The African Business Journal: Weatherly International PLC

Weatherly International PLC
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admin on 17 August, 2010 08:06:00
 
As Rod Webster, CEO for Weatherly International PLC, the UK-based,  AIM-quoted
copper player, begins our interview for IRJ by saying that  things have
“been going very well,” we can’t help but think that is 
somewhat of an understatement. We last spoke with Weatherly in 
November/December, 2009, and if the results of the interim seven-or-so  months
prove anything, it’s that truly hard work truly pays off.
“I  just think it’s really a case of do the hard work, get our core 
operations back going again and then we won’t have to look for 
opportunities. The opportunities as we found in the past, particularly  in
places where we have a good track record, will come to us,” Webster 
explains.
“I expect the company to be resurgent in the next six  to 12 months, and I
think it will become quite an actively sought-after  stock. One of the reasons
for that is that at the moment, we are trading  at pretty much our cash backing.
It’s almost an option. There’s really  no downside; it’s on
the upside.”
It is the upside here that Weatherly is setting out to stimulate today.
Catching up with Weatherly
According  to Webster, getting Weatherly to where it is today is “a bit of
a ‘back  to the future’ story.” The company kept ticking along
by operating the  smelter on a tolling basis during 2009, allowing it to pay off
debts and  reach its current position.
“That culminated in the sale of our  smelter in February/March 2010. The
wash-up of that was that effectively  Dundee paid about US$55 million for the
smelter, and once the debts  were all repaid to various parties, including our
own corporate debt, we  were left with about US$19 million,” Webster
explains.
“From  that, we paid US$6 million out in special dividends in the form of 
Dundee shares to our long-suffering shareholders who were very happy  with that,
me being one of them. Then we set about getting the company  back into
production again, as a mining company, as we originally  envisioned.”
Reaching the original mining company envisaged is  coming along well, and the
board has given Weatherly the green-light to  re-open the best mine amongst its
asset register, the Otjihase Mine and  the satellite feeding into
Otjihase’s concentrate, Matchless.
“The  plan is we need about US$10 million to re-open these mines and that
is  now being fully founded internally,” Webster says. “We’ve
just finished  putting together the financing package for that, which will be
done  through one of our trading companies, who are advancing us a $7 million 
loan and the rest of the equity will be from assets and sales of assets  that we
have already in Namibia.”
Today, Weatherly has a  fully-funded package—long-lead items already in
place—and anticipates  recommencing production by the start of 2011 (if
not a little earlier).
“The  production we anticipate is about 7,000 tonnes of copper contained
in  concentrates,” Webster says. “Effectively, what we’ll be
doing is  selling concentrates at the mine gate to the trading company, and 
they’ll be responsible for where they take the concentrated materials to 
smelt, probably off to China or India.”
As the company approaches Otjihase and Matchless, its five-year plan comes into
effect.
The Otjihase five-year plan
Otjihase,  situated just outside of Windhoek, the capital, is a reasonably old, 
underground room and cooler mine. Webster carefully explains how its  mine
characteristics have been effectively used to shape this  all-important
five-year plan.
“[Room and cooler] is a flat  dipping ore body, a bit like a coal seam,
and it has various  compartments where the seam has been cut by faults and
displaced  downward,” he details.
“Our five-year plan involves primarily the  recovery of the existing
pillars, so that we’re starting at the bottom.  We’ve filled in all
the voids that exist with a cement sand fill mix,  and we’re now
extracting the remaining pillars and they’re retreating  from the
mine.”
The project also contains a much deeper virgin  ore body at around 800 metres
down, and due to its likely requiring a  full feasibility study in its own right
and probably a shaft, Webster  says that this part of the project is not on plan
as of yet.
“The  other mine that will be feeding into the Otjihase concentrator is 
called Matchless. This is another old mine but it has a new western  extension,
and we mined out the top part just before closure, but we’re  now getting
into the better grades,” he continues.
“This is just a  single vein. The hope here is that we will mine out that
very  successfully, and that will spur us to link up with the old mine where 
there is quite a large remaining reserve. So the Matchless mine, even  though
it’s only at five-year plan stage, could go for 15 years.”
As a result, expectations are running high and investment is entirely geared
towards these crucial next five years.
Potential opportunities
Webster  says that Weatherly has “essentially wrapped our funding around a
 five-year plan” and should any new discovery or extension emerge, it 
will quite simply add to the existing mine life. The company is also 
considering selling some equity in this project to a number of  empowerment
groups in Namibia. Four groups have been targeted and  Weatherly is in quite
advanced discussions with them.
“These are  essentially the groups that represent the unions and they
represent the  government. The government has a new mining company. And they
represent  the private investors,” Webster says. “What we’re
contemplating is  perhaps selling 20 per cent of the project to a combined
empower-ment  group.”
This offers a way to meet Namibian objectives to increase  local participation,
where resource projects are often looked at, but  also strategically links
Weatherly to the political workings of the  nation. Whilst the nation does not
have the empowerment legislation of  its neighbouring South Africa, doing what
Weatherly can to encourage  local participation will undoubtedly be
well-received.
“At the  end of the day, this is all about very quickly re-establishing
our  operating base,” Webster explains. “We see the development of
our next  project that is currently in feasibility—the Tschudo—as
being far more  significant. Even though it’s a much larger ore body,
it’s an open bit,  the copper will be leachable and it will have a much
longer life.”
This  exemplifies Weatherly’s forward planning —the best asset is
yet to  come, facilitated by those before it.  Webster says that the company 
sees establishing its operating base again as a key step to further  increasing
the capacity of the company.
“The short-term goal is  getting the operating base back going again and
the medium-term goal is  to expand our production to 20,000 tonnes of copper per
year through the  development of the Tschudi open pit,” he explains.
“That  feasibility study is being carried out at the moment by a company
called  Sedgmin in Perth [WA]. The samples from the open pit area are being 
sent off there and they’re going through various metallurgical tests. So 
we should get some results back in the last quarter of this year, and  look to
be completing the feasibility study certainly by mid-next year.”
Next  up is informing the wider market. And while it may be overlooked having 
recovered from the smelter sale and reorganised as a company, Weatherly  is
about to aggressively prove its worth.
“The attraction that  we have is because the copper market is still tight
and it will remain  tight, irrespective of how the world economies ebb and flow.
But, I  suspect that the fundamentals haven’t changed,” Webster
says.
“In  2008, the price of copper collapsed, but it didn’t collapse
because  there was an imbalance in the supply and demand equation, it collapsed 
simply because the GDPs of various countries collapsed. So we think that  copper
in particular has a very strong future for the foreseeable  future and our
attraction is that we have a number of projects that can  be brought into
production very quickly and at minimal capital cost.”
Herein is the key advantage that any start-up company would give anything for.
“For  small companies that have projects that can get online very quickly
for  very small amounts of cash, particularly in our case where we basically 
sell fund, we’ve got to be attractive to shareholders,” Webster
says.
So  here the company is, seven months later, a whole lot healthier and  poised
to put its five year plan into practise, impressing many market  eyes along the
way.
weatherlyplc.com