Weatherly International Plc Regulatory News (WTI)

26 Apr 2006 08:00

Weatherly International PLC26 April 2006 26 April 2006 Weatherly International plc ("Weatherly" or the "Company") Signs Heads of Agreement with the Government of Namibia, Ongopolo Board andSecured Lenders to acquire an initial 56% stake in Ongopolo Mining & Processing Limited ("Ongopolo") The Board of Weatherly is pleased to announce that the Company has signed aHeads of Agreement to acquire an initial 56% interest in Ongopolo Mining &Processing Limited for a cash investment of US$30 million (approximately £16.8million). Ongopolo is a copper mining and smelting company with activities incentral and northern Namibia. It operates three copper mines and a smelter andis in the process of developing three new mining projects. The proposed Ongopolo investment is subject to due diligence and funding. Owingto its size, the transaction will constitute a reverse takeover and will beconditional on Weatherly shareholder approval. In consequence, Weatherly shareswill be suspended pending the completion of the transaction and applicationfor readmission. Funding for the investment is to be provided by the proposed placing of £18million of new Weatherly shares (the "Placing"). In addition, the Company hasexisting cash resources of £3.5 million. The Placing will take place in twostages, the first having already been completed. Commitments have been receivedin respect of £9.1 million representing 87,215,000 new Weatherly shares to beplaced at 10.5p. These initial funds have been raised unconditionally. The balance of the Placing, which will be conditional upon the completion of theOngopolo transaction, will take place when a new Competent Person's Report isavailable on Ongopolo's operating and exploration assets. Ongopolo is a private Namibian company which owns and operates three coppermines and a smelter. Two of the operating mines (Otjihase and Matchless) arelocated near Windhoek, the capital of Namibia. The other operating mine islocated at Kombat with the smelter nearby at Tsumeb, both in the northern partof the country. During the year ended December, 2005, Ongopolo's smelterproduced approximately 24,000 tonnes of copper, approximately 50% sourced frominternal mine production and the rest from imported concentrates. Based on anindependent technical report prepared in 2004, Weatherly estimates that Ongopolohas sufficient known reserves for the next five years, plus sufficient resourcesfrom its existing leases to expand the reserve base by a further 5 years. In addition to the operating assets, Ongopolo is in the process of developingthe new Asis Far West underground mine to replace the aging Kombat mine. At AsisFar West, an 800 metre shaft was recently completed and lateral development tothe main ore body is in progress. Ongopolo also plans to develop a smallsatellite underground operation at Tsumeb West (1 million tonnes @ 2% copper),and a significant Open Pit at Tscheudi (15 million tonnes @ 0.93% copper). Theoverall resource base, to be confirmed in due diligence, is believed to bearound 30 million tonnes grading 1.5% copper or 476,000 tonnes of containedcopper. Ongopolo also owns a diverse portfolio of advanced exploration assetsprimarily copper, zinc/lead and precious metals. The cash investment by Weatherly comprise: (i) US$ 20 million by way ofsubscription for new shares in Ongopolo to establish a controlling 50% interest;(ii) US$8.2 million to secured creditors in order to purchase Ongopolo debtsecurities at below par value and to purchase an additional 6% of the enlargedshare capital of Ongopolo; and (iii) US$1.8million to one of the secured lendersto retain a property package which includes five farms containing surface rightsfor the Tscheudi project. The Heads of Agreement requires that the secured lenders convert theiroutstanding debt in Ongopolo to shares in Ongopolo with the option to convertinstead to Weatherly shares at a value of 20p per Weatherly share. Dependent onwhether the secured lenders elect Ongopolo or Weatherly stock, Weatherly'sequity interest in Ongopolo could increase over time to 70%. This 'debt to equity' conversion will leave Ongopolo essentially debt freeexcept for loans of approximately US$10 million owing to Weatherly. Discussionshave been held with trade creditors concerning the outstanding amount ofapproximately US$17 million and trade creditors representing 85% of this amounthave agreed to a rescheduling over a five year period. Application is being made to the London Stock Exchange plc for the admission ofthe new Weatherly shares issued in the Placing to trading on AIM. Admission isexpected to become effective by Thursday 4 May and dealings will commence oncethe transaction is complete and Weatherly's shares are readmitted to trading onAIM. Commitments received for Weatherly shares in the placing at 10.5p include asubscription by Dr Wolf Martinick, Chairman and Director of Weatherly, inrespect of 450,000 new Weatherly shares resulting in his shareholding inWeatherly increasing to 18,797,290 Weatherly shares representing 8.14 per centof the enlarged issued share capital; a subscription by Mr John Bryant, Directorof Weatherly in respect of 85,000 new Weatherly shares resulting in hisshareholding in Weatherly increasing to 397,500 Weatherly shares representing0.17 per cent of the enlarged issued share capital; and a subscription by MrPeter Redmond, Director of Weatherly in respect of 85,000 new Weatherly sharesresulting in his shareholding in Weatherly increasing to 251,666 Weatherlyshares representing 0.11 per cent of the enlarged issued share capital.Following the placing the enlarged issued share capital of the Company willcomprise 230,904,593 ordinary shares. During the restructuring period, which is likely to take several months,Weatherly will undertake detailed due diligence on the Ongopolo group which willinclude a new Competent Person's Report on its operating and exploration assets. Weatherly has also entered into an Interim Management Agreement with Ongopolo totake over the operational management of the company during the restructuringperiod. Additionally, Weatherly has agreed, as part of its total equitysubscription of US$20 million to advance up to $N40 million (approximately £3.7million) of interim funding to support Ongopolo's existing mining operations.N$30 million of this interim funding is guaranteed by the Government of Namibiain the event of a failure to close the transaction by 30 June 2006.The balanceof N$10 million is secured by a first mortgage over certain exploration assetsof Ongopolo. Chief Executive Rod Webster said: "This is a unique opportunity for bothWeatherly and the Government of the Republic of Namibia to oversee therejuvenation and future development of Ongopolo's considerable assets. The Boardalso sees this as part of a regional strategy whereby Ongopolo's smelter couldbe expanded to process concentrates from both Weatherly's own Luanshya projectand others in Zambia and the Congo." For further information please contact: Weatherly International plcRod Webster, Chief Executive +44 (0) 20 7917 2989John Norris, Company Secretary Libertas CapitalJonathan Flory / Stephen Pickup +44 (0) 20 7569 9650 First City FinancialSarah Samworth +44 (0) 20 7436 7486 Information on Weatherly Weatherly's main activity is that of exploration and development of mining andmineral projects. The Company holds certain exploration and development rights to a copper miningproject in Zambia, covering a decommissioned copper mine and tailings damsituated in Luanshya, in the Zambian copper belt (the copper-producing region ofnorthern Zambia). The Luanshya Copper Project (an area defined by the licensescovering these exploration and development rights) is considered by the Board ofWeatherly to be one of the larger copper resources in Zambia with up to 1.4million tonnes of copper contained in resource categories. The Board ofWeatherly estimates that the Luanshya Copper Project could be capable ofproducing up to 60,000 tonnes of copper annually using modern, proven mining andprocessing techniques. This information is provided by RNS The company news service from the London Stock Exchange