Annual report and accounts
FY 2015

I am pleased to announce that with our focus on operational efficiencies and cost of production, we have delivered a significant increase in EBITDA and operating profit.

P. Ramnath, CEO, Copper India

It has been a difficult year for Copper Zambia due to higher unit costs of production, lower volumes and lower metal prices. We are working hard to improve operational costs and realise cost efficiency. We are also planning for the future and will start to examine new mining options for the year ahead.

Steven Din, CEO, Copper Zambia

Key metrics

Copper India and Australia

Copper Zambia

Results:

During the year we achieved:
  • Copper cathode production at Tuticorin record 362,000 tonnes.
  • Cost of production at Tuticorin reduced due to higher volumes, lower input costs and higher by-product credits.
  • Mined metal in Zambia reduced due to maintainence shutdowns.

KCM Konkola Mine, Zambia.

Copper India and Australia

FY2015 copper cathode production at Tuticorin was a record 362,000 tonnes, despite the 23-day planned maintenance shutdown in Q1. The 160MW power plant at Tuticorin continued to operate at a Plant Load Factor of 86%.

Our copper mine in Australia remains under care and maintenance and we continue to evaluate various options for its restart.

Over FY2015, average LME copper price fell by 8% while treatment and refining charges (TCs/RCs) increased by 29%.

FY2015 FY2014 % Change
Production (kt)
  India – cathode 362 294 23.1%
  Australia – mined metal content 0 18
FY2015 FY2014 % Change
Average LME cash settlement prices
  (US$ per tonne) 6,558 7,103 (7.7)%
Realised TCs/RCs (US cents per lb) 21.4 16.6 29.2%

Unit costs

At the Tuticorin smelter, the cost of production decreased from 9.7 US cents per lb to 4.2 US cents per lb, mainly due to higher volumes, lower input costs (fuel and power) and higher by-product credits.

Recently, we have seen some pressure on copper prices but treatment and refining charges are expected to remain relatively strong. Global treatment and refining charges for 2015 have so far settled at higher levels compared to 2014, and we expect to realise over 24 US cents per lb for FY2016.

FY2015 FY2014 % Change
Unit conversion costs (CoP) – (US cents per lb) 4.2 9.7 (56.8)%

Financial performance

EBITDA for FY2015 was US$281.0 million, significantly higher compared with US$197.9 million in the previous year. This increase was mainly driven by higher volumes, with improved operational efficiencies, higher treatment and refining charges, and lower cost of production. Operating profit was US$229.4 million in FY2015, an improvement from US$155.7 million in the previous year.

(in US$ million, except as stated)

FY2015 FY2014 % Change
Revenue 3,700.7 3,404.8 (8.7)%
EBITDA 281.0 197.9 42.0%
EBITDA margin (%) 7.6% 5.8%
Depreciation and amortisation 51.6 42.1 22.6%
Operating profit before special items 229.4 155.7 47.2%
Share in Group operating profit (%) 13.2% 6.8%
Capital expenditure 29.6 56.2 (47.3)%
Sustaining 29.6 37.3 (20.6)%
Growth 18.9

Production is expected to be stable around 400kt with no planned maintenance activities scheduled in FY2016.

  • Sustaining operating efficiencies and reducing our cost profile.
  • 400ktpa project to expand capacity along with the flexibility to handle multiple grades of concentrate.

Copper Zambia

FY2015 mined metal production was 10% lower at 116kt. Production at the Konkola underground mine was negatively affected as remediation and critical maintenance was being carried out at the shafts. Shaft #1 resumed partial hoisting in March 2015 and work at Shaft #4 is expected to be completed by Q3 FY2016. At Nchanga, FY2015 mined production was affected by lower grades and a transformer failure at the Tailings Leach Plant (TLP). During the year, TLP primary copper production was at 52,000 tonnes (56,000 tonnes in FY2014).

Production from the Upper Ore Body at the Nchanga underground was suspended in November 2014 pending a review of an appropriate mining method to exploit this ore body.

Copper custom production was marginally lower by 1%, constrained by blending challenges from concentrates available in the market.

On 23 February 2015, the Government amended the documentation requirements to reclaim VAT on future exports. This will enable us to resume purchase and treatment of third-party concentrate and thereby increase the smelter utilisation.

FY2015 FY2014 %
Change
Production (kt)
Mined metal 116 128 (9.5)%
Finished copper 169 177 (4.6)%
  Integrated 117 124 (5.9)%
  Custom 52 53 (1.3)%

The unit cost of production without royalty, logistics, depreciation, interest and sustaining capex increased to 257.7 US cents per lb in FY2015, 8.1% higher than the previous year. This was mainly due to the lower volumes and higher maintenance costs.

FY2015 FY2014 % Change
C1 cash costs (US cents per lb)1 257.7 238.4 8.1%
Total cash costs (US cents per lb)2 329.1 334.0 (1.5)%
  • 1 C1 cash cost, excludes royalty, logistics, depreciation, interest, sustaining capex.
  • 2 Total cash cost includes sustaining capex.

EBITDA in FY2015 was US$(4) million compared with US$156 million in the previous year, impacted by the lower volumes explained above, higher unit costs and lower metal prices. These factors also contributed to an operating loss before special items of US$191 million for FY2015.

(in US$ million, except as stated)

FY2015 FY2014 % Change
Revenue 1,077.1 1,271.4 (15.3)%
EBITDA (3.8) 156.3 (102.4)%
EBITDA margin (%) (0.4)% 12.3%
Depreciation and amortisation 187.2 171.5 9.2%
Operating (loss)/profit before special items (191.0) (15.3)
Share in Group operating profit (%) (11.0)% (0.7)
Capital expenditure 57.9 150.9 (61.6)%
Sustaining 57.9 114.2 (49.3)%
Growth 36.7 (100.0)%

Konkola mine

KCM is focusing on running the Konkola mining operations efficiently through its Pivot strategy, which focuses on three key production areas, thereby resulting in improved equipment availability and productivity. There is also a programme under way to increase the number of underground workshops and the training of frontline employees.

Smelter and refinery

While the Konkola mine ramps up production levels, we have the opportunity to increase the utilisation rate of the smelter by treating third party concentrates, from both within Zambia and from other countries. This has been positively assisted by the decision of the Government of Zambia to amend Rule 18, which has eased the documentation requirements for VAT refunds.

Nchanga operations

At Nchanga, we are focused on sustaining and improving the operations at the Tailings Leach Plant by treating copper refractory ore stockpiles and old tailings. Open pit and underground operations at Nchanga are approaching the end of their economic life, and therefore experiencing low grades and high unit costs.

Production is expected to ramp-up after first quarter. FY2016 total production is expected to be 190-210kt with integrated production of 120-130kt at C1 cost of 225 US cents per lb.

  • Focus on profitable production at Konkola, with the ‘Pivot strategy’ and maintenance work around the shaft infrastructure and mobile fleet to increase capacity.
  • Ensure that Tailings Leach Plant operations continue reliably, and roll-out an effective preventative maintenance programme.
  • Increase smelter utilisation by filling spare capacity with purchased concentrates.
  • Realise cost efficiency, driven by volume growth and other measures.
  • Improve productivity.