PRIVATE AND CONFIDENTIAL ZCCM INVESTMENTS HOLDINGS PLC MINUTES OF THE 33RD MEETING OF THE INVESTMENTS COMMITTEE OF THE BOARD HELD ON WEDNESDAY, 12 JULY 2017 Minutes of the 33rd Meeting of the Investments Committee of the Board (ICB) held at ZCCM-IH Office Park, Stand No. 16806, Alick Nkhata Road, Mass Media Complex Area, Lusaka, in the ZCCM-IH Board Room on the 1st Floor on Wednesday, 12 July 2017 at 10:18 hours. PRESENT: Mr Philippe Taussac Non-Executive Director (Chairman) Mr Mateyo C Kaluba Non-Executive Director (from Minute 5) Dr Pius C Kasolo Chief Executive Officer – Director Mr Patrick D Chisanga Co-opted Member Mr Charles Mpundu Co-opted Member Mr Basil Nundwe Co-opted Member Mr Mabvuto Chipata Chief Financial Officer Mr Situmbeko Mubano Acting Chief Investments Officer APOLOGIES: Mr Paul Chanda Non-Executive Director SECRETARY: Mr Charles Mjumphi Corporate Services Manager IN ATTENDANCE: Mr. Chabby Chabala Chief Corporate Services Officer/Company Secretary Mrs Matildah P Lyama Business Development Manager Mr Wilphred K Katoto Chief Technical Officer Mr Lombe Mbalashi Property Manager 1. QUORUM The quorum for the meeting was confirmed and the Chairman called the meeting to order. 2. DIRECTORATE None. 3. ADOPTION OF AGENDA As respectively proposed and seconded by Mr P D Chisanga and Mr B Nundwe, the Agenda was adopted as presented. 4. DECLARATION OF INTERESTS None. 5. MINUTES AND MATTERS ARISING 5.1. MINUTES OF THE 32ND ICB MEETING HELD ON 3 & 4 MAY 2017 5.1.1. Minutes the 32nd ICB Meeting held on 3 May 2017: As respectively proposed and seconded by Dr P C Kasolo and Mr C Mpundu, the Minutes of the 32nd ICB Meeting held on 3 May 2017 were approved as a correct record of the proceedings and signed by the Chairman. 5.1.2. Minutes of the 32nd ICB Meeting held on 4 May 2017: As respectively proposed and seconded by Mr C Mpundu and Mr B Nundwe, the Minutes of the 32nd ICB Meeting held on 4 May 2017 (continuation) were approved as a correct record of the proceedings and signed by the Chairman. 5.2. MATTERS ARISING: 5.2.1 Legal proceedings against Kansanshi Mining Plc (Kansanshi) and First Quantum Minerals (FQM) The ICB was informed that: 5.2.1.1. A Negotiation Team comprising ZCCM-IH Management and the Government of the Republic of Zambia (GRZ) Senior Officials met with representatives of FQM at the end of May 2017. GRZ appointed Mr F K Yamba, the Secretary to the Treasury, as Chairman to mediate the negotiations. The first round of negotiations were held from 30 May to 1 June 2017. Following the first meeting, it was agreed that FQM comes up with a settlement proposal and provides financial information which would then be reviewed by ZCCM-IH. The proposal and information from FQM were thus being awaited. 5.2.1.2. The ICB enquired on the objective of the negotiations. It was reported that the involvement of GRZ was aimed at having the parties to the legal proceedings reach an amicable solution without losing much time. 5.2.1.3. The ICB enquired on what steps would be taken since FQM had not responded within the agreed timeframe i.e. two weeks after the negotiations. It was reported that GRZ through the Minister of Finance would write to FQM to compel them to respond within a given time period failure to which the Minister of Finance would take a hard line against FQM. 5.2.1.4. With regard to the legal proceedings, the following was reported: a) Lusaka Proceedings: The matter was heard on 29 and 30 June 2017 and adjourned to 7 August 2017. b) Arbitration Proceedings: Following the notice of Arbitration and the selection of Arbitrators, the Arbitration proceedings commenced on 29 June 2017. Hearing was scheduled for either December 2017 or January 2018. 5.2.2 Status of the proposal to Privatise Ndola Lime Company Limited (NLC) 5.2.2.1 With regard to the privatization of NLC, a Cabinet Memo was finalised and was awaiting incorporation of an independent assessment of market for lime in Zambia and the Democratic Republic of Congo including the existing capacity for lime production in Zambia. The information was intended to assist in ascertaining the viability of the Lime business of NLC. 5.2.2.2 Furthermore, it was proposed that the business plan should take into account the impact of the proposed Cement Plant as this would provide additional revenue for NLC through the sale of limestone to the Cement Plant. The ICB observed that NLC’s survival was dependent partly on the swift implementation of the restructuring program. 5.2.3 Kapiri Glass Manufacturing (KGM) 5.2.3.1 The ICB was informed that the engagement process for an independent consultant to undertake a review of the commercial and technical aspects of the business had commenced. 5.2.3.2 Furthermore, it was envisaged that once an independent assessment was finalised, ZCCM-IH would own at least 75% of the shares (the current owners of the KGM were agreeable to the proposal) and take up the management of the business. The ICB observed that there was need to first, carryout an independent review of the business i.e. both commercial and technical review, before making a decision on whether or not ZCCM-IH should invest in KGM. This was because the business was highly indebted and as such ZCCM-IH’s taking up a controlling stake would also result in the transfer of an equivalent debt burden which was undesirable. Once a thorough review was finalised, a detailed business proposal should be presented to the ICB for review and guidance. 5.2.3.3 Furthermore, the ICB observed that there was need for ZCCM-IH to maintain focus on the basis of a detailed Strategic Plan and that all proposed projects should undergo the necessary due diligence process. In addition, all the proposed projects should be in line with the ZCCM-IH Investments Policy. In this regard, the completion of the Strategic Plan should be prioritised. 5.2.3.4 The ICB observed that as Investment was the core business of the Company, there was need for ZCCM-IH Management to provide adequate and timely information to the ICB on each of the proposed projects. This would help ICB members to provide guidance to Management and make appropriate recommendations to the Board of ZCCM-IH from an informed standpoint. In this regard, Management was directed to provide information to the ICB on a regular basis on matters which could affect the future of the proposed projects. In an event that there was material information which could significantly affect the attainment of the objectives of the proposed project, an ICB meeting should be convened immediately. 5.2.4 Wangwa Farms Limited (Wangwa) 5.2.4.1 The ICB was informed that the engagement process for an independent consultant to undertake a review of the commercial and technical aspects of the business had commenced. 5.2.4.2 The ICB observed that ZCCM-IH was taking long to conclude on investment decisions. It was reported that the major hindrance to the timely completion of the investments decisions was the procurement process which was in many instances subjected to lengthy procurement guidelines as provided for in the Public Procurement Act of Zambia. The ICB observed that while the procurement process had its own challenges, there was need for Management to find innovative ways of reducing the timeframes for decision making. In particular, Management could consider working through a third party such as a Special Purpose Vehicle (SPV) which could be responsible for contracting services on behalf of ZCCM-IH at an agreed retainer fee. Additionally, ZCCM-IH could consider short term employment for specific projects. 5.2.4.3 The ICB was informed that the IDC in collaboration with the Zambia Public Procurement Agency (ZPPA) was exploring ways to help improve on the turnaround time for procurement of various services particularly for State Owned Enterprises such as ZCCM-IH which were negatively affected by the lengthy procurement processes. 5.2.5 Proposed Cement Project The ICB was informed that ZCCM-IH was expected to conclude the financial closure by end of August 2017. In view of this, ZCCM-IH was in discussion with other institutions such as the National Pensions Scheme Authority (NAPSA) to core-own the 49% stake in the SPV. Once these matters were finalised, a detailed Project Proposal would be submitted to the ICB for review. 5.2.6 Progress on the court case against Konkola Copper Mines Plc (KCM) The ICB was informed that ZCCM-IH had filed a claim for interest payment amounting to about $38 million. Furthermore, it was reported that ZCCM-IH was likely to have the courts rule in its favour as KCM had not yet submitted a counterclaim. KCM proposed that there be negotiations with ZCCM-IH regarding the matter, however, ZCCM-IH’s position was that no negotiations should be held until the final court judgment at which point a payment plan would be agreed between the parties. 6. ZCCM-IH CASHFLOW FORECAST FOR 2016/17 TO 2018 6.1 The cashflow forecast for 2016/17 to 2018 were presented to the ICB. The following were the highlights: 6.1.1 Cash flows and Liquidity: The Company’s net cash flows were positive during the quarter ending 31 March 2017, at K426 million. 6.1.2 Inflows for the quarter consisted of the following; Price participation income of K438 million and dividend receipt of K34.6 million. 6.1.3 Outflows during the quarter were mainly; Ndola Lime Company Limited (NLC) , Standard Bank of South Africa (SBSA) Loan repayment – K18 million, staff expenses – K18.2 million, administration expenses – K6.4 million, legal fees – K2.4 million and CAPEX – K3 million. 6.1.4 The Company closed the year 31 March 2017 with cash and fixed deposit balances at K593 million. Major outflows in the year to 31 March 2017 were the NLC loan and restructuring costs of K106 million, operational expenses of K98 million and non-operational expenses of K22 million. 6.1.5 Forecast Cash flow: Going forward for the year ending 31 March 2018, the projected inflows were based on the assumption that Copperbelt Energy Corporation Plc and Kansanshi Mining Plc would pay out dividends of US$3.4 million and US$4 million respectively. 6.1.6 Projected deferred consideration from Konkola Copper Mines Plc (KCM) was K315 million or US$31.5 million (i.e. US$2.6 million per month for 12 months). 6.1.7 Loan financing of K630 million (US$63 million) for the Cement Project ($28 million), Wangwa Farm ($20 million) and Kapiri Glass Limited ($15 million) projects. 6.1.8 No loan repayments from Lubambe Copper Mine Limited, Kariba Minerals Limited and NCL were assumed due to uncertainties surrounding these operations. 6.1.9 NLC loan repayments to SBSA of K68 million (US$6.8 million) per annum was provided for. 6.2 Following presentation of the Cashflows, the following discussions ensued: 6.2.1. The ICB was informed that Kansanshi Mining Plc (Kansanshi) had communicated that the company would be unable to pay any dividends for a period of five years (beginning in 2017) due to its plans to recapitalize the mine to support expansion of mining activities. The ICB enquired on whether ZCCM-IH would legally compel Kansanshi to consider paying dividends. The ICB was informed that ZCCM-IH’s position was weakened due to the fact that decisions were made by the majority shareholders who also held management positions. 6.2.2. The ICB enquired on whether the payment of dividends and other salient matters were subject of the Shareholder Agreements (SHAs). It was reported that most of the SHAs had general terms on dividend payment and did not specify the quantum of dividend declarations to be made. The ICB observed that there was need to renegotiate the terms of the SHAs particularly those which were not in the best interest of ZCCM-IH’s rights as a shareholder. 6.2.3. The ICB directed that all future cashflows should be presented month by month so as to help in making a comparison of the factors driving cashflows on a monthly basis. 7. PROPOSED INVESTRUST BANK PLC (INVESTRUST) MANDATORY OFFER BUDGET: 7.1 The ICB was informed that: 7.1.1 In February 2016, ZCCM-IH undertook to underwrite 100% of the Investrust Rights Offer to shareholders. Subsequent to the Rights Offer, ZCCM-IH’s shareholding in Investrust increased from 10.6% to 48.6%. As a result, ZCCM-IH was required to make a Mandatory Offer to all other shareholders in Investrust in accordance with Clause 56 of the Third Schedule of the Securities Rules, Statutory Instrument No. 170 of 1993. However, as provided for under Clause 56 of the Takeover Rules, ZCCM-IH opted to apply to the Securities and Exchange Commission (SEC) for a waiver of the Mandatory Offer requirement, which was granted by the SEC on 21 October 2016, effectively giving ZCCM-IH until 21 October 2017 to sell-down its shareholding in Investrust to below 35%. ZCCM-IH had only managed to sell-down to a 45.4% shareholding in Investrust. 7.1.2 On 5 May 2017, the Board of ZCCM-IH resolved that ZCCM-IH Management proceeds to immediately undertake a Mandatory Offer ahead of the sunset of the waiver period granted by the SEC. ZCCM-IH would, therefore, offer to purchase 4,458,730 shares (representing 54.6% shareholding in Investrust, not held by ZCCM-IH) from the minority shareholders of Investrust at a price of ZMW 11.44 per share, that was, the price at which ZCCM-IH acquired its 48.6% shareholding in Investrust. 7.1.3 ZCCM-IH was required to undertake the following prior to the opening of the Mandatory Offer period and trade execution on the Lusaka Stock Exchange (LuSE): 7.1.3.1 ZCCM-IH to formally communicate to the Investrust Board its intention to undertake the Mandatory Offer. 7.1.3.2 ZCCM-IH to formally notify the SEC of its intention to proceed with the Mandatory Offer. 7.1.3.3 Publication of Cautionary Announcements and updates during the Mandatory Offer period, to the extent required by relevant laws and regulations. A Cautionary Announcement with regards to the Mandatory Offer was published by ZCCM-IH. 7.1.3.4 Announcement of the Requirement to undertake and Terms of the Mandatory Offer. 7.1.3.5 Circulation of a Mandatory Offer document detailing the background and terms of the Mandatory Offer and the actions to be taken by the minority shareholders. 7.1.4 The total costs of undertaking the mandatory offer were outlined as below: Table: 1 Item No. Description ZCCM-IH (ZMW) INVESTRUST (ZMW) Total (ZMW) 1 Value of shares to be acquired (ZMW 13.50 x 4,458,730) 60,192,855.00 - 60,192,855.00 2 Transaction Sponsor/Adviser and other advisory fees: Lead advisory fees 765,000.00 200,000.00 965,000.00 Legal advisory fees 188,000.00 112,800.00 300,800.00 Independent Financial Expert - 155,100.00 155,100.00 Transfer Secretary - 35,000.00 35,000.00 Marketing Agents - 100,000.00 100,000.00 3 Printing fees 14,616.00 - 14,616.00 4 LuSE and SEC Document Scrutiny Fee 30,791.65 30,791.65 61,583.30 5 Brokerage fees on trade 601,928.55 - 601,928.55 6 SEC fees on trade 75,241.07 - 75,241.07 7 LuSE fees on trade 150,482.14 - 150,482.14 8 Contingency (10% of the aggregation above costs 1 to 6) 6,220,480.61 - 6,220,480.61 TOTAL BUDGET 68,220,805.85 633,691.65 68,854,497.50 7.1.5 The 2017/18 Approved Budget did not take into account the cost of a mandatory offer as it was expected that other shareholders would exercise their rights with the result that ZCCM-His shareholding would be below 35% in compliance with the Listing Rules. 7.2 Following presentation of the proposed budget : 7.2.1 The ICB enquired on why ZCCM-IH should meet costs related to Investrust. It was reported that Investrust was not able to meet its own costs due to financial constraints. 7.2.2 On the proposed offer price, the ICB was informed that it was a requirement by law that the offer price should be a minimum of the prevailing market price. Furthermore, while it was a requirement to undertake an independent valuation of the appropriate value of the shares, the offer price would still be the prevailing market price as a minimum regardless of whether or not the valuation showed otherwise. 7.2.3 The ICB was informed that ZCCM-IH was required by law to undertake the Mandatory offer process even if indications were that all or a significant number of shareholders were willing to sale their shares. 7.2.4 Regarding the expected number of shareholders that would be willing to sell their shares, the ICB was informed that ZCCM-IH expected about 70% of shareholders to sell their shares. 7.2.5 Regarding the future of the bank post the mandatory offer, the ICB was informed that ZCCM-IH was in discussion with potential equity partners i.e. Cavmont Bank Limited and UBA Bank Limited. 7.2.6 The ICB observed that the timeframe for the completion of the entire process was long and directed Management to find ways to shorten some of the processes to save on time. 7.2.7 The ICB was informed that the LuSE was of a view that as far as was possible, ZCCM-IH should try to avoid delisting Investrust. The ICB observed that while LuSE’s concerns were reasonable, whether or not the mandatory offer would result in the delisting of Investrust would be dependent on what was best for the bank. 7.2.8 Regarding the budget, the ICB observed that the proposed figure of K 6,220,480.61 for contingencies was high and that due to the nature of the transaction, there was no need to provide for any contingence. Furthermore, ZCCM-IH should be at liberty to negotiate downwards for the proposed services as some of them were very high. 7.3 Following review, the ICB Resolved that: 7.3.1 The budget of K 62,617,606.06 (excluding contingencies and K 35,000 relating to transfer secretary costs as this would be borne by Investrust) be and is hereby adopted for presentation to the Board for approval. The details of the budget were as shown in Table 2 below: Table: 2 Item No. Description Total (ZMW) 1 Value of shares to be acquired (ZMW 13.50 x 4,458,730) 60,192,855.00 2 Transaction Sponsor/Adviser and other advisory fees: Lead advisory fees 965,000.00 Legal advisory fees 300,800.00 Independent Financial Expert 155,100.00 Marketing Agents 100,000.00 3 Printing fees 14,616.00 4 LuSE and SEC Document Scrutiny Fee 61,583.30 5 Brokerage fees on trade 601,928.55 6 SEC fees on trade 75,241.07 7 LuSE fees on trade 150,482.14 TOTAL BUDGET 62,617,606.06 7.3.2 The fees relating directly to Invetrust should be met by ZCCM-IH, however, Investrust should pay back to ZCCM-IH on terms to be agreed between the parties. 8. PROPOSED SHAREHOLDER LOAN TO MISENGE ENVIRONMENTAL AND TECHNICAL SERVICES (MISENGE): 8.1. The ICB was informed that: 8.1.1. Misenge (a 100% subsidiary of ZCCM-IH) had requested ZCCM-IH for a Shareholder Loan amounting to ZMW2.35 million for the purchase of four motor vehicles i.e. three to be used for operations while one would be allocated to the Chief Executive Officer of Misenge as a personal to holder vehicle. 8.1.2. When Misenge commenced operations in 2013, two motor vehicles were transferred from ZCCM-IH to Misenge. 8.1.3. The Government also provided Misenge with 6 vehicles which were purchased in 2008. The vehicles were to be used for the Copperbelt Environment Project (CEP). 8.1.4. On 9th November 2016, officials from Ministry of Finance requested Misenge to stop using the motor vehicles purchased under the CEP since the project had come to an end. 8.1.5. Following the withdrawal of these vehicles, Misenge’s operations were negatively affected particularly the monitoring of the various environmental liabilities on behalf of ZCCM-IH. 8.1.6. It was proposed that Misenge would repay the loan at 17.5% interest to ZCCM-IH over a period of 6 years i.e. with the first 3 years as moratorium. 8.1.7. The ZCCM-IH 2017/2018 Approved Budget had a provision of ZMW2.35 million as proposed loan to Misenge. 8.1.8. The following was the Projected Income Statement for Misenge: Table 3: Projected Income Statement 8.2. Following presentation: 8.2.1. The ICB observed that Misenge’s performance was consistently poor and it was doubtful whether the company would be able to repay the proposed loan to ZCCM-IH. 8.2.2. The ICB enquired on whether Misenge had considered acquiring the vehicles through a bank lease since the company was confident that it would become profitable from 2018 onwards. The ICB was informed that lease financing was more expensive and that given the company’s poor performance, any lease financing would require ZCCM-IH to provide a guarantee. In an event that Misenge was unable to pay the bank loan, ZCCM-IH would have to pay on behalf of Misenge as a guarantor. 8.2.3. The ICB was informed that when Misenge was formed, it was expected that it would offer specialized laboratory services to the mining companies. However, due to unforeseen circumstances, the completion of the laboratory and the provision of laboratory equipment delayed thereby negatively affecting Misenge’s operations. 8.2.4. It was reported that with the completion of the laboratory and the coming on board of the World Bank Project in which the firm would provide consultancy, Misenge’s outlook was brighter. 8.2.5. The ICB observed that from the projected income statement, Misenge would still heavily rely on ZCCM-IH for its survival. Furthermore, it was observed that while Misenge was expected to increase its revenue streams from 2018, the cost of sales were expected to increase significantly thereby reducing expected profits. The expected profits were thus far much lower and would not be adequate to meet loan obligations. The ICB directed ZCCM-IH Management to critically review figures that were presented by subsidiary companies as some figures had discrepancies which could not be justified. 8.2.6. The ICB observed that the proposed loan to Misenge was clearly sending a wrong message in that Misenge would continue to exhibit a dependency syndrome which was unstainable. There was need for the Misenge Management to take full responsibility for the future of the company and ensure that the company was self-reliant. 8.2.7. The ICB observed that the proposed loan repayment period of 6 years for vehicles which had an asset life of between 3-4 years was disproportional. In this case there was need to match the repayment period to the life of the assets (vehicles). 8.3. Following review, the ICB Resolved that: 8.3.1. ZMW1.7 million loan for purchase of motor vehicles to Misenge be and is hereby adopted for presentation to the Board for approval. Further that once the vehicles were purchased, these should be registered in ZCCM-IH’s name until they were fully paid for. The interest rate for the loan be set at 17.5% with a term of 4 years. 8.3.2. Misenge should start paying back the loan to ZCCM-IH as soon as the vehicles were procured. 9. PROPOSED AMENDMENT OF ARTICLES OF ASSOCIATION OF MISENGE ENVIRONMENTAL AND TECHNICAL SERVICES (MISENGE): 9.1. The ICB was informed that: 9.1.1. When Misenge was incorporated, it adopted the Standard Articles of Association provided under the Companies Act Chapter 388 of the Laws of Zambia. 9.1.2. Initially, Misenge had a Share Capital of K5, 000.00 divided into 5,000 shares of K1.00 each. Statutory Instrument No. 52 of 2014 was later passed where private companies were required to raise their share capital to a minimum amount of K10, 000.00. 9.1.3. The share capital of Misenge was thus raised to K10, 000.00 divided into 10,000 shares of K1.00 each. 9.1.4. In 2017, another regulation was passed under Statutory Instrument (SI) No. 11 of 2017 requiring that private companies increase their Share Capital to a minimum amount of 50,000 fee units (which was the equivalent of K15, 000.00). The Articles of Association of Misenge therefore needed to be amended to comply with Statutory Instrument No 11 of 2017. 9.1.5. Additionally, Misenge needed to amend the section relating to the appointment of Directors to bring this in line with the Articles of Association of ZCCM-IH. 9.1.6. Furthermore, the need to amend the articles was motivated by the limit placed on borrowing powers of the Directors of Misenge. Misenge’s borrowing was limited to its share capital and as such the proposed loan request to ZCCM-IH of ZMW2.35 million would be beyond the powers of the Directors of Misenge to borrow. 9.1.7. In view of the above, it was proposed that the Articles of Association of Misenge be revised as follows: Article Current form Proposed change Article 58 “In addition to the circumstances in which the office of a director becomes vacant by virtue of the Act, the office of a director shall become vacant if the director makes any arrangement or compositions with his creditors generally”. Article 58(1) In addition to the circumstances in which the office of the director becomes vacant, by virtue of the Act, the office of a director shall become vacant if the director makes any arrangement or composition with his creditors generally. Article 58(1) Subsections (4) (5) and (6) of Section 206 of the Act (rotation of directors) shall not apply to the Company At any time and from time to time the Company may (without prejudice to the powers of the directors under subsection 10 of Section 206 of the Act) by ordinary resolution appoint any person a director. 59(2) “The amount of any borrowings outstanding at any time shall not exceed the amount of issued share capital of the Company at the time.” “The amount of any borrowings outstanding at any time shall not exceed the amount of issued share capital of the Company at the time unless approval by the majority shareholder has been obtained.” 9.2. Following review, the ICB Resolved that: The proposal to amend the Articles of Association of Misenge, be and is hereby adopted for presentation to the Board for approval subject to the following amendment to Article 59: ‘“The amount of any borrowings outstanding at any time shall not exceed the amount of issued share capital of the Company at the time unless approval by the majority of the shareholders has been obtained.”’ 10. PROPOSED LEASE OF LAND TO COPPER TREES MINERALS LIMITED (CTML) AND UPDATE ON FUTURE INVESTMENT IN DEVELOPMENT OF LAND POST RECLAMATION OF TAILINGS: 10.1. The ICB was informed that 10.1.1. Copper Trees Minerals Limited (CTML) was a Joint Venture Company (JVC) set up by and between ZCCM-IH and Horizon Mining Limited following a Consent Order signed by the parties on 14th November 2013 to process Tailings Dams (TDs) No. 25, 26 and 27 in Kitwe. 10.1.2. On 2nd December 2013, an application for the Subscription of Shares in Copper Trees was made by ZCCM-IH. The application was for the allotment of 900 Ordinary shares of K 1 per share in consideration of the Mining Rights being transferred by ZCCM-IH to Copper Trees Minerals Limited. 10.1.3. The ZCCM IH Board approved the partnering of ZCCM-IH and Horizon Mining through a JVC which would translate in a 15% Free Carry stake for ZCCM-IH and 85% stake for Horizon who would effectively secure the funding and also oversee the operations. 10.1.4. The Consent Order also required ZCCM-IH to transfer the surface rights to the Tailings Sites as part of their equity contribution. This was yet to be concluded as there were some encroachments on the land which had since been resolved. 10.1.5. A parcel of land belonging to ZCCM-IH measuring approximately 309.79 Hectares was identified in between Kitwe and Kalulushi where the waste from the tailings process could be dumped. The area was behind the Mopani Copper Mines Plc mining license area and in between other tailings facilities belonging to other entities. CTML has requested to purchase the said land. A valuation of the land was in progress to determine an appropriate purchase price. 10.1.6. It was thus proposed that the land be sold to CTML at the highest value base on an independent valuation. The recommendation was on the basis that ZCCM-IH should extract value immediately and avoid any direct liability that may arise from the environmental degradation (environmental liabilities) arising from the dumping of tailings on the site. 10.2. Following presentation: The ICB observed that there was need for ZCCM-IH to consider the option of converting the value of land into shares in the JVC. While an outright sale of land might result in ZCCM-IH receiving cash immediately, the valuation of land was based on agricultural usage which may not reflect the true value of land to the JVC. In this regard, a more prudent approach would be to negotiate for an increase in the shareholding of the JVC. 10.3. Following review, the ICB Resolved that the following be adopted and presented to the Board for approval: That: ZCCM-IH negotiates to convert the value of land into an increase in the shareholding in CTML (i.e. the JVC). 11. QUARTERLY BANK ANALYSIS FOR THE QUARTER ENDED 31 MARCH 2017 11.1 The ICB was informed that on the basis of the bank analysis, the following funds placements were made: Name of Bank Average Interest Rate (%) LIQUIDITY RATING QUARTER-END DEPOSITS $ CONVERTED INTO ZMW TOTAL As a % of Total TOTALS TOTALS PER PER @ DEPOSITS CATEGORY CATEGORY USD ZMW USD$'000 ZMW'000 9.54 ZMW'000 ZMW'000 % 1 Bank of China - - 14% A 0 0 0 0 0.00% 392,632 79.4% 2 Barclays - - 33% 0 0 0 0 0.00% 3 BancABC* 3.67% 25.15% 28% 10,400 19,000 99,216 118,216 23.89% 4 Finance Bank* 2.50% - 0% 8,400 0 80,136 80,136 16.20% 5 FNB - 20.42% 27% 0 60,000 0 60,000 12.13% 6 Indo Bank - - 43% 0 0 0 0 0.00% 7 Stanbic - 13.50% 31% 0 18,500 0 18,500 3.74% 8 Standard Chartered - 13.00% 20% 0 5,000 0 5,000 1.01% 9 Zanaco 2.83% 18.20% 38% 7,000 44,000 66,780 110,780 22.39% 10 Citibank - - 27% B 0 0 0 0 0.00% 0 0.0% 11 Cavmont Bank - 24.50% 25% C 0 4,000 0 4,000 0.81% 102,136 20.6% 12 Ecobank 4.10% - 41% 4,000 0 38,160 38,160 7.71% 13 First Alliance 4.17% - 34% 3,400 0 32,436 32,436 6.56% 14 First Capital / ICB - - 22% 0 0 0 0 0.00% 15 Investrust 3.75% 24.50% 32% 1,000 3,000 9,540 12,540 2.53% 16 UBA - 19.50% 33% 0 15,000 0 15,000 3.03% 18 Access Bank - - 19% D 0 0 0 0 0.00% 19 AB Bank - - 24% 0 0 0 0 0.00% 0 0.0% TOTALS 34,200 168,500 326,268 494,768 100.0% 494,768 100.0% 11.2 The ICB was informed that the guarantee amounting to $ 8.75 million relating to Maamba Collieries Limed (MCL) was earning 0.6% interest. It was reported that ZCCM-IH risked losing the $ 8.75 million guarantee due to nonpayment by ZESCO for power purchased from MCL. In this regard, the ICB directed Management to be providing a risk profile indicating the potential for default i.e. including all securities and collaterals of ZCCM-IH in future reports. 11.3 The ICB noted the Quarterly Bank Analysis for the Quarter ended 31 March 2017 for presentation to the Board for noting. 12. UPDATE REPORT ON SOME PROJECTS UNDER REVIEW: 12.1. Eucalyptus Farming Ltd: The project promoters had challenges securing land required for the project. As a result, soil analysis and environmental due diligence could not be conducted as planned. Once the soil analysis and environmental due diligence were completed, technical due diligence and a market research would be undertaken. 12.2. Instinct Energy ZCCM-IH had engaged the Ministry of Mines and Minerals Development (MoMMD) for purposes of securing a licence for the proposed project. The MoMMD indicated that it would setup a team to review the submission. 12.3. Real Estate: a. Proposed construction of residential flats in Kabulonga: There was a plan to construct flats on the land owned by ZCCM-IH in Kabulonga, Lusaka (for renting out). ZCCM-IH was yet to engage an Architect to develop building plans and the bill of quantities. b. Proposed purchase of the Mukuba Pension House (Mukuba) (i). Following a financial analysis of Mukuba, the Net Present Value (NPV) was negative (K54m) at 24.94% required return, with an Internal Rate of Return of 9.9%. Further, the new mall in front of Mukuba made the premises unattractive. In addition, the occupancy after ZCCM-IH and CopperNet vacated the premises was very low and thus not attractive. (ii). The ICB observed that following the sale of the significant piece of land at Mukuba, the property had become less attractive. 13. ANY OTHER BUSINESS 13.1. Mr P D Chisanga informed the ICB that he would separate from the Zambia Development Agency (ZDA) effective 4 August 2017, consequently he would cease to be a member of the ICB as his appointment was as a result of the office he held at the ZDA. 13.2. The ICB noted Mr P D Chisanga’s submission and that it would present the matter to the Board. There being no other business to discuss, the Chairman closed the Meeting at 13:53 hours. Chairman: _________________________________ Date: _________________ Mr Philippe Taussac Secretary: __________________________________ Date: _________________ Mr Charles Mjumphi