The conversion of the Kansanshi royalty, under which the Company will now receive 3.1% of Kansanshi Mining Plc’s (Kansanshi) total revenue, has been approved by the shareholders of ZCCM Investments Holdings Plc (ZCCM-IH).
The Kansanshi mine’s life, which now lasts until 2045, will be covered by quarterly payments of the royalty income.
At the Shareholders Extraordinary General Meeting (EGM), which took place in Kitwe on March 31, 2023, the consent was given.
The old dividend pay-out model has been replaced with a royalty income stream, which is predictable and guaranteed. These decisions were left up to the Board’s judgment and were based on how profitable the business was.
Instead, a royalty is predictable and guaranteed since, in accordance with the Royalty Agreement, it will be assessed at 3.1% of the company’s overall revenue (from sales of Copper, Gold, and all other metal products). So long as there is production at Kansanshi, this ensures ZCCM-IH a consistent cash stream.
According to ZCCM-IH Board Chairwoman Ms. Dolika Banda, this will result in a much healthier cash flow for the company, making it much simpler for the company to raise capital and carry out its ambitious investment goal.
Ms. Banda continues, “The royalty arrangement will provide us with continuous and predictable income, and by doing so, it will radically alter the financial situation of ZCCM-IH.
Our goal is to invest across the whole mining value chain, from exploration to value addition, to contribute to national economic success stories that will benefit all Zambians and provide value creation and a return on investment for our shareholders.
Actual dividend payments from Kansanshi since 2009 and projected royalty rates show that the royalty model will significantly increase overall revenue while also improving predictability and consistency of the revenue flow.
In addition, if copper prices rise after recent market instability, ZCCM-IH will profit from such high prices through a royalty. As it is based on production rather than profitability, it also offers protection from the worst of any upcoming price decline.
A royalty will be paid if Kansanshi is operating and generating income, even if the mine is then operating at a loss. ZCCM-IH will continue to hold 20% of the shares in Kansanshi Mining Plc, keep 2 of the 10 board seats, and continue to be fully aware of all Kansanshi operations while also taking part in the company’s governance.
The completion of the Royalty Transaction follows extended discussion
Corporate Affairs Manager
ZCCM Investments Holdings Plc