TIDMWTI
RNS Number : 2808X
Weatherly International PLC
12 August 2009
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Weatherly International Plc ("Weatherly" or the "Company")
Corporate and Trading Update
Weatherly is pleased to provide the following update with respect to its recent
activities. Weatherly operates two subsidiaries in Namibia, Namibian Custom
Smelters ('NCS') and Weatherly Mining Namibia.
Namibian Custom Smelters
Weatherly's focus during the first six months of 2009 was on achieving the
forecast smelter performance. During the 3 months to 30 June 2009 the smelter
treated 29,994 tonnes of concentrate compared with 29,546 tonnes in the previous
quarter. The majority of concentrates were sourced from the Chelopech mine in
Bulgaria which is operated by Dundee Precious Metals Ltd ('DPM') and the EL
Brocal mine in Peru, which supplies concentrate to NCS under a contract with
Louis Dreyfus Commodities.
NCS has been successfully transformed from a tied, downstream processing plant
to a standalone tolling business. During 2008 Weatherly was a buyer and seller
of copper products from its mines and was severely impacted by metal price
declines. From January 2009, the smelting company became a custom smelter, paid
on a dollar per tonne of concentrate basis, and as such, has no ownership of any
products nor exposure to metal prices.
Adverse exchange rate variations between the US and Namibian dollars resulted in
profit margins being reduced from 23% in the first quarter of 2009 to 4% in the
second quarter. However, the Chelopech contract, which accounts for 60% of our
throughput, allows all costs to be passed through including the impact of
exchange rate movements. As the Chelopech contract provides for the impact of
exchange rate movements to be calculated on a 3 month rolling average basis, the
benefits of this to NCS will begin to flow through in the third quarter of
2009.
As announced on 31 July 2009, The Company has completed a placement of
40,468,000 ordinary shares (approximately 9% of the enlarged issued share
capital) to DPM to raise proceeds of US$2 million. Under the terms of a
subscription agreement, the placement proceeds are to be applied to NCS and will
be used to complete the construction of a new residue disposal site which is
required to meet the exacting environmental standards set by the Company. NCS
is a major producer of arsenic trioxide, a substance which is sold in increasing
quantities to the agri-chemical industry, and negotiations are underway to
increase the volumes supplied under the current contract with Amcrop, the
Malaysian company.
The placement will also provide additional working capital to NCS when the
Ausmelt furnace ceases production for approximately two weeks in order to reline
the furnace and connect the oxygen plant presently under construction. The
oxygen plant is now expected to be commissioned in January 2010, with the exact
timing to be set such that the furnace re-bricking and the oxygen plant
connection occur simultaneously.
Pursuant to the subscription agreement, DPM has also agreed to subscribe for
further ordinary shares at the option of the Company for maximum proceeds of
US$5 million. If the Company elects to take up this option, the ordinary shares
would be subscribed for at the higher of prevailing market price or 3p per
ordinary share. As a condition of the subscription agreement, Chelopech EAD, a
subsidiary of DPM, and NCS have entered into a new agreement to extend the
existing concentrate supply agreement through to 2020 on terms which the Company
considers more favourable than those of the existing supply agreement.
The other major concentrate supply contract with Louis Dreyfus is scheduled to
expire in mid 2014. We are currently in discussion with Louis Dreyfus to extend
the contract as part of discussions over the terms and conditions for
concentrate shipments in 2010 and the finalisation of outstanding positions from
2008. These discussions are expected to be concluded by the end of September
2009.
Weatherly Mining Namibia
Weatherly currently has five copper mines and a zinc lead project on care and
maintenance. The company's stated strategy is to divest the smaller, higher cost
assets and focus on those that will make a significant impact in the future. The
development of an open pit project at Tschudi, which is located 26km by road
from the Tsumeb concentrator and smelter, in particular has significant
potential and is likely to be our future focus.
An open pit operation at Tschudi would be based on a shallow dipping tabular
orebody. As at 30 June 2008, including underground resources, Tschudi
represented an in situ resource of 356,385t Cu. However, it would not be our
intention to recommence underground mining activities at Tschudi until the open
pit mine under consideration had been exhausted. Weatherly completed a major
drilling program in 2008 of approximately 28,066 metres and this data is now
being incorporated into a new JORC compliant resource by our consultants, Coffey
& Partners which is expected to be completed in September 2009. This will be
followed by detailed mine planning and optimisation of the metallurgical
process. Final feasibility work is expected to be completed by mid 2010 with
development possible thereafter, subject to financing, and a positive outcome to
these studies.
The Company has completed an internal evaluation of the viability of re-opening
the Otjihase and Matchless mines, given the recent increase in copper prices. We
have also received expressions of interest from a number of parties potentially
interested in acquiring our mining assets. Weatherly is currently reviewing the
various alternatives open to it and will take a decision to divest or to place
these mines back into production in due course. Any funds raised from the
potential sale of these assets would in the first instance be required to be
paid to the Company's Noteholders, who are owed a total of US$12 million plus
interest, payable over the next three years.
Corporate
Following the receipt of proceeds from the sale of Weatherly's entire holding of
shares in Emerging Metals Ltd and other asset sales as previously announced, as
at 30 July 2009 the Company had cash reserves of approximately US$2million. This
excludes the funds now held by NCS for the development of the Tsumeb smelter.
For further information contact:
+---------------------------------------------+--------------------------+
| Rod Webster, Chief Executive Officer, | +44 (0) 20 7868 2232 |
| Weatherly International Plc | |
| | |
+---------------------------------------------+--------------------------+
| Richard Greenfield, Ambrian Partners | +44 (0) 20 7634 4700 |
| Limited | |
+---------------------------------------------+--------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
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