Zccm Inv.hds.b Regulatory News (ZCC)

Brief Particulars of the Transaction

· The grant of a life of mine royalty (the "Royalty") to ZCCM-IH in respect of 3.1 per cent of the gross value of Royalty products to be extracted from the KMP mine pursuant to a Royalty Agreement to be executed on the Transaction closing date.

· Post transaction, the economic value of ZCCM-IH's 20% equity stake in KMP will be realised through the VAT refunds. 

· The varied rights attached to the ZCCM-IH Class A shares in KMP will be amended and prescribed in the amended KMP Articles of Association ("New KMP Articles") to be adopted at Closing.

· ZCCM-IH Class A shares will entitle the Company to nominate 2 Directors to the KMP Board each with voting rights. 

· At closing ZCCM-IH will de-recognise its equity stake in KMP as an investment in associate and recognise the acquired Royalty as a financial asset.

Conditions Precedent include:

Closing or completion of the Transaction is subject to the fulfilment or waiver of all the following conditions precedent in accordance with the Framework Agreement:

· ZCCM-IH Shareholders approval.

· Approval of the Transaction by the Competition and Consumer Protection Commission.

· Letter of No Objection from the Securities and Exchange Commission of Zambia concerning the New KMP Articles.

· Withdrawal of the criminal complaint against KMP directors and confirmation of such withdrawal

· Zambia Revenue Authority confirmation of the parties' tax position on the Transaction.

Key Financial Terms of Agreement

· Pursuant to the KMP shareholder resolution, KMP will make a dividend declaration of United States Dollars Nine Hundred Seventy-Five Million (US$975,000,000) payable in proportion to the shareholding structure (ZCCM-IH:20% and Kansanshi Holdings Ltd 80%) to be paid no later than the date falling seven (7) days following the date of execution of the framework agreement as stated below:

ü United States Dollars One Hundred and Ninety-Five Million (US$195,000,000) to ZCCM-IH and United States Dollars Seven Hundred and Eighty Million (US$780,000,000) to Kansanshi Holdings Limited ("KHL").

· At Closing, the change of KHL's Class A shares to Class C shares and the variation of ZCCM-IH's rights (inter alia, to reflect that ZCCM-IH's dividend right is converted into the Royalty rights as further described below) pursuant to the New KMP Articles and the Termination Agreement between KHL, KMP and ZCCM-IH relating to the termination of rights and obligations under the KMP Shareholders Agreement.

· At Closing, a Royalty consideration of Six Hundred and Eighty-Five Million Dollars (US$ 685,000,000) representing ZCCM-IH's dividend declared on Class A shares by KMP, will be settled by issuance of a Loan Note by KMP to ZCCM-IH. The Royalty Agreement will be executed and delivered by using the Loan Note as Royalty consideration.

· At Closing, ZCCM-IH will have the right to receive quarterly Royalty payments of 3.1% of the Gross Value of Royalty Products (Copper, Gold, and all other metal products) sold or otherwise extracted at KMP, throughout the life-of-mine, pursuant to the Royalty Agreement.

· In accordance with the VAT Agreement between KMP and ZCCM-IH, KMP has agreed to pay to ZCCM-IH 20% of the aggregated amount of the Value-Added Tax refunds as of 30 June 2022 less 20% of any VAT claim costs incurred, as and when received by KMP from ZRA post the closing of the Transaction. The aggregated amount of the VAT refund is:

ü US$ 442 million and

ü ZMW 433 million

Effective Date

The Closing Date, as defined in the Framework Agreement.

Rationale for the Transaction

· A key objective of the ZCCM-IH Strategic Plan (2020-2026) is to extract value from the ZCCM-IH portfolio by focusing on the income flow from each investee company. The right to receive quarterly Royalty payments ensures that ZCCM-IH is guaranteed a predictable and regular revenue stream over the Kansanshi life of mine.

· Another key objective of the ZCCM-IH Strategic Plan is the investment in greenfield and brownfield mining and mining-related ventures across a diverse range of minerals. With this regular Royalty income from KMP, ZCCM-IH will be better placed to finance these investments;

Before

Pro Forma Adjustments

After

Percentage change (%)

EPS (ZMW)

12.22

16.12

28.34

132%

HEPS (ZMW)

12.01

10.00

22.01

83%

NAV per share

168.81

16.12

184.93

10%

Ordinary Shares in issue

160,800,286

-

160,800,286

-

 Shares in issue

160,800,286

-

160,800,286

-

Weighted average number of Ordinary Shares in issue

160,800,286

-

160,800,286

-

Transaction Sponsoring Broker

Transfer Secretary

Stockbrokers Zambia Limited

Corpserve Transfer Agents Limited

32 Lubu Road

6 Mwaleshi Road

Longacres

Olympia Park

P.O. Box 38956

Lusaka

Lusaka

Zambia

Lusaka Securities Exchange Sponsoring Broker for the Transaction

T | +260-211-232456

E | advisory@sbz.com.zm

W | www.sbz.com.zm

Stockbrokers Zambia Limited (SBZ) is a member of the Lusaka Securities Exchange and is regulated by the Securities and Exchange Commission of Zambia.