Shareholder Queries
Management responses to queries raised by sectors of the minority shareholders
a) What are the Aims of the Strategic Plan 2012-2016
The Board and Management of ZCCM-IH fully appreciate the importance of preserving shareholder value. This is the reason why the Strategic Plan was revised to focus on the following strategic areas, among others:
1. Strategic Focus Area1: leveraging and consolidating existing investments in the copper mining sector and pursuing other copper assets:
i. Maintain investment in the existing copper mining companies;
ii. Search for and Invest in other copper assets;
iii. Encourage Zambian participation in the mining sector.
2. Strategic Focus Area 2: Diversifying into other minerals:
i. Invest in gemstone assets;
ii. Invest in Small Scale Mining Operations;
iii. Invest in Gemstone Value Adding Programs;
iv. Invest in exploration activities;
v. Invest in other mineral assets;
3. Strategic Focus Area 3: Investing in mining related sectors
i. Carry out exploration works for Oil & Gas;
ii. Invest in new power projects.
4. Strategic Focus Area 4: Investing in mining related manufacturing
i. Invest further in Ndola Lime Company Limited and list it on LuSE;
ii. Invest in Cement production;
iii. Invest in Production of copper alloys, wires, tubes, rods and steel;
iv. Invest in localisation of supply chain;
v. Invest in gemstone mining, cutting & polishing and auctioning
The Board and Management believe that, when fully implemented, this long-term direction will create value for ZCCM-IH shareholders. Projects such as Lubambe Mines Ltd, operating capacity improvements for Ndola Lime Company Limited, the construction of the Thermal Power Plant Project under Maamba Collieries Limited and revamping of the operations of Kariba Minerals Limited are underway. Investments in these and other areas will ensure sustained returns for investors.
b) Balance Sheet and share Capital.
It is true that positive communication about the performance of ZCCM-IH will impact the share price positively. ZCCM-IH has in the past not communicated as much with the investing community largely because it had focused on trying to get its financials up to date. Given the fact that the 2012 financials will be concluded not long from now, ZCCM-IH is now in a position to communicate more confidently with the investing world. To this effect, the company is in the process of recruiting an officer dedicated to investor relations. In addition, the companys website is being up-dated. The team working on the website should conclude their work by mid-December 2012.
It is without any doubt that when ZCCM-IH incorporates in its financials, its investment at fair values, it will have a very positive impact on the value of the company and therefore the share price. In this regard, ZCCM-IH has recruited a new Chief Financial Officer, with the aim of strengthening the finance function and improve financial reporting, including implementation of the fair valuation of our investments. The new Chief Financial Officer is working with auditors with a view to reflecting ZCCM-IHs investments at Fair Valuation in the 2013 Financials. The Board and Management realize that this exercise is critical and it will involve a lot of work.
It is also worth noting that ZCCM-IH has carried a debt of circa US$450 million in its Balance Sheet since inception. This is a debt that the company owes to the majority shareholder; the Government of the Republic of Zambia. This item has placed considerable strain not only on the Balance Sheet as a significant liability but also in the Income Statement through the foreign exchange risk that it imposes. The Board and Management are working on finding a solution to this matter.
c) Institutional and Financial Communication
i) Financial Communication
The 2012 financial statements are expected to be completed within December 2012. The delay has been occasioned by a number of factors including the rigorous reviews relating to the relevant disclosures required in the markets where the company is listed. A number of employee separations in the finance department also resulted in inadequate staffing which impacted completion of the 2012 financial statement.
In the subsequent financial years, starting with 2013, measures have been put in place to ensure that reporting will be done on time and incorporating ZCCM-IH investments at Fair Valuation. These measures include conducting an interim audit for 2012/13 financial year and improvements of capacity in the finance department through recruitment of additional staff. The Chief Financial Officer has already been recruited. Additional staff are in the process being recruited.
ii) Institutional Communication
It was very important for ZCCM-IH to bring its Annual Reports up to date. In this way, the company would interact confidently with investors. Now that this is almost achieved, the company will step up its interactions with the investing world.
The Board and Management believe that an effective investor relations function has a positive impact on the company. In this regard, ZCCM-IH has set up its investor relations team to comprise the following:
a) Chief Executive Officer;
b) Chief Financial Officer;
c) Company Secretary; and
d) Investor Relations Officer.
The company is in the process of recruiting an Investor Relations Officer. The investor relations team is currently working on creating the ZCCM-IH Investor Relations Function. In doing this, the team is referencing useful guides such as the London Stock Exchange Investor Relations Practical Guide and such other relevant references. The team will also work with advisors in ensuring the effectiveness of the investor relations function. The strategy and tools to communicate with investors will include meetings, six monthly Directors Interim Summaries, Annual Reports, Road Shows, the company website and presentations at forums such as the Mining Indaba. The objective is to have up-to-date and regular communication with investors and demonstrate to them efforts that the company is making in creating value. ZCCM-IH will fully utilize its website to keep its shareholders and potential investors informed of the evolution of the company.
d) Short and Medium Term Measures
The Board and Management fully acknowledge that the primary preoccupation of all shareholders is the share value. In this regard, the Board and Management are taking all relevant steps to achieve enhancement of share value in the short-term, medium-term and long-term.
For the short-term, the following measures are being undertaken:
i. Bring up-to-date all communication that needs to be made to the shareholders. This includes:
Publishing in the shortest possible time the annual report for the period ended 31st March 2012;
Implementing measures, including undertaking an interim audit, to ensure that the annual report for the year ending 31st March 2013 is published by 30th June 2013;
Ensure that the annual report for year ending 31st March 2013, incorporates the companys investments at fair value;
ii. Strengthen the Investor Relations Function, including the recruitment of an Investor Relations Officer;
iii. Through the Investor Relations Function, inform the shareholders and the financial world about the evolution of the company, company performance and the efforts being made to enhance shareholder value. Meetings, the company website, road shows, taking part in International Financial Events and such other channels will be used to send a consistent and reliable message about the value of the ZCCM-IH assets;
iv. As suggested, ZCCM-IH will review the markets on which it is listed with a view to ensuring that the company is listed on the correct markets consistent with its status. This review will include consideration of the NYSE Alternext (Paris).
v. Review the companys ability to declare a dividend to its shareholders;
vi. Strengthen the companys representation on the Boards of investee companies. This measure has already been implemented.
For the Medium-Term to Long-Term, the following measures will be undertaken:
a) The company is undertaking an Organizational Design Program to restructure the company and give it the best chance to create the most value for its shareholders. In this regard, the following steps have been taken:
i. The Legal Department has been restructured and has reduced staff from 23 to 4 to make it lean, professional and efficient. The new team will focus on matters pertaining to new and value adding business. All legacies matters have been outsourced;
ii. The Environmental Department is also being restructured to ensure that all legacy environmental matters can be handled outside ZCCM-IH. In this way, ZCCM-IH will remain focusing on new environmental matters affecting new investments;
iii. The Technical Department is being restructured to ensure the creation of a capability that will fully leverage the companys relationship with Government and step up exploration activities to support future value creation for the shareholders;
iv. The other departments are also being restructured to make them more relevant, more efficient and focused on value creation.
b) Ensure implementation of all the activities in the Strategic Focus Areas contained in the Strategic Plan;
e) Other Matters
i. Dividend Concerns from Kansanshi Mine Plc: ZCCM-IH has engaged Kansanshi Mine Plc and First quantum Mine regarding the concern that the shareholders have raised regarding the quantum of dividends that Kansanshi Mine Plc has paid out so far vis-a-vis its capacity to pay more dividends. We are hopeful that we will reach an amicable resolution of this matter. Due to these discussions, dividends payments from Kansanshi have improved;
ii. Matters Pertaining to Mopani Copper Mines Plc: ZCCM-IH has engaged Mopani Copper Mines Plc on many matters, including dividend declaration, third party transactions, etc. We are hopeful that we will reach an amicable resolution of these matters.
ISSUED BY ZCCM-IH MANAGEMENT
11 DECEMBER 2012
