LONDON (Alliance News) - Weatherly International PLC saw its shares fall on Monday after it said was looking to raise GBP6.9 million through a share subscription and open offer, money it will use to further develop its Tschudi copper mine in Namibia in the face of weak copper prices.
It said it had agreed a share subscription with fellow AIM-listed Polo Resources Ltd, initially raising GBP902,000 by issuing Polo with 30.8 million shares at 2.925 pence per share, a sharp discount to its opening price of 3.75 pence per share on Monday.
That caused its share price to drop sharply, and by Monday afternoon, the stock was down 15.5% to 3.17 pence per share. Polo shares were down 0.4% to 8.27 pence per share.
Weatherly said Polo has also committed to subscribe to a further 76 million Weatherly shares at the same price in order to raise around GBP2.2 million.
Along with the Polo subscription, Weatherly said it intends to raise another GBP3.8 million through a 4 for 19 offering of approximately 129.8 million shares at the same issue price to its existing shareholders.
The proceeds of the subscription and open offer will provide additional working capital for Weatherly and give greater certainty that its Tschudi project will achieve its stated objectives, said Polo in a statement.
"With weaker copper pricing no doubt undermining cash flows from the high cost production currently underway at Weatherly and ongoing capex for the development of Tschudi, we are not surprised to see a need to raise additional funds. Key going forward will be progress at Tschudi and we hope to see successful on time delivery else further funds may be required," Investec wrote in a note to clients Monday.
"Having Polo as a cornerstone investor is a welcome vote of confidence not only in the Tschudi project but Weatherly as a whole," said Chief Executive Rob Webster in a statement.
Weatherly had previously said The Tschudi project was fully funded until first copper production through its USD88 million Orion Mine finance facility. B & E International have also invested USD19 million to construct crushing, agglomeration and stacking facilities, and Basil Read will operate the mine and has invested USD21 million. LogiMan will build the SX-EW plant, which will leach the copper ore.
In its statement Monday, the company said there was a strong case for accelerating the waste stripping in order to provide greater certainty that the Tschudi project will achieve its targets.
"To do this, it will most likely be necessary to draw down on the Orion USD8 million overrun facility which requires the company to contribute on a dollar for dollar basis. The minimum raising under the open offer, combined with the company's existing cash reserves, ensures that the overrun facility can be fully utilised, making available a cash reserve of USD16 million to deal with the above and any commissioning issues that may arise," it said.
Webster last month told Alliance News that the entire Tschudi project had been built on a debt model.
"We were forced to find funding due to the market and to manage future risk. Having multiple parties involved allows the risk to be encompassed into the financing. All the parties involved are committed and have incentives to complete the project just as much as us," Webster told Alliance News at that time.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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