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Condensed reviewed consolidated interim results for the six months ended 30 September 2012
ZCI Limited
(Bermuda registration number 661:1969)
(South African registration number 1970/000023/10)
JSE share code: ZCI ISIN: BMG9887P1068
Euronext share code: BMG9887P1068
("ZCI" or "the Company" or "the Group")
Condensed reviewed consolidated interim results for the six months ended 30 September 2012
Chairman and Chief Executive Officer's statement
We are pleased to present the Group's condensed reviewed consolidated interim results for the
six months ended 30 September 2012. The Group incurred an operating loss of USD3.8 million
from activities for the six months to 30 September 2012, compared to an operating loss of
USD7.7 million for the same period in the previous year.
Mining activities
While mining operations have yet to consistently achieve forecast production levels, there have
been very positive outcomes reported since 31 March 2012.
Significant plant upgrades have been completed during the period, which has contributed to the
progress being made toward realising the full potential of the assets and achieving operating
stability.
In terms of copper produced in concentrate, production during the six-month period increased
by 31% compared to the same period last year. Copper produced in concentrate continued to
progressively increase during the second quarter of the financial year with total production of
4.490 tonnes for the six months ended 30 September 2012. Since the shutdown in May 2012,
as previously reported in the Company's 31 March 2012 annual financial statements, there has
been a significant improvement in production and September 2012 was the third month in a row
where copper produced in concentrate equalled or exceeded 950 tonnes. The increased copper
in concentrate tonnes were achieved during this period by strong mill throughput.
Furthermore, the introduction of an increasing proportion of sulphide ore has brought flotation
stability and improved recovery, and has also resulted in the reduction of costs due to curtailed
usage of the reagent used to treat oxide ores. Plant efficiency has benefited from the Larox
filter plant installed this year which has significantly increased filtration capacity and reduced
moisture content. Notably, in the month of August, the mill achieved and exceeded for the first
time its nameplate capacity of 150 Mtph, and during the same month the mine achieved a
record production level of 976 tonnes of copper in concentrate.
In summary, higher production levels were achieved due to improvements in maintenance
strategies, improved production at Thakadu, higher availability of the mill and increasing
recoveries as mining moved from oxidic areas to areas with higher sulphide content at Thakadu.
We anticipate that average recoveries will continue to increase as mining progresses deeper
into the mines and away from more oxidic areas.
With copper prices ranging between a low of USD3.24 per lb in June 2012 and a high
of USD3.84 per lb in April 2012, the average weighted copper price achieved on sale of
concentrate has been approximately USD3.53 per lb compared with a budgeted figure averaging
approximately USD4.15 per lb. The combination of lower realised prices and lower than
expected production levels in the first two months of the first quarter were primary contributors
to the underperformance of the operations compared to the Directors' original projections.
Nevertheless, there have been positive results in terms of reducing operating costs per tonne
to below budgeted projections and recoveries above budgeted projections towards the latter
half of the period.
The mine is not yet performing at optimal levels, but we remain confident that the groundwork
has been laid for a good second half to the year where the projected production figures can still
be met, despite uncertainties disclosed in note 5 to the financial statements.
Financial statements and operations
The weakening of the Botswana Pula of approximately 10% against the US Dollar during the
period impacted the financial position negatively.
Additions to property, plant and equipment over the reporting period comprised principally
significant waste stripping activity at Thakadu mine, as well as equipment for enhancements.
The impact of these on the statement of financial position at period end was reduced by the
weakening in the exchange rate. We are pleased to report that major capital expenditure on
upgrading the plant has been completed during the period. The next major plant upgrade,
once feasibility of mining further resources has been established, will be linked to a second
processing circuit.
ZCI continued to provide financing for mining activities of its subsidiary with an additional
USD6 million loan facility drawndown during the six-month period ended 30 September 2012.
Furthermore, ZCI has agreed to defer all principal and interest payments arising from its
subsidiary's debt obligations to ZCI until 31 March 2013 and has provided a letter of financial
support. The additional funds have been used to finance a range of activities including growth
projects, plant capital expenditure, plant enhancements, working capital and additional
stripping. The benefits of this additional investment are evidenced by higher production levels
and improved efficiencies achieved in the second quarter, and we expect this to continue in
coming periods.
Significantly increased ore and concentrate stock pile inventory quantities on hand, resulted in
an overall increase in inventory balances at 30 September 2012, compared to the same period
last year.
There has been a decrease in the cash and cash equivalents on hand during the period, with
pressure placed on cash balances, especially during the first half of the period, due to the
shutdown experienced in May, continued demands of plant enhancement projects, as well as
increased mining activity and significant waste stripping.
Trade payables for the period reduced largely due to removal of dependence on the more
expensive reagents because of mining better ore as well as improved cash flows in the latter
half of the period enabling the operation to settle its liabilities as they fell due.
Revenues increased to USD27 million, an increase of 18% from our revenues of USD23 million
for the corresponding period last year. Increased copper produced in concentrate and sold,
as a result of increased throughput and higher grades achieved, combined with the quality of
concentrates resulting in a reduction of penalties, contributed to positive growth in revenue for
the six-month reporting period when compared to the prior period.
Corporate governance developments
The most significant change at a ZCI board level since issuing the Integrated Annual Report
for the year ended 31 March 2012 in September, has been the appointment of a new Finance
Director. With an effective date of 12 November 2012, Kathryn Bergkoetter resigned from the
Board of ZCI, and effective the same date Willem Badenhorst was appointed as Financial
Director. Ms Bergkoetter has been involved with ZCI for a number of years in an accounting
capacity and latterly serving on its board as Financial Director. On behalf of the Board of
Directors we again thank her for her contributions to the Company over her years of service.
Furthermore, we extend our congratulations to Mr Badenhorst on his appointment and we look
forward to supporting him in the role.
All other members of the Board of Directors were re-elected at the recent annual general
meeting of the Company held on 11 October 2012.
ZCI continues to be committed to the implementation of corporate governance principals which
are in accordance with best practices and significant advancements in its long-term plan for the
incremental implementation of King III corporate governance principles have been made. We
are pleased to announce that the following directors of the Company, Mr Stephen Simukanga,
Mr Michel Clerc and Mr Cyril O'Connor, were elected as the members of the Audit and Finance
Committee of the Company. We would like to take this opportunity to thank them in advance for
the important contributions they will make to the Company in these roles.
In line with the strategic objectives of ZCI, the Board will continue to ensure ongoing compliance
with regulatory requirements and improved corporate governance.
Risk management
As previously reported, ZCI provided notice of the termination of the Investment Advisory and
Management Agreement (the "IAMA") between ZCI and iCapital (Mauritius) Limited during July
2011. A settlement for certain of the claims against the "fixed fee" element of the agreement has
been reached during September 2012 and accrued for accordingly in the consolidated interim
financial statements. Negotiations on some disputed clauses in the agreement are continuing
and shareholders will be informed about any further developments as appropriate.
The engagement of Rand Merchant Bank ("RMB") to realise value from ZCI's investment in its
subsidiary, as reported previously, remains a key area of focus. RMB and the Board of Directors
remains committed to the process to identify potential parties with sufficient resources to
support the development of the Group's operations and realise its potential value.
The strategic direction of ZCI and the Group will be significantly influenced by the outcome of
the engagement of RMB, and as we advance that process we are confident that the period to
31 March 2013 will be one in which the ongoing investment of ZCI in the mining operations of
the Group will continue to result in production levels moving closer to achieving the intended
level of steady state copper production.
Edgar Hamuwele Tom Kamwendo
Chairman Chief Executive Officer
6 December 2012
Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 September 2012
Reviewed Reviewed Audited
Six months Six months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Notes USD'000 USD'000 USD'000
Revenue 27 152 23 066 42 772
Cost of sales (22 440) (28 264) (46 133)
Gross profit/(loss) from mining
activities 4 712 (5 198) (3 361)
Administrative expenses (3 767) (2 865) (7 926)
Other expenses 6 (3 609) (1 581) (31 116)
Foreign exchange (losses)/gains (1 098) 1 943 4 093
Loss before net finance expense (3 762) (7 701) (38 310)
Finance income 22 442 725
Finance expense (829) (337) (2 352)
Loss before tax (4 569) (7 596) (39 937)
Income tax 230 211 4 141
Loss for the period (4 339) (7 385) (35 796)
Other comprehensive income:
Exchange differences on translation
of foreign operations (926) (4 554) (7 944)
Total comprehensive income
for the period (5 265) (11 939) (43 740)
Loss attributable to:
Equity holders of the parent (2 919) (4 849) (29 068)
Non-controlling interest (1 420) (2 536) (6 728)
Total comprehensive income
attributable to:
Equity holders of the parent (3 699) (8 683) (35 756)
Non-controlling interest (1 567) (3 256) (7 984)
Basic loss per ordinary share
(US cents) 7 (5.24) (8.71) (52.21)
Diluted loss per ordinary share
(US cents) 7 (6.20) (10.42) (56.73)
Condensed Consolidated Statement of Financial Postition as at 30 September 2012
Reviewed Audited
30 September 31 March
2012 2012
USD'000 USD'000
ASSETS
Property, plant and equipment 40 060 41 248
Intangible assets 43 999 44 463
Other financial assets 404 423
Total non-current assets 84 463 86 134
Inventories 9 113 8 792
Trade and other receivables 4 556 4 132
Cash and cash equivalents 9 580 18 441
Total current assets 23 249 31 365
Total assets 107 712 117 499
EQUITY
Share capital 102 688 102 688
Foreign currency translation reserve (3 766) (2 987)
Accumulated losses (16 720) (13 865)
Equity holders of the parent 82 202 85 836
Non-controlling interest (4 290) (2 723)
Total equity 77 912 83 113
LIABILITIES
Interest-bearing debt 1 106 1 611
Deferred tax 2 816 3 046
Environmental rehabilitation provision 6 966 7 065
Total non-current liabilities 10 888 11 722
Trade and other payables 15 622 18 067
Current portion of interest-bearing debt 1 292 1 293
Bank overdraft 1 998 3 304
Total current liabilities 18 912 22 664
Total equity and liabilities 107 712 117 499
Condensed Consolidated Statement of Changes in Equity for the six months ended 30 September 2012
Retained earnings/ Attributable
Foreign currency (Accumulated to equity holders Non-controlling
Share capital translation reserve losses) of the parent interest Total equity
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance as at 31 March 2011 102 688 3 701 14 701 121 090 5 260 126 350
Share option reserve 362 362 362
Loss for the period (4 849) (4 849) (2 536) (7 385)
Other comprehensive income
foreign currency translation differences (3 834) (3 834) (720) (4 554)
Total comprehensive income for the period (3 834) (4 849) (8 683) (3 256) (11 939)
Balance as at 30 September 2011 102 688 (133) 10 214 112 769 2 004 114 773
Balance as at 31 March 2012 102 688 (2 987) (13 865) 85 836 (2 723) 83 113
Share option reserve 64 64 64
Loss for the period (2 919) (2 919) (1 420) (4 339)
Other comprehensive income
foreign currency translation differences (779) (779) (147) (926)
Total comprehensive income for the period (779) (2 919) (3 698) (1 567) (5 265)
Balance as at 30 September 2012 102 688 (3 766) (16 720) 82 202 (4 290) 77 912
Condensed Consolidated Statement of Cash Flows for the six months ended 30 September 2012
Reviewed Reviewed
Six months Six months
ended ended
30 September 30 September
2012 2011
USD'000 USD'000
Cash flow from operating activities
Cash (utilised)/generated by operations (2 530) 55
Interest received 22 430
Interest paid (829) (337)
Cash (outflow)/inflow from operating activities (3 337) 148
Cash flow from investing activities
Additions to maintain operations:
Property, plant and equipment (3 323) (10 179)
Additions to expand operations:
Intangible assets (1 255) (1 037)
Proceeds of disposal of property, plant and equipment 400
Cash outflow from investing activities (4 578) (10 816)
Cash flow from financing activities
Repayment of long-term receivable 6 000
Repayment of interest-bearing debt (505)
Interest-bearing debt raised 1 609
Cash (outflow)/inflow from financing activities (505) 7 609
Net decrease in cash and cash equivalents (8 420) (3 059)
Effect of foreign currency translation 865 789
Cash and cash equivalents at the beginning of the period 15 137 26 417
Cash and cash equivalents at the end of the period 7 582 24 147
Notes to the Financial Statements
1. General information
ZCI ("the Company") is a public company incorporated and domiciled in Bermuda. It has
a primary listing on the Johannesburg Stock Exchange and a secondary listing on the
Euronext.
The Company's business is not affected by any Government protection or investment
encouragement laws.
ZCI is the holding company of African Copper Plc ("ACU"), a copper producing and mineral
exploration and development group of companies (the "Group"). The Group's main project
is the copper-producing open pit Mowana mine. The Group also owns the rights to the
adjacent Thakadu-Makala deposits and holds permits in exploration properties at the
Matsitama Project. The Mowana Mine is located in the north-eastern portion of Botswana
and the Matsitama Project is contiguous to the southern boundary of the Mowana Mine.
The address of ZCI's registered office is Clarendon House, 2 Church Street, Hamilton,
Bermuda.
These condensed consolidated interim financial statements were approved for issue on
6 December 2012 by the Board of Directors.
2. Basis of preparation
The condensed consolidated interim financial statements for the six months ended
30 September 2012 have been prepared in accordance with International Accounting
Standard IAS 34: Interim Financial Reporting and the AC 500 series issued by the Accounting
Practices Board and in compliance with the Listings Requirements of the JSE Limited.
The condensed consolidated interim financial statements are presented in United States
Dollars ("USD"), which is the Company's functional currency. All financial information
presented in USD has been rounded to the nearest thousand.
3. Significant accounting policies
The accounting policies applied in the presentation of the condensed consolidated interim
financial statements are consistent with those applied for the year ended 31 March 2012.
4. Segment information
An operating segment is a component of the Group that engages in business activities from
which it may earn revenues and incur expenses, including revenues and expenses that
relate to transactions with any of the Group's other components. The Group's only operating
segment is the exploration for, and the development of copper and other base metal
deposits. All the Group's activities are related to the exploration for, and the development
of copper and other base metals in Botswana with the support provided from the Company
and it is reviewed as a whole by the Board (who is considered the chief operating decision-
maker) to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. All mining revenue
derives from a single customer.
As such, a separate segmental report has not been prepared.
5. Going concern
Since the publication of the Company's annual report on 17 September 2012 which
contained details of the key assumptions and factors impacting on the Company and its
subsidiary's ability to continue as a going concern further progress has been made in
respect of production levels.
The Group incurred a loss of USD3.9 million for the period ended 30 September 2012
(2011: USD7.4 million).
The Company's subsidiary, ACU, realised a significant increase in revenue, from
USD23.1 million for the corresponding period last year to USD27.1 million for the period
ended 30 September 2012. This was as a result of the very favourable increase in copper
produced in concentrate, which increased during the six-month period by 95% compared
to the same period last year. Gross profit from mining activities for the six months
ended 30 September 2012 also increased to USD4.7 million, compared to a gross loss of
USD5.2 million for the corresponding period last year, driven by investments in enhancing
recoveries and in reducing operating costs per ton.
The copper produced in concentrate for the six months of April, May, June, July, August
and September 2012 was 704, 270, 635, 955, 976 and 950 tonnes of copper in concentrate
respectively. As previously reported in the Company's 31 March 2012 annual financial
statements, May's production figures arose following a mechanical failure in the processing
plant and a resulting shutdown from 20 May until 5 June 2012. Since then, there has been
a significant improvement in production and September 2012 was the third month in a row
where copper produced in concentrate equalled or exceeded 950 tonnes. Despite these
record production highs, due to the impact of the beforementioned shutdown in May and
June the mass of copper produced in concentrate did not yet attain the levels needed to
generate overall positive cash flows from operating activities for the business over the
six-month period ended 30 September 2012.
In light of the sensitivities of the cash flow forecast, the Directors of ZCI issued a letter
of financial support to ACU during the period, confirming that ZCI will continue to make
sufficient financial resources available to allow ACU to meet its liabilities as they fall due in
the course of normal operations. Furthermore, to ensure that ZCI has the ability to provide
such support based on existing and any additional funding requirements, the Company
obtained a letter of financial support from its controlling shareholder, to the value of
USD7 million.
Although there have been significant improvements during the past six months, there still
exists an uncertainty that the Company and its subsidiaries will not achieve the projected
production levels and projected cash flows. If the Company and its subsidiaries do not
achieve the projected production levels and cash flows it will have to source additional
external funding. Should the Company and its subsidiaries not achieve the projected
production levels and cash flows and obtain the additional funding, there exists a material
uncertainty which may cast significant doubt about the ability of the Company and its subsidiaries to
continue as going concerns, and therefore that it may be unable to realise its assets and discharge
its liabilities in the normal course of business. The financial statements are prepared on the basis of
accounting policies applicable to a going concern.
6. Other expenses
Included in other expenses for the 12 months ended 31 March 2012 is an impairment loss of USD25.7 million
(USD15 million relating to property, plant and equipment and USD10.7 million relating to intangible assets)
that was recognised in the previous financial year. Further impairment losses or reversal of impairment
losses was not required in the current period.
7. Loss per share
Six months Six months 12 months
ended ended ended
30 September 30 September 31 March
2012 2011 2012
Basic loss per ordinary share (US cents) (5.24) (8.71) (52.21)
Diluted loss per ordinary share (US cents) (6.20) (10.42) (56.73)
Headline loss per ordinary share (US cents) (5.24) (8.71) (14.48)
Diluted headline loss per ordinary share (US cents) (6.20) (10.42) (17.41)
Number of ordinary shares in issue 55 677 643 55 677 643 55 677 643
Basic and diluted weighted average number
of ordinary shares in issue 55 677 643 55 677 643 55 677 643
USD'000 USD'000 USD'000
The following adjustments to loss attributable to
ordinary shareholders were taken into account in the
calculation of diluted loss per share:
Loss attributable to equity holders of the parent (2 919) (4 849) (29 068)
Increase in shareholding in subsidiary with respect to
convertible portion of debt (532) (950) (2 520)
Diluted loss attributable to equity holders of the
parent (3 451) (5 799) (31 588)
The following adjustments to loss attributable to
ordinary shareholders were taken into account in the
calculation of headline and diluted headline loss per
share:
Loss attributable to equity holders of the parent (2 919) (4 849) (29 068)
Impairment loss 25 741
Deferred tax on impairment loss (2 363)
Noncontrolling interest in impairment loss (2 372)
Headline loss attributable to equity holders
of the parent (2 919) (4 849) (8 062)
Increase in shareholding in subsidiary with respect to
convertible portion of debt (532) (950) (1 632)
Diluted headline loss attributable to equity holders
of the parent (3 451) (5 799) (9 694)
8. Mineral Resources and Mineral Reserves
The Group's Mineral Resources and Ore Reserves are under review to provide updated estimations for
2013, however no material changes to the Mineral Resources and Ore Reserves disclosed in the ZCI
annual report for the year ended 31 March 2012 are expected other than depletion, due to continued
mining activities.
9. Contractual commitments
9.1 Contractual obligations
Total 2012 2013 2014
USD'000 USD'000 USD'000 USD'000
Goods, services and equipment (a) 3 641 14 3 627
Exploration licences (b) 4 738 1 620 1 923 1 195
Lease agreements (c) 432 371 55 6
8 811 2 005 5 605 1 201
(a) The Group has a number of agreements with third parties who provide a wide range of goods and services and
equipment. This includes commitments for capital expenditure.
(b) Under the terms of the Company's prospecting licences Matsitama is obliged to incur certain minimum
expenditures.
(c) The Company has entered into agreements to lease premises for various periods.
9.2 Investment Advisory and Management Agreement
The dispute around the Investment Advisory and Management Agreement ("IAMA") with iCapital
(Mauritius) Limited ("Advisor") as disclosed in the 31 March 2012 annual report, has been partially
settled during the period. Payment of an amount of USD1 million for certain of the claims against
the fixed fee element of the agreement has been agreed. A portion has already been paid and the
remaining amount of USD0.75 million has been included in trade and other payables at period
end. The dispute with regards to the interpretation of certain other clauses in the agreement is
however still ongoing and negotiations are continuing. The extent of the liability, other than the
above-mentioned settlement included in trade and other payables, cannot be reliably estimated at
period end.
There were no other significant changes to commitments and contingencies as disclosed in the
31 March 2012 annual report.
10. Related party transactions
There were no changes with respect to the nature or terms of related party transactions during the period
to that previously reported, other than disclosed in note 9.
11. Dividends
No dividends were declared for the period under review.
12. Events after the reporting period
No other material events have taken place since the period end that require adjustment to balances
reported.
13. Review opinion
The condensed consolidated interim financial statements of ZCI Limited for the period ended 30 September
2012 have been reviewed by our auditors, KPMG Inc. In their review report dated 6 December 2012,
KPMG Inc state that their review was conducted in accordance with the International Standards on
Review Engagements 2410, Review of Interim Information Performed by the Independent Auditor of the
Entity. They have expressed an unmodified conclusion with an emphasis of matter as follows: "Without
qualifying our conclusion, we draw attention to note 5, which indicates that the Group incurred a loss for
the six months ended 30 September 2012 of USD3.9 million. This condition, along with other matters as
set forth in the note, indicates the existence of a material uncertainty that may cast significant doubt on
the ability of the Company and its subsidiaries to continue as going concerns."
The review report is available for inspection at the registered office of the Company (Clarendon House,
2 Church Street, Hamilton, Bermuda) and the offices of the sponsor.
10 December 2012
Company secretary
John Kleynhans
Registered office
Clarendon House, 2 Church Street, Hamilton, Bermuda
Transfer secretaries
Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001, South Africa
Sponsor
Bridge Capital Advisors (Pty) Limited, 27 Fricker Road, lllovo Boulevard, lllovo, 2196, South Africa
Auditors
KPMG Inc, KPMG Crescent, 85 Empire Road, Parktown, 2193, Private Bag X9, Parkview, 2122, South Africa
Website: www.zci.lu
Date: 10/12/2012 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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