Weatherly International Plc Regulatory News (WTI)

2 Nov 2009 07:00



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, Namibia Custom Smelters ('NCS') and Weatherly Mining Namibia ('WMN').

WMN

Weatherly has entered into an option agreement with a South African company, Cubenco 192 Pty Ltd ('Cubenco') whereby Cubenco has the option to purchase the Kombat mine from WMN's subsidiary, Ongopolo Mining Ltd for total consideration of US$3 million. The Kombat mine was flooded late in 2007 and although the mine and plant has been kept on care and maintenance, it is not part of Weatherly's future development plans. Weatherly is focussing on the reopening of the Otjihase and Matchless mines and the development of the Tschudi open pit.

Cubenco has paid a non refundable option fee of R1.2m (US$160,000) and has 42 days in which to complete its due diligence and make a second payment of US$600,000. The final sale is subject to consent from Noteholders, East China Mineral Exploration and Development Bureau ('ECE') and the Government of Namibia. Assuming these are given, the final payment of US$2.24m is due by the end of March 2010. Under the option agreement, Cubenco has early access rights to the site on completion of the second payment subject to various conditions including payment of all site costs during the option period. All proceeds from the sale will be applied to paying down the US$12 million debt to Noteholders.

The final results of the Tschudi 'infill drilling' program were announced in September. Based on a report prepared by Coffey Mining (SA), and using a cut off of 0.3% Cu, a potentially open pitable (down to a vertical depth of 180m) Measured and Indicated resource has been estimated at 25.2 million tonnes of ore grading 0.92% Cu as set out in table 1. This relatively shallow resource will form the basis of the next stage of the pit optimisation and design process to be completed later this year. 

Table 1 - Tschudi Resource to 180m Vertical Depth

For resource statements to a vertical depth of 180m calculated using a variety of cut off grades please see Appendix 1 below.

NCS

The smelter at Tsumeb continued to improve throughput, smelting a total of 32,935 tonnes of concentrate for the 3 months ended 30 September 2009, an increase of approximately 10% over the previous quarter of 29,941 tonnes. Production will be maintained at this level until the oxygen plant is commissioned towards the end of the year. Construction work on the US$15 million oxygen plant is close to completion and is now only awaiting the completion of the power cable connection and the off-take piping that will deliver the oxygen to the furnace. When fully operational, the oxygen plant is expected to increase smelting capacity to more than 240,000tpa of concentrates (40,000-45,000tpa of copper blister).

From a commercial standpoint operating profit margins continued to be eroded throughout the quarter as the Rand continued to appreciate against the US dollar. NCS's two main contracts with Dundee Precious Metals ('DPM') and Louis Dreyfus Minerals ('LDM') are priced in US$ however the DPM contract which accounts for approximately 50% of throughput enables NCS to recover the impact of exchange rate movements with a lag of one quarter. At the end of September the Rand /US$ exchange rate stood at 7.5R/US$, an effective appreciation of 25% since the start of the year. Despite this, operating profit margins increased from 4% to 12%, largely as a result of the increased throughput and the receipt of delayed exchange related payments from the previous quarter.

Under the terms of its current tolling agreement with NCS, LDM is required to deliver 120,000 annual tonnes of copper concentrates to the smelter from 2010 to 2013. While the commercial terms are established in principle, they are subject to annual ratification and this process has now been completed as far as shipments for 2010 and 2011 are concerned. The Company is pleased to announce that these new terms, which include final end of contract reconciliations in respect of 2008, provide for tolling charges which are some 10% better than those prevailing in the current 2009 contracts. The LDM contract, together with the long term supplies from DPM, will effectively take up all of the additional capacity resulting from the commissioning of the oxygen plant. This in turn will underpin the future profitability of the smelter and its ability to service its loans when they fall due.

WTI/Corporate

In September, WTI signed a letter of intent ('LOI') with ECE, whereby ECE would subscribe for new ordinary shares in the Company giving ECE a 50.1% holding in Weatherly.

Since the signature of the LOI, ECE has commenced its due diligence exercise and the parties have commenced the process of obtaining the regulatory and other approvals required to complete the proposed transaction. Representatives of both Weatherly and ECE held a briefing with the Namibian Prime Minister in late September as part of the process of gaining support for the transaction at the highest level. At this stage the parties are continuing to work to complete the subscription before the end of January 2010 as envisaged in the LOI. 

The company's cash position as at 23rd October, 2009 was US$2.6 million, slightly higher than the cash position at 30 June 2009 of US$2 million. 

For further information contact:

Qualified Person Notes

The mineral resource estimates contained in this news have been prepared in accordance with The Code for Reporting of Mineral Resources and Ore Reserves of the Australasian Joint Ore Reserves Committee (JORC). The technical information in this news release, including the information that relates to geology, mineralization, drilling, and mineral resource estimates on the Tschudi Project, is based on information prepared under the supervision of, or has been reviewed by M McKinney of Coffey Mining (SA) (Pty) Ltd The foregoing person is a "qualified person" for the purposes of JORC with respect to the geology, mineralization and drilling being reported on. The "qualified person" responsible for the independent resource estimate for resources at Tschudi was A B Goldschmidt, a geologist with Coffey Mining (SA) (Pty) Ltd with more than 20 years of experience. The technical information has been included herein with the consent and prior review of the above noted qualified persons. The qualified persons have verified the data disclosed, including sampling, analytical and test data underlying the information or opinions contained herein.

APPENDIX 1

Weatherly Mining Namibia - Tschudi Resource Estimation

Summary of Resources to a Depth of 180m