The African Business Journal: Weatherly International

Weatherly International
================================================================================
admin on 16 November, 2009 12:33:00
 
Weatherly International PCL began as a cash-shell back in 2005 with the
expressed purpose to develop a company which would take advantage of
opportunities in Africa. “[Management] had aspirations to be a world-class
resource company,” Rod Webster, CEO and founder of Weatherly International
PCL says.
“By 2006, we were in position to acquire the remnants of the copper
industry in Namibia. These were a group of small mines that had been left from
some very large mining giants such as Newmont and Goldfields.”
“Our business plan was to turn that back into a viable business in a
two-year timeframe. We were a bit behind but we hit our stride in about two
years and six months. In the July quarter [of 2008] we achieved most of what we
set out to do,” he continues.
Unfortunate timing
The only unfortunate detail was timing. By October the global financial meltdown
had hit and metal prices plunged.
“We were left with a number of reasonably high cost mines at a time when
the metal prices had fallen from a high in July of nearly $8,000 to close to
$3,000 by the end of the year,” Webster says.
The London-based mining operator owns five copper mines in Namibia, four of
which were running full-tilt until the dramatic fall in the price of copper last
year forced the owners to shut down operations temporarily. That also meant
letting go an upward of 600 people, which in a small country like Namibia, is a
significant number.
“As a reasonably small company we had no choice, no access to capital
markets at the time,” Webster says. “We were losing money at the
current metal prices.”
Strategic decision helps company recover ground
In an effort to recover ground Weatherly configured its smelting business into a
separate entity as a toll-mill. A number of the company’s suppliers were
prepared to fund the expansion for the smelter in order to continue operations
through a mutual agreement.
“We’re able to keep that business going, so we can keep our assets
together. Despite the fact that we had to close the mines, we’re able to
payout the redundancies, pay off creditors and more importantly, keep all of our
assets in good shape,” Webster says.
“Suddenly, in the middle of this year, we saw prices almost back to where
they were at this time last year before the whole crisis hit.”
Webster says that Weatherly is also looking at redeveloping the mining business
with its assets. Weatherly International has a number of other development
opportunities in Namibia and possibly Burkina Faso. The mining operator company
is also expanding its smelting business, which is strategically located at
Tsumeb, which is capable of double its capacity.
The smelter’s current capacity is around 120,000 tonnes a year. As one of
only four copper smelters currently operating in Africa, and with the resurgence
of mining in key regions such as Zambia, DRC and Botswana, there is great
opportunity to capitalise on the smelter’s expansion potential to increase
the custom treating business. Concentrate is currently smelted at Tsumeb from
Dundee Chelopech and from First Quantum’s Guelb Mogrein mine and
Metorex’s Chibuluma mine.
Restarting on a ‘clean sheet’
Having coped with the economic storm in the mining industry, Weatherly has
re-positioned itself in the global market with assets to start again with a
completely clean sheet. The company agenda has changed accordingly.
“Our original idea was to turn around the older mines to generate the cash
to develop newer ones,” Webster says, adding Weatherly has shifted its
focus to a project near its smelting operation.
“There’s the potential for a medium sized, open-pit mine, 20 km away
from the existing concentrators and the smelter complex. The resource is around
50 million tons at .9 per cent copper, but we have an open pitable inventory of
about 20 million tons at 1 per cent copper as well as 10 grams of silver per
tonne,” he explains.
“We’re looking at optimizing some pit designs, and investigating
what costs are involved in upgrading our existing concentrator to the required
throughput of about 1 to 2 million tonnes per annum, we are also looking at
other expenditures that are involved in getting the open pit underway.”
Smelting operation turning into a custom business
Webster highlights the benefits existing infrastructure provides to this
advanced project.
“We also understand this whole field very well, as we carried out a small
underground both sampling mining exercise just before we closed last
year,” he says, adding the mining operator is now looking to bring on
board a new Chinese shareholder.
“We’ve turned our smelter into a sort of boutique business, and a
unique one at that,” Webster continues.
“We can handle high levels of contaminating elements such as
arsenic.” The custom smelter business specializes in extracting these
metals and turning them into sellable products.
“We’re not in the mainstream at all. For us to service just normal
mines in the area, they would have to pay a very significant premium or displace
concentrates already in the smelter in the future. We’ve signed lucrative
contracts with suppliers all over the world, namely Bulgaria, Peru and
Russia.and we don’t have
an enormous capacity.the smelter is full,” Webster says.
There are other similar projects in the nearby Congo and Zambia. However Webster
doesn’t think these operators would be able to pay treatment charges
necessary for them to displace their current customers.
Opportunities and the 2010 oxygen plant
An oxygen plant, which is set to come on stream in early 2010 and double the
capacity of the smelter, is close to completion.
“Currently, we’re treating 120,000 tonnes of concentrate every
year.this will essentially double that number,” Webster says. “Once
that is completed, it will put us on a new financial footing because as you
know, smelter costs are a function of economies of scale; it will reduce our
operating costs considerably.”
Shareholder opportunities on the horizon
The most important strategy for Weatherly is re-capitalizing the business as a
whole. In addition to consolidating its debts, the smelting and copper mining
operator is looking for  new shareholders.
“We’ve signed a letter of intent with a company called East China
Exploration and Development (ECE). Under that new agreement with ECE,
they’ll become the dominant shareholder with just over 50 per cent of the
shares. For that we’ll be raising about $27 million U.S., which will be
used to re-open the underground mines that were closed last year and also,
accelerate the Tschudi open pit, which is our prime focus,” Webster says.
The mutual agreement with ECE will also help the mining and smelting company to
get rid of some debts, which will be paid when due in the next quarter. 
“For us, it would be nice to have a financially capable shareholder
backing us because capital is always a problem with smaller companies like us,
as they grow,” he adds.
“This new partnership will change the company quite considerably.”
* Weatherly also has a zinc lead project in Namibia.
* Weatherly has a number of development projects in Namibia and one in Burkina
Faso.
* Tsumeb is a major regional custom smelting business
* Strategically positioned to grow into a prominent regional mining and smelting
centre
* Strong production growth potential through brownfields development and
exploration projects