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1 Dec 2008 12:00
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WeatherlyΒ International plcΒ ('Weatherly' or the 'Company')
Operational Update
Heads of Agreement for Loan Facility
On 19 November 2008 Weatherly announced that in response to the recent decline in world copper prices, it had taken various actions to lower costs including the closure of the Tsumeb West and Matchless Mines and was reviewing its remaining operations.Β
The BoardΒ announces today that following the conclusion of its review the decisionΒ has been takenΒ toΒ suspend operations at the Company's remainingΒ mines,Β Otjihase and TschudiΒ andΒ toΒ place themΒ on care and maintenance.Β Copper prices have declined from approximatelyΒ US$ 8400/t in July 2008 to present prices of around $3,700/t. Consensus forecasts do not indicate there will be a recovery in the medium term. Taking into account the costs of operation, Weatherly's mining operations at current and forecast near term copper prices lack sustainable economic viability.Β Production will continue until ChristmasΒ at which timeΒ approximately 630Β employees will be made redundant.Β
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TheΒ Tsumeb smelter will continue to operateΒ under the control ofΒ Weatherly's subsidiary,Β Namibia Custom Smelters ('NCS'). Since the smelter's revenues are derived primarily from processing fees,Β it is not directly affected by theΒ volatileΒ copper price andΒ will continue to process ore sourced internationally.Β Currently, the smelter is able to treat 150,000 tonnes of concentrate per year. The commissioning of an oxygen plant in 2009 will increase this capacity by 60%.Β
The Board alsoΒ announcesΒ that itΒ hasΒ entered into heads of agreementΒ ('HOA')Β with Dundee Precious MetalsΒ ('DPM')Β andΒ another partyΒ for an US$11 million loan facility.Β DPM hasΒ agreed to pay NCS US$1 million which will be offset against the final joint facility which is subject to due diligence and the completion of final loan agreements. ThisΒ isΒ expected to be completed by mid December 2008.Β Β TheΒ funds provided by the loan facilityΒ will beΒ usedΒ to fund the expansion and ongoing requirements ofΒ theΒ Tsumeb Smelter.Β Interest is to be paid on amounts borrowed under the loan facility at a rate of 4 per cent. over LIBOR,
The terms of theΒ HOAΒ include proposed modifications to the terms of existing three year contractsΒ for the supplyΒ ofΒ imported concentrates. The proposed modifications include the extension of these contracts to 2013 and the requirement for NCS to process up to 75,000 dry metric tonnes ('dmt') of concentrate in 2010,Β increasingΒ to up to 120,000 dmt in 2011, 2012 and 2013 subject to the successful commissioning of the proposed oxygen plant.
In order for the Company to enter into final loan agreements effecting the terms of theΒ HOA, it will be necessary for the Company to renegotiate certain terms of its existing convertible loan notes issued inΒ May 2008.Β These negotiations are currently underway.Β
On 14 November 2008, trading in the Company's ordinary shares on the AIM Market was suspendedΒ pending further investigation of a potential claim against the Company from a third party in relation to an alleged, previously unknown financial obligation. This trading suspension will remain in place while this claim continues to be investigated and pending the conclusion of the negotiations referred to above to conclude definitive loan agreements effecting the terms of the HOA.
Enquiries:
Rod Webster, Weatherly International +44 (0)207 868Β 2232
Chief Executive OfficerΒ
Richard Brown Ambrian Partners Limited +44 (0)207 634 4700
Richard GreenfieldΒ
Anthony Cardew Cardew Group +44 (0)207 930 0777
Jamie Milton
Matthew Law
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