TIDMZCC
RNS Number : 8673P
ZCCM Invs.Hldgs PLC
07 October 2013
ZCCM INVESTMENTS HOLDINGS PLC
[Incorporated in the Republic of Zambia]
Company registration number: 771
Share Code: ZCCM-IH
ISIN: ZM0000000037
["ZCCM-IH "or the "Company"]
MARKET UPDATE ON THE INTERNAL
RESTRUCTURING AND REPOSITIONING STRATEGY
AND
FURTHER CAUTIONARY ANNOUNCEMENT
Further to the cautionary announcement issued on 12 December
2012, shareholders and themarket are advised of the following
further and on - going developments relating to the Company and are
advised to continue exercising caution when dealing in ZCCM-IH
shares.
INTRODUCTION
ZCCM Investments Holdings PLC ("ZCCM-IH") is an investments
holdings company with diversified interests in metals, mining,
power and other sectors of the Zambian economy. The Company has a
primary listing on the Lusaka Stock Exchange ("LuSE") in Zambia and
a currently non active secondary listing on the London Stock
Exchange and some shares are traded on the Euronext stock exchange
in Paris.
ZCCM-IH is the privatized entity formerly known as Zambia
Consolidated Copper Mines Limited ("ZCCM"). In 2000 ZCCM was
privatized by the Government of the Republic of Zambia ("GRZ").
ZCCM-IH emerged from the privatization of ZCCM as an investments
holdings company with equity stakes of between 10 to 20.6 % in the
new companies that were formed from the unbundling of ZCCM.
The focus of ZCCM-IH today, and going forward, is to achieve
full operational sustainability and realize the original objectives
which shareholders sought to achieve through the privatization of
ZCCM. These objectives include the following:
-- Mobilise substantial amounts of committed new capital for new operations;
-- Ensure that ZCCM-IH realises value from its assets and
retains a significant minority interest in principal mining
operations in Zambia;
-- Extinguish ZCCM-IH liabilities, including long standing indebtedness to the GRZ;
-- Diversify the investment portfolio; and
-- Promote Zambian participation in the ownership of mining assets.
Shareholding structure and status on the stock exchange
As shown on Table 1 below, the GRZ currently holds 87.6 %
shareholding in ZCCM-IH made up of 60.3% designated as "A" shares
and 27.3 % designated as "B" shares. The balance of the
shareholding of 12.4 % is designated as "B" shares and these are
held by minority shareholders ("Minorities "). GRZ acquired its
27.3 % shareholding of "B" shares from Zambia Copper Investment
Holdings Limited ("ZCI") under the privatization of ZCCM in 2000.
ZCI was controlled by Anglo American Corporation ("AAC").
All the "B" shares (i.e. the 12.4 % shares held by the
Minorities and the 27.3 % held by GRZ) were listed on the LuSE in
1995. The "A" shares held by GRZ are not listed on any stock
exchange.
A portion of the "B" shares held by the Minorities are deposited
on the Euronext (Paris Bourse) and presently trade on that stock
exchange, on a non formalized basis.
Table 1: ZCCM-IH Shareholding Structure
SHAREHOLDER CLASS OF SHARES STATUS NO OF SHARES % SHAREHOLDING
GRZ A Not Listed 53,825,808 60.3
----------------- ------------ ------------- ---------------
GRZ B Listed 24,329,828 27.3
----------------- ------------ ------------- ---------------
MINORITIES B Listed 11,140,792 12.4
----------------- ------------ ------------- ---------------
Total 89,296,428 100.0
------------- ---------------
[Note: The "A" and the "B" shares of ZCCM-IH are similar in
every respect and carry equal voting rights.]
INVESTMENT PHILOSOPHY
The investment philosophy of ZCCM-IH is "to operate as an
investment holding company holding shares, stocks, warrants, bonds,
debentures, options and securities of whatever nature in privatized
power and mining and other profitable companies".
INVESTMENTS HELD BY ZCCM-IH
The table below summarizes the companies in which ZCCM-IH
currently holds equity.
Table 2: ZCCM-IH Investment Portfolio
Investment Major Shareholder ZCCM-IH
% Holding
------------------------------------- -----------
Ndola Lime Company Limited ZCCM-IH 100.0
------------------------------------------------------ ------------------------------------- -----------
Misenge Environmental and Technical Services Limited ZCCM-IH 100.0
------------------------------------------------------ ------------------------------------- -----------
Mawe Exploration and Technical Services Limited ZCCM-IH 100.0
------------------------------------------------------ ------------------------------------- -----------
Nkandabwe Coal Mine Limited ZCCM -IH 100.0
------------------------------------------------------ ------------------------------------- -----------
Kariba Minerals Limited ZCCM-IH/GEMFIELDS 50.0
------------------------------------------------------ ------------------------------------- -----------
Maamba Collieries Limited Nava Bharat Singapore (Pte) Limited 35.0
------------------------------------------------------ ------------------------------------- -----------
Konkola Copper Mines PLC Vedanta Resources 20.6
------------------------------------------------------ ------------------------------------- -----------
Kansanshi Mining PLC First Quantum Minerals 20.0
------------------------------------------------------ ------------------------------------- -----------
Copperbelt Energy Corporation PLC Zambian Energy Corporation 20.0
------------------------------------------------------ ------------------------------------- -----------
Luanshya Copper Mines PLC CNMC 20.0
------------------------------------------------------ ------------------------------------- -----------
Lubambe Copper Mines PLC Vale/ARM 20.0
------------------------------------------------------ ------------------------------------- -----------
NFC Africa Mining PLC CNMC 15.0
------------------------------------------------------ ------------------------------------- -----------
Chibuluma Mines PLC Jinchaun 15.0
------------------------------------------------------ ------------------------------------- -----------
Investrust Bank PLC Zambian institutions 10.6 %
------------------------------------------------------ ------------------------------------- -----------
Mopani Copper Mines PLC Glencore 10.0
------------------------------------------------------ ------------------------------------- -----------
Chambishi Metals PLC ENRC 10.0
------------------------------------------------------ ------------------------------------- -----------
[Source: ZCCM-IH]
RECENT PERFORMANCE OF ZCCM-IH
At the Group or holding company level, in the year ended 31
March 2012, the consolidated statement of comprehensive income
recorded revenue of ZMW257.3 million and an operating profit of
ZMW367.3 million. Revenues were made up of dividends (ZMW79.7
million) from investee companies constituting 31 %, and sales of
lime (ZMW 177.6 million) under Ndola Lime Company representing 69
%. Dividend revenues, as expected, depend on the operational
performance of the investee companies, commodity prices and other
factors. Dividends are currently constrained by the on-going
capital expenditure projects being undertaken at the various
investee companies.
At the company level the balance sheet of ZCCM-IH for the year
ended 31 March 2012 carries total liabilities of ZMW2, 352 million
against total assets of ZMW2, 302 million resulting in a negative
book value of ZMW 50.5 million. The bulk of the liabilities
constitute debt owed to the GRZ carried over from ZCCM.
The GRZ indebtedness has severely constrained the balance sheet
of ZCCM-IH in the recent past. In turn this has affected valuation
of the Company by the market and limited the capacity of Management
to unlock value for the benefit of shareholders.
Taking into account the high volatility associated with copper
prices, the unpredictability of dividends from investee companies,
and other related factors that impinge on the revenues of the
Company, the Board of Directors of ZCCM-IH believes that it is
imperative that the balance sheet of ZCCM-IH be restructured as a
matter of urgency and that priority be the reduction or elimination
of the current debt burden. In so doing the Company will be put on
a sustainable trajectory going forward and thus will maximise
shareholder value.
STRATEGIES TO IMPROVE PERFORMANCE OF ZCCM-IH
To improve the performance of the Company, going forward, in
April 2012 the ZCCM-IH Board approved a 5 year Strategic Plan under
which the key strategic objectives for the period 2012 - 2016
are:
-- Reposition the Company to improve operational efficiency;
-- Resolve the long standing legacy liabilities;
-- Strengthen the oversight and monitoring capacity on investments; and
-- Unlock the value of investments to increase overall shareholder value.
Repositioning the Company to improve operational efficiency
The Board and Management are taking measures to reposition the
Company and improve its operational efficiency. These include the
following:
-- The Company engaged the services of organizational
restructuring consultants to review and realign the ZCCM-IH
organisational structure to the 2012-2016 Strategic Plan. The
review was undertaken to ensure the availability of structural
capacity to deliver on the 2012-2016 Strategic Plan. A review of
the current skills set was also undertaken to ensure that necessary
skills are available in all the functions of the Company. The
Organisational Design has recently been completed, and the Board
has approved a new organisational structure and its implementation
is already under way.
-- A detailed exercise was undertaken to identify and select
suitable persons to serve as independent non-executive directors on
the boards of investee companies. This has already yielded positive
results through improved monitoring and supervision of the
investment portfolio of the Company;
-- The Company reclaimed the technical library services and
geological data and core sheds of the former ZCCM in Kalulushi on
the Copperbelt.
These facilities were reclaimed from the Chamber of Mines in the
second half of 2013. In the past, these two functions operated as
cost centres. As part of the internal restructuring, these
operations have now been converted to revenue centres through the
incorporation of wholly owned subsidiaries called Mawe Exploration
and Technical Services Limited ("Mawe") and Misenge Environmental
and Technical Services Limited ("Misenge"). Mawe will pursue
opportunities in the areas of exploration, small scale mining, the
gemstone sector, local content and beneficiation amongst others
whereas Misenge will undertake environmental remediation relating
to past obligations and pursue opportunities in the provision of
environmental support services to the mining industry in
Zambia.
The Board and Management continue to explore further measures
and strategies in pursuit of operational efficiency.
Recent movements in the Portfolio
Further to the incorporation of Misenge and Mawe in December
2012 and April 2013 respectively, there have been further recent
changes to the investment portfolio of ZCCM-IH, namely:-
-- In February 2013 the GRZ requested ZCCM-IH to assume the
ownership and operation of the Colum Coal Mine in Southern Province
of Zambia. ZCCM-IH has since completed the legal formalities and
has taken ownership of the coal mine under the name Nkandabwe Coal
Mine Limited.
-- In June 2013, the Directors issued the Half Yearly Statement
where it was announced that Jin Tuo Investment Limited had proposed
to acquire 100 per cent of the Albidon Limited (an asset under Care
and Maintenance) at a cash price per share of US$0.0025 via a
Statutory Merger pursuant to the British Virgin Islands Business
Companies Act 2004 (as amended). The Statutory Merger has since
been concluded and thus ZCCM-IH's 0.97% shares in Albidon were
acquired by Jin Tuo Investment Limited at a cash consideration of
US$8,474 (In 2008 ZCCM-IH invested US$10 million in Albidon
Limited).
Resolving the long standing legacy liabilities
ZCCM-IH currently has significant loans mainly arising from the
restructuring programs undertaken prior to and during the
privatisation of ZCCM in 2000. The majority of these loans are owed
to the GRZ and continue to be carried on the books of the Company.
As at 31 March 2012, the ZCCM-IH audited financial statements
reflected loans amounting to ZMW 1,998 million (approximately
US$363 million) owed to the GRZ.
These loans have placed a significant burden on the Company with
the result that ZCCM-IH has had a weak balance sheet from 2000.
The Company has been in discussions with the GRZ over these
loans and recently the GRZ accepted proposals from the Board to
reduce or eliminate all of the loans on the balance sheet through a
Rights Offer transaction.
ZCCM-IH is currently liaising with the GRZ to verify and
quantify the loans in preparation for the proposed Rights
Offer.
PROPOSED RIGHTS OFFER
In order to implement the Strategic Plan and achieve its
critical objectives, the Board has recommended that the Company
should immediately undertake a Share Rights Offer to all
shareholders (the "Rights Offer").
A "Rights Offer" is an offer made to existing shareholders of a
company to subscribe for new shares on a pro rata basis. It is a
common mechanism for raising a large quantum of capital relative to
existing market capitalization, particularly where shareholders do
not wish to be diluted.
The Rights Offer process is lengthy and highly regulated by the
stock exchange listing rules to ensure all shareholders are fairly
and equitably treated.
The offer is made by way of "Renounceable Rights" which are
listed on the stock exchange and can be traded so shareholders may
sell or renounce their rights if they do not want to subscribe for
the new shares on offer.
Provided the rights trade at fair value, shareholders who sell
their rights are economically indifferent to those who exercise
their rights. Shareholders who elect not to follow their rights
will have their interests in the company diluted.
A Rights Offer also allows unallocated rights to be placed to
new shareholders or underwriters.
Objectives of the ZCCM-IH Rights Offer
The proposed Rights Offer has a number of critical and important
objectives that include the following:
-- De-gear the ZCCM-IH balance sheet by expunging GRZ debt of
ZMW1,998million (approximately US$ 363 million) and thereby unlock
the value of ZCCM-IH for the benefit of all shareholders;
-- Ensure ZCCM-IH remains financially solvent and able to continue as a going concern;
-- Inject additional fresh capital into ZCCM-IH which the
Company can utilize for strategic investments and developments;
and
-- Avoid involuntary dilution of any class of shareholders.
Expected Benefits from the Rights Offer
It is envisaged that successful implementation of the Rights
Offer will lead to several benefits and advantages for all
shareholders and stakeholders at large. These include the
following:
-- The restructuring of the ZCCM-IH balance sheet by eliminating
or reducing current GRZ debt of ZMW1,998 million ( approximately
US$363million);
-- After the implementation of the Rights Offer exercise, the
GRZ debt will be eliminated or significantly reduced, leaving
ZCCM-IH with a clean balance sheet and therefore in a better
position to consider payment of dividends to all shareholders going
forward;
-- A balance sheet with no debt or significantly lower debt will
enhance the attractiveness of ZCCM-IH to investors. In turn this
may lead to increased and active trading of the Company's shares on
the stock exchanges for the benefit of all shareholders.
-- The shareholding structure of the Company will not change as
a consequence of the Rights Offer since it is not the intention of
GRZ to increase its equity beyond the current level of 87.6% whilst
the balance of 12.4% will be held by the minority shareholders and
investors who will underwrite the Rights Offer .;
-- It is envisaged that ZCCM-IH will raise some fresh capital from the Rights Offer; and
-- The Rights Offer route allows for equal treatment of all
shareholders since they all have a right to exercise or renounce
their rights. Minorities have the right to participate in the
Rights Offer and maintain their shareholding by exercising the
rights and subscribing for the new shares that will be issued.
Action steps to facilitate the Rights Offer
It will be necessary for ZCCM-IH to undertake a number of
preparatory steps and actions as well as comply with the Listing
Rules of the LuSE before the proposed Rights Offer can be
implemented. These actions include the following:-
-- There is need to carry out a detailed verification exercise
on the indebtedness between GRZ and ZCCM-IH and agree the net
quantum of debt as amount owed to GRZ by ZCCM-IH . This exercise is
currently on-going - and is expected to be completed shortly in
readiness for the proposed Rights Offer.
-- The Directors of ZCCM-IH believe the market is currently
undervaluing the Company. There are several reasons for this
undervaluation by the market. Part of the reason, in the past, has
been lack of up to date information on the operations and
performance of the Company due to delays in releasing audited
annual financial statements of the Company. The back log has now
been cleared and the Company is now finalizing the audited accounts
for 31(st) March 2013 and expects to remain current going
forward.
-- Another important factor and reason for the undervaluation of
ZCCM-IH is that the balance sheet of the Company is currently
carrying the huge debt of ZMW 1,998 million as funds owed to GRZ.
This huge debt has suppressed the value of the Company and made the
Company unattractive to investors and the market. Accordingly, the
Directors commissioned an independent valuation of the Company.
This exercise was completed in September 2013.
-- The results from the independent valuation of the Company
will then form the basis on which the shares in the proposed Rights
Offer will be priced.
-- In compliance with the Listing Rules of the LuSE, a general
meeting will be called by ZCCM-IH at which shareholders will
deliberate on the proposed Rights Offer and consider for approval,
the required resolutions to undertake the Rights Offer. It is
envisaged that the general meeting will be held before 31 December
2013.
-- In compliance with the Listing Rules of LuSE, there is need
to prepare a Rights Offer Circular to Shareholders. This Circular
will provide details on the Rights Offer and explain the various
options that Shareholders of ZCCM-IH can take in regard to their
shareholding under the Rights Offer. The Circular will be posted to
shareholders ahead of the general meeting that will be called to
approve the Rights Offer.
-- There is need for the Company to update its share register
records. The objective is to be able to make contact with as many
shareholders as possible so that they can receive the Rights Offer
Circular, attend the general meeting if they so choose and
participate in the Rights Offer. In this regard, the Company has
appointed a new transfer secretary (namely Corpserve Transfer
Agents Limited) to liaise with the LuSE Central Share Depository,
Euronext Stock Exchange in Paris and the Company's Registrars in
England and produce an updated share register ahead of the proposed
Rights Offer.
Strategic Direction of ZCCM IH after the Proposed Rights
Offer
The Directors believe the actions and measures recently
implemented and the proposed Rights Offer are critical and
necessary to reposition the Company to play its proper role and
mandate as an investment holdings company. Therefore the Directors
believe ZCCM-IH will be in a position, after the proposed Rights
Offer, to unlock value which should flow directly to all
shareholders.
INVESTOR RELATIONS
Corpserve Limited appointed as Transfer Secretary
The Board and Management of ZCCM-IH are fully committed to
improving and enhancing communication with all shareholders and the
market. As outlined and summarised above, the strategic thrust,
re-positioning and re-orientation of the Company is fundamentally
aimed at unlocking the value of ZCCM-IH for the benefit of all
shareholders.
Accordingly on 31 May 2013, ZCCM-IH appointed Corpserve Transfer
Agents Limited as the Transfer Secretary of the Company. Corpserve
has already made significant progress in updating and reconciling
the share register records with a view to improving the
communication link with all shareholders.
Recognition of Investors on Euronext / Paris Bourse.
Whilst the primary listing of the Company is on the LuSE, it is
noted that the shares of the Company have been actively traded on
the Euronext stock exchange in Paris for many years. About10,
679,421 shares of the Company, representing 11.96 % shareholding in
the Company are currently residing on Euronext. The Board believes
the regular trading of shares in the Company on Euronext / Paris
Bourse is important for share price valuation and provides
liquidity to shareholders.
Therefore, the Management of ZCCM-IH has contacted Euroclear as
nominee shareholder for the minority shareholders on Euronext
regarding the procedures and processes required to obtain details
of the beneficiary owners.
Euroclear requires that the Company confirms that the Zambian
legal framework and the Articles of Association of ZCCM-IH
authorises the Company to obtain disclosure of the shareholders
under Euroclear. Preliminary review indicates that there may be
need to amend the Articles of Association of the Company in order
to conform to the statutory requirements in France and the
Euroclear regulatory requirements.
Accordingly, ZCCM-IH has continued with consultations in respect
of the shares trading under Euronext and seeks to explore ways to
enhance communication with these shareholders in regard to
corporate actions.
CONCLUSION
The Board believes that urgent action is necessary and a new
strategic direction for ZCCM- IH is required in order to improve
its operational performance and unlock value for the benefit of all
shareholders on the one hand and simultaneously have capacity to
participate in new projects and opportunities in Zambia and beyond
going forward.
Accordingly, it is imperative that a line be drawn between
historical legacy issues that have constrained the Company since
privatisation of ZCCM in 2000 and prevented it from rising to its
full potential and role in Zambia and the new era of mining in
Zambia that is driving the resurgence of the industry on the back
of higher metal prices and increased global demand for mineral
resources and creating new opportunities that ZCCM-IH should
seize.
The measures instituted by the Board and Management and the
proposed Rights Offer provide a basis on which ZCCM-IH can chart a
new path and unlock value for the benefit of all shareholders.
In this regard, the Board looks forward to the support of all
shareholders at the forthcoming general meeting which will chart
the way forward for ZCCM-IH as outlined above.
CONTACTS
For further information, the Company Secretary can be contacted
as follows:-
Mr. Chabby Chabala,
Company Secretary:
Telephone: + 260 211 221023 / 228833
Email: cchabala@zccm-ih.com.zm
www.zccm-ih.com.zm
The Transfer Secretary can be contacted as follows:
Mr. Setfree Nhapi
Country Manager
Corpserve Transfer Agents Limited
6 Mwaleshi Road, Olympia Park
PO BOX 37522 Lusaka Zambia
Tel: +260 211 256969/70 | Fax: +260 211 256975
Email: info@corpservezambia.com.zm
Shareholders with physical certificates are strongly urged and
advised to contact the Transfer Secretary or the Sponsoring Broker
and deposit their shares in the Central Share Depository ("CSD") of
the LuSE. This will enable shareholders to sell shares in the
Company in a timely manner and with ease. It will also enable quick
and fast communication with shareholders on the proposed Rights
Offer.
RISK WARNING
Prospective investors are urged to exercise caution in dealing
in securities that, by their nature, are volatile and subject to
price fluctuation.
In compliance with the Securities Act, Cap 354 of the Laws of
Zambia and the Listing Rules of the LuSE, further announcements
will be made to inform the shareholders and the investing public as
the transaction progresses.
Accordingly, shareholders are advised to exercise caution when
dealing in the Company's securities until a full announcement is
made.
04 October 2013
Lusaka - Zambia
Sponsoring Broker and Lead Advisor Legal Advisor
Lead Advisor
STOCKBROKERS ZAMBIA IMARA BOTSWANA LIMITED CORPUS LEGAL PRACTITIONERS
LIMITED
Independent Reporting
Accountant JOHN KAITE
LEGAL PRACTITIONERS
DELOITTE & TOUCHE CHARTERED
ACCOUNTANTS CORPSERVE ZAMBIA
----------------------------- ----------------------- ---------------------------
First issued on 12 December 2012
This information is provided by RNS
The company news service from the London Stock Exchange
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