Weatherly International Plc Regulatory News (WTI)

23 February 2017

Weatherly International Plc

("Weatherly" or "the Company")

Interim Results for the Period from 1 July 2016 to 31 December 2016

Weatherly International plc (AIM: WTI), a Namibian focused copper producer, announces its interim results for the period from 1 July 2016 to 31 December 2016.

Operational Summary

Financial Summary

Corporate Summary

Post Period

· It was announced on 23 February 2017 that a rescheduling of repayments in relation to the facility agreement between Orion Mining Finance and Weatherly's subsidiary Ongopolo Mining Limited had been concluded.

Operations Summary

During the quarter ending June 2016, excessive groundwater inflows restricted the ability to deliver sufficient ore volumes from the open pit to maintain scheduled copper production rates. During the half year under review, the groundwater inflows were brought under control, mined ore volumes improved, and as ore stocks under leach then recovered, cathode production also improved and nameplate production rates were again achieved by October 2016.

The issue of groundwater is now under control and the Company is looking to the design of long-term groundwater management systems. The aim of this is to remove groundwater before it enters the pits, further reducing risks of future mining production delays, as well as to reduce operating costs for dewatering compared to the current in-pit systems.

At Otjihase and Matchless, safe and productive underground mining skills developments are critical to unlocking the opportunity to resume production at sustainable unit costs in future. The Company has identified a low-risk and potentially incrementally cash-generative opportunity to commence with its skills development programme at Otjihase. The Company intends investigating the potential for such skills development to support a strategic goal of achieving 10-12ktpa of contained copper in concentrate from the underground mines at C1 costs below US$ 4,400 per tonne (US$2/lb). The Company plans to study the opportunity further before taking any decisions to proceed.

The Company also announced during the period that it has entered into a Cooperation Agreement with Mr Wilhelm Shali, holder of Exclusive Prospecting License 5772 covering the Ongombo prospect area within 25km of the Otjihase concentrator. The agreement clarifies the intention of the two parties to work together to seek to develop mining prospects in the vicinity of the Otjihase concentrator which may otherwise not be viable. The parties will initially share technical information on their respective projects. Previous holders of prospecting licenses over the Ongombo project reported JORC-compliant resources of 10.5Mt @ 1.6% Cu in 2012.

Financial Summary

Revenue benefitted from an increase in the average sales price of US$4,916 in the half year, up from US$4,692 in the previous six months but volumes sold were 7,855 tonnes, 282t lower than production, leaving revenue at US$37.8m after royalties.

Overall the Company made a Loss before tax of US$11.3m, an operating loss of US$6.7m and a gross loss of US$4.1m.

The loss before tax of US$11.3M includes finance costs of US$5.2m and a foreign exchange gain of US$0.6m.

Included within the operating loss of US$6.7m was a write down in the value of China Africa Resources plc of US$1.3m as the Group's investment was reallocated from an associated company to an investment as a result of dilution due to a share raise. The underlying loss of US$5.4m is after US$7.7m of depreciation consistent with the Group generating an operating cash flow but not at a level that covered interest or capital repayments.

Inventory increased to US$12.9m at the end of December 2016 from US$10.2m at the end of the previous financial year. Cathode inventory increased to 1,553 tonnes at the half year valued at only US$4,307 per tonne as a result of the strong December production month. This compares favourably to June where cathode inventory was valued at sales price due to the poor production in June. In addition to the changes in cathode inventory, ore stocks have nearly doubled since June.

While spot copper prices increased notably during the December quarter, the Company advised in January that certain hedges had been implemented prior to that price increase, and during the second half of the financial year the Company currently has prices for 3,400 tonnes of production fixed at US$5,077 per tonne. This hedging position is in addition to the option (but not the obligation) to purchase up to 700 tonnes per month at US$5,000 per tonne until May 2017 held by Orion Mine Finance (Master) Fund I LP (Orion). This was agreed and announced on 2 June 2016 as a fee in consideration of deferred repayment of loan amounts due. Beyond the current financial year the Company has a hedging commitment of 450 tonnes of copper at US$5,102 per tonne.

The Group ended the half year with US$8.7m of cash up from US$5.8m at the end of June. The Group generated US$3.5m of operating cash flow but incurred US$2.8m of investments mostly in property plant and equipment relating to dewatering or the stripping asset and received a working capital loan of US$1.8m from Orion Mine Finance, our off taker, in lieu of inventory at the port that was unsold at year end. There was no forward progress in recovering VAT in Namibia in the half year with US$7.0m due since May 2016.

Corporate Summary

Logiman notified the Company on the 7th December 2016 that their new shareholding was 102,164,832 shares representing 9.6% of the Company. As Logiman's holding is now less than 10% Krzysztof Szymczak tendered his resignation as a director of the Company with immediate effect. This was accepted by the Board.

As part of continuing efforts to minimise costs, in July the Company also announced that Dr Wolf Martinick, the founding Chairman of the Company, and Mr Charilaos Stavrakis have retired from the Board, and will not be replaced in the near term.

Post Period

The Company announced on 23 February 2017 that a rescheduling of repayments in relation to the facility agreement between Orion Mine Finance and Weatherly's subsidiary, Ongopolo Mining Limited, had been concluded.

Weatherly has previously advised that if copper prices remain at current levels it is unlikely that the Company and its subsidiaries will generate sufficient surplus cash to meet all loan repayments when due. This remains the case and the Company continues to positively engage with Orion on the subject. 

For further information please contact:

Weatherly International Plc +44 (0)1707 800 774

Craig Thomas, CEO

Kevin Ellis, CFO & Company Secretary

RFC Ambrian Limited +44 (0) 20 3440 6800

(Nominated Adviser & Broker) 

Nominated Advisor Contact: Stephen Allen / Bhavesh Patel

Broker Contact: Kim Eckhof

Blytheweigh +44 (0) 20 7138 3204

(Financial PR) Tim Blythe / Camilla Horsfall / Nick Elwes

About Weatherly

Weatherly is an AIM listed copper mining company operating in Namibia in southern Africa. Its principal assets are one operating open pit copper mine called Tschudi and two underground copper projects called Otjihase and Matchless. 

These assets will enable Weatherly to achieve its medium term goal of establishing a mining business capable of sustaining approximately 30,000 tonnes per annum of copper production.

Condensed consolidated income statement

for the period from 1 July to 31 December 2016

Condensed consolidated statement of comprehensive income

for the period from 1 July to 31 December 2016

Condensed consolidated statement of financial position

as at 31 December 2016

Condensed consolidated statement of changes in equity

for the period from 1 July to 31 December 2016

Condensed consolidated cash flow statement

for the period from 1 July to 31 December 2016

Notes to the condensed consolidated financial statements

for the period 1 July to 31 December 2016

1. a. Basis of preparation

These interim condensed consolidated financial statements are for the six months ended 31 December 2016. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2016. The information included in these interim condensed consolidated financial statements in respect of the year ended 30 June 2016 does not constitute all the information required for annual statutory accounts at that date.

These financial statements have been prepared under the historical cost convention, except for revaluation of certain properties and financial instruments.

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. These condensed consolidated interim financial statements (the interim financial statements) have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to 30 June 2016.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these condensed consolidated interim financial statements.

b. Nature of operations and general information

Weatherly International plc and its subsidiaries' ("the group") principal activities include the mining and sale of copper cathode and copper concentrate.

Weatherly International plc is the group's ultimate parent company. It is incorporated and domiciled in the United Kingdom. The address of Weatherly International plc's registered office, which is also its principal place of business, is Orion House, Bessemer Road, Welwyn Garden City AL7 1HH. The company's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Weatherly International's consolidated interim financial statements are presented in United States dollars (US$), which is also the functional currency of the parent company.

These consolidated condensed interim financial statements have been approved for issue by the Board of Directors on 23 February 2017.

The financial information for the period ended 31 December 2016 set out in this interim report does not constitute statutory accounts as defined by the Companies Act 2006. The Group's statutory financial statements for the year ended 30 June 2016 have been filed with the Registrar of Companies.

c. Going Concern

The Group incurred a loss before tax of US$11.3m during the 6 months ended 31 December 2016 and, at that date, had net current liabilities of US$98.0m.

On 23 February 2017 under the Amended Facility with Orion Mine Finance, the first repayment of Facility B and the repayments of Facility C and Facility D all of which were due on 28 February 2017 have all been deferred to 30 April 2017 and interest accruing on the loan made under Facility B, Facility C and Facility D capitalised. Orion agreed effective until 30 April 2017, to limit its acceleration and enforcement rights during this period on the terms set forth in the Amended Facility. Repayments due on 30 April 2017 amount to US$17.6m.

If copper prices remain at current levels it is unlikely that the Group will generate sufficient surplus cash to meet subsequent loan repayments and the Group's going concern will be dependent on Orion's continued support, of which there is no certainty.

The directors believe that with the support of Orion to defer loan repayments, Tschudi can generate sufficient surplus funds for the Group to remain as a going concern. However there are a number of uncertainties

around the assumptions that have a potentially negative impact on the Group's ability to deliver the forecast cash flows.

These are:

· That Tschudi is able to achieve and maintain nameplate production levels of 1,400t of copper cathode a month throughout the period. The risks of not achieving this revolve around not being able to mine and process sufficient ore tonnes to achieve this output as well as the leach time and metallurgical recovery rates remaining in line with the feasibility study as we mine into different types of ore.

· Copper price fluctuations not having a further material adverse affect on the Group's profitability.

· As the Group's revenue streams are converted from US dollars to Namibian dollars exchange rate fluctuations could have a material adverse effect on the Group's profitability.

· The timing of income is uncertain. Sales are dependent on the date our customer, Orion, ships the copper cathode. The Group recovers VAT receipts in Namibia, the timing of which is uncertain.

The likely ongoing need for Orion's support along with the above conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Group financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

2. Segmental reporting

Business segments

In identifying its operating segments, management generally follows the physical location of its mines.

The activities undertaken by the Tschudi segment include the sale of copper cathode from the Tschudi mine. The activities undertaken by the Central Operations segment include the sale of copper concentrate from Otjihase and Matchless mines. The revenues of Otjihase and Matchless are indistinguishable as the ore coming from both mines passes through the same concentrator and the two mines are viewed as one operating unit.

Each of these operating segments is managed separately as each of these service lines requires different technologies and other resources as well as marketing approaches.

The measurement policies the group uses for segment reporting under IFRS 8 are the same as those used in its financial statements.

The group's operations are located in Namibia and the UK. The operating segments are located in Namibia, while the corporate function is carried out in London.

Segment information about these businesses is presented below.