8th May 2015 07:49
LONDON (Alliance News) - Weatherly International PLC Friday revised down its full year production guidance after slower recoveries from the Tschudi mine in the first quarter, and its chief executive said he plans to retire at the end of June as the company also struck an equity financing deal with Orion Mine Finance that give's it enough money to ramp up production.
Chief Executive Rob Webster will be retiring from the company on June 30 to return to Australia, but will remain with the company as a non-executive director. Current Chief Operating Officer Craig Thomas has been appointed as the company's new CEO.
The miner said it produced 1,822 tonnes of copper in the in third quarter ended March 31, of which 1,172 tonnes, or 64%, was produced in March alone. However, no sales were recorded in the quarter as the company must compile sufficient lots for bulk transportation. In April, Weatherly shipped 970 tonnes of copper cathode at an average price of USD5,731 per tonne.
"The company continues to look at ways in which central operations can be recapitalised in order to fully realise the potential of the underground mines and processing capability," it said.
The Tschudi mine in Namibia came into production in the middle of February, and produced 692 tonnes of copper in March. Central operations produced 1,172 tonnes of copper in March.
Weatherly said in March that initial production from Tschudi was negatively impacted by underestimation of the extent of a leached cap containing significant carbonate and clay content as well as partly refractory copper oxides which resulted in slower copper recoveries as well as higher acid consumption.
The company said it has now undertaken "considerable work" to define the extent of the material and optimise the way of processing it.
The company has undertaken a mining optimisation plan which includes accelerating mining during 2015 and 2016 to ensure a sufficient supply of ore to support the plant's designed level of copper output of 17,000 tonnes per year.
"As a result of the issues detailed previously, the initial ramp up in production will continue to be constrained in the current quarter while the mining rate increases and the amount of stacked ore under leach reaches the required levels. The company expects to achieve 70% of design capacity, or 1,000 tonnes per month, in the third quarter of 2015 and design capacity of 1,400 tonnes per month by the last quarter of 2015. The revised target for the full 2015 is now 10,000 tonnes of cathode," it said in a statement.
"The combination of factors affecting revenue during the ramp up period has put the company at the limits of its available funding. The key factors were the copper price, the slow ramp up resulting from the technical issues detailed above and losses incurred by central operations in January and February," said Weatherly.
Weatherly shares are currently suspended due to its financial uncertainty and it currently has a cash balance of USD6.3 million but said it will not draw down tranche C of its facility with Orion Mine Finance, and has instead agreed an equity subscription from Orion.
"While drawing down on tranche C, a facility of USD8 million in total, with Orion would in isolation have resolved the company's immediate funding requirement at Tschudi, it was felt that, without an increase in copper price, such a drawdown would simply put further pressure on an already tight debt repayment schedule," said the company.
"Discussions between the company and Orion have consequently led to agreement of an equity subscription from Orion. Whilst formally uncommitted at the current time, pricing of any advance with respect to tranche C would be agreed between Orion and Weatherly at the time of such request," it added.
Under the non-binding agreement, Orion will subscribe to just under 171.9 million shares in Weatherly at 2.0 pence per share to raise over GBP3.4 million with the stake representing 18.1% of the enlarged share capital of the company.
Orion has also committed to subscribe to a further GBP2.8 million of shares, subject to shareholder approval, as part of a proposed placing which the company wants to hold "in the coming weeks", it said. That would be at the same 2.0 pence per share price.
Orion, at its sole election, could subscribe to another USD2.5 million in the same placing that needs shareholder approval, as long as Orion's shareholding does not exceed 29.9%, said Weatherly.
The facility agreement now provides for tranche C to be made available at Orion's discretion; any tranche C loan, if made, will provide for working capital support beyond the approximately USD8 million equity committed above. Should the proposed placing not be approved by the company's shareholders, then Weatherly will be required to obtain Orion's consent to drawdown equivalent sums under tranche C and incur the servicing costs of this.
As part of the proposed placing, Weatherly has already recieved additional subscription commitments for just under 22.3 million shares at the 2.0 pence price, to raise around GBP460,000. This is also subject to shareholder approval. Weatherly's current largest shareholder, Logiman CC, has also committed to subscribe to over 16.5 million shares to raise GBP330,000.
"With the additional equity support from Orion and the further placees, as well as the Orion debt facilities, it is expected that Tschudi's working capital requirements through the ramping up of production will be met, as well as meeting the group's working capital requirements. However, there can be no certainty that should copper prices deteriorate further or should there be any further delays to the Tschudi ramp-up, then there may be a requirement for further working capital by the group," it said.
With ongoing financial support from Orion having been re-affirmed, the board of Weatherly has sought the restoration of trading of the company's shares on AIM. The trading of shares on AIM is scheduled to recommence May 11.
Weatherly International shares were up 1.0% at 1.62 pence Friday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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