News & Media

CHAIRMAN’S STATEMENT

During the period under review the global economy experienced a slowdown on account of the Euro Zone debt crisis, weak recovery in the USA, a slowdown in Chinese exports and social geopolitical unrest in the Middle East and North Africa. These conditions resulted in emerging market economies being generally weaker than expected. Despite these conditions, the Zambian economy continued to grow at a rate of 6.8 percent in 2012. Good economic performance is expected to continue in the short term driven by the Government’s economic diversification programmes, infrastructure development, growth in mining, agricultural, manufacturing and service sectors. This economic performance places Zambia among Sub-Saharan Africa’s fastest growing economies.

Financial performance

During the year under review, copper prices on average declined from around US$9 642 per tonne at the beginning of the year to US$8 318 per tonne at the close of the financial year. Copper prices, like other commodity prices, were dampened by the challenging global economic conditions.

For the Group, despite the above global economic scenario, investment in productive capacity continued premised on the prospect of recovery in global demand as solutions are found for the fiscal challenges in Europe, the USA, return to growth in China and at a local level improved investments in power intended to remove bottlenecks in electricity supply. Output is expected to grow in 2014-15 as investments continue in Lubambe Copper Mine Limited and Konkola Copper Mines Plc. Further growth is expected from improved productive capacity at Ndola Lime Company Limited upon completion of the recapitalisation programme in 2013.

Despite remaining profitable, the Group experienced reduced revenues. The Group recognised sales of K257 billion (2011: K368 billion) and operating profit of K367 billion (2011: K501 billion). Lower commodity prices impacted negatively on the revenues of most of the investee companies.

During the year under review, ZCCM-IH disposed of its 2.30% interest in Equinox Minerals Limited (Lumwana Copper Project) and realised a gain of K273 billion (proceeds of K802 billion (US$ 167.5 million) less carrying amount of K529 billion). The funds from this transaction were ring-fenced for purposes of reinvesting them in a manner that realised value to ZCCM-IH’s shareholders. The funds have since been reinvested in:

i. Ndola Lime Company Limited, to enable it complete the recapitalisation project within an appropriate timeframe and thus take advantage of the surplus demand for its products;

ii. New projects at Maamba Collieries Limited, particularly, the 300 MW Thermal Power Plant Project;

iii. Lubambe Copper Mine Limited (formally Konnoco); and

iv. Partial repayment of outstanding loans to the majority shareholder, GRZ.

For the period under review, the Group reported a profit before tax of K1,053 billion (2011:K1, 532 billion). The profit after tax was K1, 238 billion (2011: K1, 431 billion).

The Group’s retained earnings continued to be positive at K3,256 billion (2011; K2,019 billion).The Company’s retained earnings improved to negative K57 billion (2011: negative K656 billion) driven mainly by the gain on sale of shares in Equinox Minerals and share of profit of equity accounted investees of K640 billion (2011: K773 billion).

Strategic and new investments

As reported in the previous financial year, on 16 November 2011, ZCCM-IH exercised its option and took up 20% shareholding in Lubambe Copper Mine Limited, of which 5% is free carry while the additional 15% required that ZCCM-IH contributes cash to the development of the mine in line with the provisions of the Konnoco Agreement of 1997. Transaction agreements were signed by ZCCMIH, VALE/ARM and Konnoco Zambia Limited representatives on 15 September 2011. As at 31March 2012, the Konnocco project reached 57% of overall project implementation. Production was expected to commence by end of the calendar year 2012.

During the year under review Maamba Collieries Limited commenced mining and production of coal while the Engineering, Procurement and Construction (EPC) contract for the development of the 300 MW Thermal Power Plant was signed in February 2012. Maamba Collieries Limited is implementing an Integrated Coal Mining and 300MW Thermal Power Plant Project. The project is expected to be completed in June 2014.

The sale and purchase agreement for the sale of the 50% Government of the Republic of Zambia (GRZ) shares in Kariba Minerals Limited (KML) to ZCCM-IH was cleared by the Attorney General’s office. As at 31 March 2012, documentation relating to the acquisition of the shares in KML was still being finalised. KML is in the business of prospecting, mining, processing and marketing of amethyst and any such other precious and semi precious stones. KML’s amethyst in Mapatizya in the Southern Province of Zambia is considered to be the largest amethyst deposit in the world. KML is the largest producer of amethyst in Zambia and the world. Finalisation of the transaction is expected before the end of the financial year ending 31 March 2013.

In September 2011, ZCCM-IH acquired 494 000 000 shares representing 10.6% of the ordinary share capital of Investrust Bank Plc, a local bank listed on the Lusaka Stock Exchange at a price of K16 per share. The total consideration amounted to K7,904 million. The acquisition was done through underwriting of a rights issue exercise that the bank undertook. The Investrust Bank Plc share price closed the year at K18 per share.

On 10 November 2011, the Board of Albidon Limited after consultations with the Zambian mining authorities and in accordance with the Mines and Mineral Development Act of 2008, announced that it had approved the temporary suspension of operations at its Munali Nickel Mine in Zambia. With the decline of global nickel prices by approximately 23% and less than budgeted nickel recoveries at Munali, the company experienced serious cash flow difficulties resulting in suspension of the company’s operations. On 7 February 2012 the Board of Albidon announced that it continued to seek to reach a transaction agreement with third parties for possible new investment in the mine. As at 31 March 2012 no progress had been made. Trading of Albidon shares, on the Australian Stock Exchange, remained under suspension as at 31 March 2012.

Capital market

The closing share price of K12,500 for the period under review showed an increase from the opening price of K10,000 at the beginning of the period, on the Lusaka Stock Exchange, the Company’s primary listing. The market capitalisation as at 31 March 2012 was K1,116 billion (2011: K893 billion).

The Company undertook a review of its 2012-2016 strategic plan with a view to enhancing and maximising shareholder value. The review resulted in the development of the following seven strategic focus areas;

• Leveraging and consolidating existing investments in the copper mining sector and pursuing other copper assets;
• Diversifying into other minerals;
• Investing in mining related sectors;
• Investing in mining related manufacturing;
• Treasury management;
• Reducing legacy liabilities; and
• Repositioning the company.

Outlook

The Zambian economy and the business environment are expected to remain stable in the future. A number of the investee companies were expected to undertake projects aimed at improving efficiencies, lowering unit costs of operations as well as expanding capacity. It is expected that solutions will be found to the challenges affecting the global economy with the result that commodity prices, the mining sector, and other sectors of the economy will be impacted positively.

This scenario will allow ZCCM-IH to maximise returns from its existing investments currently concentrated in copper mining, as well as pursuing value adding opportunities in other minerals and mining related opportunities.

Directorate

During the year, new members of the Board of Directors were appointed and previous members retired, resulting in a change in the entire composition as follows:

Mr W D Mung’omba Appointed 1 December 2011 Executive Chairman

Mr J M D Patterson Appointed 13 February 2012 Non Executive Director

Mr C Mwananshiku Appointed 13 February 2012 Non Executive Director

Ms S Mutemba Appointed 13 February 2012 Non Executive Director

Dr A Mwenda Appointed 13 February 2012 Non Executive Director

Dr V Mutambo Appointed 13 February 2012 Non Executive Director.

Appreciation

I would like to thank my fellow Board members, the Management and Staff of ZCCM-IH for their loyalty, dedication and hard work and those from the investee companies for their efforts and contributions during the past year. The Group remains well positioned to seize the opportunities in the years ahead and has capacity to manage the challenges.

Wila D Mung’omba

Executive Chairman of the Board

CHAIRMAN’S STATEMENT

Group performance benefited from a stable business environment in the Zambian economy, favourable business conditions in China and positive sentiment about the global economy.

Financial Performance

During the period under review, copper prices on average rose from around US$3 per pound at the beginning to US$4.27 per pound at the close of the financial year. Copper prices were influenced by increased Chinese demand, positive sentiment about future global economic expansion, continued constraints and disruptions to the global supply of copper and receding concerns of a double dip recession in the United States.

For the Group, the increases in copper prices encouraged continued scaling up of operations and a relatively stable Zambian Kwacha. The overall impact of all this was that the Group significantly increased its profitability in the 2011 financial year.

The Group recorded sales of ZMK396 billion (2010: ZMK142 billion) and operating profit of ZMK530 billion (2010: ZMK47 billion as restated). High commodity prices impacted positively on the revenues of most of the investee companies which continued to record profitability. This impacted positively on ZCCM-IH as reflected in the share of profits of associates of ZMK745 billion (2010 : ZMK366 billion) in the financial year under review.

As a consequence of the significant share of profits of associates and the favourable economic and business environment, the Group reported a profit before tax of ZMK1,530 billion in the 2011 financial year (2010: ZMK85 5 billion as restated).

While the Group recorded positive retained earnings of ZMK2,005 billion (20 10: ZMK571 billion) driven by 7 share of profits of associates, the Company recorded negative retained earnings of ZMK628 billion (2010: ZMK966 billion as restated) resulting mainly from exchange losses incurred on historical United States Dollar denominated shareholder debts.

Strategic and new investments

Shareholders will recall that over the last 11years, the Company continued to report that ZCCM-IH had a choice to take up either 15% or 20% in Konkola North Copper Project (Konnoco). The developers ofKonnoco finally made a development decision in the financial year under review following the completion of feasibility studies. In this respect, ZCCM-IH took up 20% shareholding in Konnoco on 16 November 2011. This was in line with the provisions of the Konnoco Agreement of 1997. Negotiations in respect of transaction documents for the actual development of Konnoco mine commenced and were finalised post the financial year under review.

ZCCM-IH owns 20.6% of shares in Konkola Copper Mines Plc (KCM) while Vedanta owns 79.4%. During the financial year under review, Vedanta announced the incorporation of a new company, Konkola Resources Plc (“KR”) in En gland and Wales which was to issue new shares to ZCCM-IH and Vedanta Resources Plc (Vedanta) in exchange for their shares in Konkola Copper Mines Plc (KCM). It was envisaged after the share exchange that KR would proceed with an initial public offering of its ordinary shares on the London Stock Ex change to be followed by an offering on the Lusaka Stock Ex change. However, due to market volatility and other events, the boards of Vedanta and KCM resolved to pursue the share ex change and attendant transactions at a future date.

As reported in the previous financial year, the Sale and Purchase Agreement for the sale of ZCCM-IH’s 65% shares in Maamba Collieries Limited (MCL) to Nava Bharat (Singapore) Pte Limited was signed subject to completing and satisfying conditions precedent. The completion point in this regard was reached in the financial year under review paving way for commencement of initiatives to recapitalise MCL and to develop a 300 me ga watt thermal power plant. Whilst ali the legal requirements requiring the transfer of the shares to Nava Bharat have since been finalised, financial closure awaits conclusion of discussions in respect of statutory liabilities of MCL such as PayAsYouEarn(PAYE) and contributions to the National Pensions Scheme Authority(NAPSA).

In continued efforts to diversify to other minerals, the Company accepted an offer to purchase 50% of the shares of Kariba Minerals Limited (KML) from the Government of the Republic of Zambia during the financial year. The transaction is expected to be finalised during the financial year ending 31 March 2013. KML is in the business of prospecting, mining, processing and marketing of amethyst and any su ch other precious and semiprecious stones. KML’s amethyst asset in Mapatizya in the Southern Province of Zambia is considered to be the largest amethyst deposit in the World, the only amethyst with a very deep purple colour. KML is the largest single producer of amethyst in Zambia and the World.

Capital market

The closing share priee of ZMK10,000 for the period under review showed a decline from the opening price of ZMK2 7,000 at the beginning of the period, on the Lusaka Stock Ex change, the Company’s primary listing. This was mainly a result of a lag in the impact of the global financial crisis that began in 2008. The market capitalisation as at 31 March 2011 was K 893 billion.

Outlook

The Zambian economy and the business environment is expected to remain stable in the future. A number of the investee companies were expected to undertake projects aimed at improving efficiencies, lowering unit costs of operations as well as expanding capacity. The level of dividend receipt, at the moment, from investee companies operating the mines is yet to correspond to the levels in rise in commodity prices, improved business environment and the general economy. The Company will thus focus on activities and actions to ensure optimum dividend receipts and increased efforts to value adding investments.

The continued recovery of the global economy and high commodity prices will impact positively on the mining sector and other sectors of the economy.

This scenario will allow ZCCM-IH to maximise returns from its existing investments currently concentrated in copper mining, as well as pursuing value adding opportunities in other minerals and mining related opportunities.

Directorate

During the year, Dr. D. H. Kalyalya retired from the Board of Directors, in November 2010. A replacement director had not been appointed as at the financial year end.

Appreciation

I would like to thank my fellow Board members, the Management and Staff of ZCCM-IH for their loyalty, dedication and hard work and those from the investee companies for their efforts and contributions during the past year. The Group remains well positioned to seize the opportunities in the years ahead and has capacity to manage the challenges.

– Wila D.Mung’omba

Executive Chairman of the Board

CHAIRMAN’S STATEMENT

During the period under review, the Company changed its financial year end from 30 June to 31 March and therefore this Report is for the nine month financial period 1 July 2009 to 31 March 2010. The change was necessitated by the need to align ZCCM-IH’s financial year to those of the majority of its investee companies (subsidiaries and associates) and thereby improve the efficiency of preparing group reports.

The period under review coincided with an upturn in the world economy following the easing of the Global Financial Crisis (GFC). During this period, the Group focused on leveraging activities to exploit emerging opportunities in the business environment.

Financial Performance and strategic investments

From a major slump in both demand and prices (low prices of US$1.64 per lb) in the previous period, 1 July 2008 to 30 June 2009, copper made strong recoveries in the current period 1 July 2009 to 31 March 2010 (high prices of US$3.30 per lb) influenced by demand from China, positive sentiments about future economic expansion and supply disruptions in Chile.

For the Company, the upturn in the world economy manifested in significant increases in copper prices, scaling up of operations as well as strengthening of the Zambian kwacha (the exchange rate improved from K5,180.71 per US$1 at the beginning of the financial year, 1 July 2009, to K4,698.75 per US$1 at the end, 31 March 2009). The overall impact of all this was that the Company returned to profitability in the 2010 financial period reversing the net loss of the previous year.

For the financial period 1 July 2009 to 31 March 2010, the Group recorded sales of K116 billion. For the same period, the Group recorded an operating profit of K42 billion. Rising commodity prices resulted in increased revenues of most of the investee companies who recorded profitability particularly in the last quarter of the financial period under review. This impacted positively on ZCCM-IH as reflected in the share of profits of associates of K391 billion in the period under review.

As reported in the previous financial year, Chambishi Metals Plc, Luanshya Copper Mines Plc and Albidon Zambia Limited were placed under care and maintenance due to depressed commodity prices resulting from the GFC. However, following the rising of commodity prices, the companies resumed operations in the period under review.

The strengthening Zambian Kwacha caused the Group’s Administration expenses to reduce by 72% as a result of an impairment review on receivables and also for the group to record exchange gains of K104 billion. The Company continued to explore measures that could be undertaken to mitigate exposure to fluctuations in foreign exchange.

As a consequence of the above favourable economic and business circumstances, the Group reported a profit in 2010 period of K436 billion.

Following the placement of Luanshya Copper Mines Limited (LCM) under care and maintenance in the previous year, the majority shareholder (Enya Holdings BV) sold its shares to China Nonferrous Metal Mining (Group) Limited (CNMM). As a way of delivering value to the members of ZCCM-IH, it is pleasing to note that during negotiations of the sale, ZCCM-IH was awarded an additional 5% free carried interest bringing its total shareholding in LCM to 20%. It is anticipated that CNMM will reopen, finance recapitalisation and give a new lease of life to LCM.

The Company continued with activities intended to diversify its investments into other mining activities other than base metals. In this regard, negotiations with the preferred bidder for the strategic equity partner in Maamba Collieries Limited (MCL),a coal mine, were concluded during the period under review. This resulted in the signing of the Sale and Purchase Agreement whereby Nava Bharat (Singapore) Pte Limited offered to buy 65% of ZCCM-IH’s shares in MCL upon completion and satisfying conditions precedents. The Agreement incorporated the commitment to recapitalise MCL and to develop a 300 mega watt thermal power plant. The completion of conditions precedent is anticipated in the next financial year.

Capital Market

The closing share price for the period under review was the same as the opening price of K27,000 at the beginning of the period, on Lusaka Stock Exchange, the Company’s primary listing. The market capitalisation as at 31 March 2010 was K 2,411 billion.

Outlook

The outlook points to a steady recovery of the global economy and an increase in commodity prices. This would impact positively on the mining sector and other sectors of the economy. This would allow ZCCM-IH to maximise returns from its existing investments currently concentrated in the mining sector, as well as pursuing value adding opportunities in other sectors of the Zambian economy.

Directorate

During the year, Mr. P Mumba retired from the Board of Directors in November 2009 and Mr. T J Kasonso was appointed in his stead in the same month.

Appreciation

On behalf of the Board, I would like to thank the Management and Staff of ZCCM-IH for their loyalty, dedication and hard work and those from the investee companies for their efforts and contributions during the past year. I also thank my fellow Board members for their support and wise counsel. The Group is well positioned to seize the opportunities in the years ahead and has capacity to manage the challenges.

A J Lungu

Chairman of the Board

CHAIRMAN’S STATEMENT

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

CHAIRMAN’S STATEMENT
It gives me great pleasure to present the Chairman’s statement for the year-ended 30 June 2008. At the outset, and on behalf of the Board and Management of ZCCM-IH, I regret the protracted and inadvertent delay in releasing this report to our shareholders and other stakeholders. I thank you all for the forbearance you have shown to the Company in this regard.

For the financial year ended 30 June 2008, Group sales grew to K118.9 billion from K106.9 billion in the previous year, representing sales growth of 12%. Similarly, the group gross profit increased by 25%. The earnings per share increased by 5%.

The performance of Ndola Lime Company Limited (NLC), a 100% subsidiary of ZCCM-IH, impacted the group results positively. The global financial crisis, whose effects started to be felt in the later part of 2008, had a fundamental impact on most mining companies. Since ZCCMIH’s investment assets are largely in the mining sector, the global financial crisis had a dampening effect on the results for the financial year.

In line with the Company’s strategic intent of diversifying its investments into other mining activities other than base metals, the Company focused on diversifying its investments portfolio away from base metals into other sectors and mining activities during the financial year under review. The Company acquired a 2.1% stake in Albidon Limited, the developers of the Munali Nickel project in Southern Province of Zambia. The Company also acquired 100% shares in Maamba Collieries Limited (MCL), a coal producing company also located in the Southern Province.

Though the MCL acquisition affected the operating results, it presents a greater opportunity to enter the energy sector of the Zambian economy, as the intention of ZCCM-IH is to develop a thermal power plant with strategic partners. Given the projected demand for power in Zambia and the south and central regions of Africa as a whole, it is anticipated that the thermal power plant will generate significant returns to Maamba Collieries Limited, ZCCM-IH and the country as a whole.

The returns from existing investments continued to improve as evidenced by the increase in the share of profits from Associates, dividend payments as well as price participation receipts

With the environmental consequences of ZCCM Limited’s mining activities to be resolved by ZCCM-IH, it was greatly appreciated that the Government of the Republic of Zambia (GRZ) obtained the support of the World Bank and the Nordic Development Fund for the Copperbelt Environment Project (CEP), to address legacy environmental liabilities and obligations. Work to address environmental concerns progressed well during the financial year.

The outlook for the future is pointing to an end to 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.

During the year, Dr B Nsemukila retired from the Board of Directors and Mr P Mumba was appointed in his stead.

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.

AJ Lungu

Chairman of the Board