The financial period 1 July 2008 to 30 June 2009 was a period significantly affected by the world economic downturn. During this period, the group focused on ways to mitigate the effects of the harsh business environment and remaining afloat.

Financial Performance and strategic investments

The effects of the Global Financial Crisis (GFC) continued to be experienced during the 2009 financial year. For the Company, this manifested in significant reductions in copper prices, significant scaling down of operations as well as weakening of the Zambian kwacha (the exchange rate moved from K3,193.33 per US$1 at beginning of the financial year, 1 July 2008, to K5,180.77 per US$1 at the end, 30 June 2009). The overall impact of all this was the wiping out of the Company’s profits in the 2009 financial year.

For the financial year 1 July 2008 to 30 June 2009, even though sales grew to K145 billion from K119 billion in the previous year, representing sales growth of 22% on account of the results of Ndola Lime Company Limited, the Company recorded an operating loss of K141, 758 million compared to K136, 825 million for the previous year (1 July 2007 to 30 June 2008). Copper prices dropped significantly from an average of US$3.30 per lb to US$1.64 per lb during the first six months of the year. Consequently, most of the investee companies cut down production as a measure to forestall loss of value. Some investee companies, including Chambishi Metals Plc, Luanshya Copper Mines Plc and Albidon Zambia Limited (Albidon) were placed under care and maintenance. Copperbelt Energy Corporation Plc (CEC), which is the only non-mining company in ZCCM-IH Plc’s portfolio of investments and supplies power to the mining companies, was also affected by the GFC due to reduced demand from its customers (the mining companies).

The weakening Zambian Kwacha, caused the Group’s Administration expenses to increase by 129% as a result of an impairment loss on receivables and also for the group to record exchange losses of K463, 521 million.

As a consequence of these disruptive economic and business circumstances the Company reported a loss for the year of K489, 853 million compared to a profit of K492, 919 million in 2008.

Despite these challenges the Group remained resolute and adopted measures to weather the storm. With regard to Albidon, the Jinchuan Group (Jinchuan) offered to fund the company appropriately for the long term benefit of all shareholders until the economic environment improved making it feasible to restart operations. Jinchuan therefore obtained the right to restructure the company’s Board and management upon drawdown of the convertible note facility. In the interim, the trading of Albidon Limited shares remained suspended.

In line with the Company’s strategic intent of diversifying its investments into other mining activities other than base metals, the Company continued to focus on diversifying its investments portfolio during the financial year under review.

Negotiations with the preferred bidder for the strategic equity partner in Maamba Collieries Limited reached an advanced stage during the period under review. Securing a strategic equity partner to enable the company resource to be exploited as feed stock for the substantially higher operating margin thermal power generation remained a fundamental consideration to the viability of the coal mine as a commercial entity.

On a brighter note, one of the latest additions to ZCCM-IH Plc’s investment portfolio, Lumwana Copper Mine through Equinox Minerals Limited, commenced commercial production on 1 April 2009. Prior to achieving commercial production, the majority of costs incurred including debt financing costs were capitalised as mine development costs.

Capital Market

The closing share price for the year was K27,000, a decrease of K1,000 from the price at the beginning of the year of K28,000 The market capitalisation as at 30 June 2009 was K 2,411 billion.

Outlook

The outlook for the future is pointing to the easing of the global financial crisis and a recovery of the global economy. This will impact positively on the mining sector and other sectors of the economy. ZCCM-IH will continue to leverage value from its existing investments as well as pursuing value adding opportunities in other sectors of the Zambian economy. ZCCM-IH expects associate mining companies to consistently declare and remit dividends in light of the improving global economic and financial environment. For CEC, demand is expected to improve in the near future as commodity prices start to increase. In particular, operations at Luanshya Copper Mines Plc and Chambishi Metals Plc are likely to resume during the second half of the year 2009. Other mines whose operations had slowed down as a result of the slump in copper and cobalt prices, which have since improved, are expected to increase their demand for energy as well.

Directorate

During the year, Mrs. L I Ng’andwe retired from the Board of Directors in March 2009 and Dr. S M Bwalya was appointed in her stead in the same month.

Appreciation

On behalf of the Board, I would like to thank the Management and Staff of ZCCM-IH and those from the investee companies for their efforts and contributions during the past year. The Group is well positioned to fully exploit the opportunities in the years ahead and has capacity to manage the challenges.

A J Lungu

Chairman of the Board