Weatherly International Plc
Quarterly Operations and Production Update
Weatherly International Plc ("Weatherly" or "the Company" AIM:WTI) is pleased to present its quarterly update for the third quarter of its 2012/13 fiscal year.
Highlights
· RK Capital's due diligence at Tschudi has been largely completed, and the Company has been offered a revised term sheet which it has accepted in principle. Loan documentation will be subject to additional review of the Company's operations
· The Tschudi front end engineering and design work has largely been completed
· Major contracts with the four main consultants/contractors are being negotiated
· The Tschudi environmental amendments were filed and are progressing through the approval process as anticipated
· A detailed operational review was completed at Central Operations leading to a restructuring to bring costs into line with revised production levels
· Third quarter production from Central Operations was 67,833 tonnes of ore containing 4,948 tonnes of copper concentrate, for copper production of 1,142 tonnes of copper metal, a decrease in production over the previous quarter due to a series of one-off events at the underground operations. Accordingly, Weatherly now expects 2013 production of around 5,000 tonnes of copper
· As a result of arbitration proceedings over Tambao being discontinued, Wadi has paid Weatherly US$2million as full reimbursement of expenses incurred on Wadi's behalf
· Cash at the end of the quarter was US$7.2m
Rod Webster CEO of Weatherly commented:
"Weatherly is making significant strides towards becoming a mid-tier copper producing company by the end of 2014. The Tschudi Project is progressing and we are currently working with Red Kite to finalise the outstanding requirements for the loan.
Operationally we have not delivered against our plans at the Central Operations and during the quarter we completed a detailed review of both our underground mines. As a result of our review, we are now implementing a number of changes which will reduce our costs in line with achievable production and ensure continuing cash flow".
Tschudi Copper Project
RK Capital's due diligence at Tschudi has been largely completed, and the Company has been offered a revised term sheet, for the full funding of Tschudi US$88 million, which it has accepted in principle. Loan documentation will be subject to additional review of the Company's operations.
We continue to progress the project and are funding the initial development through existing cash flow to avoid delays to the project.
Front end engineering and design is largely complete and the various tender packages and orders for long lead items are ready to go as soon as funding has been finalised. Concurrently we have been advancing contractual arrangements with the four main consultants/contractors working on the Tschudi project.
The Ministry for Environment and Tourism is reviewing the environmental amendments submitted last month and an external consultant has been appointed by the Ministry to accelerate the process in recognition of the importance of the project to Namibia.
Central Operations
Opening Old Matchless
During the last quarter of 2012 the Weatherly Board approved a work programme for the development of the Old Matchless Mine. Work is proceeding and a new environmental assessment (EA) and environmental management plan (EMP) have been submitted to the Ministry of Environment & Tourism for the Matchless licence area. Dewatering of the mine is on-going and power to the site is being procured.
Under revised plans the Company intends to use existing crew and equipment to advance the decline thus not incurring any incremental costs. Work on the decline will commence as soon as the preparatory works noted above are completed.
Opening of Old Matchless will result in increased production from lower cost primary mining.
Production
Production results for the past four quarters are set out in the table below.
|
| Jun-12 | Sep-12 | Dec-12 | Mar-13 |
Ore Treated (t) |
| 85,153 | 87,645 | 79,330 | 67,833 |
Grade (%) |
| 1.66 | 1.8 | 1.81 | 1.81 |
Recovery (%) |
| 91.52 | 93.31 | 92.58 | 92.92 |
Copper concentrate (t) |
| 5605 | 6499 | 5780 | 4,948 |
Copper contained (t) |
| 1292 | 1470 | 1328 | 1,142 |
During the quarter, a significant ground subsidence occurred in the upper levels of the Otjihase compartment, unfortunately resulting in a decision to abandon the area. Inspections and monitoring permitted the controlled withdrawal of personnel several days before the event occurred, so avoiding any risk of injury.
With the loss of future production from this area, the Company has revised the Otjihase mine plan, bypassing the conveyor system to improve efficiencies and restructured the contractual arrangements currently in place. Under the new arrangements Weatherly has agreed to the appointment by the contractor of a new Otjihase management team with extensive international experience in successfully turning around safety and production performance to achieve best practice.
While these changes are bedding down we expect Central Operations to produce at around the recent rate of 5,000 tonnes of copper per annum. Further production uplift is expected when a new compartment (Hoffnung West) becomes available to replace the ore blocks lost through subsidence, and, in the longer term, from Old Matchless.
Very regrettably, an employee of our mining contactors at Matchless was electrocuted while attending a pump. The fatality caused a temporary shutdown of Matchless, while an independent audit of all electrical installations was undertaken, and the incident is currently under investigation by the Chief Inspector of Mines in Namibia. Meanwhile, the mine is operating normally.
Commercial
During the quarter, the Company delivered 1,226 tonnes of copper contained in 5,938 tonnes of concentrate to metal trader Louis Dreyfus at a weighted average price of US$ 7,743 /t (US$3.51 /lb) copper. The Company continues its policy of forward selling a proportion of its production up to 18 months ahead.
The cash cost (C1) for the quarter was US$7,344 (US$3.33 /lb) while the year the date cost was U$6,238 (US$2.83 /lb). The unusually high cash cost for the quarter was a consequence of the abandonment of the Otjihase compartment, the restructuring of the contractual arrangements and the loss of production associated with the fatality at Matchless. This cost is expected to be reduced once the operational changes referred to earlier take effect.
As at 31 March 2013, the Company had:
(1) Cash at bank of US$7.2m equivalent
(2) Reduced its working capital loan with Louis Dreyfus to US$4.1m, having made loan repayments of US$0.3m in the quarter
(3) Forward contracts over 3,100 tonnes copper at an average price of US$7,965/t (US$ 3.61 /lb)
Burkina Faso
Wadi and the Government of Burkina Faso (GBF) have settled their dispute with respect to the Tambao manganese deposit. Wadi entered into an agreement with GBF in April 2007. In June 2007, Wadi engaged Weatherly to complete a feasibility study on the Tambao Project. Wadi submitted it to Burkina Faso in September 2008.
A dispute arose between Wadi and the GBF regarding the rights over the deposit, which was submitted in April 2011 for resolution by a tribunal constituted under the auspices of the International Court of Arbitration of the International Chamber of Commerce.
This dispute has now been settled and Wadi has agreed to discontinue the arbitration. As a result Wadi has paid Weatherly US$2million as full reimbursement of expenses incurred on Wadi's behalf.
About Weatherly
Weatherly is an AIM listed, copper focused mining company, the principal assets of which are located in Namibia. It currently has two producing copper mines (Otjihase and Matchless), and has recently completed a bankable feasibility study over the Tschudi Copper Project. These assets will enable Weatherly to achieve its medium term strategy of establishing a copper mining business capable of sustaining approximately 25,000tpa of copper at an average industry cost of production.
The Company also has a 25% stake in an AIM listed company, China Africa Resources Plc (CAF), which is currently focused on the development of the lead/zinc project at Berg Aukas in Northern Namibia.
For further information please contact:
Weatherly International Plc +44 (0) 20 7917 2989
Rod Webster, Chief Executive Officer
Canaccord Genuity Limited +44 (0) 20 7523 8000
Andrew Chubb / Andrei Kroupnik
