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Chambishi Metals Plc 2017-02-28T07:14:44+00:00

Chambishi Metals Plc is involved in the mining, refining and tolling of cobalt and copper. As part of the privatisation process of Zambia Consolidated Copper Mines Limited (“ZCCM Ltd”), Anglovaal Mining Limited (“Anglovaal”) acquired the Chambishi cobalt and acid plants and the Nkana slag dumps in 1998. In 2003, ENYA Holdings BV (“ENYA”) acquired Chambishi from Anglovaal, following which ENYA itself was acquired by the London listed Eurasian Natural Resources Company (“ENRC”) in 2010 for US$ 300mn in a related-party transaction; the founding shareholders of ENYA held approximately 15% of the shares of ENRC during the time of acquisition. ENRC, through its shareholding in ENYA, currently holds a 90% shareholding stake in Chambishi, whilst ZCCM-IH holds the remaining 10% shareholding.

Business Model

The core business of Chambishi is in refining copper and cobalt, the majority of which is sourced from the Democratic Republic of Congo from both mines related to ENRC as well as third-party mines. Prior to 2009 in the wake of the global financial crisis, Chambishi sourced its copper from then sister company, Luanshya Copper Mines Plc (LCM, now majority owned by CNMC of China). However, following the subsequent placement of LCM under care and maintenance, Chambishi was also placed under care and maintenance in 2009, and sought out new source mines following the acquisition of ENYA by ENRC in 2010. Currently, Chambishi sources its copper concentrates from BOSS Mine in the Democratic Republic of Congo (DRC) and the cobalt concentrates from Tenke Fungurume Mine (TFM), also in DRC.

The Refinement Process

The refinement process involves channeling the copper concentrate through a Roaster to burn off a portion of the sulphur as sulphur dioxide, thereby changing the chemical composition of the concentrate to make it suitable for electrowinning.

Processed copper and cobalt is transported to various commercial destinations in Zambia and to Johannesburg in South Africa, where it is shipped to customers.

Extract from 2015 annual report

For the financial year ended 31st December 2014, Chambishi generated total revenues of K1, 883 million (US$289.5 million) (2013: K1,594.1 million (U$D286 million)) compared to the budgeted figure of K2,042.4 million (US$314 million). The net loss for the year was K63.7 million (US$9.8 million) (2013: K53.7 million (US$9.7 million) loss).

During the financial year ended 31st December 2014, Chambishi Metals Plc (Chambishi) faced problems with equipment breakdowns and pending VAT Refunds of US$74.8 million from ZRA. The pending VAT refund impacted on the company’s cash flows resulting in liquidity problems. Chambishi has since engaged a Consultant to attend to the equipment breakdowns.

On the other hand, the Copper Plant that was completed towards the end of 2012 had started to pay off and the company was able to generate positive earnings before depreciation and finance costs.

There were no dividends declared during the financial year ended 31st March 2015 (2014: Nil).

Extract from 2014 annual report

During the year under review, Chambishi Metals Plc faced 2 notable strategic challenges. Firstly, Chambishi’s copper production performance continued to be adversely affected by power fluctuations, which the company estimated resulted in losses amounting to US$9.5 million, of which US$6.8 million resulted from lost production of 3,300t of Copper and 410t of Cobalt. Secondly, the Zambia Revenue Authority (ZRA) withheld the use of US$6.5 million in respect of the audit claim during the year following a comprehensive tax audit carried out for the period 2006 to 2011. In addition, a further US$23 million was withheld by ZRA as at March 2014 relating to a Value Added Tax (VAT) refund due to Chambishi. The matter remains unresolved, but given that Chambishi estimates that 90% of its input costs are VAT deductible, the suspension has had a material effect on day-to-day operations.

There were no dividends during the financial year 2014 (2013: Nil).

Copper

Extracting value from tier one assets by improving efficiencies and operations.