise price. In the
event that the parties are unable to reach agreement on the option exercise
price within this period, the price shall be determined by an independent
investment bank to be appointed either by agreement between Vedanta and ZCI, or
in the absence of such agreement, by the auditors of KCM.
In the event that Vedanta is unwilling to pay the option exercise price, it
shall not be required to proceed with the associated purchase of ZCI`s KCM
shares. The Deed requires however that ZCI accept the option exercise price as
determined by the independent investment bank.
ZCI and Vedanta were unable to reach agreement on the option exercise price
within the initial 10 business day period prescribed in the Deed and the
parties are now involved in the process of selecting and appointing a
mutually-acceptable independent investment bank, whose mandate will be to
determine the option exercise price. The ZCI Board undertakes to provide
regular updates to shareholders on all significant developments as and when
they occur.
Jean-Pierre Rozan
Chairman
Bermuda 23 September 2005
Date: 23/09/2005 10:00:15 AM
Produced by the JSE SENS Department
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