January 2014

Lusaka Stock Exchange approved an application by Copperbelt Energy Corp., shareholders, to buy more shares (Rights Offer) in their company to increase their stakes, following a declaration made in December last year.

The shareholders want to purchase 625, 000, 000 new shares in addition to the existing 1,000, 000, 000 shares they in the company, said an advertisement by the Zambian Capital Market.

The ‘renounceable Rights Offer is expected to raise K387, 500, 000 revenue for the company at the close of the sale on January 31, 2014.

The new shares will be auctioned at K0.62 per rights offer share, at five new shares for every eight existing shares held at Record Date.

The gross proceeds of the rights offer are expected to generate K387.5 million and the rights offer subscription price represents a discount of 19.5 percent and 9.5 percent to the share price and a 30-day volume weighted average of the company’s shares respectively at the close of the trading that was held on 16 January this year.

The company will trade ex-rights on 27 January, while he Letters of Allocation listed on the Zambian bourse will be held the same day.

January 30 will be the last day for shareholders to register for the Rights Offer while the Rights Offers will open on 6 February, 2014.

February 21, will be the last day for dealing in Letters of Allocation on the LuSE On 26 February, the capital market will receive the postal acceptances of the Rights Offer before the offer closes on 28 February at 14 hours (Local Time), the statement added.

The results of the Rights Offers will be announced the following day after closure to be preceded by the listing of new shares on the local bourse, or LuSE. A rights issue is an invitation to existing shareholders to purchase additional new shares in the company as a privilege for their investment.

The Zambian capital market or LuSE, is one of Africa’s fastest emerging markets with about 22 companies trading their stocks with a market capitalization in excess of K58 billion at the close of last year, according to records seen by Zambian Mining News

Advantages:
The Rights Offer gives existing shareholders securities called “rights”. This gives the shareholders the right to purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stock at a discount price.

Until the date at which the new shares can be purchased, shareholders may trade the rights on the market the same way they would trade ordinary shares. The rights issued to a shareholder have a value.

According to data, troubled companies typically use rights issues to pay down debt, especially when they are unable to borrow more money. However, not all companies that pursue rights offerings are shaky. Some with clean balance sheets use them to fund acquisitions and growth strategies.

For re-assurance that it will raise the finances, a company will usually, but not always, have its rights issue underwritten by an investment bank.

Disadvantages:
The Offer, though an advantage to existing shareholders, is subject to its own shocks including the risk that the value of each share will be diluted as a result of the increased number of shares issued.

It is awfully easy for investors to get tempted by the prospect of buying discounted shares with a rights issue.

However, it is not always a certainty that you are getting a bargain. But besides knowing the ex-rights share price, you need to know the purpose of the additional funding before accepting or rejecting a rights issue.

A rights issue can offer a ‘quick fix’ for a troubled balance sheet, but that doesn’t necessarily mean management will address the underlying problems that weakened the balance sheet in the first place.

The Copperbelt Energy Corp., Liquid has become the preferred wholesale broadband connectivity telecommunications company, both at national level and within the region.

The company is planning to accelerate investment into urban fibre networks in 2013.

CEC Liquid Telecom is jointly owned 50 percent each by CEC Plc and Liquid Telecom. CEC Liquid’s customer base continues to grow and includes all mobile operators, top financial institutions, Internet Service Providers, NGOs, quasi-Governmental organisations, educational institutions and foreign missions.

New, modern fibre optic services are being rolled out, which will further consolidate both the market and financial position of the company. The company anticipates expansion and growth within and outside Zambia, it said on its website.

Commissioning of fibre cable with access to East Africa and co-located submarine cables has offered numerous opportunities, as well as competition, but the solid foundation of the company with support from both shareholders (CEC and Liquid Telecommunications of Mauritius), enables the company to pursue opportunities.

Zambia’s Copperbelt Energy Corp. supplies an average 530 megawatts to mining companies on the copperbelt and has an additional interconnector facility to tap power into neighboring DR Congo to plug into the country’s energy deficit that experiences power outages, thereby disrupting copper production.

The company, seeking to expand its operations at home and abroad plans to invest over $900 million in new projects by 2018 to meet rising mining sector demand.

There are further plans to develop five new hydro sites in northern Zambia, with a combined potential to produce 800 megawatts (MW), according to CEC, ostensibly to assist develop the projects in sequence with the first two sites alone are estimated to cost $800 million.

An associated transmission line to connect northern Zambia to the Copperbelt region through the Democratic Republic of Congo is estimated to cost $100 million, a company spokeswoman told Reuters News agency recently.

The projects are subject to multiple approvals because they involve two countries. The Commissioning is expected in 2018, in anticipation that all necessary formalities and approvals are complied with within the planned period.

CEC will invite other investors to help develop the projects but will work alone in the initial stages. The five projects would benefit from Zambia’s introduction of tax breaks for new power projects.

CEC has also made significant progress in developing the 40 MW Kabompo hydro power project in north-western Zambia, to be commissioned next year fora value of $170 million, Reuters said citing the company’s spokeswoman.

Demand for power by mining companies in Zambia, Africa’s top copper producer has steadily been rising fast, with CEC’s sales up by 8 percent to 470 MW in 2010 from 436 MW in 2009.

CEC needed to boost its output after having signed new supply agreements with mining companies building new projects and expanding existing mines.

Canada’s First Quantum Minerals, London-listed Vedanta Resources, Glencore International of Switzerland, Metorex of South Africa, China’s Non Ferrous Metals Africa, operating Chambish Copper Smelter, Luanshya Copper and Chambishi Mines, are among Foreign mining companies operating in Zambia.

Source: Mining News Zambia

Other than Kansanshi Copper Mines Plc which has sought to dual list its shares in Zambia and abroad, most of the multinational companies with operations in the country are undecided whether to partially list shares in Africa’s leading copper producer to defray costs of raising capital for projects.

Recently, Commerce minister Emmanuel Chenda appealed to mining companies to consider listing on Lusaka stock exchange and a cheaper and nearest source of raising capital for their financial obligations while operating in Zambia.

Presently, only Kansanshi Copper Mines, the world’s eighth largest copper producer and a unit of First Quantum Minerals Limited, listed on the Australian bourse, has sought to open its shareholding to the public.

Others, including Vedanta Resources Plc’s Konkola Copper Mines and Mopani Copper Mines, a unit of Glencore International AG of Switzerland, among others remain outside the local bourse.

With the reluctance by most mining companies to dual or partial list on the Lusaka Stock Exchange, despite its 20-years of operations as a local capital market, regulators and managers of the capital market are using “moral suasion” to excite the foreign multinationals to consider, says Security and Exchange Commission Secretary and Chief Executive, Wala Chabala.

“We have tried to persuade them to consider coming to the LuSe and list their shares for easy access to cheaper finances but we are still talking,” he said in Lusaka today on the sidelines of the briefing of the media on the stock market’s performance in the last quarter of 2013.

LuSE chief executive Officer, Brian Tembo said it has been the desire of the capital market in Zambia with 21 listed companies, to entice mining companies for access to cheaper capital to meet their project needs but many of them have remained silent despite the Government’s desire to embrace them locally.

Two years ago Konkola Copper Mines (KCM) had indicated its desire to dual list on the London Metal Exchange as well as Lusaka’s capital market but reversed its intentions citing market forces at play.

The Toronto, London and Lusaka Stock Exchange listed copper miner is owned by first quantum minerals and is one of Zambia’s most tax compliant companies.
It had by the end of 2012 since its inception in 2006 paid the government about US$1.6 billion in form of taxes.

It had planned to also spend about $16 million or K80 billion kwacha by the end of 2012 under its corporate social responsibility programme, said its spokesperson, Godfrey M’siska recently.

Kansanshi mine has a labour force of about 6000 people and is the largest tax payer in the country as it pays about $1.5 million daily to the Government treasury.

By the end of 2010, it had produced about 231,000 tons of copper and 110 tons of gold which it exported outside the country.

Kansanshi Mining plc operates one of the largest copper mines in Africa. It is 20 percent owned by ZCCM-IH and 80 percent by First Quantum Minerals.
Currently, Kansanshi has capacity to produce 250,000 tonnes of copper up from 100,000 when the mine opened, the company said on its website.

The multi-stage expansion project, when operational, will ramp up copper production to 400,000 tonnes and will also significantly increase the gold output. The project is expected to be completed by 2015.

Source: Mining News Zambia