Interim report
ZAMBIA COPPER INVESTMENTS LIMITED
(Registered in Bermuda)
("ZCI" or "the Company")
Consolidated statement of earnings
for the six months ended June 30, 2003
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2003 June 30, 2002 December 31, 2002
Turnover 177,569 207,658 394,096
Cost of Sales (157,004) (167,867) (344,463)
_________________ ________________ _________________
Gross Profit / (Loss) 20,565 39,791 49,633
Other operating expenses (34,357) (35,511) (68,986)
Depreciation (8,186) (15,889) (30,272)
Impairment of tangible fixed - (240,369) (240,369)
assets
_________________ ________________ _________________
Loss from operations (21,978) (251,978) (289,994)
Other income 647 604 4,696
Interest income 7 - 17
Interest expense (596) (14,636) (9,516)
Commitment fees on loan - (102) (102)
facility
General and administration (135) (605) (784)
expenses
Impairment of goodwill - (8,265) (66,066)
Contributions to finance - - 16,876
restructuring
Restructuring costs - - (4,687)
_________________ ________________ _________________
Loss before taxation (22,055) (274,982) (349,560)
Taxation (139) (8) (193)
_________________ ________________ _________________
Loss after taxation (22,194) (274,990) (349,753)
Loss attributable to 9,256 - -
minority interest
_________________ ________________ _________________
Net Loss (12,938) (274,990) (349,753)
================= ================ =================
per ordinary share in US cents
Headline loss before
exceptional item and
amortisation of goodwill (10.25) (21.50) (44.90)
Exceptional income
Contributions to finance - - 13.65
restructuring
Exceptional expenses
Impairment of tangible - (196.13) (194.46)
fixed assets
Impairment of goodwill - (6.74) (53.44)
Restructuring costs - - (3.79)
_________________ ________________ _________________
Net Loss (10.25) (224.37) (282.94)
================= ================ =================
Consolidated statement of financial position
as at June 30, 2003
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2003 June 30, 2002 December 31, 2002
Fixed Assets
Tangible fixed assets 111,131 39,343 100,195
_________________ ________________ _________________
111,131 39,343 100,195
Investments and advances - 54,142 -
_________________ ________________ _________________
111,131 93,485 100,195
_________________ ________________ _________________
Current assets
Stocks 75,891 95,990 88,308
Accounts receivable 43,033 51,355 46,658
Cash and short-term 17,803 8,702 39,126
investments
_________________ ________________ _________________
136,727 156,047 174,092
Current Liablilites
Short term loans and bank (13,805) (13,877) (5,824)
overdrafts
Accounts payable and accrued (42,684) (51,976) (53,171)
liabilities
_________________ ________________ _________________
(56,489) (65,853) (58,995)
_________________ ________________ _________________
Net current assets 80,238 90,194 115,097
_________________ ________________ _________________
Total assets less current 191,369 183,679 215,292
liabilities
Long term liabilities
Long term loans (35,093) (380,105) (35,033)
Provisions (90,843) (77,632) (92,632)
Deferred purchase - (61,913) -
consideration
Minority interest (27,079) - (36,335)
_________________ ________________ _________________
Net assets / (liabilities) 38,354 (335,971) 51,292
================= ================ =================
Capital and reserves
Capital 508,807 46,781 508,807
Accumulated deficit (470,453) (382,752) (457,515)
_________________ ________________ _________________
38,354 (335,971) 51,292
================= ================ =================
Number of ordinary shares in 126,197,362 122,559,900 126,197,362
issue
Net asset value (per 30.39 (274.13) 40.64
ordinary share) in USD cents
Consolidated statement of changes to equity
for the six months ended June 30, 2003
expressed in thousands of US Dollars
Share Contribute Accumulate
Capital surplus deficit Total
Balance at December 31, 2001 29,426 17,355 (107,762) (60,981)
Shares issued (note 21) 873 - - 873
Contributed on restructuring - 461,153 - 461,153
(note 21)
Loss for the year - - (349,753) (349,753)
_______ __________ __________ _________
Balance at December 31, 2002 30,299 478,508 (457,515) 51,292
Loss for the period - - (12,938) (12,938)
_______ __________ __________ _________
Balance at June 30, 2003 30,299 478,508 (470,453) 38,354
======= ========== ========== =========
Consolidated statement of cash flow
for the six months ended June 30, 2003
expressed in thousands of US Dollars
Unaudited Unaudited Audited
Six months ended Six months ended Year ended
June 30, 2003 June 30, 2002 December 31, 2002
Cash flow from operating activities
Cash received from customers 180,188 212,933 398,559
Cash paid to suppliers and (188,358) (186,539) (378,425)
employees
_________________ ________________ _________________
Cash (absorbed)/ generated (8,170) 26,394 20,134
by operations
Interest received 7 - -
Interest paid (692) (933) (1,343)
Income tax paid (170) - (80)
_________________ ________________ _________________
Net cash (absorbed)/generated (9,025) 25,461 18,711
by operating activities
_________________ ________________ _________________
Cash flow from investing activities
Proceeds from disposal of 3 - 334
tangible fixed assets
Capital expenditure (20,282) (34,654) (58,277)
_________________ _________________ _________________
Cash absorbed by investing activities (20,279) (34,654) (57,943)
_________________ _________________ _________________
Cash flow from financing activities
Proceeds from external borrowings - 95,000 -
Advances by minority - 2,813 -
shareholders in KCM
Shareholders long-term loans received - - 97,813
Other loans received - - 35,000
Contributions received to - - 33,637
finance restructuring
Short term loans repaid - (60,000) (60,000)
_________________ _________________ _________________
Cash generated by financing activities - 37,813 106,450
_________________ _________________ _________________
Net increase / (decrease) in cash (29,304) 28,620 67,218
Net cash / (debt) at the 33,302 (33,916) (33,916)
beginning of the year
_________________ _________________ _________________
Net cash / (debt) at the 3,998 (5,296) 33,302
end of the year
================= ================= =================
Cash deposits and cash at bank 17,803 8,580 39,126
Short term loans and bank (13,805) (13,876) (5,824)
overdraft - unsecured
_________________ _________________ _________________
Net cash / (debt) at the 3,998 (5,296) 33,302
end of the year
================= ================= =================
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
The six-month period to June 30, 2003 was characterised by the focus on consolidation after the
restructuring process. The Company was able to build positively upon the foundations laid during the
restructuring and is looking forward to further progress during the next period.
Despite progress on many fronts, the Company incurred a consolidated net loss of US$12.9 million. This
was mainly due to continued depressed metal prices throughout the period and restructuring costs
at our subsidiary, Konkola Copper Mines plc (KCM). Production of copper at KCM was 92,477 tonnes. In
spite of this creditable performance in production, market conditions continue to be difficult as
the average price of copper was US cents 75.1 per pound (2002: US cents 71.5 per pound). Cobalt sales
for the period were 726 tonnes at a realized price of $7.72 per pound. Although there was a gradual
improvement in copper and cobalt prices over the period, the outlook for copper prices and demand for
the next period remains stable, although at relatively low levels. Operating expenses remain high,
while the refurbishment programme continues to realise improvements in production levels and
safety standards. Most significant is the Nkana smelter modernization project scheduled for completion
in September which will reduce production costs by approximately U.S. 3c/lb of copper. The other is
the Nchanga Tailings Leach Plant CCD circuit that will commence operation in November and increase
leach copper recovery by 7%.
Since the withdrawal of Anglo American during September 2002, management has been actively involved in the
development of a new business plan and has sought appropriate means to introduce additional finance to meet
the capital requirements of KCM. As previously recorded in the Company's Annual Report, KCM is in the
process of seeking a strategic equity partner to provide further technical assistance and financial support
in the longer term.
The review process of potential strategic equity partners has been completed and, of the 8 companies
who met all of the initial participation criteria, the shareholders of KCM have, after extensive
consideration, selected Sterlite Industries Limited as the bidder most likely to meet the ongoing needs and
requirements of KCM. As has been previously announced, Sterlite Industries Limited has now been awarded
preferred bidder status. At present, representatives of the Government of the Republic of Zambia, ZCI, the
Board of KCM, and ZCCM Investments Holdings plc, are involved in negotiations with Sterlite Industries
Limited on the terms of the proposed investment. Further announcements regarding any further developments in
the process will be published as they occur.
It is believed that the measures that have been put in place in the initial period after the restructuring
of the ZCI Group have begun to realise positive results in the short term and are expected to remain a
realistic platform from which the business can be developed.
The directors of ZCI wish to record their appreciation of the efforts made by all employees of KCM during the
period, which has been a time of great change and uncertainty for the Company, but which promises to be the
foundation for renewed stability, development and progress for the years ahead.
B Ireton Bermuda Registered Office
Chairman September 16, 2003 Clarendon House
2, Church Street
Hamilton, Bermuda