Annual Report

CHAIRMAN’S STATEMENT

I am delighted to have been appointed Chairman of the ZCCM-IH Board from 6 March 2018. I am particularly happy to serve on the ZCCM-IH Board which comprises very qualified and dedicated professionals whose contribution to the Company is highly valued.

I am delighted to be of service to ZCCM-IH in my capacity as Chairman. ZCCM-IH has a rich history particularly in the development of the mining sector in Zambia and I am glad to be part of those who will contribute to the transformation of the Company for the benefit of our Shareholders and all key stakeholders.

On behalf of the Board of Directors of ZCCM-IH, I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCM-IH) as a Company and that of its investee companies during the financial year ended 31 March 2018.

The year saw an improvement and stability in copper prices which in turn resulted in improved performance in some of our mining investee companies. The increase in demand for copper on the global market has resulted in positive developments in the mining sector in general. The sustained growth in copper demand is expected to continue as copper remains essential in many economic activities more so in the wake of modern technology which requires increased usage of copper.

Zambia is poised to benefit from the global upswing in demand for copper and other minerals. ZCCM-IH is now more than ever before strategically positioned to extract maximum value from its investments in mining for the benefit of its shareholders and all stakeholders. While profitability for the Company has dropped due to low turnover from the Ndola Lime Company Limited’s (Ndola Lime) operation, the Group’s share of profit of equity accounted investees has increased to 465% from a loss of K 189 million in 2017 to a profit of K 689 million in 2018. This movement signifies improvements in the mining operations following increases in copper prices and production.

Global economy

According to the International Monetary Fund (IMF) Report for 2018, global economic activity continued to firm up as was predicted. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016. Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent. The key factors contributing to the growth include increased economic activity in most industrialised countries and stabilisation of oil prices resulting in predictability in production costs. The copper price recovery that emerged from mid-2016 has started to encourage project development. The demand is mainly boosted by high consumption in China and other major copper consumers. The high demand has in turn resulted in mine developments and expansion programs in copper producing countries including Zambia and the Democratic Republic of Congo (DRC). Global annual copper production increased marginally by about 2% to around 19.7 million tonnes as at December 2017. London Metal Exchange – 3-month copper prices increased by about 20%, from US$ 5,676 per tonne at the end of December 2016 to US$6,839 per tonne at the end of December 2017.

Zambian economy

The Zambian economy continued on a recovery path following improvements in the energy supply to key sectors of the economy as well as copper prices. The improvements in copper prices resulted in positive growth in the mining sector with the GDP expected to rise to 5% at the end of 2018 from 3.4% recorded in 2017.

Financial Performance

The Group recorded turnover of K61 million (2017: K95 million) and operating profit of K47 million (2017: profit: K848 million). The low turnover is attributed to low sales at Ndola Lime Company Limited due to increased competition in the lime market as well as technical challenges which negatively affected the production and sale of lime and related products. A 95 percent decline in operating profit is owing to decrease in copper price participation income from K719 million in the preceding year to K360 million for the year. Further, the continuous loss making position of Ndola Lime Company Limited and the impairment of investment in Konkola Copper Mines Plc amounting to K167 million and K42 million respectively contributed to the decrease in operating profit.

Subsequent to the year end, two (2) former employees of Ndola Lime Company Limited (NLC) instituted proceedings to the High Court of Zambia to place NLC under supervision pursuant to the Corporate Insolvency Act No. 9 of 2017. By order of the Court dated 5th October 2018, the Official Receiver was appointed as Interim Business Administrator of NLC. The application for the Business Rescue Proceedings will be heard in January 2019 at which all affected persons (including ZCCM-IH) will be heard. However, ZCCM-IH remains committed to the affairs of NLC and will continue to pursue all activities that better the Company and ZCCM-IH’s investments.

The Group reported a profit before tax of K603 million (2017: K 1,244 million) and a profit for the year of K843 million (2017: K729 million). The improvement in the profitability is largely attributed to improved performance in investee companies due to continued upsurge in copper prices during the year. The Group’s share of profit of equity accounted investees was K689 million (2017: loss of K189 million).

The Group’s retained earnings as at 31 March 2018 were positive at K1,779 million (2017: K 891 million). The increase in retained earnings is attributed to profit recorded at Group level of K843 million (2017:K729 million). The Company’s retained earnings increased by 60 percent to K1,166 million (2016: K731 million) on account of profit recorded at company level.

Fundamental Strategic Change

ZCCM-IH has undertaken a strategic evolution as a response to the ever changing and competitive operating environment, and has developed a new Strategic Plan (SP) for the period 2018-2023 themed ‘Taking Giant Steps’. In it is a transformational agenda which permeates through all operational landmarks with a view to sustain growth and value extraction for the benefit of its shareholders.

We have chosen to transition the Company away from the traditional dependence on dividend income and have identified more forward-looking strategies which will improve revenue generation with predictability. These strategies will not only improve the Company’s cash position but will also facilitate organic growth as the Company will be better able to finance its investment projects.

Energy Sector

Following the achievement of the commercial operating date in August 2017 of the first phase of the Maamba Collieries Limited (MCL) Thermal Power Plant (TPP), MCL has recorded positive growth with an impressive performance resulting in increased revenue and a profit after tax of K148.87 million following its ability to achieve a commercial operating date within a year of commissioning.

Manufacturing Sector

As part of ZCCM-IH’s strategy to diversify its portfolio, the Company entered into a Joint Venture partnership with Sinoconst for purposes of setting up a cement manufacturing company. Subsequently, Central African Cement Company Limited (CAC) was incorporated. ZCCM-IH owns 49% of CAC while Sinoconst owns the remaining 51%. CACs operations will be located in Masaiti district in the Copperbelt Province of Zambia.

The planned production capacity of the Plant will be 5000 tonnes per day of Clinker with a two (2) by twenty five (25) MW Thermal Power Plant. It is expected that the Plant will take 3 years to construct and employ over 1000 people during construction. Once completed, the plant is expected to employ about 400 people.

Investment in the Financial Services Sector

Subsquent to the financial year end and following closure of the mandatory offer on 30 April 2018, ZCCM-IH now holds 71.4 % shares in Investrust Bank Plc from 45.4%. ZCCM-IH will implement a robust recapitalisation plan and identify equity partners to make the bank more competitive.

Capital market

The ZCCM-IH share price on the Lusaka Securities Exchange closed the year at K38 (2017: K38). The market capitalisation as at 31 March 2018 remained unchanged at K6, 110 million (2017: K6, 110 million). The stagnation of the share price is indicative of low liquidity of the shares.

Outlook

Copper prices have moved to attractive levels which in turn will improve investment in the mining sector. With improvements in the supply of power to mining companies, there has been stability in the production. As a result of these factors, it is estimated that production will increase hitting an all-time high of 1 million tonnes from around 755,000 metric tonnes recorded in 2017.

ZCCM-IH will take advantage of these favourable performance indicators of the mining sector and strive to achieve its objectives by realigning its operations and improve its income streams through an equitable participation in top-line revenues.

Appreciation

I express sincere gratitude to my fellow Board members, Management and Staff of ZCCM-IH for their dedication and commitment during the past year. I further extend my gratitude to the shareholders and investee companies for their efforts, cooperation and contributions during the year.

Mr Eric S Silwamba, SC

Board Chairperson

CHAIRMAN’S STATEMENT

On behalf of the Board of Directors of ZCCM-IH, I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCM-IH) as a Company and that of its investee companies during the financial year ended 31 March 2017.

Mining will continue to be Zambia’s main economic driver for the foreseeable future and, as such, ZCCM-IH will continue to leverage its unique position as a key player in the mining sector to create value for its shareholders. In recent years however, the mining industry by and large saw a dip in growth as a result of sustained low copper prices due to low demand by high copper consumer countries. Furthermore, the first half of 2016 saw a continued deficit in energy, which resulted in low production and productivity hence reduced revenues for most mining companies. The lower than expected performance in the mining sector resulted in reduced revenues for the Company and Group.

The last quarter of 2016 and the first quarter of 2017 saw an improvement in copper production for most major mining companies due to stability in energy supply and an improvement in copper prices on the world market.

Growth in the mining sector is expected to continue as major economies mainly the United States of America and China embark on expansion programs in the manufacturing and infrastructure development sectors. ZCCM-IH is poised to take advantage of the expected buoyance of the mining and related sectors to increase shareholder value.

Global economy

According to the International Monetary Fund (IMF) Report for 2016, the global economy grew by 3.1% reflecting a more subdued growth in advanced economies due to geopolitical reasons mainly in Europe and weaker than expected growth in economic activity in the United States of America. The IMF predicted a recovery of the global economy on the strength of the long awaited recovery in manufacturing and trade with growth estimated to increase marginally to 3.5% at the end of 2017. This growth will further be seen in emerging and developing economies as a result of a gradual improvement in commodity prices. Furthermore, growth is expected to remain strong in China and many other commodity importers.

Growth in Sub-Saharan Africa remained fragile in 2016 owing to lower than expected demand for commodity prices globally. Following the rebound of some commodity prices particularly copper and other minerals, growth is expected to improve marginally to between 5 and 7.5%.

Global annual copper production increased marginally by about 4% to 19.4 million tonnes as at December 2016. London Metal Exchange (LME copper prices increased by 17%, from US$ 4,710 per tonne at the end of December 2015 to US$5,500 per tonne at the end of December 2016. The prices have continued to increase steadily since December 2016.

Zambian Economy

The Zambian economy continued to be affected by two major factors, namely declining copper prices and the energy deficit due to low water levels. Other factors, such as high inflation, negatively impacted the growth of the economy. While copper production was up by around 8.2% to 575,780 metric tonnes in the first nine months of 2016, the mining sector did not fully realise its potential owing to low copper prices and high cost of production as a result of energy deficits. By the end of 2016, the economy had grown to 3% against a target of 5%. As a consequence of these factors, the economy is expected to grow marginally to 3.4% in 2017.

Financial Performance

The Group recorded turnover of K 95 million (2016: K199 million) and operating profit of K848 million (2016:loss of K 858 million). The low turnover is attributed to low sales recorded for lime and lime products at Ndola Lime Company Limited. The Group reported a profit before tax of K1,244 million (2016: loss of K 2,865 million). The Group recorded a profit after tax of K 729 million (2016: loss of K 2,912 million). The Group’s share of loss of equity accounted investees’ losses was K 189 million (2016: loss of K 2,210 million). The Group’s retained earnings as at 31 March 2017 were positive at K891 million (2016: K 147 million). The increase in retained earnings is attributed to profit recorded at group level of K 729 million (2016: loss of K 2,912 million). The Company’s retained earnings increased by 740 % to K 731 million (2016: K 87 million) owing to profit recorded at Company level.

Strategic and New Investments

Recapitalisation of Ndola Lime Company Limited (NLC)

Further to the hot commissioning phase of the Recapitalisation Project which commenced in prior the year, NLC continued to optimise the performance of the Vertical Kiln (VK2). The project was met with a series of technical hurdles which affected the performance the company.

The Board is undertaking a review of the entire operation of the company to determine an appropriate option that will result in improving the operations of NLC as well the performance of the Group.

Energy Sector

ZCCM-IH has continued to explore opportunities in the energy sector. With the commissioning of the first phase of the Maamba Collieries Limited (MCL) Thermal Power Plant (TPP), plans are underway to explore investment in the second phase of the TPP.

Manufacturing Sector

As part of its diversified program, ZCCM-IH is looking at value addition options for the limestone deposit in Ndola by developing a cement manufacturing plant. ZCCM-IH will develop the cement plant with the support of strategic and equity partners.

Capital Market

The ZCCM-IH share price on the Lusaka Securities Exchange closed the year at K38 (2016: K40). The market capitalisation as at 31 March 2017 reduced to K6,110 million (2016: K6,431 million). The marginal reduction in the share price is indicative of the general stock market performance, which has experienced low liquidity and hence low share transactions.

Outlook

The Zambian economy is expected to continue on a recovery path and maintain a steady growth of around 3.4 percent in 2017. This growth is hinged on key sector policy interventions in agriculture, tourism, industrialisation and mining within a diversification framework. The move to more cost reflective tariffs is expected to improve investment in the energy sector which will help drive growth in the key sectors of the economy.

Copper prices are expected to increase steadily premised on increased demand from high copper consumer countries. ZCCM-IH’s performance is expected to improve as a result of the improvement in copper prices which drive the performance of the mining portfolio. Furthermore, as a result of good rains experienced during the 2016/17 season, the generation capacity of hydroelectricity is expected to improve, thereby stabilising energy supply.

The recovery in copper prices as well as stability in energy supply will contribute to the growth in copper production, which in turn will lead to growth in copper exports. The expected growth is further confirmed by additional investments of over $ 2 billion over the next several years announced by major multinational investors in the mining sector of Zambia.

In response to the positive outlook, ZCCM-IH will implement a new Strategic Plan hinged on expansion of its investment footprint in various sectors of the economy including mining with a focus on industrialisation, energy, agriculture, manufacturing, real estate and financial services.

Appreciation

I express sincere gratitude to my fellow Board members, the immediate past Board members, the Management and Staff of ZCCM-IH for their dedication and commitment during the past year. I again extend my gratitude to the shareholders and investee companies for their efforts and contributions during the year.

Mr. E S Silwamba, SC

Chairman

CHAIRMAN’S STATEMENT

On behalf of the Board of Directors, I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCM-IH) as a Company and that of its investee companies during the financial year ended 31 March 2016.

As ZCCM-IH’s investment is largely in the mining sector, the Company experienced low to static growth owing to the challenges faced by the mining sector in general. The mining sector was faced with a significant energy deficit which affected production negatively and consequently led to a reduction in revenues. The situation was further compounded by low commodity prices particularly copper due to increased supply on the market and reduced demand mainly in high copper consumer countries such as China. As a result of the foregoing, investment in the mining sector was reduced and mainly concentrated on consolidation of already existing operations.

The lower than expected performance in the mining sector resulted in reduced revenues and impairment of the value of certain investee companies for the Company and consequently a loss at Group level.

Global economy

The International Monetary Fund (IMF) World Economic Outlook estimated global economic growth to slow to 3.1% in 2016, reflecting a more subdued growth in advanced economies due to geopolitical reasons mainly in Europe and weaker than expected growth economic activity in the United States of America. It is further projected that the global economy will marginally increase to around 3.4% in 2017.

Regarding the prospects of Sub-Saharan Africa, the IMF projected a sharp slowdown in growth generally due to a reduction in demand for commodities on which the Sub-Saharan African economies rely. Growth for the region as a whole fell to 3.5 percent in 2015 and remained within the same range as at 31 March 2016. This figure has been the lowest level in some 15 years, and may remain unchanged in 2017.

Global annual copper production remained constant at around 18.7 million tonnes as at December 2015. LME copper prices declined by 26%, from US$ 6,359 per tonne at the end of December 2014 to US$4,710 per tonne at the end of December 2015.

The decline in copper prices as well as the challenges in the energy sector resulted in a lower than expected growth in the Zambian economy of just above 3 percent in 2016 (growth was projected to be around 5 percent). Other sectors such as agriculture could not provide the needed buffer as severe weather conditions impacted negatively on the sector resulting in reduced production of commercial crops. The manufacturing sector was equally negatively affected by the energy deficit and unstable exchange rates (depreciation of the kwacha) which increased the cost of production and consequently reduced demand for locally manufactured goods

Financial performance

The Group reported a loss before tax of K 2,865 million (2015: K 1,329 million). The Group recorded a loss after tax of K 2,912 million (2015: K 987 million). The Group’s share of loss of equity accounted investees’ was K 2,210 million (2015: Profit of K 281 million).The Group recorded turnover of K 199 million (2015: K242 million) and operating loss of K 858 million (2015: K2, 179 million). The Group’s retained earnings as at 31 March 2016 were positive at K 147 million (2015: K 3,058 million). The reduction in retained earnings is attributed to an increase in the share of losses as a result of operating losses reported by the investee companies mainly: Kansanshi Mining Plc, Konkola Copper Mines Plc and Copperbelt Energy Corporation Plc. The Company’s retained earnings were K87 million (2015: K 512 million)

Strategic and new investments

Recapitalisation of Ndola Lime Company (NLC)

The recapitalisation project at NLC continued. ZCCM-IH provided an additional shareholder loan of K28.7 million (US$ 2.82 million) for the Ndola Lime Recapitalisation Project. The Second Vertical Kiln (“VK-2”) is still undergoing hot commissioning. Furthermore, there are plans to restructure the operations of NLC to improve its performance in response to the changing market environment.

Real Estate

As part of its diversification program, ZCCM-IH has acquired the Trinity Park offices located along Alick Nkhata road. The premises consist of three identical buildings suitable for up-market office accommodation. ZCCM-IH offices will move to one of the buildings while two-thirds of the buildings have been leased out to other tenants. ZCCM-IH will continue to seek for opportunities in this sector as it has huge and varied potential.

GRZ Share Sell Down and Transfer of Shares

During the presentation of the 2015 National Budget, the Minister of Finance directed the Securities and Exchange Commission (SEC) to ensure that all listed Companies on the Lusaka Stock Exchange (LuSE) complied with the LuSE minimum free (public) float requirements of 25% of the shares. In this regard, the Finance Minister announced GRZ’s intention to reduce its shareholding in ZCCM-IH from 87.5% to 60.3% by selling some of its shares. Subsequently, GRZ transferred its 60.3% to the Industrial Development Corporation (IDC) while the 27.2% were offered to the public through a Preferential Secondary Market Offer.

The objectives of the Preferential Secondary Market Offer were as follows:

i) to increase economic participation of Zambian citizens in economic development through a Preferential Secondary Market Offer of shares to Zambian citizens;

ii) to ensure a broad distribution of shares in order to increase the liquidity and trading of ZCCM-IH shares on the LuSE;

iii) to comply with LuSE Listings Requirements with regard to the minimum percentage of shareholding available to the public;

iv) implement GRZ’s initial intention of the second phase of privatisation, specifically the sale of part of its shares in ZCCM-IH; and

v) to raise revenue for the Treasury through the sale of GRZ’s shares in ZCCM-IH.

The results of the share sell down was an under-subscription due to low liquidity in the market. Generally, the stock market experienced low growth as evidenced from the share price index on the LuSE.

Amidst the challenges of the past, ZCCM-IH is confident that with improved prospects in the mining sector, there will be an increased appetite for investment in the sector through the purchase of shares on the stock exchange.

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange closed the year at K40 (2015: K40). The market capitalisation as at 31 March 2016 remained unchanged at K6, 431 million (2015: K6, 431 million). The static share price is indicative of the general stock market performance, which has experienced low liquidity and hence low share transactions.

Outlook

Beyond these current challenges, the underlying drivers of growth in Sub-Saharan Africa that have been in play domestically in the region over the past decade most importantly, the much improved business environment generally continue to be in place, and favorable demographics are poised to support these drivers over the coming decades. These will anchor medium-term growth prospects.

The Zambian economy is expected to continue on a recovery path and maintain a steady growth of around 3.4 percent in 2017. This growth is hinged on key sector policy interventions in agriculture, tourism, industrialisation and mining within a diversification framework. The move to more cost reflective tariffs is expected to improve investment in the energy sector which will help drive growth in the key sectors of the economy.

As the majority of ZCCM-IH’s investment remains in the mining industry, the Company is confident that the industry will perform better in the coming years premised on the recent improvements in the copper prices as a result of anticipated demand in the United States of America, China and Europe.

The commissioning of the 150 MW power plant by Maamba Collieries Limited (MCL) is a success story for ZCCM-IH and its partners who have worked tirelessly to ensure the project was completed. Once the plant is fully operational, it will provide the much needed dependable and sustainable base load power, which is crucial for the country’s economic growth and energy security.

In response to the challenges faced by the Company and in order to increase shareholder value, ZCCM-IH will implement a robust strategy aimed at taking advantage of the opportunities that exist in various sectors of the economy including mining, energy, agriculture and real estate. ZCCM-IH is better placed to leverage its position and expand its operations in sectors of the economy that offer opportunities.

Directorate

During the year, the following changes were made to the Directorate:

Mr Cosmas Mwananshiku Retired Non-Executive Director

Dr Bwalya Ng’andu Retired Non-Executive Director

Mrs Pamela C Kabamba Retired Non-Executive Director

Ms Sophie Mutemba Retired Non-Executive Director

Mr Paul Chanda Retired and reappointed Non-Executive Director

Mr Fredson Yamba Appointed Non-Executive Director

Mr Mateyo Kaluba Appointed Non-Executive Director

Mr Yollard Kachinda Appointed Non-Executive Director

Dr Pius C Kasolo Appointed Executive Director

Appreciation

I express sincere gratitude to my fellow Board members, the immediate past Board members, the Management and Staff of ZCCM-IH for their dedication and commitment during the past year. I again extend my gratitude to the investee companies for their efforts and contributions during the year.

Director

CHAIRMAN’S STATEMENT

I am pleased to share with you the performance of ZCCM Investments Holdings Plc (ZCCM-IH) as a company, and that of its investee companies during the financial year ended 31 March 2015. The performance of ZCCM-IH for the financial year ended 31 March 2015 was underpinned by the development and significant milestones achieved in the 2013/14 financial year, in particular the restructuring of the balance sheet through a Claw-Back rights offer resulting in a strengthened financial position.

The strengthened financial position enabled the company to declare its first dividend from the time of its business transformation in 2000. The dividend was declared in line with the dividend policy that was developed and approved during the 2014/2015 financial year.

Global economy

The January 2016 IMF World Economic Outlook estimated global growth for 2015 to have remained modest at 3.1% at the end of December 2015 (2014: 3.4%). The decline in global growth was attributed to the slowdown and transition in the Chinese economic activity from investment and manufacturing toward consumption and services, lower energy and commodities prices, and the gradual tightening in monetary policy in the United States. Additionally, economic growth in emerging and developing economies declined from 4.6% in 2014 to 4.0% in 2015 while developed economies grew from 1.8% in 2014 to 1.9% in 2015.

The global economic growth was forecasted at 3.4% in 2016, a downward revision from 3.6% forecasted in October 2015, but higher by 0.3% than that achieved in 2015. The increase will be driven by a gradual pickup in growth in emerging and developing economies from 4.0% in 2015 to 4.3% in 2016, and growth in developed economies from 1.9% in 2015 to 2.1% in 2016. The key risks to the forecast is the potential further appreciation of the United States Dollar, further deterioration in the commodities prices and sharper than expected slowdown in China.

The annual GDP growth in Sub-Saharan African declined to 3.5% in 2015 from 5.0% in 2014. For 2016, Sub-Saharan Africa economic growth is estimated at 4.0%. This was a downward revision from 4.3% forecasted in October 2015 due to continued adjustments to lower commodity prices and higher borrowing costs on the continent’s commodity exporters.

Global annual copper production increased by 2.2% at the end of December 2015 to 18.7 million tonnes (2014:8% to 18.3 million). LME copper prices declined by 25.3%, from US$6,289.5 per tonne at the end of December 2014 to US$4,701 per tonne at the end of December 2015.

Domestic Economy

The Zambian economy recorded annual growth of 3.6% in 2015 compared to 4.9% recorded in 2014. The decrease in economic activity was driven by adverse weather conditions; which led to a decline in output in the agriculture sector and power generation and affected productivity in key sectors of the economy. In addition, the increase in fuel prices and the sharp depreciation of the Zambian Kwacha raised input costs, production costs and transportation cost.

Copper production in Zambia was estimated to have risen marginally by 0.5% at 711,515 tonnes (2014: 708,000 tonnes). This was despite the power challenges and falling copper prices on the international market. The increase in copper production was attributed to commencement of production at Kalumbila Mine, owned by First Quantum Minerals, in February 2015.

Financial performance

The Group recorded turnover of K242 million (2014: K1, 001 million) and operating loss of K2,179 million (2014: K871 million profit).

The Group reported a loss before tax of K1,329 million (2014: K362 million profit). The Group recorded a loss after tax of K987 million (2014: K277 million profit). The Group’s share of profit of equity accounted investees’ was K281 million (2014: K537 million loss).

The Group’s retained earnings as at 31 March 2015 were positive at K3,058 million (2014: K4,295 million).The Company’s retained earnings decreased to K512 million (2014: K1,403 million).

Strategic and new investments

Recapitalisation of Ndola Lime Company (NLC)

The recapitalisation project at NLC continued. ZCCM-IH provided an additional shareholder loan of K125 million ( US$16.5 million) for the Ndola Lime Recapitalisation Project. The commissioning of the second Vertical Kiln (“VK-2”) has been delayed and is now targeted for the end of March 2016. Once commissioned, VK-2 is expected to increase production by 500 tonnes per day, which is predominantly expected to substitute the less efficient Rotary Kiln’s capacity of 400 tonnes per day. The use of coal in the VK-2 as opposed to Heavy Fuel Oil (HFO) will greatly enhance the prospects of reducing operating costs and thus make the products competitive.

Nkana Alloy Smelting Company Limited

ZCCM-IH owns 10% of Nkana Alloy Smelting Company Limited (Nkana Alloy), a company that was formed for purposes of processing the slag material from the Nkana Slag Dump situated in Kitwe, Copperbelt province of Zambia. As at 31 March 2015 operations at the company had not commenced due to an injunction served on Nkana Alloy, restraining it from interfering with activities on the slag dump. The plaintiffs who obtained the injunction were to be handed the property for purposes of commencing prospecting works at the site as per mineral processing licence until determination of the matter.

Mawe Exploration and Technical Services Limited

Shareholders will recall that, ZCCM-IH incorporated Mawe Exploration and Technical Services Limited (Mawe), a wholly owned subsidiary in April 2013. Mawe was intended to play a catalytic role in exploration of base metals and other minerals, oil and gas, the development of local content and beneficiation capabilities, small scale mining development, as well as the provision of attendant quality mining services.

Following a review of the structure and operations of Mawe, ZCCM-IH reversed this decision and will now retain the functions that were to be performed by Mawe in the Technical Directorate within ZCCM-IH. This decision is aimed at making cost effective operations in this regard.

Nkandabwe Coal Mine Limited

Following the granting to ZCCM-IH of the mining licences previously held by Collum Coal Mining Industries Limited situated in Southern province of Zambia, ZCCM-IH incorporated Nkandabwe Coal Mines Limited, a 100% wholly owned subsidiary to operate the mine. During the year under review, ZCCM-IH applied to convert the small-scale coal licences into a large scale prospecting licence and was issued with one following approval by the Ministry of Mines, Energy and Water Development. However, in March 2015, ZCCM-IH was informed that the licence was cancelled and re-issued to the previous owners, Collum Coal Mining Industries Limited.

Real Estate and Agriculture

The Company recently included investment into the real estate and agriculture in its 2016 Strategic Plan. This is part of the on-going initiatives for diversification and one of the approaches to reduce its investment concentration in the mining sector.

GRZ Sell down

In his Budget Speech in October 2014, the Minister of Finance announced that the Government of the Republic of Zambia (GRZ) would reduce its shareholding in ZCCM-IH from 87% to 60% via the sale of its shares proportionate to the required reduction. The reduction in GRZ’s shareholding will also lead to ZCCM-IH complying with the listing requirement that the company must have at least 25% of each class of equity securities held by the public.

Subsequent to this announcement, ZCCM-IH was mandated to initiate processes to achieve the GRZ sell down.

Dividend Policy

During the year under review, the ZCCM-IH Board approved a dividend policy which is underpinned on the following general principles:

a) The company may pay at least 20% of the realized profits for a particular financial year;

b) The company may pay a dividend in a financial year when conditions for declaring a dividend are met; and

c) All dividend declarations will take into account the company’s free cash flow and investment needs.

The Company paid a dividend of K1.56 per share to its shareholders in November 2014 in line with this dividend policy

Capital market

The ZCCM-IH share price on the Lusaka Stock Exchange closed the year at K40 (2014: K27). The market capitalisation as at 31 March 2015 was K6,431 million (2014: K4,341 million).The continued growth in the company’s share price is indicative of the growing confidence from the market.

Outlook

According to the World Bank’s “Zambia Economic Brief – December 2015”, the Zambian economy in 2016 is expected to grow between 3% to 3.5% in 2016 and 2017, and will return to robust growth rates of 5% to 6% in 2018 as copper prices stabilize and domestic pressure ease. The main challenges to the Zambian economy in 2016 will include the reduction of expenditure, double digit inflation and the growing deficit. Fiscal policy will be the key factor in shifting the country back onto a sustainable fiscal path.

However, the outlook is subject to external and domestic downside risks. Externally, a further slowdown in China’s economy would weigh-in on the demand for Zambia’s exports by further reducing copper prices, and would severely affect Zambia’s prospects. Furthermore, strengthening of the US dollar in the event of the Federal Reserve increasing interest rates would lead to added volatility of the kwacha. Three domestic risks were identified. Firstly, that the power crisis would worsen if there are delays in new generation coming on board or if there is further reduction in generation capacity in the main hydro power plants. Secondly, a deterioration of confidence in the economy, leading to further weakening of the currency and increased levels of inflation. Thirdly, a bad harvest that serves to increase food prices and reduce rural and agricultural incomes, with the greatest impact falling on the poorest households.

Since the majority of ZCCM-IH’s investments remain in the mining industry, the Company is confident that the copper prices will improve and the increase in the number of power projects will address the issue of power shortages.

ZCCM-IH will continue to pursue diversification programmes intended to create additional value for its shareholders

Directorate

During the year, the following were changes to the Directorate:

Mr John M D Patterson Retired Non-Executive Director

Mr Paul M Chanda Appointed Non-Executive Director

Appreciation

I express sincere gratitude to my fellow Board members, the Management and Staff of ZCCM-IH for their dedication, commitment and good performance during the past financial year. I again extend my gratitude to the investee companies for their efforts and contributions during the year.

Cosmas Mwananshiku

Director