ZCCM Investments Holdings Plc and its Subsidiaries

Transcription

1 and its Subsidiaries ZCCM Investments Holdings PLC Incorporated in the Republic of Zambia Certificate of Incorporation No ANNUAL REPORT Contents Page Notice of Meeting 1 Corporate Information 2 Directors Report 3-6 Chairman s Statement 7 An overview of operations of Investee Companies 8-17 Statement of Directors Responsibilities 18 Report of the Auditors Consolidated Profit and Loss Account 21 Consolidated and Company Balance Sheets Consolidated and Company Statements of Changes in Equity Consolidated Cash Flow Statement 26 Accounting Policies Notes to the Financial Statements CONTENTS

2

3 and its Subsidiaries NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Seventh Annual General Meeting of members of ZCCM Investments Holdings Plc will be held on Tuesday, 23 November 2010 at Southern Sun Ridgeway Hotel, corner of Church Road and Independence Avenue, Lusaka at 10:00 hours to transact the following business: (a) To consider and adopt the minutes of the Sixth Annual General Meeting held on Friday, 22 September (b) To receive and adopt the Accounts and Reports of the Directors and the Auditors for the financial year ended 30 June (c) To receive and adopt the Accounts and Reports of the Directors and the Auditors for the financial year ended 30 June (d) To ratify the appointment of Auditors who had filled the casual vacancy left following the retirement of the previous Auditor at the last AGM, to ratify the Auditors remuneration paid for the periods ended 30 June 2006 and 30 June 2007, to appoint Auditors for the ensuing year and authorize Directors to fix their remuneration. (e) To transact such other business as may properly be transacted at an Annual General Meeting. A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and, on a poll, to vote in his/her stead. The proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the office of the Company Secretary not less than 48 hours before the time appointed for holding the meeting. By Order of the Board NOTICE OF MEETING Chabby Chabala COMPANY SECRETARY 22 October 2010 Lusaka, Zambia. 1

4 and its Subsidiaries CORPORATE INFORMATION Registered and Corporate Office Auditors Mukuba Pension House PricewaterhouseCoopers 5309 Dedan Kimathi Road P O Box P O Box Lusaka Lusaka 10101, Zambia Zambia CORPORATE INFORMATION UK Registrars CAPITA IRG PLC Bourne House 34 Beckenham Road Beckenham Kent BR3 4TU England Depository for American Shares Principal Bankers JP Morgan Chase & Co. Barclays Bank of Zambia Limited 60 Wall Street Standard Chartered Bank Zambia plc New York, NY Zambia National Commercial Bank Plc USA Joint Brokers: Lusaka Stock Exchange Stockbrokers Zambia Limited 2 nd Floor South Wing Exchange Building, Central Park Cairo / Church Road P O Box Lusaka, Zambia Pangaea/EMI Securities (Zambia) Limited 1 st Floor, Lusaka Stock Exchange Building 2A Cairo Road P O Box Lusaka, Zambia 2

5 and its Subsidiaries DIRECTORS REPORT The directors submit their report together with the audited financial statements for the year ended 30 June 2006, which disclose the state of affairs of ZCCM Investments Holdings Plc ( the Company ) and its subsidiaries (together the Group ). Investments The holding company had the following interests in the undernoted companies: 1. Ndola Lime Company Limited 100% 2. AHC Mining Municipal Services Limited 100% 3. Konkola Copper Mines plc 20.6% 4. Kansanshi Mining plc 20% 5. Copperbelt Energy Corporation plc 20% 6. Chibuluma Mines plc 15% 7. NFC Africa Mining plc 15% 8. Luanshya Copper Mines plc 15% 9. Chambishi Metals plc 10% 10. Mopani Copper Mines plc 10% 11. Equinox Minerals Limited (Lumwana Copper Project) 4.4% The Company has a conditional future shares election option to take up to 20% shareholding in Konnoco Zambia Limited, a Konkola North Copper Project. AHC-Mining Municipal Services Limited was taken over by Nkana Water and Sewerage Company Limited on 1 January 2006 DIRECTORS The directors who held office during the year to 30 June 2006 were; Mr G K Chibuye - Retired April 2007 (Non Executive Chairman of the Board) Dr S Musokotwane - Retired April 2006 Mr C Evans Chibiliti - Appointed April 2006 Mr L Nkhata Mr G P Mukala (late) Dr D H Kalyalya Mrs L I Ng'andwe Mr E Mutale DIRECTORS REPORT The directors who held office as at the date of this Report (18 December 2009) were; Mr A J Lungu - Non Executive Chairman, Appointed April 2007 Mr L Ndalamei - Appointed January 2009 Dr G M Beene - Appointed January 2009 Mr T J Kasonso - Appointed November 2009 Dr D H Kalyalya Dr S M Bwalya - Appointed March 2009 Mr O B Munyenyembe - Appointed August

6 and its Subsidiaries MANAGEMENT COMMITTEE Management officials who held office during the year to 30 June 2006 were: Vacant Mr W S Musama Mr J K Kaite Mr Z Zekko Mr J M D Patterson Mr W K Katoto Mr J Makumba Mr K K Mulaisho Chief Executive Officer Company Secretary Legal Investments Manager Finance and Investments Manager Technical Investments Manager Technical Investments Officer Environmental Manager Financial Analyst Management officials who held office as at 18 December 2009 were; DIRECTORS REPORT Mr W S Musama Mr C Chabala Mr J K Kaite Mr M Mbewe Mr P Mapani Mr W K Katoto Mr J Makumba Mr B F Shamalavu SHARE CAPITAL Acting Chief Executive Officer Acting Company Secretary Legal Manager Investments Manager Finance Manager Technical Managemer Environmental Manager Head-Human Resource and Administration The authorised share capital of the Company remained unchanged at K900,000,000 divided as follows: 54,000,000 A ordinary shares of K10 each; and 36,000,000 B ordinary shares of K10 each. There were no changes in the issued share capital of 89,296,428 shares with a nominal value of K892, 964,280 during the year which remained as detailed below: Number of shares Amount Kwacha At beginning and end of year 89,296, ,964,280 The shares are held as follows: Number of shares Amount Kwacha A shares - Ministry of Finance and National Planning on behalf of the Government of the Republic of Zambia (GRZ) 53,825, ,258,080 B shares - Ministry of Finance and National Planning on behalf of the Government of the Republic of Zambia (GRZ) 24,329, ,298,280 B Shares - Others 11,140, ,407,920 89,296, ,964,280 The 11,140,792 B ordinary shares are thinly spread and held as at 30 June 2006 by 2,339 minority shareholders. During stage 2 privatisation, GRZ will dispose of some or all of its 87.6 per cent shareholding in the Company. The timetable for stage 2 privatisation of the Company has yet to be set by GRZ. Principal activities The principal activities of the Company include managing the Zambian Government s stake in the mining sector. The Company is also charged with the responsibility of environmental restoration arising out of the past operations of ZCCM Ltd. 4

7 and its Subsidiaries Functions and Performance of the Company In its transformed state as an investments holding company, the main functions of the Company are as follows: - to monitor the performance of the privatised companies with respect to production and metal prices in order to ensure that commitments agreed upon relating to disbursements are actioned on a timely basis. The Company continued monitoring production and cost levels in the associate Companies. In addition, metal prices in relation to the payment of price participation disbursements have been followed through to payments and as a result all price participation income due was received. - to anticipate the receipt of deferred sale considerations and ensure that these are received on a timely basis and in the correct amounts; The Company followed up all deferred sale considerations and payments were timely paid. - to ensure that capital investment commitments pledged at the time of privatisation are fulfilled; It is pleasing to note that investments commitments relating to recapitalisation of privatised mines specified in the Agreements were met and additional capital were incurred over and above what was pledged. - to assist the Government, through the Ministry of Mines and Minerals Development, in monitoring compliance of the resources committed in the Development Agreements, including local Business Development Management and Training, Human Resources and Social Services obligations; The Company continued to assist GRZ by providing technical advice and assistance on matters relating to Development Agreements post privatisation and the interpretation of existing ones. - to ensure that ZCCM-IH environmental obligations under the transaction documents are complied with. DIRECTORS REPORT All environmental obligations have been attended to through different levels of participation under the Copperbelt Environment Project and significant progress made by the remedial measures undertaken to date. - to liaise with prospective Greenfield investors in the mining and minerals industry who will enter into Agreements with the Government. The Company has continued to liaise with Greenfield investors and it is pleasing to note that during the year under review, shares were acquired in Equinox Minerals Limited, the sole shareholder of the Lumwana Copper Project,and more opportunities remain to be exploited. 5

8 and its Subsidiaries Corporate Governance The Company continued to operate by enforcing good governance practices and observing the separation of powers between the Directors and Management and the Chairman of the Board and the Chief Executive Officer. Activities were further streamlined by the full utilisation of the existing Audit and Remuneration Committees of the Board whose membership of Non-Executive Directors for the year to 30 June 2006 is indicated below: Audit Committee Mrs L I Ng andwe (Chairperson) Dr S Musokotwane Retired April 2006 Mr C E Chibiliti Appointed April 2006 Mr G P Mukala Remuneration Committee Dr D H Kalyalya (Chairperson) Mr L Nkhata Mr E Mutale DIRECTORS REPORT Membership of the Committees as at the date of this Report (18 December 2009) was as follows: Audit Committee Dr S M Bwalya (Chairperson) Mr L Ndalamei Dr G M Beene Mr T J Kansonso Number and remuneration of employees Remuneration Committee Dr D H Kalyalya (Chairperson) Dr G M Beene Dr S M Bwalya Mr O B Munyenyembe The total remuneration of employees during the year amounted to K26,467 million (2005: K22,769 million) and the number of employees was as follows: Month Number Month Number July January August February September March October April November May December June The Group recognises its responsibility regarding the occupational health, safety, and welfare of its employees and has put in place measures to safeguard them. Signed on their behalf by: A J Lungu Director S M Bwalya (Dr) Director 6

9 and its Subsidiaries CHAIRMAN S STATEMENT I am pleased to present the Chairman s Report. The year recorded significant improvements in the Group s profitability, an increase in investments portfolio and satisfactory implementation of the environmental remedial measures undertaken on the Copperbelt Province and Kabwe town. The year also witnessed a shift in corporate focus towards more emphasis on investments activities. This shift in focus was a deliberate effort aimed at increasing shareholder value. The portfolio in 2006 was enhanced by a new investment in Equinox Minerals Limited which is a Canadian (Toronto) listed company with over 95% interest in the Lumwana Copper Project in North-Western Province of Zambia. When operational, the Lumwana Mine will be the largest open pit mine in Africa with potential to open up a uranium mine in the near future. Performance of the Associate Companies continued to be driven by global commodity market fundamentals mainly influenced by Chinese demand for copper leading to unprecedented high selling or realised prices. The Group achieved total income of K101,305 million (2005: K249,198 million). The Group recorded a profit before tax of K 503,675 million (2005: K194,473 million). The Group however, has a total deficit of K 806,210 million (2005: K1,265,971 million) on its balance sheet. The shareholding of AHC Mine Municipal Services Limited, a wholly owned subsidiary of the Company, was finally transferred on 19 January 2006 to the respective District Councils on the Copperbelt. The transfer of this subsidiary had a significant impact on the Group consolidated financial figures. Consequently any comparison with previous year s figures needs to take this into account. In accordance with good corporate governance practice, KPMG were subsequent to year end retired as the Company s auditors having held the office of External Auditors for five years. PricewaterhouseCoopers were engaged to fill the casual vacancy that arose. During the year Mr C Evans Chibiliti, Secretary to the Treasury, joined the Board replacing Dr S Musokotwane who retired from the Board. Finally, I wish to express my gratitude and appreciation to the Directors, Management and all members of staff for their dedication to the affairs of the Company. CHAIRMAN S STATEMENT A J Lungu Chairman of the Board 7

10 ZCCM Investments Holdings Plc and its Subsidiaries AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE 1 Kansanshi Mining plc Financial AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE For the year ended 30 June 2006, revenues were US$ million broken down into copper US$ million and gold of US$ 16.7 million. Copper revenues comprised US$ million from copper cathodes and US$207.8 million from copper concentrates. Operational The Company produced 73,683 tonnes of copper cathode and 53,496 of copper concentrate. Included within cathode production were 67,656 tonnes from the (Solvent Extraction and Electrowinning (SX/EW) process and 6,027 tonnes produced from the tolling of copper concentrates at the Mufulira smelter. Production increased by 77% over 2005 as Kansanshi continued to ramp up after achieving commercial production during April 2005, as well as cathode production from the toll treatment of concentrate production commenced in Concentrate production was up by 91% over 2005 as Kansanshi continued to ramp up after achieving commercial production during April During the 2005 year, the world shortage of mining truck tyres had impaired the availability of the Company s haul trucks at Solwezi. The 34% increase this year, compared with 2005 was reflective of the easing of the tire shortages, accompanied by the improved equipment availability and the larger drilling and haul truck fleet. There was substantial capital programme in the 2006 year. The High Pressure Leach plant was constructed during most of 2006 and will be commissioned in This will enable the Company to treat it s own copper concentrates on site. A new SX/EW plant was commissioned in 2006 and new crusher units were installed. Also various housing projects were completed and will be continued in Kansanshi Mining Plc Oxygen Plant 8

11 and its Subsidiaries 2 Copperbelt Energy Corporation plc Financial The year to 30 June 2006 was a challenging one for CEC partly due to negotiations by the majority shareholders - Cinergy and National Grid for the sale of their shareholding to a Zambian Consortium and also the strengthening of the Kwacha. However the turnover amounted to US$127.7 million while the cost of sales was US$88.2 million. The turnover was below budget by US$1.6 million. The operating costs in the sum of US$25.8 million were higher than budget because of exchange losses amounting to US$870 million. Operating costs were higher than budget by US$3.0 million. The gross profit therefore amounted to US$37.2 million. The profit before interest and tax was US$13.7 million and the net profit amounted to US$8.3 million. A total dividend of US$5.8 million was declared. The Kitwe Chamber of Commerce conferred the award of Best Service Company for the year 2005 on CEC. This is the 4 th time CEC has won this award. Operational In order to accommodate the forecast power demand, the Company embarked on several reinforcement and extension projects on the transmission system. These projects include; the Mufulira Area Project covering MCM s Mufulira Mine and Smelter, the CEC Northern Area Reinforcement project intended to accommodate KCM s expansion projects, the CEC/DRC interconnector and the Nkana Area Project at MCM s Nkana Mine. These Projects are expected to increase the demand for power and hence the revenue. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE Part of CEC Infrastructure 9

12 and its Subsidiaries 3 Konkola Copper Mines plc Financial For the financial year ended 30 June 2006 a total of 160,056 tonnes of copper was produced. The revenue for the period was US$ 861 million and the company recorded a net profit of US$ 170 million. Operational Construction of the 500 tonnes per day sulphur burning acid plant at Chingola was completed in the first quarter of 2006 of the financial year and the plant was successfully commissioned to operate at design capacity. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE Significant progress was made to the US$ 400 million Konkola Ore Body Expansion (KOBE) Project with the award of major contracts for shaft sinking, underground pump chamber excavation, underground haulage development and surface concentrator plant construction to expand Konkola Mine capacity from 2 million to 6 million tonnes per annum of ore production. The Project is scheduled for completion in The construction of a new Smelter and Acid Plant at Chingola, which was approved at a cost of US$ 300 million, will have a production capacity of 250,000 tonnes of copper annually and of 1,700 tonnes of acid per day. The Project is scheduled for completion in Chibuluma Mines plc Financial The profit before taxation for the year ended June 2006 was $16.3m generated from copper sales of $43.5m and copper production of 8017 tonnes. The financial year represented the first full year of production at the South Mine and the company achieved its name plate capacity precisely on target in June 2006 with 40,000 tonnes of ore mined. The performance overall benefitted from the increases to the LME copper price averaging $5427 per tonne.the Mine Operating Cost base also increased significantly to $1.1m per month (from $0.6m) reflecting the additional throughput together with the appreciation of the Zambian Kwacha to an average of 4748 to the Dollar (prior year average 3699).The copper cost C1 increased to $1.30 (from $1.20) but is planned to decrease in the following financial year when production stabilises at 40,000 tonnes each month. Capital expenditure in the year was $8.7m increasing the cumulative investment by Metorex Ltd to $57m. The first year of production at the South Mine and the generation of the company's first profit enabled the deficit on profit and loss reserves after 9 years of operations to reduce to $33m. 10

13 and its Subsidiaries Operational The Mine achieved its planned production in June 2006 at 40,000 tonnes of ore.the total for the full financial year was 363,000 at an average grade of 2.67%.The South Mine produces copper concentrates which it sells to Smelters at contractual tolling fees. The Company is contracted to the KCM Smelter at Nkana to December The Ore Reserve Statement as at 30th June 2006 indicated 6,119,000 tonnes grading at 3.3% providing a 13 year life of mine. A further deposit within the Mining License area known as Chifupu has been identified and will be subject to diamond drilling within the next financial year to establish its commercial viability Part of Chibuluma South Infrasturcture 5 Luanshya Copper Mines plc Financial Subsequent to year end, Luanshya Copper Mines Plc concluded negotiations for the Development of the Muliashi Deposit and signed the Development, Price Participation and Sale & Purchase Agreements with the Government of the Republic of Zambia on 21 September The Agreements envisage capital expenditure of US$90 million to develop a Heap/Agitation Leach and Solvent/Extraction operation to produce 32,000 tpa of copper for a period of at least 15 years. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE 11

14 and its Subsidiaries Operational Production of both copper and cobalt was below budget during the period resulting mainly from geotechnical constraints affecting the cut and fill areas. To resolve this problem, conversion of the cut and fill mining method in the flat areas to mechanised open stoping sub level caving (MOS/SLC) mining method was progressed during the year. The Company adopted and implemented an HIV/AIDS policy so as to mitigate the effects of the pandemic on the LCM employees. One fatality arising from rock fall was experienced during the period. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE 6 NFC Africa Mining Plc Financial LCM Employees underground Construction of the 5000 tpa copper cathode Leach and Solvent Extraction plant together with a 40,000 tpa acid plant continued during the year and commissioning was subsequently undertaken in the month of September All concentrates produced were exported due to a contractual tolling dispute with KCM. Operational Copper production to June 2006 was below budget mainly due to below schedule mined tonnage and headgrades. An upward trend in production was however noted. 12

15 and its Subsidiaries 7 Chambishi Metals plc Financial Generally operations were adversely affected by the 30% appreciation of the Kwacha. Operational Production of both copper and cobalt to end of June 2006 was below budget mainly due to lower than forecast metal content in both Baluba ore and the Nkana slag. 8 Mopani Copper Mines plc Financial A number of projects were commissioned during the year and prominent on this list were the new Nkana Cobalt Plant Roaster and Acid Plant together with the Oxygen Plant. Operational Chambishi Metals Concentrator Production for the year was affected by equipment failures, low copper headgrades and ore arisings to the mill and the on-going remedial work at the Smelter. Subsequent to year end, Phase 1 of the Mufulira Smelter Upgrade Project comprising the Isasmelt Furnace, Matte Settling Electric furnace and associated ancillaries were officially commissioned by the Republican President. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE 13

16 and its Subsidiaries (B) SUBSIDIARY COMPANIES 1 Ndola Lime Company Limited Financial During the year the company-achieved sales of K73,759 million compared to budgeted sales of K88,854 million and K84,314 million achieved during 2004/5 period. In quantity terms, the company achieved sales of quicklime of 136,487 tonnes (2005: 132,870), limestone of 136,487 tonnes (2005: 227,817) and hydrated lime of 11,147 tonnes (2005: 19,889). AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE Total quicklime produced at 157,300 metric tonnes was 2% below the budgeted 161,200 metric tonnes. The below budget production of Quicklime is mainly attributed to lost production of 11,500 tonnes due to lack of demand and a country wide shortage of HFO which resulted into a total shut down of the kilns for 16 days between 27 th September and 11 October Total hydrated lime produced at 23,133 tonnes was 633 metric tonnes below budget. Hydrated lime production was also adversely affected by the shortage of Quicklime feed as a result of the shut down of the kilns due the countrywide shortage of HFO. The below budget sales value recorded during the year is explained by the significant appreciation of the Kwacha and the reduction in the uptake of lime products by mining companies. A total of K10,500 million was lost as a result of the appreciation of the Kwacha against the US Dollar. Reduction in uptake of lime products resulted into revenue loss in the order of K11, 300 million. The company made a loss before tax of K17,202 million compared to the budgeted profit of K8,038 million and a profit before tax of K14,560 million achieved in the previous year. Operational A total of 645,025 metric tonnes of limestone was hauled from the quarry compared to the budget of 858,320 metric tonnes during the year under review. Operations in the quarry recorded negative variances mainly due to a planned suspension of mining activities for 64 days between 14 January 2006 and 19 March A total of 476,191 metric tonnes was crushed against a budget of 542,844 metric tonnes. The deficit in crushing is mainly attributed to the deliberate suspension of crushing operation for 17 days between 1 st and 17 th March 2006 while running the Rotary kiln in order to reduce on the pre-crushed stockpiled Rotary kiln feed material. 14

17 and its Subsidiaries (C) Ndola Lime Company Limited Vertical Kiln 2 AHC Mining Municipal Services Limited Financial The MTSP was successfully executed and all the projects completed by December 2005, except for the Four Towns Pumping project which was 68% complete. The Contractor, ERTEC, failed to complete this project in time and the performance guarantee on the project amounting to $266,000 was recalled by the company (AHC-MMS). All the company s short term obligations, with the exception of ZESCO and ZRA, have since been paid off. Operational The Mine Township Services Project (MTSP), for which AHC Mining Municipal Services Limited (AHC-MMS) was the executing agent, came to an end on 31 December On 4 May 2005, the Government of the Republic of Zambia announced its decision to have AHC-MMS taken over in its entirety by Nkana Water and Sewerage Company (NWSC) with effect from 1 January 2006 as the exit strategy for the MTSP. The modalities for this take over have since been finalised. At the time of reporting, ZCCM - IH had already issued its deed of gift to the local authorities in the areas where the AHC-MMS operated as the new shareholders in AHC-MMS, based on the value of the company s assets located in their areas. This is in line with the provisions of the Water and Sanitation Act of The company intensified its efforts to improve the quality of treated water in Mufulira Chingola and Chililabombwe where NWASCO had imposed some sanctions due to poor raw water quality in these areas. The sanctions were finally lifted in Mufulira and Chililabombwe in September The water quality in Chingola continued to be a challenge and the tariff embargo was still in force by the end of December ENVIRONMENTAL REVIEW 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 environmental liabilities and obligations remaining with GRZ/ZCCM-IH following the privatization of mining assets. The Environmental Management Facility (EMF), which is composed of multiple stakeholders, working as the EMF Steering Committee, was established by the Minister of Finance and National Planning, to manage Component 1 of the CEP, for the purpose of prioritizing and approving subprojects of the CEP for funding. The preparation of Consolidated Environmental Management Plans (CEMP) for the Copperbelt Environment Project, identification of priority mitigation measures and subprojects to be funded through the EMF was completed and was awaiting a Public Disclosure in line with the Environmental Protection and Pollution Control Act Cap 20 of the Laws of Zambia. 15 AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE

18 and its Subsidiaries A team of experts from the World Bank conducted a Mid -Term Review (MTR) of the CEP to assess; the performance of ZCCM-IH in carrying out subprojects under Component 1 of the CEP; progress in meeting the Project s objectives; and overall Pr oject performance as measured against the performance indicators included in the Development Financing Agreement. A total of Thirty-six (36) Subprojects have been identified to date, and Twenty-six (26) have received approval for implementation by the E MF Steering Committee and the World Bank has only approved sixteen (16) out of the Twenty-six (26) subprojects. The following are the major highlights of subproject implementation during the year: AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE i ii iii iv v vi vii The Resettlement Action Plan for A mco residents was under implementation and the house construction for the resettlement of eighty -nine (89) families at Amco in Kitwe had started. The preparation of the Resettlement Action Plan for Zambia Railways residents was completed. Due to poor physical integrity, all the houses at Zambia Railways Compound were demolished and the sixty -five (65) families were provided with temporary accommodation until such time as the construction of the new settlements is complete. All decommissioned Tailings Dams on the Copperbelt wer e sampled for copper analysis with a view to assess potential for reprocessing and determining which require final closure to safeguard dam stability. A preliminary Risk Assessment of A mco Uranium Tailings was done by International Atomic Energy Agency t o assess the potential impact on the environment and public health and safety. The preparation of the Kabwe Scoping and Design Study (KSDS) and the Site Rehabilitation and Environmental Management Plan (SREMP) for the rehabilitation of the Kabwe mine site and implementation of the lead risk mitigation programmes in the surrounding settlements was completed. The implementation of the Kabwe Water Supply Project (KWSP) to supply potable water for lead mitigation in lead impacted communities commenced during the year. The dredging of the Luanshya River which has been impacted by mining operations was completed. Dredging of Luanshya River 16

19 and its Subsidiaries (D) OTHER INVESTMENTS 1 Konnoco Zambia Limited Discussions with potential development partners gained momentum during the year and the restructuring of African Rainbow Minerals Subsidiaries into a Canadian listed company (Teal Exploration & Mining Incorporation) was completed. Further work to establish the viability of various mining and processing options will continue in the next financial year. This will be accomplished through re-evaluation of the resources surrounding the existing mine infrastructure and re-categorizing the current resource base in the light of the current economic climate. 2 Equinox Minerals Limited (Lumwana Copper Project) The Company acquired through a private placement million shares at a cost of US$30 million in Equinox Minerals Limited, parent company to the Equinox Copper Ventures Limited operating the Lumwana Copper Mine. Due to the strategic importance of Lumwana Mine and in line with majority shareholder policy of full participation by the Company in such enterprises, the Board had decided to participate through Equinox Minerals Limited, being the only vehicle available for acquisition of the shares. ENVIRONMENTAL REVIEW - Corporate Social Responsibility Rehabilitated Clayton Park, Kabwe under CEP The Group recognises its responsibility regarding the occupational health, safety, and welfare of its employees and has put in place measures to safeguard them. In addition the Group activities have increased its level of donation in areas where it operates and carried out the following activities during the year: a. The renovation of Mufulira, Kitwe and Kabwe Public Libraries to include Environmental Public Information Centres. AN OVERVIEW OF INVESTEE COMPANIES PERFORMANCE Mufulira Public Library, Environmental Public Information Centre 17

20 and its Subsidiaries b. Construction of an Environmental Public Information Centre in Katondo township of Kabwe. W S Musama, Acting Chief Executive Officer Lusaka, Zambia 18 December 2009 STATEMENT OF THE DIRECTORS RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2006 STATEMENT OF DIRECTOR S RESPONSIBILITIES The Companies Act requires the directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the company and its subsidiaries as at the end of the financial year and of its profit or loss. It also requires the directors to ensure that the company and its subsidiaries keep proper accounting records that disclose, with reasonable accuracy, the financial position of the Group. They are also responsible for safeguarding the assets of the company and of its subsidiaries. The directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and the requirements of the Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company and of its profit or loss. The directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. As at 30 June 2006 the Group had a total deficit of K 806,210 million (2005 K 1,265,971 million). The group depends on continued financial support from the Government of the Republic of Zambia. The Directors have obtained an undertaking from the major shareholder, the Government of the Republic of Zambia (GRZ), that the necessary financial and operational support will be made available for the 12 months following the date of signing of the consolidated financial statements Signed on their behalf by: A J Lungu Director S M Bwalya (Dr) Director 18

21 PricewaterhouseCoopers PricewaterhouseCoopers Place Stand Number 2374 Thabo Mbeki Road P.O.Box Lusaka, Zambia Report of the independent auditor to the members of ZCCM Investment Holdings Plc Telephone +260 (211) / Facsimile +260 (211) We have audited the consolidated financial statements of ZCCM Investment Holdings Plc for the year ended 30 June 2006 set out on pages 20 to 52. These financial statements comprise the consolidated and company balance sheets at 30 June 2006, and the consolidated profit and loss account, consolidated and company statements of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes to the consolidated financial statements. Directors responsibility for the consolidated financial statements The directors are responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and with the requirements of the Zambia Companies Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor s responsibility Our responsibility is to express an independent opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements. Opinion In our opinion the accompanying financial statements give a true and fair view of the state of the Group s financial affairs at 30 June 2006 and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and the Zambia Companies Act. 19

22 Report on other legal requirements The Companies Act requires that in carrying out our audit we consider whether the company has kept the accounting records, other records and registers required by this Act. We confirm that in our opinion the accounting records, other records, and registers required by the Companies Act have been kept by the company, so far as appears from our examination of those records. Chartered Accountants 27 January 2010 Lusaka Richard Mazombwe Partner 20

23 and its Subsidiaries Consolidated Profit and Loss Account Notes 2006 Restated 2005 Continuing operations Lime sales 73,759 84,180 Cost of lime sales (80,447) (57,065) Gross (loss)/profit (6,688) 27,115 Other income 15, ,315 Grant income 12,178 13,703 Administration expenses (66,168) (81,902) Environmental expenses 11 (12,634) (18,355) Operating (loss)/profit 5 (58,214) 91,876 Net finance income 6 217,991 32,070 Share of profit of associates ,898 70,527 Profit before income tax 503, ,473 Income tax expense 7 (43,129) (9,110) Profit for the year from continuing operations attributable to equity shareholders 460, ,363 Discontinued operations : Loss on disposal of AHC 12 (8,701) - Profit/ (loss) for the period from discontinu ed operations 12 7,916 (5,542) Profit for the year 4 59, ,821 Earnings per share 8 5,166 2,021 21

24 and its Subsidiaries Consolidated balance sheet Notes restated Non-current assets Property, plant and equipment 10 13, ,807 Investment in associates , ,763 Deferred income tax assets 24 10,620 - Available-for-sale financial assets ,013 19,531 Non-current receivables 17-18,987 1,037, ,088 Current assets Inventories 18 13,403 21,818 Receivables and prepayments , ,281 Investments in securities held to maturity 16 82,094 43,778 Cash and cash equivalents 20 1,669 38, , ,734 Current liabilities Payables and accrued expenses 21 97, ,594 Current income tax ,092 Borrowings 23 74,243 3,088 Finance Lease 23 1,238 1,707 Provision for other liabilities and charges 26 7, , ,481 Net current assets 15, ,253 Net assets 1,053, ,341 Capital and reserves attributable to the Company s equity holders Share capital Revaluation Reserve 1,812 9,215 Accumulated losses (808,915) (1,276,079) Total deficit (806,210) (1,265,971) Non-current liabilities Borrowings 23 1,791,273 2,114,848 Deferred income tax 24 60,834 7,687 Retirement benefit 25 5,755 - Finance lease 23-1,783 Deferred grant 31-25,503 Provisions for liabilities and other charges 26 1,931 2,491 Total non-current liabilities 1,859,793 2,152,312 Total equity and non-current liabilities 1,053, ,341 The financial statements on pages 21 to 54 were approved for issue by the board of directors on 18 December 2009 and signed on its behalf by: A J Lungu Director. S M Bwalya (Dr) Director 22

25 and its Subsidiaries Company balance sheet Notes Non-current assets Property, plant and equipment 10 4,965 5,513 Investment in subsidiaries Investment in associates , ,512 Available for sale financial assets ,013 19,531 Non-current receivable 17-21, , ,187 Current assets Receivables and prepayments 19 76, ,577 Investments in treasury bills 16 82,094 43,778 Cash and cash equivalents 20 1,669 32, , ,078 Current liabilities Payables and accrued expenses 21 72,182 89,566 Current income tax ,004 Borrowings 23 69, ,812 91,570 Net current assets 17, ,508 Net assets 510, ,695 Equity Share capital Revaluation reserve 1,369 1,395 Accumulated losses (1,340,792) (1,463,331) Total deficit (1,338,530) (1,461,043) Non-current liabilities Borrowings 23 1,791,273 2,058,938 Deferred income tax 24 52, Retirement benefit 25 5,755 - Deferred grant income 31-2,518 Total non-current liabilities 1,849,235 2,061,738 Total equity and non-current liabilities 510, ,695 The financial statements on pages 21 to 54 were approved for issue by the board of directors on 18 December 2009 and signed on its behalf by: A J Lungu Director.. S M Bwalya (Dr) Director 23

26 Consolidated statement of changes in equity Note Share capital Revaluation reserves Accumulated losses Total equity Year ended 30 June 2005 At start of year - as previously reported ,398 (1,588,286) (1,575,995) - prior year adjustment , ,022 - as restated ,398 (1,459,264) (1,446,973) Revaluation surplus Transfer of excess depreciation - (3,364) - 3,364 - Deferred income tax on transfer Profit for the year , ,821 At end of year 893 9,215 (1,276,079) (1,265,971) Year ended 30 June 2006 At start of year - as previously reported 893 9,215 (1,454,051) (1,443,943) - prior year adjustment 4 129, ,022 - prior year adjustment 4 48,950 48,950 - as restated 893 9,215 (1,276,079) (1,265,971) Realisation of reserve on disposal of - (7,219) 7,219 - discontinued operation Transfer of excess depreciation - (283) Deferred income tax on transfer - 99 (99) - Profit for the year , ,761 At end of year 893 1,812 (808,915) (806,210) 24

27 Company statement of changes in equity Share capital Revaluation reserve Accumulated losses Total equity Year ended 30 June 2005 At start of year (1,597,220) (1,595,457) Revaluation surplus Deferred income tax on revaluation - (282) - (282) Profit for the year , ,889 At end of year 30 June ,395 (1,463,331) (1,461,043) Year ended 30 June 2006 At start of year 893 1,395 (1,463,331) (1,461,043) Transfer of excess depreciation - (40) 40 - Deferred tax on transfer - 14 (14) - Profit for the year , ,513 At end of year 30 June ,369 (1,340,792) (1,338,530) 25

28 Consolidated cash flow statement Notes Operating activities Cash generated from operating activities , ,030 Interest income Interest expense (4,494) 724 Net cash generated from operating activities 336, ,754 Investing activities Purchase of property, plant and equipment 10 (26,493) (42,528) Proceeds from disposal of assets - 1,398 Acquisition of equity investments 15 (121,482) - Purchases of government securities (38,316) (14,637) Net cash outflow from investing activities from discontinued operation (23,079) (3,560) Net cash used in investing activities (209,370) (59,327) Financing activities Proceeds from borrowings 69,918 - Repayments on borrowings (267,655) (73,140) Grant amortisation (15,637) (13,703) Finance lease repayments (469) (2,203) Financing cash flow used in discontinuing operation 17,248 19,086 Net cash used in financing activities (165,321) (69,960) Net (decrease)/increase in cash and cash equivalents (38,425) 18,743 Movement in cash and cash equivalents At start of year 35,769 17,026 (Decrease)/increase (38,425) 18,743 At end of year 20 (2,656) 35,769 26

29 Accounting policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated. (a) Basis of preparation The consolidated financial statements are prepared in compliance with International Financial Reporting Standards (IFRS).The measurement basis applied is the historical cost basis, except as otherwise stated in the accounting policies below. The consolidated financial statements are presented in kwacha (K), rounded to the nearest million. The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 2. Going concern assumption At 30 June 2006, the total deficit of the Group stood at K 806,210 million (30 June 2005: K1, 265,971 million). The ability of the Company to continue as a going concern is dependent upon the continued support of the Group s major shareholder, the Government of the Republic of Zambia to enable the Group settle its liabilities as and when they fall due. The Group s projected cash requirements are to be financed from internally generated funds as well as from government grants and loans. The consolidated financial statements have been prepared on the going concern basis, which assumes that the Company and its subsidiaries will continue in operational existence for the foreseeable future. The Directors have obtained an undertaking from the major shareholder, the Government of the Republic of Zambia (GRZ), that the necessary financial and operational support will be made available for the 12 months following the date of signing of the consolidated financial statements. Based on the foregoing, it is the Directors view that it is appropriate for the consolidated financial statements to be prepared on a going concern basis. (i) Adoption of new and revised standards and interpretations In 2006 new and revised standards and interpretations became effective for the first time and have been adopted by the Group where relevant to its operations. The adoption of these new and revised standards and interpretations had no material effect on the Group s accounting policies or disclosures. 27

30 Accounting policies (continued) (ii) Standards, interpretations and amendments to published standards not yet effective The following amendment to an existing standard and new standard will be mandatory for the Group s accounting periods beginning on or after 1 January 2007, but which the Group has not early adopted: (b) Consolidation IAS 1 Amendment, Capital Disclosures. The amendment to IAS 1 introduces disclosures about the level of the Group s capital and how it manages capital. IFRS 7, Financial Instruments: Disclosures. IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. (i) Subsidiaries Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit and loss account. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. 28

31 Accounting policies (continued) (ii) Associates Associates are those enterprises in which the Group has significant influence but not control over the financial and operating policies of the enterprise, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting. In the holding company, investments in associates are accounted for on a fair value basis in line with International financial reporting standards. The Group s share of its associates post-acquisition profits or losses is recognised in the profit and loss, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. (c) Functional currency and translation of foreign currencies (i) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Zambian kwacha, which is the Company s functional and presentation currency. (ii) Transactions and balances in group entities Foreign currency transactions are translated into the functional currency of the respective entity using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. 29