 | | | Published : June 30th, 2011 | Final Results for the Year to 31 March 2011 |
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| June 30, 2011 |
| African Copper plc: Final Results for the Year to 31 March 2011 |
LONDON, UNITED KINGDOM--(Marketwire - June 30, 2011) - African Copper plc (AIM:ACU)(BOTSWANA:AFRICAN COPPER) ("African Copper", "the Company" or "the Group"), today announces preliminary audited results for the year ending 31 March 2011. As a result of the Company changing its accounting reference date during 2009 from 31 December to 31 March to align with major shareholder, ZCI Limited, the comparative period to 31 March 2010 is for 15 months.
Summary
-- As a result of the more than doubling of ore processed year-on-year, the
increases in grades and recovery and generally buoyant copper prices,
revenues for the year to 31 March 2011 were US$24.7 million (15 months
to 31 March 2010: US$7.4 million)
-- Reduced operating loss of US$2.3 million (15 month period to 31 March
2010: loss of US$11.6 million)
-- At the Mowana Mine, the programme to upgrade and de-bottleneck the
production facilities was continued with key plant CAPEX projects
awaiting delivery, installation and commissioning of units following
placement of orders
-- The award of a Mining Licence for the Thakadu deposit, which is
approximately 70km from Mowana mine, further increased the
utilisation of the Mowana facilities following the start of ore
extraction
-- The Amec Minproc Study on the Secondary and Tertiary crushers - long
a bottleneck at the Mowana facilities - has been completed, and the
Company is reviewing the report's recommendations to determine a
cost-effective implementation plan to upgrade the circuits as soon
as possible. Once such a plan is in hand and with access to the
February 2011 funding facility provided from ZCI, the Company will
expeditiously move to make the changes necessary to ramp up
production
-- Exploration activities resumed on exploration permits at the adjacent
Matsitama Project
-- Due to the positive results to date and the planned exploration
programme aimed at further defining known targets, the Company's
Matsitama Minerals subsidiary was granted a two year renewal on four
of its six prospecting licences by the Minister for Minerals, Energy
and Water Resources, Botswana. The four prospecting licenses cover
much of the highly prospective Matsitama Schist Belt.
Commenting on the results, Jordan Soko, Interim CEO of African Copper, said, "There is no doubt that the upcoming year will be a pivotal time in our Company's development as many of the key initiatives at Mowana are implemented to maximize production and minimize costs. Our goal this year is to have the operations at Mowana and Thakadu reach sustainable profitability so we can start to leverage off the considerable assets we have in Botswana."
For further information please visit www.africancopper.com.
The following Chairman's Statement, Review of Operations and Financial Review should be read in conjunction with the Company's audited consolidated financial statements for the twelve months ended 31 March 2011 (the "Financial Statements"). The Financial Statements are presented in US dollars. The Financial Statements have been prepared under the historical cost basis or, for certain financial instruments, the fair value basis, and in accordance with International Financial Reporting Standards ("IFRS"). The information in the Statements is current to 29 June 2011.
The technical information in the Statements has been reviewed and approved by David De'Ath, BSc (Hons), MSc, GDE-Mining, MIMMM and MAusIMM, the Company's Manager, Geology, of the Mowana and Thakadu Mines for the purposes of the current Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in June 2009.
All amounts are expressed in US dollars ("US$") unless otherwise indicated. Certain financial information originates in British Pounds Sterling ("GBP"), Botswana Pula ("Pula"), South African Rand ("ZAR") and Canadian Dollars ("$CAD"), and has been translated into USD based on prevailing exchange rates and in accordance with Note 2 to the Financial Statements.
Additional information relating to the Company is available at www.africancopper.com or under the Company's profile on the SEDAR website at www.sedar.com.
CHAIRMAN'S STATEMENT
The year under review saw African Copper make good progress overall towards its goal of delivering sustainable commercial production levels from the Company's high quality copper assets in north eastern Botswana.
Overview
At the Mowana Mine, the programme to upgrade and de-bottleneck the production facilities was continued with key plant CAPEX projects awaiting delivery, installation and commissioning of units following placement of orders. Throughput has risen and progress is being made on opening up the Mowana pit by increasing the stripping ratios in the short term to increase the available ore extraction footprint. These have resulted in demand for increased drilling, blasting and load and haul capacity.
Despite the constraints on production which were mostly caused by circuit bottlenecks and breakdowns progress was made during the year as ore processed increased to 632,981Mt compared to 290,259Mt in the previous 15 month fiscal period.
Following the award of a Mining Licence for the Thakadu deposit, which is approximately 70km from Mowana mine, the start of ore extraction further increased the utilisation of the Mowana facilities. Currently, ore processing at the Mowana facilities continues to be batch processed on an alternating basis between Mowana and Thakadu ores due to differences in ore quality that require different chemical reagent suites to maximize copper recovery.
At Thakadu itself, full scale mining has commenced with a ramp up to required volumes expected in the next few months. Thakadu operations have created both mining and processing flexibility with marked positive impact on de-stressing mining operations at the Mowana pit. Negotiations are at an advanced stage with the Botswana Government on the remaining part of the copper deposit under the Archaeological Site. There are some positive indications of ore quality improvement with significant pockets of sulphide ore having been extracted resulting in copper recoveries being higher than target for this ore.
At the beginning of the financial year under review, the Company resumed exploration activities on its exploration permits at the adjacent Matsitama Project. A panel of internationally recognized geological experts was assembled and an experienced exploration manager was hired. The expert panel identified ten new and highly prospective targets during the review process and the Matsitama exploration staff have systematically executed on an exploration programme to assess these targets.
Due to the positive results to date and the planned exploration programme aimed at further defining known targets, the Company's subsidiary was granted a two year renewal on four of its six prospecting licences by the Minister for Minerals, Energy and Water Resources, Botswana. The four prospecting licenses, PL 14/2004, 15/2004, 16/2004 and 17/2004, total 1,988.6km(2) in extent and cover much of the highly prospective Matsitama Schist Belt. The Company's subsidiary also holds title to two other prospecting licenses in the Matsitama Schist Belt, which collectively cover an area of 96.2km(2).
Results
As a result of the more than doubling of ore processed year-on-year, the increases in grades and recovery and generally buoyant copper prices, revenues for the year to 31 March 2011 were US$24.7 million (15 months to 31 March 2010: US$7.4 million). After the higher operating costs commensurate with the increased production and increased amortization, these revenues led to a much reduced operating loss of US$2.3 million (15 month period to 31 March 2010: loss of US$11.6 million, calculated prior to taking account of the US$46.0 million reversal of prior period impairment charges).
Administrative expenses were cut significantly to US$4.8 million from US$7.9 million in the prior period, reflecting expenses over a twelve month period compared to a fifteen month period and significant professional fees and other one-time costs incurred during the financial restructuring that was completed during 2009. After increased finance costs due to both the quantum and interest cost of borrowings being higher, loss before tax was US$9.0 million, compared to a profit of US$30.7 million in the prior period, which included a US$46.0 million reversal of prior period impairment charges.
Financing
To support the completion of the infrastructure upgrades at the Mowana and Thakadu mines and renewed exploration efforts at Matsitama, the Company's controlling shareholder ZCI Limited ("ZCI") has provided strong support during the year. After providing a $10 million working capital facility in March 2010 (the "March Facility"), ZCI provided a further $7.5 million development facility for exploration drilling at Matsitama and Mowana North, scoping study at the Makala deposit and certain plant enhancements at Mowana. Their commitment was further demonstrated in February 2011 with a $12.5 million development facility for Mowana plant enhancements, acceleration of mining activities at Thakadu and working capital. At 31 March 2011 $4.0 million of the available $12.5 million had been drawn. At 31 March 2011 ZCI also provided a 1 year extension on the payment of the March Facility which was due.
Outlook
At Mowana, the constraint on production levels remains ore delivery to the mill as a result of poor secondary and tertiary crusher availability and although these constraints have been somewhat offset by improving mill feed copper grades during the past three months, a permanent solution needs to be implemented.
The Amec Minproc Study on the Secondary and Tertiary crushers - long a bottleneck at the Mowana facilities - has been completed, and the Company is reviewing the report's recommendations for modification to determine a cost-effective implementation plan to upgrade the circuits as soon as possible. Once such a plan is in hand and with access to the February 2011 development facility provided from ZCI, the Company will expeditiously move to make the changes necessary to be able to ramp up production to levels that the assets at Mowana, Thakadu and, in due course, Matsitama justify.
In summary I would like to recognize and give thanks to our Board, our acting chief executive officer, Jordan Soko, for his leadership and our team of managers and employees for their outstanding efforts and commitment towards moving the Mowana mine to full production. I am confident that their contributions will ensure African Copper's bright future. The Board expects to report further progress towards our goals during the current financial year.
David Rodier
Chairman
29 June 2011
REVIEW OF OPERATIONS
We are looking forward to the coming year as many of the initiatives we have put in place are expected to be implemented and should result in the Mowana mine finally reaching sustained commercial production levels. Looking back, the past year has been a challenging one but we have achieved a considerable amount and laid the foundation for success in our operations. In addition, we also are looking forward to encouraging results from our exploration project Matsitama.
Mowana
Work was completed on many fronts during the year as part of our plant and related infrastructure refurbishment programme that is required to establish stable commercial operations at the Mowana mine. Throughout the year management repeatedly tried to drive operations to full capacity but were consistently met with circuit bottlenecks and breakdowns that needed to be addressed. However, even with these production challenges progress was made during the year as ore processed increased to 632,981 Mt compared to 290,259 Mt in the previous 15 month fiscal period as evidenced in the table below:
----------------------------------------------------------------------------
Jan to Jan to Oct to Oct to
March March Dec Dec
Description 2011 2010 2010 2009 FY(1)2011 FY(2)2010
----------------------------------------------------------------------------
Ore processed (Mt) 131,604 92,047 182,013 148,286 632,981 290,259
----------------------------------------------------------------------------
Cu grade (%) 1.68 1.12 1.39 1.25 1.37 1.24
----------------------------------------------------------------------------
Recovery (%) 50 41 49 49 48 45
----------------------------------------------------------------------------
Concentrate
produced (Mt) 5,034 1,936 5,829 3,203 18,778 6,280
----------------------------------------------------------------------------
Copper produced in
concentrate (Mt) 1,107 428 1,246 907 4,143 1,620
----------------------------------------------------------------------------
Payable copper
sold (Mt) 1,266 460 981 975 3,841 1,435
----------------------------------------------------------------------------
1. 12 months ended 31 March 2011
2. 15 months ended 31 March 2010
Over the year a number of improvements were implemented and programmes commenced to improve performance at Mowana including:
1. Migration from a dry tailings facility to a more conventional wet
tailings system - Stage 1 of the wet tailings storage facility was
completed in April 2011 under the technical supervision of Scott Wilson
Africa. Stage 1 provides capacity to store 3.8 million tonnes of
tailings and corresponds to a life of 3.5 years. The tailings storage
facility will thereafter be raised in stages as required.
2. Mining operations - after appointing a new mining contractor at the
Mowana pit in March 2011 efforts are being concentrated on increasing
the stripping ratios in the short term to increase the available ore
extraction footprint. Previous mining and blasting activities had been
stretched as a result of low availability, and hence reliability of the
previous mining and drilling contractor's fleet. This had an adverse
impact on tonnage, dilution rates and consequently copper production.
Currently 4 large 60 tonne trucks and an associated large excavator have
been deployed at Mowana with 5 additional 60 tonne trucks and 120 and 50
tonne excavators due to arrive shortly. We are also planning to double
the mining and drilling fleet at the Thakadu mine to ramp up the volumes
to coincide with the current life of mine plan.
3. Copper concentrate filtration - the existing copper concentrate
filtration system has been a capacity bottleneck and has produced
unacceptably high moisture levels. Committed plans are in place to add
an additional press filter which is expected to reduce the cake moisture
and increase filtration capacity by 250 tonnes per day. The order has
been placed for installation in January 2012.
4. Column cells - the main objective of this initiative is to reduce the
level of silica (and related silica penalty costs) in the final copper
concentrate. The order for the new column cells has been placed for
installation in August 2011.
5. Dense media separation plant - plans had initially been made for the
purchase and installation of a dense media separation ("DMS") plant.
Based on the importance and cost of other competing initiatives to
increase production it was decided the DMS be delayed so that management
could focus on these other production initiatives including changes to
the secondary and tertiary plant modifications discussed below.
6. Wet season mining plan - a comprehensive wet season mining plan was
successfully implemented which limited the amount of mining in wet ore.
Initiatives such as the construction of a lifted road around the pit
perimeter avoided surface drainage into the pit, the construction of
adequate sumps and associated pipe installation for pit dewatering, and
the acquisition of pit dewatering pumps were all effective in reducing
the amount of wet ore fed to the plant.
7. Secondary and tertiary plant - the primary constraint on production
levels remains ore delivery to the mill as a result of poor secondary
and tertiary ("SnT") crusher availability. The Amec Minproc study on the
SnT crusher modifications was completed during the year, and the Company
is reviewing the report to determine a cost-effective implementation
plan to complete modifications as soon as possible. As part of this
circuit modification the addition of a washing plant is being
recommended to screen and wash out the fine fraction from the ore to
further alleviate the demands on the SnT crusher. In an effort to
supplement existing SnT capacity mobile crushing capacity was added
during the year. While the mobile crushers provided intermittent
capacity during the year, reliability and downtime of the units were
problematic and combined with their relative inability to consistently
crush the harder Mowana ore limited their contribution to mill feed.
Thakadu
The receipt of the Thakadu mining licence (the "Mining Licence") from the Botswana Government in December 2010 was a major milestone for the Company. The high grade Thakadu copper-silver deposit lies about 70 km from the Mowana processing infrastructure. The open pit mining area embodied in the Mining Licence excludes the archaeological site that is still under negotiations with the Botswana Government. The goal is to receive permission under the issued Mining Licence to mine out the ore reserve directly underneath the Thakadu archaeological site by open pit means. It is anticipated that the current interim open pit cut design allows for the extraction of approximately 1.4 million tonnes of ore out of the 2.4 million available reserves.
Thakadu's high grade mineral reserves will be developed on a relatively small scale (and relatively low cost) operation with a low stripping ratio and will share the Mowana Mine infrastructure and management. The pure Thakadu oxide layer is a relatively small portion of the deposit and is estimated to range approximately 30 metres from surface. To date this highly oxidized ore has been difficult to process with recoveries generally below 50%. After mining down approximately 15 metres there are some positive indications of ore quality improvement with significant pockets of sulphide ore having been extracted. Historical test work estimated 40% recovery for the Thakadu oxide ore but significant improvement for the Thakadu sulphide ore of 90%. Management is looking forward to accessing sulphide material with grades in excess of 2% over the next year from Thakadu which is expected to have a significant impact on copper units produced. The processing mining plan for the upcoming year contemplates 60% of the ore processed from Thakadu.
Based on the importance of accessing more sulphide ore at Thakadu the Company is planning to invest in accelerating mining activities at the Thakadu deposit. A portion of the use of proceeds from the $12.5 million development facility secured from ZCI in February 2011 is allocated to mining activities at Thakadu. As reported in the Company's Management Discussion & Analysis, announced in June 2010, the principal operational requirement at Thakadu will be to establish sustained transport between Thakadu and Mowana. To date trucking from Thakadu has not been a bottleneck and successful negotiations have been completed by signing longer term contracts to secure the required capacity.
Geology and Exploration
Management focused on the strengthening of our technical team during the year with new hiring taking place within our mine technical services team, which covers Geology, Mine Planning, Survey and Geotechnical Services. The new team has identified several possible opportunities to increase the Mowana Resource Base. We have undertaken successful drilling of a greater than 1,000 metre deep borehole north of the current pit, examining its implications for future underground mining, and as a result of this drilling we have proved potential lateral and vertical extent of mineralisation at the site. The recruitment of a senior mine geologist to manage the near mine exploration programmes highlights the serious potential we believe is present here.
During the year our Board also committed to exploration at the Matsitama Project which encompasses the highly prospective Matsitama Schist Belt and has demonstrated similarities to iron oxide copper gold ("IOCG") deposit types. During the first quarter of the past year an experienced exploration manager was hired to oversee exploration activities and a panel of internationally recognised geological experts were engaged to help generate new exploration strategies, refine mineral emplacement and deposit models, and assist in target generation.
This programme was designed to ensure that exploration commitments of the Company were met and exploration expenditures optimally spent, in order to allow African Copper to apply and obtain extensions of the existing exploration licences. On 24 June 2011 the Company announced the successful renewal of these licences for a period of two years. Results from the current programme were also announced on 24 June 2011.
Human Resources
We have experienced a very busy year and all parties involved have been required to be very resourceful in their approach. I would like to thank our majority shareholder ZCI for its financial and operational support and recognize the hard work from our chairman and our full team in Botswana. In addition, I would like to send a special thanks to the communities that surround our properties in Botswana who provide us tremendous support and who will play an important role in our success.
Outlook
Our properties provide tremendous opportunities for growth. However, we understand that to achieve this potential we must realize the full operational capacity at the Mowana mine as soon as possible. There is no doubt that the upcoming year will be a pivotal time in our Company's development as many of the key initiatives at Mowana are implemented to maximize production and minimize costs. Our goal this year is to have the operations at Mowana and Thakadu reach sustainable profitability so we can start to leverage off the considerable assets we have in Botswana. We have a highly capable team that is committed to achieving success and building the future of our Company.
Jordan Soko
Acting Chief Executive Officer
29 June 2011
FINANCIAL REVIEW
Income Statement
----------------------------------------------------------------------------
Year ended 15 months ended
($US 000's) 31 March 2011 31 March 2010
----------------------------------------------------------------------------
Revenue 24,731 7,392
----------------------------------------------------------------------------
Operating cost (27,038) (18,965)
----------------------------------------------------------------------------
Reversal of impairment of property, plant
and equipment - 46,013
----------------------------------------------------------------------------
Results from operating activities (2,307) 34,440
----------------------------------------------------------------------------
Investment and other income 31 44
----------------------------------------------------------------------------
Finance Costs (6,693) (3,770)
----------------------------------------------------------------------------
Net income (8,969) 30,714
----------------------------------------------------------------------------
Revenue of $24.7 million (2010: $7.4 million) was generated from the sale of copper concentrates. Production commenced at the Mowana mine in August 2009 so the comparative period reported revenue was for seven months of production.
Operating costs per ton remained above budgeted levels as a result of maintenance costs (caused by major component inefficiencies and design upgrades) throughout the plant being higher than originally anticipated. While many of the production bottlenecks were proactively addressed during the current year the Mowana plant saw the introduction of highly oxidized ore from the Thakadu deposit which required different plant set-up and settings while the processing characteristics of the oxide ore were understood. Due to the demands of responding to these challenges, production related costs consequently increased. The Company does not believe that the operating results for this period of production will be indicative of those it will achieve over time, after the plant is operated at full commercial levels.
Included in the operating costs is amortization of $3.5 million (2010: $1.1 million) of the Mowana Mine's property, plant and equipment. In addition, operating costs include administrative expenses totalling $4.8 million (2009: $7.9 million) and are reflective of a reduction in costs that were incurred during 2009 as a result of the restructuring of the Company during that period.
During the 15 month period ended 31 March 2010 the Company recognized a $46.0 million partial reversal of the impairment of property, plant and equipment provision that was recognized in fiscal 2008.
Cash Flow Statement
----------------------------------------------------------------------------
Year ended 15 months ended
($US million's) 31 March 2011 31 March 2010
----------------------------------------------------------------------------
Opening cash 10.0 2.5
----------------------------------------------------------------------------
Used for operating activities (10.9) (20.1)
----------------------------------------------------------------------------
Used for investing activities (11.2) (8.1)
----------------------------------------------------------------------------
Inflow from financing activities 11.5 33.6
----------------------------------------------------------------------------
Exchange gain 3.4 2.1
----------------------------------------------------------------------------
Closing cash at 31 March 2.8 10.0
----------------------------------------------------------------------------
Cash used in operating for the current year was $10.9 million compared to $20.1 million in the 15 months ended 31 March 2010. The primary factor, after adjusting for the $46.0 million reversal of impairment recognized in the comparative period, was a lower operating loss from operations of $2.3 million in the current year compared to $11.6 million in the comparative period. Further capital expenditures of $11.2 million (2010: $8.1 million) were invested by the Company including $8.5 million (2010: $8.1 million) spent on Mowana and related infrastructure capital expenditure projects and $2.7 million (2010: $38K) on its portfolio of exploration prospects. To fund these operating losses and investments the Company secured $11.5 million (2010: $33.6 million) during the year.
The current financing activities included the following:
$ m
Proceeds from the November 2010 ZCI Development Facility 7.5
Amount drawn from February 2011 ZCI Development Facility 4.0
------
11.5
For further information on the amount and terms of loans from ZCI, please refer to Note 19 of the Company's audited Financial Statements for the year ended 31 March 2011.
Group Liquidity
At 31 March 2011 the Group held cash and cash equivalents of $2.8 million (31 March 2010: $10.1 million. As at 31 March 2011 the Group had a total principal debt of US$53.4 million to ZCI:
-- a US$31.9 million Convertible Loan Facility;
-- a US$10.0 million working capital facility provided in March 2010;
-- a US$7.5 million development loan provided in November 2010; and
-- US$4.0 million drawn on a US$12.5 million development facility approved
by ZCI in February 2011.
In advance of the year-end the Company exchanged $9.5 million in current outstanding debt assignment agreements held by ZCI for the issue of 105,369,488 new ordinary shares in the Company at a price of 5.5782p per share ("the Debt Conversion"). The Debt Conversion resulted from ZCI entering into debt assignment agreements with certain of the Company's large creditors, as part of the refinancing of the Company in May 2009.
The Convertible Loan Facility and the two development facilities are longer term debts repayable in approximately three years time. The $10 million working capital facility was originally due on 31 March 2011 but ZCI consented to a deferral of this repayment date to 31 March 2012.
In addition, on 24 March 2011, the Group entered into a facility with African Banking Corporation of Botswana Limited ("ABCB") to provide working capital and finance for certain items of capital equipment. As such, the capital equipment facility is not generally available although the projected capital expenditure does include items that would be covered by the terms of this facility. The working capital facility is for an amount of US$3.0 million and the capital equipment facility is for an amount of US$3.1 million. Both facilities were undrawn at the year-end pending completion of documentation.
Going Concern
Attention is drawn to disclosure surrounding the going concern basis of preparation. Further information is provided in Note 1: Nature of operations and basis of preparation to the Company's audited financial statements for the year ended 31 March 2011.
Resources and Reserves
Mowana Mine
The table below sets out estimates of proven and probable mineral reserves and additional inferred mineral resources at the Mowana Mine. These estimates were prepared for ZCI by Read, Swatman & Voigt (Pty) Ltd ("RSV") in connection with the preparation of a circular to ordinary shareholders of ZCI dated 17 December 2009, and appeared in a Competent Persons Report of RSV dated October 2009 (the "CPR").
In preparing the CPR, RSV reviewed the Company's existing Mineral Resource and Mineral Reserve models for the Mowana Mine, which were calculated on assumptions determined to be appropriate by African Copper (including a 0.10% Cu cut-off grade), and which have previously been disclosed by African Copper in its announcement dated 26 November 2007. RSV applied its own set of assumptions (including a higher cut-off grade of 0.25% Cu) and re-estimated certain values as shown below. These reserves have been re-estimated allowing for depletions due to mining between August 2009 to 31 March 2011.
Proven & Probable In-pit Mineral Reserves and In-pit Inferred Mineral Resources at a 0.25% Cu cut-off as at 31 March 2011:
----------------------------------------------------------------------------
Contained
metal(i)
Category Tonnage (Mt)(i) Copper (%)(i) (Tonnes Cu)
----------------------------------------------------------------------------
Proven Reserves 7.46 1.26 93,970
----------------------------------------------------------------------------
Probable Reserves 3.14 1.60 50,179
----------------------------------------------------------------------------
Sub Total 10.60 1.36 144,149
----------------------------------------------------------------------------
In-pit Inferred Resources 2.51 1.20 30,127
----------------------------------------------------------------------------
(i) Rounding of figures may result in minor computational discrepancies
The inferred material has been included at the bottom of the Mowana Mineral Reserve statement because it is incidental to the mine plan. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
During the year under review, African Copper completed the drilling of a deep borehole north of the current open pit to confirm the existence of mineralization below 500 metres depth. This borehole showed copper mineralization to 1,000 metres depth before passing into footwall lithologies.
A drilling exploration programme commenced in January 2011 to evaluate copper mineralization over a 2km strike length northwards of the current Mowana open pit. The Mowana ore body is known to extend from previous sparse exploration drilling carried out by Falconbridge exploration during the early 1980's.
Thakadu Mine
The table below sets out the most recent estimates of proven and probable mineral reserves and additional inferred mineral resources at the Thakadu Mine. In preparing these estimates, which appeared in the RSV CPR, RSV reviewed the Company's existing Mineral Resource models for the Thakadu Mine, which were calculated based on assumptions determined to be appropriate by African Copper (including a 0.5% Cu cut-off grade utilizing ordinary kriging), and which had previously been disclosed by the Company in its announcement dated 25 July 2007.
In converting the Resources to Probable Mineral Reserves RSV applied its own set of assumptions (including a higher cut-off grade of 0.5% Cu), to evaluate an economic pit-shell based on African Copper's existing proposed pit design.
These reserves have been re estimated allowing for depletions due to mining between August 2009 and 31 March 2011.
Probable In-pit Mineral Reserves at a 0.5% Cu cut-off as at 31 March 2011:
----------------------------------------------------------------------------
Contained metal
Category Tonnage (Mt) Copper (%) (Tonnes Cu)
----------------------------------------------------------------------------
Proven Reserves Nil - -
----------------------------------------------------------------------------
Probable Reserves 2.36 2.14 50,584
----------------------------------------------------------------------------
Sub Total 2.36 2.14 50,584
----------------------------------------------------------------------------
In-pit Inferred Resources Nil - -
----------------------------------------------------------------------------
(i) Rounding of figures may result in minor computational discrepancies
Matsitama Minerals
Matsitama Mineral's holds title to six prospecting licenses ("PL's") in east-central Botswana, 60km to 90km west of Francistown. The PL's are contiguous with Mowana Mine to the north and Thakadu Mine to the south. The licenses cover much of the highly prospective Matsitama Schist Belt ("MSB") and total 2,084.8km2 in extent.
Exploration activities recommenced in the MSB in March 2010 after a hiatus of some 15 months. An experienced exploration manager was hired to oversee exploration activities and the belt was re-examined with fresh eyes and from a totally new perspective. A number of world renowned earth scientists skilled in a range of disciplines were brought into Botswana to assess and evaluate the existing datasets. The international panel applied the latest thinking and generated a number of new, highly prospective, hitherto unexplored targets.
A one year, fast-track exploration program was drawn up in June 2010. Fieldwork commenced in the latter half of 2010 and the new ideas and concepts put forward by the panel of international experts were quickly shown to hold true. It was soon realized that intensive field programs spanning a number of years would be required to move the new exploration targets forward so that detailed mineral resource assessments and economic studies, if warranted, could be carried out.
Exploration in the MSB is now focused on iron-oxide-copper-gold ("IOCG") mineralization. These deposits can be very large, capable of supporting mining operations for periods of 30 or more years. It has long been believed that the MSB may host IOCG mineralization but until recently no conclusive proof had been found to confirm the existence of this type of deposit in the belt.
Three highly prospective IOCG targets have now been identified in the MSB, namely the Nakalakwana, Lepashe and Matsitama West targets. The Nakalakwana target also hosts a pre-tectonic, copper-rich protore of possible basaltic affinity. Resources for the protore have recently been estimated by the MSA Group using historical, unverified drill hole data. The resource estimate was completed in order to guide future exploration activities at Nakalakwana.
In addition, the Company is currently evaluating banded iron formation ("BIF") exposures in the Gamogae area for both iron and gold. The BIF can be traced over a distance of 13km. Only the extreme northern portion of the target has been sampled to date.
Results from the current programme were announced on 24 June 2011 and included the following:
Table 1. Nakalakwana IOCG target
----------------------------------------------------------------------------
From To Interval Cu Au
Borehole ID(1) (m) (m) (m) (%) (g/t)
----------------------------------------------------------------------------
NTRC02 72 160 88 0.12 0.23
Includes: 95 123 28 0.21 0.69
98 102 4 0.62 0.90
99 104 5 0.46 2.42
----------------------------------------------------------------------------
(1) Borehole drilled October 2010.
Table 2. Nakalakwana protore resource estimate.(1)
----------------------------------------------------------------------------
Cut-off Tonnage Cu Au
Target (% Cu) (Mt) (%) (g/t)
----------------------------------------------------------------------------
Nakalakwana Hill 0.3 18.8 0.52 0.06
0.0 33.7 0.39 0.05
----------------------------------------------------------------------------
(1) The resource estimate is based on historical, unverified drill hole
data. Consequently, Matsitama Minerals does not consider the estimate
to be compliant with modern reporting codes but does consider the
estimate to be a reasonable indication of the potential.
Table 3. Matsitama West IOCG target.
----------------------------------------------------------------------------
Grab sample (selection of better assays)(1) Cu (%) Au (g/t) Ag (g/t)
------------------------------
1.90 0.89 8.66
Gossanous quartz-chlorite schist 0.33 3.71 1.26
1.74 0.95 6.34
Gossanous vein quartz 3.02 0.50 5.79
----------------------------------------------------------------------------
(1) Total of 28 samples taken; average Cu value = 1.22%; average Au value =
0.49g/t; average Ag value = 2.39g/t; samples taken across two areas
measuring 200m x 75m and 175m x 75m, respectively, in extent.
Table 4. Lepashe IOCG target
----------------------------------------------------------------------------
Grab sample (all samples)(1) Cu (%) Au (g/t) Ag (g/t)
----------------------------------------------------------------------------
Amphibolite, quartz-haematite breccia 2.14 0.05 3.47
Amphibolite 1.82 0.05 1.07
Quartz-haematite breccia 0.64 0.18 2.06
----------------------------------------------------------------------------
(1) Total of three samples taken over an area measuring 25m x 25m in
extent.
Table 5. Gamogae BIF target
----------------------------------------------------------------------------
Grab sample (35 Fe (%, lowest Fe (%, highest Fe (%, average
samples)(1) value) value) value)
----------------------------------------------------------------------------
BIF, Fe-rich
quartzite 10.4 41.0 26.6
----------------------------------------------------------------------------
(1) Total of 35 samples taken over the northern and central portions of the
BIF.
Note
The technical information relating to Matsitama has been reviewed and approved by Warwick Bullen, M.Sc., Pr.Sci.Nat., Exploration Manager - Matsitama Minerals. Warwick Bullen is a Qualified Person for the purposes of NI 43-101, and a Competent Person for the purposes of SAMREC and JORC and the current Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in June 2009. Exploration data is acquired by Matsitama Minerals and its consultants under strict quality assurance and quality control protocols. Samples are prepared and assayed at ALS Chemex laboratory located near Johannesburg, South Africa. All gold assay values are accredited in accordance with the recognized International Standard ISO/IEC 17025:2005. All copper samples assaying at greater than 0.2% Cu are re-assayed using the ALS Chemex Cu-OG62 method and these sample assays are similarly accredited. On-site quality control procedures follow industry standard protocols.
Four key exploration licenses, namely PL's 14/2004, 15/2004, 16/2004 and 17/2004, were set to expire on 31 June 2011. All four licenses, which total 1,988.6km(2) in extent, have now been extended by the Botswana Government for another two years renewable for a further two years. Detailed exploration activities have been planned for the upcoming two-year period and budgets determined accordingly.
Brad Kipp
Chief Financial Officer
29 June 2011
African Copper Plc
Consolidated Statement of
Comprehensive Income
For year For period
ended ended
31 March 31 March
2011 2010
Note US$'000 US$'000
Continuing operations
Revenue 3 24,731 7,392
----------------------------------------------------------------------------
Operating costs excluding
amortization (21,317) (11,839)
Amortization of mining properties
and equipment (3,508) (1,104)
----------------------------------------------------------------------------
Operating loss from mining
operations (94) (5,551)
Foreign exchange gain 3,418 2,075
Administrative expenses (4,757) (7,898)
Depreciation (874) (199)
Reversal of impairment of property,
plant and equipment - 46,013
----------------------------------------------------------------------------
Operating (loss)/profit 4 (2,307) 34,440
Investment income 26 44
Other income 5 -
Finance costs (6,693) (3,770)
----------------------------------------------------------------------------
(Loss)/profit before tax (8,969) 30,714
Income tax expense 6 - -
----------------------------------------------------------------------------
(Loss)/profit for the period from
continuing operations attributable
to equity shareholders of the
parent company (8,969) 30,714
Other comprehensive income:
Exchange differences on translating
foreign operations 9,047 (6,288)
----------------------------------------------------------------------------
Other comprehensive
income/(expenditure) for the year,
net of tax 9,047 (6,288)
----------------------------------------------------------------------------
Total comprehensive income for the
year attributable to equity
shareholders of the parent company 78 24,426
----------------------------------------------------------------------------
Basic earnings/(loss) per ordinary
share 7 $(0.01) $0.05
Diluted earnings/(loss) per
ordinary share 7 $(0.01) $0.05
----------------------------------------------------------------------------
African Copper Plc Group Company
Balance Sheets As at 31 As at 31
March March March March
2011 2010 2011 2010
Note US$'000 US$'000 US$'000 US$'000
----------------------------------------------------------------------------
ASSETS
Property, plant and equipment 8 81,485 65,224 - -
Deferred exploration costs 9 2,768 38 1 1
Other financial assets 10 345 327 - -
Long term receivables 11 - - 13 12
Investments in subsidiaries 12 - - 17,111 8,396
----------------------------------------------------------------------------
Total non-current assets 84,598 65,589 17,125 8,409
----------------------------------------------------------------------------
Other receivables and
prepayments 14 3,792 936 58 98
Inventories 15 10,483 1,780 - -
Cash and cash equivalents 16 2,829 10,047 3 150
----------------------------------------------------------------------------
Total current assets 17,104 12,763 61 248
----------------------------------------------------------------------------
Total assets 101,702 78,352 17,186 8,657
----------------------------------------------------------------------------
----------------------------------------------------------------------------
EQUITY
Issued share capital 17 15,167 13,469 15,167 13,469
Share premium 170,075 162,328 170,075 162,328
Other reserve- ZCI convertible
loan 502 502 502 502
Merger reserve - - 17,135 17,135
Acquisition reserve 8,931 8,931 - -
Foreign currency translation
reserve 6,188 (2,859) (15,017) (15,395)
Accumulated losses (174,343) (165,374) (170,851) (169,481)
----------------------------------------------------------------------------
Total equity 26,520 16,997 17,011 8,558
----------------------------------------------------------------------------
LIABILITIES
Rehabilitation provision 20 7,150 4,051 - -
Amounts payable to ZCI Ltd 19 43,424 31,924 - -
----------------------------------------------------------------------------
Total non-current liabilities 50,574 35,975 - -
----------------------------------------------------------------------------
Trade and other payables 21 14,608 5,935 175 99
Amounts payable to ZCI Ltd 19 10,000 19,445 - -
----------------------------------------------------------------------------
Total current liabilities 24,608 25,380 175 99
----------------------------------------------------------------------------
Total equity and liabilities 101,702 78,352 17,186 8,657
----------------------------------------------------------------------------
----------------------------------------------------------------------------
African Copper Plc
Consolidated statement of changes in equity
Share Share Acquisition
Note Capital Premium Reserve
US$'000 US$'000 US$'000
Balance at 1 January 2009 2,911 162,328 8,931
Foreign exchange adjustments - - -
----------------------------------------------------------------------------
Loss for the period - - -
----------------------------------------------------------------------------
Total comprehensive income
for the period - - -
New share capital subscribed 17 10,558 - -
Credit arising on share
options - - -
Equity component of ZCI
convertible loan - - -
----------------------------------------------------------------------------
Balance at 31 March 2010 13,469 162,328 8,931
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign exchange adjustments - - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss for the year - - -
----------------------------------------------------------------------------
Total comprehensive income
for the year - - -
New share capital subscribed 17 1,698 7,747 -
----------------------------------------------------------------------------
Balance at 31 March 2011 15,167 170,075 8,931
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign
Currency Hedging/
Translation Other (ZCI) Accumulated Total
Reserve Reserve Loss Equity
US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2009 3,429 - (196,131) (18,532)
Foreign exchange adjustments (6,288) - - (6,288)
----------------------------------------------------------------------------
Loss for the period - - 30,714 30,714
----------------------------------------------------------------------------
Total comprehensive income
for the period (6,288) - 30,714 24,426
New share capital subscribed - - - 10,558
Credit arising on share
options - - 43 43
Equity component of ZCI
convertible loan - 502 - 502
----------------------------------------------------------------------------
Balance at 31 March 2010 (2,859) 502 (165,374) 16,997
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign exchange adjustments 9,047 - - 9,047
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss for the year - - (8,969) (8,969)
----------------------------------------------------------------------------
Total comprehensive income
for the year 9,047 - (8,969) 78
New share capital subscribed - - - 9,445
----------------------------------------------------------------------------
Balance at 31 March 2011 6,188 502 (174,343) 26,520
----------------------------------------------------------------------------
----------------------------------------------------------------------------
African Copper Plc
Company statement of changes in equity
Share Share Merger
Note Capital Premium Reserve
US$'000 US$'000 US$'000
Balance at 1 January 2009 2,911 162,328 17,135
Loss for the period - - -
Foreign exchange due to
conversion from GBP to US
Dollar - - -
----------------------------------------------------------------------------
Total comprehensive loss
for the period - - -
New share capital subscribed 17 10,558 - -
Credit arising on share
options - - -
Equity component of ZCI
convertible loan - - -
----------------------------------------------------------------------------
Balance at 31 March 2010 13,469 162,328 17,135
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss for the year - - -
Foreign exchange due to
conversion from GBP to US
Dollar - - -
----------------------------------------------------------------------------
Total comprehensive loss for
the year - - -
New share capital subscribed 17 1,698 7,747 -
----------------------------------------------------------------------------
Balance at 31 March 2011 15,167 170,075 17,135
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Foreign
Currency Hedging/
Translation Other (ZCI) Accumulated Total
Reserve Reserve Loss Equity
US$'000 US$'000 US$'000 US$'000
Balance at 1 January 2009 (15,207) - (166,475) 692
Loss for the period - - (3,007) (3,007)
Foreign exchange due to
conversion from GBP to US
Dollar (188) - - (188)
----------------------------------------------------------------------------
Total comprehensive loss
for the period (188) - (3,007) (3,195)
New share capital subscribed - - - 10,558
Credit arising on share
options - - 1 1
Equity component of ZCI
convertible loan - 502 - 502
----------------------------------------------------------------------------
Balance at 31 March 2010 (15,395) 502 (169,481) 8,558
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Loss for the year - - (1,370) (1,370)
Foreign exchange due to
conversion from GBP to US
Dollar 378 - - 378
----------------------------------------------------------------------------
Total comprehensive loss for
the year 378 - (1,370) (992)
New share capital subscribed - - - 9,445
----------------------------------------------------------------------------
Balance at 31 March 2011 (15,017) 502 (170,851) 17,011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
African Copper Plc
Consolidated cash flow statement
----------------------------------------------------------------------------
15 Month Period
Year ended ended
31 March 2011 31 March 2010
Note US$'000 US$'000
----------------------------------------------------------------------------
Cash flows from operating
activities
----------------------------------------------------------------------------
Operating (loss)/profit from
continuing operations (2,307) 34,440
(Increase)/decrease in receivables (2,875) 725
Increase in inventories (8,703) (636)
Increase/(decrease) in payables 8,673 (4,101)
Share based payment expense - 33
Reversal of impairment of property,
plant and equipment - (46,013)
Foreign exchange gain (3,418) (2,075)
Depreciation and amortization 4,383 1,303
----------------------------------------------------------------------------
Cash used in operating activities (4,247) (16,324)
Interest received 26 44
Other income 5 -
Finance costs (6,693) (3,770)
----------------------------------------------------------------------------
Net cash outflow from operating
activities (10,909) (20,050)
----------------------------------------------------------------------------
Cash flows from investing
activities
Payments to acquire property, plant
and equipment (8,496) (8,075)
Payments of deferred exploration
expenditures (2,731) (38)
----------------------------------------------------------------------------
Net cash outflow from investing
activities (11,227) (8,113)
----------------------------------------------------------------------------
Cash flows from financing
activities
Issue of equity share capital, net
of issue costs - 10,558
Repayment/Proceeds from interest
bearing borrowings - (19,383)
ZCI Convertible loan- share premium - 502
Proceeds from ZCI Convertible/non-
convertible loans - 31,924
Proceeds from ZCI March 2010
Facility - 10,000
Proceeds from ZCI November 2010
development loan 7,500 -
Proceeds from ZCI February 2011
development facility 4,000 -
Issue of equity capital on
conversion of debt 9,445 -
Repayment of debt on conversion to
equity (9,445) -
----------------------------------------------------------------------------
Net cash inflow from financing
activities 11,500 33,601
----------------------------------------------------------------------------
Net (decrease)/increase in cash and
cash equivalents (10,636) 5,438
Cash and cash equivalents at
beginning of the year 10,047 2,534
Foreign exchange gain 3,418 2,075
----------------------------------------------------------------------------
Cash and cash equivalents at end of
the year 16 2,829 10,047
----------------------------------------------------------------------------
----------------------------------------------------------------------------
African Copper Plc
Company cash flow statement
----------------------------------------------------------------------------
Year Ended 15 Month ended
31 March 31 March
2011 2010
Note US$'000 US$'000
Cash flows from operating
activities
----------------------------------------------------------------------------
Operating loss from continuing
operations (1,363) (2,919)
Decrease/(increase) in receivables 39 (13)
Increase/(decrease) in payables 76 (410)
ZCI convertible loan share premium - 502
----------------------------------------------------------------------------
Cash used in operating activities (1,248) (2,840)
Interest received 8 2
----------------------------------------------------------------------------
Net cash outflow from operating
activities (1,240) (2,838)
----------------------------------------------------------------------------
Cash flows from investing
activities
Increase in loans to subsidiaries (8,716) (8,408)
Payments of deferred exploration
expenditures - (1)
----------------------------------------------------------------------------
Net cash outflow from investing
activities (8,716) (8,409)
----------------------------------------------------------------------------
Cash flows from financing
activities
Issue of equity share capital, net
of issue costs - 10,558
Issue of equity capital on
conversion of debt 9,445 -
----------------------------------------------------------------------------
Net cash inflow from financing
activities 9,445 10,558
----------------------------------------------------------------------------
Net decrease in cash and cash
equivalents (511) (689)
Cash and cash equivalents at
beginning of the year 150 1,116
Exchange gain/(loss) 364 (277)
----------------------------------------------------------------------------
Cash and cash equivalents at end of
the year 16 3 150
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Notes:
The financial information presented in this preliminary announcement does not comprise the statutory financial statements of African Copper Plc for the financial year ended 31st March 2011 issued on 29th June 2011 but represents extracts from them. These extracts cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the company as a reading of the complete Annual Report.
The statutory financial statements will be delivered to the Registrar of Companies and the auditors have reported on them; their report was unqualified but contains an Emphasis of Matter paragraph in relation to the going concern basis of preparation, further details of which are set out in the following note/paragraph.
1. Nature of operations and basis of preparation
African Copper Plc ("African Copper" or the "Company") is a public limited company incorporated and domiciled in England and is listed on the AIM market of the London Stock Exchange and the Botswana Stock Exchange. African Copper is a holding company of 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 Group has only one operating segment, namely copper exploration, development and mining in Botswana.
Basis of preparation
The consolidated and company financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations (collectively "IFRS") issued by the International Accounting Standards Board ("IASB") as adopted by the European Union ("EU") in accordance with EU laws.
The consolidated and company financial statements have been prepared according to the historic cost basis or the fair value basis where the fair value of relevant assets and liabilities has been applied.
The consolidated and company financial statements are presented in United States Dollars ("US$" or "US dollar") and rounded to the nearest thousand. The Company's functional currency is GB Pounds ("GBP") and the functional currency of the Company's principal subsidiary is Botswana Pula.
Going concern
The Directors have prepared the financial statements on the going concern basis having considered the status of current operations, the current funding position and the projected funding requirements of the business for, at least, 12 months from the date of approval of these financial statements as detailed below.
Current operations
In the year to 31st March 2011, the consolidated financial statements show a loss before tax of US$8,969,000 and at 31st March 2011, net current liabilities of US$7,504,000.
The Company's principal subsidiary sold a total of 3,841 tonnes of copper in concentrate during the financial year to 31st March 2011 of which 1,266 tonnes were produced in the final quarter of the year, i.e. an average of 422 tonnes for each of the three months. The average price per tonne achieved during the financial year was US$8,347.00. Since the end of the year, copper produced in concentrate for April and May was 564 tonnes and 508 metric tonnes ("Mt") respectively and the average price per tonne achieved was US$9,315.00.
Current funding
At 31st March 2011, the consolidated principal debt of the Group was US$53.4 million all of which is owed to ZCI Limited ("ZCI"), African Copper's immediate parent company, as set out in note 19 to the financial statements. Of this figure, US$10.0 million is classified as a current liability and is included in calculating the figure for net current liabilities that existed at the year-end of US$7,504,000; the balance of the debt is classified as a non-current liability.
The Group has an additional US$8.5 million of undrawn facility with ZCI.
In addition, on 24 March 2011, the Group entered into a facility with African Banking Corporation of Botswana Limited ("ABCB") to provide working capital and finance for certain items of capital equipment. As such, the capital equipment facility is not generally available although the projected capital expenditure does include items that would be covered by the terms of this facility. The working capital facility is for an amount of US$3.0 million and the capital equipment facility is for an amount of US$3.1 million. Both facilities were undrawn at the year-end pending completion of documentation.
Projected funding requirements
The Directors have prepared cash flow projections covering at least the 12 month period from the date of approval of these financial statements.
The projections, which have been drawn up on a monthly basis, are based on a number of inputs and assumptions which include mined tonnage, all associated mining and processing costs, extraction and yield rates for production of the copper concentrate and the price of copper. The Group's approved capital expenditure is also included in the cash flows. The key assumptions to which the projections are most sensitive in the opinion of the Directors are the tonnage of produced copper concentrate and the copper price; the tonnage of produced copper concentrate is itself a function of mining output and yield achieved in the processing operations. The projections show that, if the key financial assumptions are achieved, the existing facility with ZCI and new facility with ABCB will be sufficient to provide the necessary funding for the Group for at least the next 12 months from the date of approval of these financial statements and in addition, enable the Group to repay US$10.0 million of debt to ZCI which is due, under the terms of the particular facility agreement, in March 2012.
However, the mining operations at Mowana and Thakadu have yet to reach full commercial production rates on a consistent basis and produce positive cash flow. The Directors have already addressed a number of the issues that have impacted the ramp up to full production, especially at the Mowana mine, and the projections include capital expenditure to improve the processing capability of the operations, principally the secondary and tertiary crusher availability. The Directors believe that with these improvements and a number of other initiatives which are referred to in the Review of Operations on pages 3 and 5 that the projections are achievable.
The key assumptions relating to production and pricing assume an average copper price per tonne over the 12 month period to June 2012 of US$9,593 and average monthly production of copper in concentrate of 1,257 Mt of copper.
The average copper price for each tonne produced would have to fall to US$7,400 for the March 2012 repayment to ZCI to be at risk. On the assumption that ZCI was prepared to reschedule the debt repayment to the following year, the average copper price per tonne could fall to US$6,500 before the Group was obliged to seek additional external funding.
The average monthly production of copper produced in concentrate needs to be at least 875 Mt before the repayment of debt to ZCI in March 2012 is at risk of not being paid. Again assuming that the repayment could be rescheduled, average monthly production of copper in concentrate needs to be at least 775 Mt before the Group has to seek additional funding.
The required levels of production of copper produced in concentrate compare with the actual rates of production achieved in the first two months of the new financial year of 564 Mt and 508 Mt in April and May respectively. The unproven ability of the Group to achieve the ramp up in production and the volatility of the copper price represent a material uncertainty which may cast significant doubt on the ability of the Group and the Company to continue as a going concern. If projected production levels and pricing fall to the levels outlined above, the Directors would first seek to reschedule the debt repayment due to ZCI in March 2012. If further funding was required, in addition to deferring repayment of the ZCI debt, the Directors would seek new sources of finance from outside the Group although currently there are no plans to do so. In the event that further funding was not available to the Directors, the Group would be unlikely to be able to realise its assets and discharge its liabilities in the normal course of business.
Conclusion
After taking account of the Group's funding position, its cash flow projections and having considered the risks and uncertainties associated with the projections, the Directors have a realistic expectation that the Group has adequate resources to operate for at least the next 12 months from the date of approval of these financial statements. For these reasons, they continue to prepare the financial statements on the going concern basis. These financial statements do not include any adjustments that would result from the going concern basis of preparation being inappropriate.
The address of African Copper's registered office is 100 Pall Mall, St James's London SW1Y 5HP. These consolidated financial statements have been approved for issue by the Board of Directors on 29 June 2011.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.
a) Comparative accounting reference date
In the prior period the Company extended its reporting period from 31 December 2009 to 31 March 2010 in order to align its year end with that of its parent company ZCI. Accordingly the results for the comparative period are for the fifteen months ended 31 March 2010. Information for the current year ended 31 March 2011 is for the twelve month period and may therefore not be directly comparable to the comparative 15 month period.
b) Statement of Compliance
The consolidated financial statements of African Copper plc have been prepared in accordance with International Financial Reporting Standards ("IFRSs") and their interpretations issued by the International Accounting Standards Board (IASB), as adopted by the European Union and with IFRSs and their interpretations issued by the International Accounting Standards Board (IASB). They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRSs.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
As permitted by section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the Company has not been presented in these financial statements.
c) Standards adopted during the year
In these financial statements no new standards, amendments to standards or interpretations that are effective and have been adopted in the year had a material effect on the financial statements.
d) New standards and interpretations not yet adopted
There are a number of new standards, amendments to standards and interpretations that are not yet effective for the year ended 31 December 2010.
None of these have been adopted early in preparing these consolidated financial statements. None of these are anticipated to have any impact on the results or statement of financial position reported in these consolidated financial statements. None of the new standards, amendments to standards and interpretations not yet effective are anticipated to materially change the Group's published accounting policies.
e) Accounting basis
(i) Subsidiaries
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 March 2011. Control is recognised where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
(ii) Transactions eliminated on consolidation
Intra-group transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
f) Revenue recognition & measurement
(i) Revenue from sales of copper concentrate is recorded net of smelter treatment charges and deductions. Copper concentrate is sold under pricing arrangements whereby revenue is recognized at the time of shipment (delivery of the products at the mine gate), at which time legal title and risk pass to the customer and provisional revenue is recorded at current month average price. The quoted period established for each sale contract to finalize the sales price is the month subsequent to the month of delivery, within which the contract is required to be settled. Changes between the prices recorded upon recognition of provisional revenue and final price due to fluctuation in copper market prices result in the existence of an embedded derivative in the accounts receivable. This embedded derivative is recorded at fair value, with changes in fair value classified as a component of revenue and receivables. Changes in the estimate of concentrate copper content resulting from the final independent analysis of the concentrate are recognised at the point at which such analysis is agreed.
(ii) Interest income
Interest income is recognised as it accrues to the Company.
g) Foreign currency translation
(i) Functional and presentation currency
The consolidated financial statements are presented in US dollars which is the 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 Functional Currency of the Company remains Pounds Sterling since this is a non-trading holding Company located in the United Kingdom that has Pounds Sterling denominated share capital.
(ii) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
-- assets and liabilities for each balance sheet presented are translated
at the closing rate at the date of that balance sheet;
-- income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of
the cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the dates of the
transactions); and
-- all resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders' equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognised in profit and loss as part of the gain or loss on sale.
(iii) Transactions and balances
Foreign currency transactions are translated into the functional currency 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 recognized in profit and loss.
h) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and less any accumulated impairment losses. Pre-production expenditure relating to testing and commissioning is capitalised to property, plant and equipment. The recognition of costs in the carrying amount of an asset ceases when the item is in the location and condition necessary to operate as intended by management. Any net income earned while the item is not yet capable of operating as intended reduces the capitalised amount.
Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be reliably measured. All other repairs and maintenance are charged to profit and loss during the financial period in which they are incurred.
Amortization methods and amortization rates are applied consistently within each asset class except where significant individual assets have been identified which have different amortisation patterns. Residual values are reviewed at least annually. Amortisation is not adjusted retrospectively for changes in the residual amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in profit and loss.
Other assets consist of vehicles, information technology equipment and furniture and equipment.
Mining development and infrastructure
Individual mining assets and deferred stripping costs are amortised using the units-of-production method based on the estimated economically recoverable metal during the life of mine plan. Mining costs incurred on development activities comprising the removal of waste rock to initially expose ore at the Mowana open pit mine, commonly referred to as "deferred stripping costs," are capitalized.
Mining plant and equipment
Individual mining plant and equipment assets are amortised using the units-of-production method based on the estimated economically recoverable metal during the life of mine plan.
Other Assets
These assets are depreciated using the straight line method over the useful life of the asset as follows:
- Vehicles 4 years
- Information technology 3 years
- Furniture & equipment 5 years
i) Deferred exploration and evaluation
All costs incurred prior to obtaining the legal right to undertake exploration and evaluation activities on a project are written-off as incurred.
Exploration and evaluation costs arising following the acquisition of an exploration licence are capitalised on project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. Costs incurred include appropriate technical and administrative overheads. Deferred exploration costs are carried at historical cost less any impairment losses recognised.
Upon demonstration of the technical and commercial feasibility of a project, any past deferred exploration and evaluation costs related to that project will be reclassified as Mine Development and Infrastructure.
Capitalised deferred exploration expenditures are reviewed for impairment losses (see accounting policy note below) at each balance sheet date. In the case of undeveloped properties, there may be only inferred resources to form a basis for the impairment review. The review is based on a status report regarding the Group's intentions for development of the undeveloped property.
j) Other receivables and prepayments
Other receivables and prepayments are not interest bearing and are stated at amortised cost.
k) Derivative financial instruments
Copper forward exchange contracts are entered into to hedge anticipated future transactions. Derivative financial instruments are initially recognised in the balance sheet at the fair value on the date of acquisition and subsequently re-measured at fair value. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged. On the date that the derivative contract is entered into, the Group designates derivatives as either a hedge of the fair value of a recognised asset or liability (fair value hedge) or a hedge of a forecast transaction or a firm commitment (cash flow hedge). Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective are recognised in equity and are released to profit and loss when the hedge matures. Changes in the fair value of derivatives that are designated as fair value hedges are recognised in profit and loss. Certain derivative transactions, while providing effective economic hedges under Group's risk management policies, do not qualify for hedge accounting. Changes in the fair value of any such derivative instruments are recognised immediately in profit and loss.
l) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
m) Inventories
Inventories of broken ore and concentrate are physically measured or estimated and valued at the lower of cost and net realizable value ("NRV").
Cost represents weighted average cost and includes direct costs and an appropriate portion of fixed and variable overhead expenditure.
Inventories of consumable supplies and spare parts to be used in production are valued at weighted cost.
Obsolete or damaged inventories are valued at NRV. An ongoing review is undertaken to establish the extent of surplus items, and a provision is made for any potential loss on their disposal.
n) Impairment
Whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable an asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying amount.
Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply:
(i) unexpected geological occurrences that render the resource
uneconomic;
(ii) title to the asset is compromised;
(iii) variations in metal prices that render the project uneconomic; and
(iv) variations in the currency of operation.
If any such indication exists, the recoverable amount of that asset is recalculated and its carrying amount is increased to the revised recoverable amount, if required. The increase is recognized in the Statement of Comprehensive Income as an impairment reversal. An impairment reversal is recognized only if it arises from a change in the assumptions that were used to calculate the recoverable amount. The increase in an asset's carrying amount due to an impairment reversal is limited to the depreciated amount that would have been recognized had the original impairment not occurred.
o) Share based payment
Certain Group employees and consultants are rewarded with share based instruments. These are stated at fair value at the date of grant and either expensed to profit and loss or capitalized to deferred exploration costs, based on the activity of the employee or consultant, over the vesting period of the instrument.
Fair value is estimated using the Black-Scholes valuation model. The estimated life of the instrument used in the model is adjusted for management's best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
p) Provisions
Provisions are recognised when, the Group has a legal or constructive obligation as a result of past events, it is more likely than not that an outflow of the resources will be required to settle the obligation and the amount can be reliably estimated.
q) Trade and other payables
Trade and other payables are not interest bearing and are stated at amortized cost.
r) Guarantees to support Group indebtedness (Company only)
Guarantees made to third parties to support interest-bearing liabilities of subsidiary companies are accounted for as financial guarantee contracts. Such contracts are 'included within the financial statements of the Company at the estimated fair-value of the commitment at the date the commitment is made. The fair-value of the commitment is determined by reference to the interest rate differential between the guaranteed interest-bearing liability and that estimated to be applicable to a similar unguaranteed liability.
The fair-value of these guarantee contracts is considered to be part of the Company's investment in the relevant subsidiary receiving the benefit of the guarantee contract.
These are intra-group transactions and are eliminated for the purposes of the consolidated financial statements in accordance with accounting policy 2 (g) above.
s) Income tax
The charge for taxation is based on the profit or loss for the year and takes into account deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit or loss, and is accounted for using the balance sheet method.
Deferred tax assets are only recognised to the extent that it is probable that future taxable profit will be available in the foreseeable future against which the temporary differences can be utilised.
t) Asset retirement obligations
Asset retirement obligations are future costs to retire an asset including dismantling, remediation and ongoing treatment and monitoring of the site. The asset retirement cost is capitalised as part of the asset's carrying value and amortized over the asset's useful life. Subsequent to the initial recognition of the asset retirement obligation and associated asset retirement cost and changes resulting from a revision to either timing or the amount estimated, cash flows are prospectively reflected in the year those estimates change. The liability is accreted over time through period charges to Statement of Comprehensive Income to unwind the discount due to the passage of time.
u) Investment in subsidiaries
Investments in subsidiaries are recognised at cost less any provision for impairment.
v) Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Many of the amounts included in the financial statements involve the use of judgement and/or estimation. These judgements and estimates are based on management's best knowledge of the relevant facts and circumstances, having regard to prior experience, but actual results may differ from the amounts included in the financial statements.
Information about such judgements and estimation is contained in the accounting policies and/or the Notes to the financial statements, and the key areas are summarised below. Areas of judgement that have the most significant effect on the amounts recognised in the financial statements:
-- Capitalisation and impairment of exploration and evaluation costs - Note
2(n) and Note 9
-- Capitalisation and impairment of Property Plant and Equipment - Note
2(n) and Note 8
-- Estimation of share based compensation amounts - Note 2(o) and Note 18
w) Borrowing costs.
Borrowing costs are expensed as incurred, unless they are directly attributable to construction of assets and therefore form part of the cost of that asset.
3. Group Segment reporting
An operating segment is a component of the Group distinguishable by economic activity or by its geographical location, which is subject to risks and returns that are different from those of other operating segments. 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 UK. In presenting information on the basis of geographical segments, segment assets and the cost of acquiring them are based on the geographical location of the assets. Segment capital expenditure is the total cost incurred during the period to acquire segment assets based on where the assets are located.
----------------------------------------------------------------------------
United Kingdom Botswana Total
Geographic Analysis ($US'000) ($US'000) (US$'000)
----------------------------------------------------------------------------
Revenue - 24,731 24,731
----------------------------------------------------------------------------
Non-current assets 17,125 67,473 84,598
----------------------------------------------------------------------------
All mining revenue derives from a single customer
4. (Loss)/Profit on operations before tax
----------------------------------------------------------------------------
Year 15 Months period
ended 31 March ended 31 March
2011 2010
US$'000 US$'000
----------------------------------------------------------------------------
Profit/(Loss) on ordinary activities is
stated after charging:
Depreciation 874 1,889
Amortisation 3,508 -
Auditors remuneration:
- Audit fee KPMG 70 -
- Audit fee PKF 8 70
Fees payable to PKF for other services:
- Other services relating to tax 9 22
- All other services 8 44
5. Staff numbers and costs
The average number of persons employed by the Group (including directors) during the period, analysed by category, was as follows:
----------------------------------------------------------------------------
Number of Number of
Employees Employees
Year ended Period ended
Group 31 March 2011 31 March 2010
----------------------------------------------------------------------------
Finance and administration 40 18
Technical and operations 263 167
----------------------------------------------------------------------------
303 185
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The aggregate payroll costs of these persons were as follows:
----------------------------------------------------------------------------
Year ended Period ended
31 March 31 March
2011 2010
US$'000 US$'000
----------------------------------------------------------------------------
Wages and salaries 6,092 5,677
Benefits 1,004 107
----------------------------------------------------------------------------
7,096 5,784
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Remuneration of directors and other key management personnel
----------------------------------------------------------------------------
Directors Basic annual Other Total
Year ended Fees remuneration benefits remuneration
31 March 2011 US$'000 US$'000 US$'000 US$'000
----------------------------------------------------------------------------
Directors:
R D Corrans 45 - - 45
B R Kipp - 140 - 140
J Soko 34 - - 34
D Rodier 49 - - 49
Prof S Simukanga 40 - - 40
----------------------------------------------------------------------------
Total directors'
remuneration 168 140 - 308
Non-directors - 1,968 321 2,289
----------------------------------------------------------------------------
Total 168 2,108 321 2,597
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Remuneration of directors and other key management personnel
----------------------------------------------------------------------------
Compensation
Directors Basic annual Other for loss Total
Period ended Fees remuneration benefits of office remuneration
31 March 2010 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------------------------------------------------------------
Directors:
R D Corrans 42 - - - 42
D Jones 16 19 - - 35
B R Kipp - 193 - 164(1) 357
C Fredericks - 120 - 188(1) 308
J Soko 25 - - - 25
D Rodier 34 - - - 34
Prof S Simukanga 17 - - - 17
A J Williams 10 - - - 10
M J Evans 8 - - - 8
----------------------------------------------------------------------------
Total directors'
remuneration 152 332 - 352 836
Non-directors - 1,648 78 - 1,726
----------------------------------------------------------------------------
Total 152 1,980 78 352 2,562
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Payments required under the Chief Executive Officer ("CEO") and Chief
Financial Officer ("CFO") employment contracts in respect of "change of
control" payments as part of the ZCI share subscription (see note 19).
The CEO resigned in December 2009 and the CFO signed a one year
contract with the Company to remain as CFO until at least December 2010
6. Income tax expense
Factors affecting the tax charge for the current period
The tax credit for the period is lower than the credit resulting from the loss before tax at the standard rate of corporation tax in the UK - 28% (2010: 28.0%).
----------------------------------------------------------------------------
Year ended Period ended
31 March 2011 31 March 2010
US$'000 US$'000
----------------------------------------------------------------------------
Tax reconciliation
Profit/(Loss) on ordinary activities
before tax (8,969) 30,714
Tax at 28% (2010: 28%) (2,511) 8,600
Effects (at 30%) of:
Expenses not deductible for tax
purposes 35 300
Deferred tax asset not recognised - -
Expenses previously not deductible
now allowed (863) (429)
Tax losses carried forward 5,242 13,781
Impairment of Property Plant and
Equipment - (12,884)
Impairment of Deferred Exploration - -
Capital allowances in excess of
depreciation (474) (9,368)
----------------------------------------------------------------------------
Loss brought forward and utilised - -
----------------------------------------------------------------------------
Tax charge - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Unrecognised deferred tax assets and liabilities
----------------------------------------------------------------------------
Year ended Period ended
31 March 2011 31 March 2010
US$'000 US$'000
----------------------------------------------------------------------------
Temporary differences
Losses 225,619 228,468
Asset retirement provision 6,945
Inventory movement (7,903)
Arising on share options - -
Accelerated capital allowances (72,110) (177,088)
----------------------------------------------------------------------------
Temporary differences not recognised 152,551 51,380
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Deferred tax assets are recognised for tax loss carry-forwards to the extent that the realization of the related tax benefit through the future taxable profits is probable. As at 31 March, 2011, the Group did not recognize deferred tax assets of US$33,847,000 (2010: US$14,387,000) in respect of losses because there is insufficient evidence of the timing of suitable future taxable profits against which they can be recovered.
The Group's tax losses have no fixed expiry date.
7. Basic and diluted earnings/(loss) per share
The calculation of basic earnings per ordinary share on the net basis is based on the loss on ordinary activities after taxation of US$8,969,245 and on 846,613,778 ordinary shares being the weighted average number of ordinary shares in issue and ranking for dividend during the period. During period ended 31 March 2010 the calculation of diluted gain per ordinary share on the net basis is based on the gain of ordinary activities after taxation of US$30,714,258 and on 613,758,960 ordinary shares.
8. Property, Plant and Equipment
Mine
Development Mine Plant
and and Other
Group Infrastructure Equipment Assets Total
US$'000 US$'000 US$'000 US$'000
----------------------------------------------------------------------------
Cost
Balance at 1 January
2009 144,971 598 6,493 152,062
Additions 449 3,150 70 3,669
Reclassifications (57,756) 47,540 10,216 -
Exchange adjustments 9,167 (1,407) (84) 7,676
----------------------------------------------------------------------------
Balance at 31 March
2010 96,831 49,881 16,695 163,407
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at 1 April 2010 96,831 49,881 16,695 163,407
Additions 8,457 462 1,030 9,949
Reclassifications (220) (1,100) - (1,320)
Disposals - - (179) (179)
Exchange adjustments 1,410 9,366 2,191 12,967
----------------------------------------------------------------------------
Balance at 31 March
2011 106,478 58,609 19,737 184,824
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Depreciation and
impairment losses
Balance at 1 January
2009 (127,535) (527) (5,846) (133,908)
Depreciation charge for
the year - (1,032) (911) (1,943)
Reversal of Impairment
of property, plant and
equipment 46,249 - - 46,249
Exchange adjustments (8,314) 3 (270) (8,581)
----------------------------------------------------------------------------
Balance at 31 March
2010 (89,600) (1,556) (7,027) (98,183)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at 1 April 2010 (89,600) (1,556) (7,027) (98,183)
Depreciation charge for
the year (525) (3,234) (927) (4,686)
Disposals - - 55 55
Exchange adjustments - (208) (317) (525)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at 31 March
2011 (90,125) (4,998) (8,216) (103,339)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carry amounts
Balance at 1 January
2009 17,436 71 647 18,154
----------------------------------------------------------------------------
Balance at 31 March
2010 7,231 48,325 9,668 65,224
----------------------------------------------------------------------------
Balance at 31 March
2011 16,353 53,611 11,521 81,485
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Property, plant and equipment were pledged as security for amounts borrowed from ZCI Limited during the period (see note 19).
Mine Computer and
Development and Office
Company Infrastructure Equipment Total
US$'000 US$'000 US$'000
----------------------------------------------------------------------------
Cost
Balance at 1 January 2009 1,196 23 1,219
Additions - - -
----------------------------------------------------------------------------
Balance 31 March 2010 1,196 23 1,219
Balance at 1 April 2010 1,196 23 1,219
Additions - - -
----------------------------------------------------------------------------
Balance 31 March 2011 1,196 23 1,219
----------------------------------------------------------------------------
Depreciation and Impairment
losses:
Balance at 1 January 2009 (1,196) (23) (1,219)
Depreciation charge for the
period - - -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance 31 March 2010 (1,196) (23) (1,219)
Balance at 1 April 2010 (1,196) (23) (1,219)
Depreciation charge for the
period - - -
----------------------------------------------------------------------------
Balance 31 March 2011 (1,196) (23) (1,219)
Carry amounts
Balance at 1 January 2009 - - -
----------------------------------------------------------------------------
Balance at 31 March 2010 Nil Nil Nil
----------------------------------------------------------------------------
Balance at 31 March 2011 Nil Nil Nil
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Impairment Review
As detailed in the accounting policies in the financial statements the Directors are required to undertake a review for impairment at least annually and in particular where events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In such situation the assets carrying value is written down to its estimated recoverable amount (being the higher of the fair value less cost to sell and value in use). However, should indications dictate that a previously recognized impairment loss no longer exist or has decreased then the Directors should estimate the recoverable amount and determine whether an impairment reversal is appropriate.
At 31 March 2011, following this review and making estimates of the value in use of the Mowana mine the Directors concluded that no impairment charges or impairment reversals were required in respect of the Mowana mine or any of the other cash generating units.
At 30 June 2009 the Directors performed a review and concluded in light of certain indicators that the $USD 168 million impairment loss recognized in 2008 had decreased. At 30 June 2009, following this review and making estimates of the value in use of the Mowana mine and taking into account the finalization of the financing package concluded with ZCI in May 2009, the Directors concluded that $USD 46.01 million of the recognized impairment loss recognized in 2008 on the Mowana mine unit no longer existed and that a partial impairment reversal was appropriate at 30 June 2009.
9. Deferred exploration costs
Group
----------------------------------------------------------------------------
Group Company
Cost US$'000 US$'000
----------------------------------------------------------------------------
Balance 1 January 2009 9,825 300
Additions 38 1
----------------------------------------------------------------------------
Balance 31 March 2010 9,863 301
Balance 1 April 2010 9,863 301
Additions 2,729 -
Exchange adjustment 1
----------------------------------------------------------------------------
Balance 31 March 2011 12,593 301
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Impairment losses
Balance at 1 January 2009 (9,825) (300)
Impairment of deferred exploration - -
----------------------------------------------------------------------------
Balance at 31 March 2010 (9,825) (300)
Balance at 1 April 2010 (9,825) (300)
Impairment of deferred exploration - -
----------------------------------------------------------------------------
Balance at 31 March 2011 (9,825) (300)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Carry amounts
Balance 1 January 2009 - -
----------------------------------------------------------------------------
Balance 31 March 2010 38 1
----------------------------------------------------------------------------
Balance 31 March 2011 2,768 1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
10. Other Non-Current Assets
----------------------------------------------------------------------------
Year ended Period ended
31 March 31 March
2011 2010
Group US$'000 US$'000
----------------------------------------------------------------------------
Bank guarantee 345 327
----------------------------------------------------------------------------
----------------------------------------------------------------------------
As part of providing electricity for the Mowana Mine, a payment guarantee is maintained by the Botswana Power Corporation.
11. Company - Long term receivables
----------------------------------------------------------------------------
US$'000 US$'000
31 March 2011 31 March 2010
----------------------------------------------------------------------------
Loans to Subsidiary undertakings
Opening Balance 12 Nil
Movement (1,233) 7,920
Conversion of intercompany debt to
equity (8,211) (7,420)
Conversion of ZCI convertible loan
from debt to equity 9,445 (488)
----------------------------------------------------------------------------
Balance 31 March 13 12
----------------------------------------------------------------------------
----------------------------------------------------------------------------
12. Company - Investments in subsidiaries
----------------------------------------------------------------------------
US$'000 US$'000
31 March 2011 31 March 2010
----------------------------------------------------------------------------
Opening Balance 8,396 Nil
Conversion of Intercompany Debt to
Equity(i) 8,715 7,908
Conversion of ZCI convertible loan from
debt to equity - 488
----------------------------------------------------------------------------
Balance 31 March 17,111 8,396
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i)During year ended 31 March 2011 and period ended 31 March 2010 the Company converted intercompany loans payable from its wholly-owned subsidiary Messina Copper (Botswana) (Pty) Ltd ("Messina") to equity.
13. Subsidiary undertakings
----------------------------------------------------------------------------
Holding of Holding of
Country of equity equity
incorporation Physical shares shares
and operation activity 2011 2010
----------------------------------------------------------------------------
Mortbury Limited British Virgin
Islands Investment 100% 100%
Messina Copper
(Botswana) (Pty) Ltd(i) Botswana Mining 100% 100%
Matsitama Minerals (Pty)
Limited(i) Botswana Exploration 100% 100%
(i) indirectly held
14. Other receivables and prepayments
----------------------------------------------------------------------------
Group Company
31 March 31 March 31 March 31 March
2011 2010 2011 2010
US$'000 US$'000 US$'000 US$'000
----------------------------------------------------------------------------
VAT receivable 1,290 445 10 17
Prepayments and other
receivables 812 336 48 81
Accounts receivables 1,690 155 - -
----------------------------------------------------------------------------
3,792 936 58 98
----------------------------------------------------------------------------
----------------------------------------------------------------------------
15. Inventories
----------------------------------------------------------------------------
Year ended Period ended
31 March 31 March
2011 2010
US$'000 US$'000
----------------------------------------------------------------------------
Stockpile inventories 8,249 233
Consumables 2,234 1,547
----------------------------------------------------------------------------
Total Inventories 10,483 1,780
----------------------------------------------------------------------------
----------------------------------------------------------------------------
16. Cash and cash equivalents
----------------------------------------------------------------------------
Year ended Period ended
31 March 31 March
2011 2010
Group US$'000 US$'000
----------------------------------------------------------------------------
Cash at bank - -
Short-term bank deposits 2,829 10,047
----------------------------------------------------------------------------
Cash and cash equivalents in the
statement of cashflows 2,829 10,047
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Year ended Period ended
31 March 31 March
2011 2010
Company US$'000 US$'000
----------------------------------------------------------------------------
Cash at bank - -
Short-term bank deposits 3 150
----------------------------------------------------------------------------
Cash and cash equivalents in the
statement of cashflows 3 150
----------------------------------------------------------------------------
----------------------------------------------------------------------------
17. Share Capital
No. of shares US$'000
Authorised
At 31 March 2010 and 31 March 2011
Ordinary shares of 1p each 495,000,000 7,116
Redeemable preference shares of GBP 1 each 50,000 72
----------------------------------------------------------------------------
Issued:
Balance at 31 December 2008 146,858,957 2,911
Ordinary shares issued on 28 April 2009 43 -
Ordinary shares issued on 22 May 2009 676,570,500 10,558
----------------------------------------------------------------------------
Balance at 31 March 2010 823,429,500 13,469
Ordinary shares issued on 9 February 2011 105,369,488 1,698
----------------------------------------------------------------------------
Balance at 31 March 2011 928,798,988 15,167
----------------------------------------------------------------------------
----------------------------------------------------------------------------
On 28 April 2009 43 new ordinary shares of 1p were issued by the Company in connection with the Company's consolidation of share capital announced on 9 April 2009 as part of the proposed financing transaction that was not completed. The proposed financing transaction necessitated a reorganisation of the Company's share capital resulting in a consolidation of the Company's existing ordinary shares. One new Ordinary Share of 10p was proposed to be created for every 100 existing ordinary shares. At the Extra-Ordinary General Meeting held on 7 May 2009 the requisite level of shareholder approval for the this financial transaction was not received so accordingly it did not proceed to completion. As part of the financing package arranged with ZCI which was completed on 22 May 2009, a total of 676,570,500 ordinary shares were issued at a price of GBP 0.01 per ordinary share, raising total net proceeds of GBP 6,765,705 (US$ 10.6m). On 9 February 2011, the Company completed an agreement with ZCI to exchange US$9.5 million in current outstanding debt assignments that ZCI held for the issue of 105,369,488 new ordinary shares in the Company at a price of 5.5782p per share ("the Debt Conversion"). The Debt Conversion resulted from ZCI entering into debt assignment agreements with certain of the Company's large creditors, as part of the refinancing of the Company in May 2009.
Share options and warrants
----------------------------------------------------------------------------
Share Options Share Options
Held at 31 Held at 31 Option Price Exercise
March 2011 March 2010 Date of Grant per Share Period
----------------------------------------------------------------------------
375,000 12 November up to 12
375,000 2004 GBP 0.76 November 2014
60,000 12 November up to 12
60,000 2005 GBP 0.76 November 2015
1,750,000 up to 1 August
1,750,000 1 August 2006 GBP 0.775 2016
- 29 December up to 29
750,000 2006 GBP 0.775 December 2016
----------------------------------------------------------------------------
2,185,000 2,935,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Acquisition reserve
The acquisition reserve comprises the difference between the issued equity of Mortbury Limited at the date of the reverse acquisition of the Company by Mortbury Limited and the par value of shares issued by the Company in the share exchange, together with the fair value of equity issued to repurchase the Mortbury preference shares in issue. As such, the acquisition reserve is a component of the issued equity of the Group.
Foreign currency translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the Botswana foreign subsidiaries that have a different functional currency from the presentation currency. Exchange differences arising are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised in profit and loss in the period in which the operation is disposed of.
Merger reserve
As permitted by the Companies Act 2006, the merger reserve represents the premium on shares issued to acquire the share capital of Mortbury Limited.
Dividends
The directors do not recommend the payment of a dividend.
Capital Management
The Group's objectives when managing capital is to safeguard the Group's ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders.
The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Group issues new shares, or sell assets to reduce debt.
----------------------------------------------------------------------------
At 31 March At 31 March
2011 2010
US$'000 US$'000
----------------------------------------------------------------------------
Total interest bearing debt 53,424 51,368
Total equity 26,520 16,997
----------------------------------------------------------------------------
Debt-to-equity ratio 2.01:1 3.02:1
----------------------------------------------------------------------------
----------------------------------------------------------------------------
18. Share based payments
African Copper has established a share option scheme with the purpose of motivating and retaining qualified management and to ensure common goals for management and the shareholders. Under the African Copper share plan each option gives the right to purchase one African Copper ordinary share. For options granted the vesting period is generally up to three years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Furthermore, options are forfeited if the employee leaves the Company. In 2005 all options were granted at 76p and in 2006 and 2007 all options were granted at 77.5p. No options were granted during the period ended 31 March 2010 and year ended 31 March 2011.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
31 March 2011 31 March 2010
Weighted average
Weighted average exercise price in
exercise price GBP
in GBP per share Options per share Options
At 1 April 77.3p 2,935,000 76p 11,215,000
Forfeited 77.5p (750,000) 74.6p (8,280,000)
----------------------------------------------------------------------------
At 31 March 77.2p 2,185,000 77.3p 2,935,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Exercisable at
the end of the
year 77.2p 2,185,000 77.3p 2,935,000
Expected volatility was determined by calculating the historical volatility of the Company's share price since it was listed on the AIM market of the London Stock Exchange in November 2004. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The total expense in respect of share based payments for the year was nil (2010: US$40,689), of which nil (2010: US$33,101) was recorded as an expense in profit and loss and nil (2010: US$7,588) was capitalised as part of deferred exploration costs.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Exercise price
in GBP per
Expiry date share Shares
31 March 2011 31 March 2010
2014 76p 375,000 375,000
2015 76p 60,000 60,000
2016 77.5p 1,750,000 2,500,000
----------------------------------------------------------------------------
77.2p 2,185,000 2,935,000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
The weighted average remaining contractual life of the outstanding options at 31 March 2011 was 4.5 years (2010: 4.5 years).
19. Amounts payable to ZCI Ltd
At 31 March At 31 March
2011 2010
US$'000 US$'000
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Due to ZCI- Convertible loan (non-
current liability) 7,891 7,891
Due to ZCI- Non-convertible loan (non-
current liability) 24,033 24,033
Due to ZCI- Development loan (non-
current liability) 7,500 -
Due to ZCI- Development Facility (non-
current liability) 4,000 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------
43,424 31,924
Due to ZCI- March 2010 Facility (current
liability) 10,000 10,000
Due to ZCI- Debt acquisitions(current
liability) - 9,445
----------------------------------------------------------------------------
10,000 19,445
----------------------------------------------------------------------------
Balance 31 March 2011 53,424 51,369
----------------------------------------------------------------------------
----------------------------------------------------------------------------
ZCI owns 84.19 percent of the Company. At 31 March 2011 the Company owed ZCI pursuant to the following principal indebtedness:
Convertible Loan Facility:
The Convertible Loan Facility is a four year secured part convertible credit facility of US$31,129,100 comprising a convertible Tranche A of US$8,379,100 with a coupon of 12 per cent. per annum and Tranche B that is not convertible of US$22,750,000 with a coupon of 14 per cent. per annum. The Convertible Loan Facility was signed on 18 June 2009. Tranche B was subsequently increased from US$22,750,000 to $24,032,900. Tranche A of the Convertible Loan Facility is convertible into ordinary shares of African Copper at a conversion price of 1p per share. The maximum aggregate number of new ordinary shares which may be issued pursuant to the conversion rights attaching to Tranche A is 556,307,263 new ordinary shares (subject to usual adjustments), which would, were Tranche A to be converted in full, increase ZCI's interest in the enlarged issued share capital of the Company from 84.19 per cent. to 90.11 per cent.
The Convertible Loan Facility contains typical covenants, warranties and events of default for an agreement of this nature. The Convertible Loan Facility is guaranteed by African Copper and all other African Copper group companies and is secured over Messina's assets including a share pledge over the shares of Messina.
On 26 March 2010 the board of directors of ZCI resolved that the interest payment on the Tranche B Convertible Loan due by the Company on 31 March 2010 be postponed for a period of one year until 31 March 2011 (the "Postponed Interest").
ZCI Debt Acquisitions
In May 2009 as part of the refinancing of the Company ZCI acquired certain debts due to large creditors of the Group representing US$9.44 million (the "Debt Acquisitions"). In February 2011 ZCI agreed to exchange the Debt Acquisitions for new ordinary shares in the Company at a deemed price of 5.5782p per share. The conversion price of 5.5782p per share was calculated based on the 30 days Volume Weighted Average Price (VWAP) and resulted in the issue of 105,369,488 ordinary shares to ZCI.
March 2010 Facility
On 31 March 2010 the Company announced it had arranged agreement with ZCI pursuant to which ZCI would fund immediately a $US 10 million term loan facility at an interest rate of 6% per annum, payable quarterly, to be repaid on or before 31st March 2011 and may be renewed, subject to ZCI giving its written consent to such renewal, prior to the repayment date. The March Facility is secured under the existing Convertible Loan Facility (with the exception of the convertible option). In March 2011 ZCI agreed to renew the March Facility with payment re-scheduled to 31 March 2012.
Development Loan
On November 29, 2010 the Company announced it had secured the Development Loan from ZCI of USD7.5 million. The purpose of Development Loan was to enable exploration drilling on the Company's Matsitama Exploration Project and Mowana North deposit and the completion of a scoping study for the Makala deposits as well as certain plant enhancements. The Development Loan has an interest rate of 12% per annum payable half yearly, and is to be repaid on or before 30 November 2014 and may be renewed for a further 2 years, subject to ZCI giving its written consent to such renewal, prior to the repayment date. The other terms and conditions are otherwise on the same terms as with the Convertible Loan Facility (with the exception of the convertible option).
The Development Facility
On February 9, 2011 the Company announced the Development Facility of $US12.5 million from ZCI. The purpose of the Development Facility was to provide the Company with further working capital and funds to execute the planned investment programme at its Mowana Mine facilities and accelerate mining activities at the Thakadu deposit. The Development Facility is a 3 year secured loan facility with an interest rate of 9.0%, repayable in January 2014. Interest is to be paid semi-annually in arrears on 31 December and 30 June each year, commencing on 31 December 2011 with this payment including accrued interest from the closing of the Facility. The terms and conditions of the Development Facility are on substantially similar terms to Convertible Loan Facility (with the exception of the convertible option). At 31 March 2011 $US4.0 million of the Development Facility had been drawn by the Group.
As a consequence of the Convertible Loan Facility, the March Facility, the Development Loan and the drawn portion of the Development Facility the Group is indebted to ZCI at 31 March 2010 in an aggregate amount of approximately US$53.42 million.
20. Rehabilitation Provision
The Company estimates the total discounted amount of cash flows required to settle its asset retirement obligations at 31 March 2011 is US$7,150,079 (2010 - US$4,051,477). Although the ultimate amount to be incurred is uncertain, the independent Environmental Impact Statement, completed on the Mowana Mine by Water Surveys Botswana (Pty) Limited in September 2006, using an assumption that mining continues to 2023, estimated the undiscounted cost to rehabilitate the Mowana Mine site of 24.3 million Botswana Pula. This estimate was recently updated by GeoFlux (Pty) Limited and the undiscounted cost was revised to 48 million Botswana Pula (due to escalation of Mowana estimate and the new estimate for Thakadu).
During the year the Company set aside US$0.54 million to a separate bank account to provide for rehabilitation of the Mowana and Thakadu Mines site at closure. The cash provision is set aside on the rate of reserves depletion basis. The Company will annually make contributions to this account over the life of the mine so as to ensure these capital contributions together with the investment income earned cover the anticipated costs.
Rehabilitation Provision US$'000
Balance, 1 April 2010 4,051
Provision 2,766
Foreign exchange on translation 333
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Balance, 31 March 2011 7,150
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21. Trade and other payables
Group Company
31 March 31 March 31 March 31 March
2011 2010 2011 2010
US$'000 US$'000 US$'000 US$'000
Trade payables 9,101 4,827 62 26
Amounts due to related
parties (Note 23) 3,971 1,052 41 19
Withholding taxes 765 21 - -
Accrued expenses and other
payables 771 35 72 54
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14,608 5,935 175 99
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22. Commitments
2014 and
Contractual Total 2011 2012 2013 thereafter
Obligations US$'000 US$'000 US$'000 US$'000 US$'000
Goods, services
and equipment
(a) 7,629 7,517 112 - -
Exploration
licences (b) 5,215 917 4,298 - -
Lease agreements
(c) 588 409 161 18 -
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13,432 8,843 4,571 18 -
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(a) The Company and its subsidiaries have a number of agreements with arms-
length third parties who provide a wide range of goods and services and
equipment.
(b) Under the terms of the Company's prospecting licences Matsitama is
obliged to incur certain minimum expenditures.
(c) The Company has entered into agreements to lease premises for various
periods.
23. Related party transactions
The following amounts were paid to companies in which directors of the Group have an interest and were incurred in the normal course of operations and are recorded at their exchange amount;
Balance
Outstanding as at
31 March 31 March 31 March 31 March
2011 2010 2011 2010
US$'000 US$'000 US$'000 US$'000
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Due to ZCI (see Note 19) 53,424 51,369 53,424 51,369
Amount paid to ZCI being
interest on loan 5,589 2,790 3,930 1,035
Amount paid to iCapital
Limited for the provision
of technical and
operational support to the
Company. J. Soko, a
director of the Company, is
a principal of iCapital
Limited. 379 418 41 17
Amount paid to Aegis
Instruments, Micro mine,
MGE and Quantec, companies
controlled by a director of
a subsidiary, in respect of
provision of geophysical
and geological consulting,
administration services and
reimbursed expenses 89 8 - -
Loans to Subsidiaries US$'000
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Balance 1 January 2009 Nil
Amounts advanced to subsidiaries 7,920
Conversion of amounts advanced to equity (7,920)
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Balance 31 March 2010 Nil
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Amounts advanced to subsidiaries 8,211
Conversion of amounts advanced to equity (8,211)
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Balance 31 March 2011 Nil
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The amounts due from subsidiaries at 31 March 2011 have been subordinated in favour of other creditors of those companies.
24. Financial instruments
The Group's principal financial liabilities comprise trade payables, purchase contracts, debts owed to ZCI and accrued expenses. The Group has various financial assets such as cash and cash equivalents, provisional revenue receivables and interest receivables, which arise directly from its operations. In addition, the Company's financial assets include amounts due from subsidiaries.
The Group sells its copper concentrate under pricing arrangements whereby the quoted period established for each sale contract to finalize the sales price is the month subsequent to the month of delivery, within which the contract is required to be settled, Changes between the prices recorded upon recognition of provisional revenue and final price due to fluctuation in copper market prices result in the existence of an embedded derivative in the accounts receivable.
From time-to-time the Group may use derivative transactions by purchasing copper put contracts to manage fluctuations in copper prices in the Group's underlying business operations. The use of derivatives is based on established practices and parameters which are subject to the oversight of the Board of Directors.
All of the Group's and Company's financial liabilities are measured at amortised cost and all of the Group's and Company's financial assets are classified as loans and receivables.
The Group has guaranteed the borrowings of Messina. The primary indebtedness is to ZCI which is also the immediate controlling entity of the Company.
The board of directors determines, as required, the degree to which it is appropriate to use financial instruments, commodity contracts or other hedging contracts or techniques to mitigate risks. The main risks for which such instruments may be appropriate are market risk including interest rate risk, foreign exchange risk and commodity price risk and liquidity risk each of which is discussed below.
The Group and Company's activities are exposed to a variety of financial risks, which include interest rate risk, foreign exchange risk, commodity price risk and liquidity risk.
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31 March 2011 31 March 2010
US$000's US$000's
Carrying Fair Carrying Fair
value value value value
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Financial assets
Cash and cash equivalents 2,829 2,829 10,047 10,047
Other current assets 3,792 3,792 936 936
Financial liabilities
Non-current borrowings 43,424 43,424 31,924 31,924
Current borrowings 24,608 24,608 25,380 25,380
(a) Market Risk
(i) Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cashflows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from interest bearing financial assets and liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-term liquid assets. Interest bearing borrowings comprise a fixed rate loans and variable rate vehicle lease obligations. Variable lease obligations are not considered material.
(ii) Foreign exchange risk
Foreign currency risk refers to the risk that the value of a financial commitment or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group is exposed to foreign currency risk as a result of financial assets, future transactions, foreign borrowings, and investments in foreign companies denominated in Botswana Pula.
The Group has not used forward exchange contracts to manage the risk relating to financial assets, future transactions or foreign borrowings. Fluctuations in financial assets, future transactions or foreign borrowings are recognised directly in profit or loss. During 2009/2010 the Group purchased South African Rand from time to time to match known future South African Rand transactions relating to the development and construction of the Mowana Mine.
The table below shows the currency profiles of cash and cash equivalents:
Group Company
31 March 31 March 31 March 31 March
2011 2010 2011 2010
US$'000 US$'000 US$'000 US$'000
Sterling 9 127 1 117
Canadian Dollars - 25 - 25
South African Rand 112 11 - -
US Dollars 1,552 9,801 2 3
Botswana Pula 1,156 78 - -
Euros - 5 - 5
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2,829 10,047 3 150
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Cash and cash equivalents bear interest at rates based on LIBOR.
As a result of the Group's main assets and subsidiaries being held in Botswana and having a functional currency different than the presentation currency (note 2(g)), the Group's balance sheet can be affected significantly by movements in the US Dollar to the Botswana Pula. During 2008 and 2009/2010 the Group did not hedge its exposure of foreign investments held in foreign currencies. There is no significant impact on profit or loss from foreign currency movements associated with these Botswana subsidiary assets and liabilities as the effective portion of foreign currency gains or losses arising are recorded through the translation reserve.
The table below shows an analysis of net monetary assets and liabilities by functional currency of group companies:
31 March 2011 31 March 2010
Sterling Pula Total Sterling Pula Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Sterling (31) (20) (51) 106 10 116
Pula (6) 6,729 6,723 - (2,120) (2,120)
Canadian
Dollars (1) - (1) 61 - 61
South African
Rand - (685) (685) (2) (431) (433)
Australian
Dollars - (2) (2) - - -
US Dollars (84) (3,404) (3,488) (21) 9,220 9,199
Euros - - - 5 - 5
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Total (122) 2,618 2,496 149 6,679 6,828
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The table above relates to Group and Company.
Foreign currency risk sensitivity analysis:
Profit/Loss Equity
31 March 31 March 31 March 31 March
2011 2010 2011 2010
US$'000 US$'000 US$'000 US$'000
If there was a 10%
weakening of Pula against
US Dollars with all other
variables held constant -
increase/(decrease) (2,748) - (890) (8,650)
If there was a 10%
strengthening of Pula
against US Dollars with
all other variables held
constant -
increase/(decrease) 2,248 - 727 7,077
Commodity price risk
Commodity price risk is the risk that the Group's future earnings will be adversely impacted by changes in the market prices of commodities. The Group is exposed to commodity price risk as its future revenues will be derived based on a contract with a physical off-take partner at prices that will be determined by reference to market prices of copper at the delivery date. From time to time the Group may manage its exposure to commodity price risk by entering into put contracts or metal forward sales contracts with the goal of preserving its future revenue streams. As at 31 March 2011, with other variables unchanged, a plus or minus 1% change in commodity prices, on sales revenue, would affect the loss for the year by plus or minus US$326,965 for the year.
(b) Credit risk
The Group is exposed to credit risk on its cash and cash equivalents and other receivables as set out in Notes 14 and 16, which represents a maximum exposure to credit risk of US$6.62 million. The Group only deposits surplus cash with well-established financial institutions of high quality credit standing.
(c) Liquidity Risk
As at 31 March 2011 the Group had US$2.83 million in cash and cash equivalents, US$3.79 million in other receivables and prepayments and US$53.4 million due to ZCI.
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of committed credit facilities. The Group manages liquidity risk by monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities.
Due or Due between Due between Due between
due in less 1 to 3 3 months 1 to 5
Financial than 1 month Months and 1 year Years
liabilities US$000's US$000's US$000's US$000's
Trade and other
payables 93 10,598 774 3,143
Due to ZCI Ltd - - 10,000 43,424
Fair value of financial instruments
The fair value of the Group's and the Company's financial instruments reflect the carrying amounts shown in the balance sheet.
25. Contingent Liability
The directors are not aware of any proceedings which are threatened or pending, which may have a material effect on our financial position, results of operations or liquidity. Specific claims against the Company, which arise in the ordinary course of business, have been provided for where the directors consider it probable that the claims will be settled.
26. Ultimate Controlling Party
The directors regard ZCI, a company registered in Bermuda, as the Company's immediate parent undertaking. Copies of the accounts of ZCI Limited, the smallest and largest group for which accounts are prepared, may be obtained from the ZCI Limited registered office.
The Company's ultimate controlling party is The Copperbelt Development Foundation. | |
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