ZCCM-IH Unaudited Half-year Results-30.06.2023

ZCCM Invs.Hldgs PLC

01 September 2023

 

SENS ANNOUCEMENT

(the "Announcement")

ISSUER

ZCCM INVESTMENTS HOLDINGS PLC ("ZCCM-IH") Incorporated in the Republic of Zambia Company registration number: 119540000771 Share Code: ZCCM-IH ISIN:  ZM0000000037

BROKER

Pangaea Securities Limited

[a member of the Lusaka Securities Exchange]

Regulated and Licensed by the Securities and Exchange Commission Zambia

Telephone Number:    [phone]   |       Website:    www.pangaea.co.zm 

AUTHORISATION

Approval for this Announcement has been granted by:

·    The Lusaka Securities Exchange ("LuSE")

·    The Securities and Exchange Commission Zambia ("SEC")

·    ZCCM-IH

DISCLAIMER AND RISK WARNING

The announcement contained herein contains information that may be of a price sensitive nature.

Investors are advised to seek the advice of their investment advisor, stockbroker, or any professional duly licensed by the Securities and Exchange Commission of Zambia to provide securities advice.

ISSUED ON: 1 September 2023

ZCCM INVESTMENTS HOLDINGS PLC

(Incorporated in the Republic of Zambia)

DIRECTORS' INTERIM UNAUDITED FINANCIAL RESULTS FOR ZCCM INVESTMENTS HOLDINGS AND ITS SUBSIDIARIES (''THE GROUP'') FOR THE SIX MONTHS PERIOD ENDED 30^TH JUNE 2023

INTRODUCTION

In compliance with the requirements of the "Securities Act, No. 41 of 2016 of the Laws of Zambia" and the Listing Rules of the Lusaka Securities Exchange, ZCCM Investments Holdings PLC ("ZCCM-IH", "ZCCM", "the Company", "We" or "Our") announces the interim unaudited financial results of the Company and its Subsidiaries (collectively referred to as the Group) for the six months' period ended 30^th June 2023.

CHIEF EXECUTIVE OFFICER'S COMMENTARY

Looking back at the first half of 2023, there has been significant developments within the ZCCM-IH portfolio, key amongst them is the conversion of the profit-based dividend rights in Kansanshi Mining Plc into a 3.1% gross revenue royalty right. This is a significant step towards ZCCM-IH having predictable and guaranteed revenue in line with Our strategic pillar of maximising shareholder value from Our existing portfolio. Further, during the period under review ZCCM-IH has increased its shareholding in Copperbelt Energy Corporation Plc ("CEC") from 24.1% to 31.07%, a flagship asset in Our portfolio that is currently expanding its renewable energy footprint in the country. We have also entered partnership with Kobold Metals Zambia ("Kobold Metals" or "Kobold")in Mingomba Mining Ltd ("Mingomba" or "MML") over one of the most promising copper and cobalt deposits licence areas in Chililabombwe, on the Copperbelt.

Notwithstanding the above gains, as We enter the second half of 2023, there are several challenges that are affecting Our portfolio companies' performance. These include liquidity constraints for mining development and exploration projects, low copper production especially from old mines, compounded by low grades, leading to low productivity, and equipment and machinery failures in some instances inter alia. ZCCM-IH is proactively working with its subsidiaries and associate companies to address some of the challenges to scale up production.   For instance, with Mopani Copper Mines Plc ("Mopani"), Our significant subsidiary's future growth prospects hinges on its planned completion and commissioning of its expansion capital projects. Mopani has planned to ramped-up production as these projects are expected to be commissioned to full capacity by 2027. In addition to spending on its expansion projects, the Company has continued to ensure that sustaining capital is secured and utilised in the best way possible given the current funding limitations. During the first quarter of 2023, ZCCM-IH advanced a total of US$37 million to Mopani for its working capital needs. The Group remains optimistic with the enormous task ahead to secure funds for Mopani of more than US$300 million to complete the expansion projects over the next three years, as well as an additional US$150 million for sustaining capital over the same period. The investments will support the Zambian Government's long-term set copper production target of 3 million metric tonnes a year by 2032, from around 800,000 metric tonnes that the country produces currently per annum.

Given the challenges being experienced within the Group and associate companies, We have since reviewed and refined the ZCCM-IH Company's Strategic Plan for the period 2020 to 2026 to optimize Our deliverables for the remaining 4 years ,and to make it more responsive in driving stakeholder value creation. The refinement is aimed at improving Our overall performance by streamlining Our portfolio and targeting new growth opportunities in the mining and mining related sectors. These changes detailed in the refined Strategic Plan will be unveiled at the next Shareholder Open Day which is scheduled for the third quarter of this year.

       STRUCTURE OF THE ZCCM-IH GROUP

       The ZCCM-IH Group consists of the following Ten (10) companies:

Name	Shareholding
Mopani Copper Mine PLC	100.00%
Kariba Minerals Limited	100.00%
Ndola Lime Company Limited ( in liquidation)	100.00%
Misenge Environmental and Technical Services Limited	100.00%
Mushe Milling Limited (in liquidation)	100.00%
Kabundi Resources Limited	100.00%
Limestone Resources Limited	100.00%
Investrust Bank PLC	71.40%
Zambia Gold Company Limited	51.00%

      The Company also has other interests in the undernoted companies:

Name	Shareholding
Rembrandt Properties Limited	49.00%
Central African Cement Limited	49.00%
Maamba Collieries Limited	35.00%
Copperbelt Energy Corporation PLC	31.40%
Konkola Copper Mines PLC	20.60%
Kansanshi Mining PLC	20.00%
CNMC Luanshya Copper Mines PLC	20.00%
Lubambe Copper Mines PLC	20.00%
Mingomba Mining Limited	20.00%
NFCA Africa Mining PLC	15.00%
Chibuluma Mines PLC	15.00%
Chambishi Metals PLC	10.00%
Copper Tree Mineral Limited	15.58%
Oranto Oil Block	10.00%
Nkana Alloy Smelting Company Limited	10.00%

FINANCIAL PERFORMANCE

ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME THE SIX MONTHS ENDED 30^TH JUNE 2023

		30 June 2023		30 June  2022
		ZMW'000		ZMW'000
Revenue		7,115,004		7,462,546
Gross (loss)/profit		(561,783)		10,949
Operating loss		(1,666,487)		(1,447,190)
Net finance cost		(1,749,567)		(710,993)
Share of profit of equity accounted investees		1,228,724		1,343,238
Loss before tax		(2,187,330)		(814,945)
Income tax		(222,217)		(2,407)
Loss for the period		(2,409,547)		(817,352)
Basic and diluted earnings per share (ZMW)		(14.98)		(5.08)

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ABRIDGED SEPERATE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME THE SIX MONTHS ENDED 30^TH JUNE 2023

		30 June 2023		30 June 2022
		ZMW'000		ZMW'000
Revenue		1,084,608		1,249,517
Operating profit		889,911		1,173,987
Net finance(cost)/ income		(115,654)		42,357
Profit before tax		774,257		1,216,344
Income tax		(222,768)		(2,243)
Profit for the period		551,489		1,214,101
Basic and diluted earnings per share (ZMW)		3.43		7.55

       ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION FOR THE SIX MONTHS PERIOD ENDED 30^TH JUNE 2023

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Assets
Non-Current Asset	35,462,967		48,320,166
Current Assets	12,845,880		10,730,324
Total Assets	48,308,847		59,050,490
Equity and Liabilities
Shareholders' Funds	6,507,038		23,801,275
Non-Current Liabilities	30,339,782		27,625,652
Current Liabilities	11,462,027		7,623,563
Total Equity and Liabilities	48,308,847		59,050,490

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ABRIDGED SEPERATE STATEMENT OF FINANCIAL POSITION FOR THE SIX MONTHS PERIOD ENDED 30TH JUNE 2023

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Assets
Non-Current Asset	21,705,749		23,029,315
Current Assets	4,488,171		2,792,404
Total Assets	26,193,920		25,821,719
Equity and Liabilities
Shareholders' Funds	25,733,633		19,124,760
Non-Current Liabilities	44,497		6,438,587
Current Liabilities	415,790		258,372
Total Equity and Liabilities	26,193,920		25,821,719

ABRIDGED GROUP STATEMENT OF CASH FLOWS FOR THE SIX MONTHS PERIOD ENDED 30TH JUNE 2023

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Net cash (used)/inflow from operating activities	(2,852,797)		729,504
Net cash inflow/(used) from investing activities	1,281,703		(1,894,092)
Net cash used from financing activities	2,149,825		847,444
Increase/(decrease) in cash and cash equivalents	578,731		(317,144)
Cash and cash equivalents at the beginning of the period	(81,060)		184,625
Cash and cash equivalents at the end of the period	497,671		(132,519)

ABRIDGED SEPERATE STATEMENT OF CASH FLOWS FOR THE SIX MONTHS PERIOD ENDED 30TH JUNE 2023

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Net cash (used)/inflow from operating activities	(808,369)		1,060,651
Net cash inflow/(used) from investing activities	1,184,450		(1,084,855)
Net cash used from financing activities	-		(1,135)
Increase/(decrease) in cash and cash equivalents	376,081		(25,339)
Cash and cash equivalents at the beginning of the period	45,587		81,498
Cash and cash equivalents at the end of the period	421,668		56,159

ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Balance at 1 January	7,908,807		27,127,358
(Loss)/profit for the period	(2,409,547)		(817,352)
Other comprehensive income and reserves	1,007,778		(2,508,731)
Balance at 30 June	6,507,038		23,801,275

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ABRIDGED SEPERATE STATEMENT OF CHANGES IN EQUITY

	30 June 2023		30 June 2022
	ZMW'000		ZMW'000
Balance at 1 January	24,679,853		18,652,446
Profit for the period	551,489		1,214,101
Other comprehensive income/(loss) and reserves	502,291		(741,787)
Balance at 30 June	25,733,633		19,124,760

FINANCIAL PERFORMANCE HIGHLIGHTS

(I)         Group Performance

The Group recorded increased losses of ZMW2.41 billion (US$125.84 million) compared to ZMW817.35 million (US$47.70 million) in the six months period ended 30^th June 2022 impacted by the underperformance of Mopani Copper Mines Plc ("Mopani") which has contributed a loss of ZMW4.02 billion (US$209.87 million). Mopani's underperformance is  due to increased cost of production,  lower copper production, significant finance cost of ZMW1.54 billion ( US$ 80.29 million) (2022: ZMW 563 million ( US$ 31.74 million), investment asset impairment and fair value adjustment of ZMW6.7 billion (US$ 302.8 million).

The Group's total assets is ZMW48.31billion (US$ 2.76 billion) as at 30 June 2023 compared to prior period of ZMW59.05 billion (US$3.45 billion). The movement was mainly on account of the impairment adjustment referred to above.

There was an improvement in the liquidity position resulting in an increase in Group cashflow position at the end of the period to ZMW 497.67 million (US$28.43 million) from a negative cash position of ZMW 132.52 million (US$7.56 million) recorded in the prior period. The improvement in the cashflow was mainly due to prudent working capital management and royalty income received from Kansanshi of ZMW 742.56 million (US$ 38.78 million).

All financial results for ZCCM-IH's subsidiaries are consolidated line by line with ZCCM-IH separate financial statements as per IAS 27:  Consolidated and Separate Financial Statements. Under these reporting requirements, all assets and liabilities of the subsidiary companies are added to the assets and liabilities of the ZCCM-IH separate financial statements. ZCCM-IH subsidiaries are listed under the sub-heading 'Structure of the ZCCM-IH Group' above.  

(II)        Company Performance

The Company recorded a profit of ZMW551.49 million (US$28.80 million) compared to ZMW1.21 billion (US$ 70.85 million) recorded in the same period in 2022. The movement in the profitability is on account of an exceptional dividend receipt from Kansanshi Mining PLC of ZMW769.8 million (US$43.5 million) in the prior year, which accounted for a significant portion of the revenue collected. The good performance at company level was negated by the underperformance of Mopani at group level.

The Company's total assets increased from ZMW25.73 billion as at 30^th June 2022 to ZMW26.19 billion as at 30^th June 2022 mainly due to the increase in current assets to ZMW 4.49 billion (US$256.42 million) recorded in 2021 from ZMW 2.79 billion ( US$ 163.28 million) recorded in 2022.This was on account of funding advanced to subsidiary companies.

PERFROMANCE AND OPERATIONAL UPDATES

Updates relating to key developments within the company portfolio during the period under review are as follows:

(I)   Appointment of new Board Chairman

As announced via the Lusaka Security Exchange Stock Exchange News Services ("SENS") on 8th May 2023, Mr. Kakenenwa Muyangwa was appointed ZCCM-IH Board Chairperson effective 5th May 2023 after the resignation of the previous Board Chairperson, Ms Dolika Banda.

Mr. Muyangwa is a mining engineer and accountant with a wealth of experience spanning over 35 years in the old Zambia Consolidated Copper Mines Limited (ZCCM) mining, business planning and strategy, corporate recoveries, turnarounds, audits, as well as metals and concentrates trading and financing.

We look forward to working and supporting his leadership contribution towards the transformation of ZCCM-IH for the benefit of all Zambians and other stakeholders.

(II)  Royalty Rights in Kansanshi Mining Plc

At an Extraordinary General Meeting ("EGM") held on 31^st   March 2023, the Company's shareholders approved the conversion of its 20% profit-based dividend rights in Kansanshi Mining Plc ("KMP") into a 3.1% gross revenue royalty right.

The estimated life of the mine is 22 years, until 2045, during which the Company's annual income from KMP is anticipated to be consistent and predictable as this is based on sales of all metal products from the mine sold at prevailing market commodity prices, as opposed to profit-based dividends.

This transaction is in line with the key objective of the ZCCM-IH Strategic Plan of maximising value extraction from investments.

(III) Mopani Copper Mines Plc: Strategic Equity Partner Process

Mopani's performance is significant to the ZCCM-IH group financial results. During the period, Mopani contributed 83% and 99% of the Group's reported revenue and loss for the year, respectively. In addition, Mopani accounted for 43% and 92% of the Group's total assets and liabilities respectively.

Below is a summary of Mopani's financial performance which has been incorporated in the Group's Unaudited Financial Statements:

Statement of Profit and Loss and Other Comprehensive - Mopani Copper Mines Plc
	30 June 2023 ZMW'000	30 June 2022 ZMW'000
Revenue	5,883,489	7,271,002
Gross (loss)/profit	(1,631,555)	(53,393)
Operating loss	(2,402,134)	(1,368,375)
Net finance cost	(1,616,466)	(738,259)
Loss for the period	(4,018,600)	(2,106,634)

Statement of Financial Position - Mopani Copper Mines Plc
	30 June 2023 ZMW '000	30 June 2022 ZMW'000
Property, plant, and equipment	14,600,035	28,760,587
Inventories	4,206,129	3,870,986
Trade and other receivables	1,862,960	2,878,010
Total assets	20,669,124	35,509,583
Equity and liabilities
Capital and reserves	(17,705,617)	2,168,516
Borrowings	29,615,122	26,191,012
Trade and other payables	4,942,823	4,037,132
Bank overdraft	652,638	253,811
Retirement benefits	387,571	270,177
Provisions	1,683,343	1,537,607
Provisions for environmental rehabilitation	1,093,244	1,051,328
Total equity and liabilities	20,669,124	35,509,583

For the period ended 30 June 2023, Mopani recorded a loss ZMW4.019 billion (US$195.65 million) compared to ZMW2.107 billion (US$120.105 million). The movement in the recorded loss is due to the reduced copper production which was 14,946 tonnes lower than the budget for the period ended 30 June 2023. 

As per the Market Announcement dated 15 June 2022, ZCCM-IH engaged  Rothschild & Co., (Pty) Ltd to assist ZCCM-IH with the strategic review of Mopani to ensure its sustainability and continued development. The review has come up with strategic options that will ensure Mopani operates optimally, and the process is expected to be completed by December 2023.

"

One of the key outcomes is to bring on board a strategic equity partner ("SEP"), which will introduce sustaining capital for the stabilization of the mine operations and expansion capital for the completion of the expansion projects. This process is near complete, with the SEP expected to be announced in due course.

The completion of Mopani's expansion projects will be a major win for ZCCM-IH, and the Zambian people with projected production once completed of over 200,000 tonnes of finished copper cathode from 2027 onwards.  Copper is in high-demand due to its use in renewable energy and electric vehicles ("EVs") and ZCCM-IH will continue to invest in this sector via existing and new opportunities.

(IV)      Shareholding increase in Copperbelt Energy Corporation Plc ("CEC")

During the period under review ZCCM-IH increased its shareholding in Copperbelt Energy Corporation Plc ("CEC") from 24.1% held since 2018, to 31.07%. The increase was influenced by Our strategic drive to maximise shareholder value in profitable and viable ventures; coupled with the confidence We have in CEC's projected business growth arising from its expansion into renewable energy.

(V)       Mingomba Mining Limited ("MML") Launch

Mingomba Mining Limited is a partnership between KoBold Metals  52%,  EMR Capital, 28%, and ZCCM-IH, 20%. MML was established in 2023 and is currently undertaking a drilling programme in the Mingomba license area in Chililabombwe, a tenement close to the Konkola Copper Mine ("KCM") and the Democratic Republic of Congo border area which was previously a part of the Lubambe mine licence area.

So far, Kobold has drilled a total of about 7,000 metres in six drill holes and three wedges as at end of June 2023. There are five drill rigs on site, and the company plans to drill thirteen holes by end of 2023 at an average depth of about 1,500 metres each.

Kobold is using Artificial Intelligence ("A.I") computer-based techniques in the exploration process, which will help fast track the process to orebody definition and thereafter, mine development. 

(VI)      Zambia Gold Company Limited ("ZGC")

While the suspension of operations at Kasenseli Gold Limited, in Mwinilunga, North-Western Province was lifted on 31st May 2022, the resumption of the operations remains stalled due to on-going resolution of shareholder related matters. These matters are expected to be rectified, and the mining activity are expected to  resume in quarter four (4) of 2023.

Kasenseli Mine is operated by Zambia Gold Company Ltd, a subsidiary of ZCCM-IH

Exploration is on-going in Rufunsa with initial reports slated to conclude later in the year. So far, a total of 27 holes representing 3,972 meters have been drilled. A further 5,000 metres are planned to be drilled in 2023. Preliminary assay results show minor mineralisation for gold and copper content.

In the short term, ZGC and ZCCM-IH plan to continue with the drilling programme until a mineral resource is defined. Trace alluvial gold occurrences in the area have also given impetus to limited mining trials as part of an on-going viability assessment.

(VII)     Limestone ResOurces Limited ("LRL")

ZCCM-IH has continued to provide Limestone Resources Limited with working capital and  human capital support to ensure continuity of its operations. Given the company's abundant limestone resource and a readily available market for its products, ZCCM-IH and LRL are jointly exploring recapitalisation options to re-equip LRL with efficient and reliable production assets that will substantially improve its long-term operational and financial performance. As a result of this, the earlier search for an equity partner has been discontinued.

(VIII)    Konkola Copper Mines Plc

On 7 September 2022, ZCCM-IH, Vedanta Resources Limited, Vedanta Resources Holdings Limited, and KCM's Provisional Liquidator entered into a written agreement to suspend the hearing of the disputes between them to pursue amicable settlement of the disputes. The parties have since been engaged in ex-curia discussions to resolve the disputes and thus the hearing of the disputes before the arbitral tribunal remain suspended. Despite this, the mine has remained operational.

(IX)      Mushe Milling Plc ("Mushe")

ZCCM-IH acquired ownership of Mushe Milling Limited in 2019. However, since ZCCM-IH's strategic plan review for the period 2020 - 2026, the asset has been deemed not to be a strategic fit. As part of the ZCCM-IH group rationalisation following the revised strategic plan, the Company has since divested from Mushe, which is currently undergoing the liquidation process.

OUTLOOK

ZCCM-IH continues to position itself to pursue more opportunities in the mining sector. As per ZCCM-IH strategy, which is focused on mining, energy and mining related investments, the Company will seek profitable and sustainable investments. ZCCM-IH is pursuing specific projects in gold, manganese, copper, nickel, lithium, and cobalt as a way of maximising value extraction and improving shareholder value.

ZCCM-IH's focus going forward continues to be:

·           Raising both short and long-term capital to support mining and mining related investments within the group. Critical to this is the raising of adequate capital for Mopani to enable the growth and sustainability of the mine;

·           Implementation of more predictable alternative income streams such as the royalty model;

·           Continued research and development to support investments in viable mining and mineral value addition projects;

·           Continued implementation of the turnaround plans for loss making subsidiary companies; and

·           Portfolio optimisation and divestment from non-viable and non-mining related investments.

By Order of the Board

Charles Mjumphi

Company Secretary

Issued in Lusaka, Zambia on 1 September 2023

APPENDICES

US DOLLAR ABRIDGED GROUP STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

USD'000		30 June 2023		30 June 2022
Revenue		371,586		435,472
Gross profit		(29,339)		639
Operating loss		(87,033)		(84,450)
Net finance (cost)/income		(91,372)		(41,490)
Share of profit of equity accounted investees		64,171		78,384
(Loss)/profit before tax		(114,235)		(47,556)
Income tax		(11,605)		(140)
Loss for the period		(125,840)		(47,696)
Basic and diluted earnings per share (USD)		(0.78)		(0.30)

  US DOLLAR ABRIDGED SEPERATE STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

USD'000		30 June  2023		30 June 2022
Revenue		56,644		72,915
Operating profit		46,476		68,507
Net finance income		(6,040)		2,472
Profit before tax		40,436		70,979
Income tax		(11,634)		(131)
Profit for the year		28,802		70,848
Basic and diluted earnings per share (USD)		0.18		0.44

US DOLLAR ABRIDGED GROUP STATEMENT OF FINANCIAL POSITION FOR THE SIX MONTHS PERIOD ENDED 30TH JUNE 2023

USD'000	30-June-23		30-June-22
Assets
Non-Current Asset	2,026,096		2,825,410
Current Assets	733,921		627,431
Total Assets	2,760,017		3,452,841
Equity and Liabilities
Shareholders' Funds	371,765		1,391,725
Non-Current Liabilities	1,733,395		1,615,346
Current Liabilities	654,857		445,770
Total Equity and Liabilities	2,760,017		3,218,802

US DOLLAR ABRIDGED SEPERATE STATEMENT OF FINANCIAL POSITION FOR THE SIX MONTHS PERIOD ENDED 30TH JUNE 2023

	30 June 2023		30 June 2022
	USD'000		USD'000
Assets
Non-Current Asset	1,240,109		1,346,586
Current Assets	256,421		163,279
Total Assets	1,496,530		1,509,865
Equity and Liabilities
Shareholders' Funds	1,470,233		1,118,276
Non-Current Liabilities	2,542		376,482
Current Liabilities	23,755		15,107
Total Equity and Liabilities	1,496,530		1,509,865

 

END