Annual Report and Accounts

27th Feb 2009 07:00



 

27 February 2009 

Weatherly International plc 

("Weatherly" or the "Company")

Publication of Annual Report and Accounts

Resumption of Trading on AIM

Weatherly International Plc today announces that its Annual Report and Accounts for the year ended 30 June 2008 which is available to download from the Company's web site, www.weatherlyplc.com and will be sent to shareholders in the coming days. 

Since the year end, there have been a number of events that have had a major impact on the Company and its operations, further details of which are contained in the Annual Report.

Following a significant fall in copper prices from around US$8,800 to around US$3,000 as a result of the global economic downturn, the directors concluded that copper prices were unlikely to recover in the short term and took the decision to close the Company's mines. 

The Company has negotiated and entered into new long term (5-year) contracts to smelt concentrate from Louis Dreyfus and Chelopech in the Tsumeb smelter, so securing its throughput and revenues subject to these suppliers continuing to be able provide contracted amounts of copper concentrate.

The Company has secured loans totalling US$11.3 million from Chelopech and Louis Dreyfus of which US$3.9 million remained committed but undrawn as at 31 January 2009. This has enabled the Company to pay redundancy costs associated with the closure of the mines, to fund future improvements scheduled at the smelter and to provide additional working capital.

As at 31 January 2009, the Company had cash at bank of US$2.4 million. 

On 14 November 2008, Weatherly announced that it had been made aware of a potential claim against the Company which was material in the context of the Company's cash resources at that time. In response, Weatherly requested that trading of its shares on the AIM Market of the London Stock Exchange ('AIM') be temporarily suspended. Since 14 November 2008 the Company has conducted a thorough investigation and believes that should this claim be pursued, it has a robust defence and would pursue a counterclaim against the other party. In these circumstances the directors do not believe that any provision for this contingent liability should be made. 

Following the publication of the Annual Report and clarification of the Company's financial position and potential claim against the Company, trading in the Company's ordinary shares on AIM has today resumed.

For further information contact:

Rod Webster, Chief Executive Officer Weatherly International +44 (0)207 868 2232

Richard Brown Ambrian Partners Limited  +44 (0)207 634 4700

Richard Greenfield 

Anthony Cardew Cardew Group +44 (0)207 930 0777

Jamie Milton

Matthew Law

Final Results for the Year Ended 30 June 2008

Summary highlights

Financial 

Turnover of US$105.5 million

Gross profit of US$5.1 million

Cash at bank US$5.4 million as at 30 June 2008

Tangible asset net book value of US$66.5 million

Corporate and operational 

Total mine production recovered in blister copper was 8,345 tonnes

Namibia Custom Smelters ("NCS") established as an independent company

Total smelter production 18,628 tonnes of copper 

Long term ore processing contracts signed with Chelopech Mining EAD and Louis Dreyfus Commodities 

Ausmelt furnace refurbished

Convertible loan note raised US$12 million 

Exploration joint venture established with Anglo American plc

Developments post year end

All mining operations suspended and placed on care and maintenance following a steep decline in the copper price

NCS will continue to operate the Tsumeb smelter

Completion of $11.3 million loan facility and extension of ore processing contracts with Chelopech Mining EAD and Louis Dreyfus Commodities to December 2013 of which US$3.9 million remained committed but undrawn as at 31 January 2009

Terms of the convertible loan notes renegotiated.

Cash at bank US$2.4 million as at 31 January 2009

Restructuring of the head office with rigorous cost cutting

  

Chairman's statement

I am pleased to announce the 2008 full year results for Weatherly International and to provide an update of the company's activities since the year end. It has been a very challenging period for the company and the mining industry in general, with volatile commodity prices, lack of liquidity and energy shortages affecting the entire southern and central African mining industry. It is also regrettable that the continuing fall in copper prices post year end has led to Weatherly's decision to suspend mining operations and place them on a care and maintenance basis especially since management had, by the end of the financial year, put in place measures to deal with the power crisis in southern Africa. However, the creation of Namibia Custom Smelters as a standalone enterprise has enabled us to continue operating the smelter at Tsumeb to process imported concentrates. 

Results

Primarily as a result of the finalisation of new tolling agreements to process third party concentrates, Weatherly recorded revenue of US$105.5 million, a significant increase compared to US$63.1 million in 2007. Gross profit was US$5.1 million, compared to US$ 7.21 million in 2007, which reflected both increased production costs and shutdowns caused by power shortages over the year. The company recorded a net loss of US$54.07 million, or US 13.15 cents per share, including an impairment charge of US$ 50.84 million relating to the Kombat mine and other mining assets. The company had US$5.4 million cash in the bank as at 30 June 2008.

Following the impairment of assets and the weakening of the rand against the US dollar, net asset value per share decreased from US 27.19 cents to US 14.15 cents year on year. 

Developments during the year 

Weatherly's focus during the year to 30 June 2008 was to make mining operations cash flow positive, and this was achieved with operating activities generating net cash of US$3.7 million. In the course of the year, Weatherly invested over US$35 million in its mines and smelter. Regrettably, however, the company was unable to reach an agreement with the Government of Namibia, NamPower and NamWater to deal with power supply and water extraction issues in the Otavi Valley. As a result, the Board took the decision to write off the Kombat mine, with a US$ 22.1 million impairment including the costs associated with closure, severance packages for employees, and placement of the mine town on a care and maintenance basis. 

 A new subsidiary, Namibia Custom Smelters, was formed to reflect the strategic shift from the smelter being solely a downstream component of Weatherly's production to becoming an independent custom facility. It was intended to be used to process ore from local mines as well as concentrates sourced through long-term supply agreements with European and South American producers. As part of this strategy, rehabilitation of the Ausmelt furnace was undertaken and completed by year end within budget. 

At the Tambao high-grade manganese project in Burkina Faso, a positive Bankable Feasibility Study was completed by Weatherly on behalf of, Wadi Al Rawda Industrial Developments, the Dubai company holding a development agreement with the government.

In May, a joint venture was signed with the Anglo American subsidiary, Ambase Prospecting Pty, for the exploration of Weatherly's EPL 2906 tenement in north-western Namibia. 

The Board was strengthened by the addition of Alan Stephens as a non-executive director. Alan brings with him significant operational and exploration experience as President and CEO of Coro Mining Corp, a Latin American focused copper exploration and development company, and former Vice President of Exploration for First Quantum Minerals.

In February 2008, the company was notified in writing that a third party was interested in merging with Weatherly. While both groups recognised the potential benefits of such a merger, uncertain market conditions hampered further progress and talks were discontinued with no formal offer being made. 

Developments post year end

In November 2008, as a result of the rapid fall in copper prices, a full review of its cash resources in progress, and a potential claim lodged against the company, Weatherly requested that trading of its shares on AIM be temporarily suspended. The company has subsequently implemented an extensive programme of cost reductions, including closure of its mines; has successfully secured a substantial long-term loan facility; and has conducted a thorough investigation into the potential claim. Following the publication of this annual report and clarification of the matters above, trading in the company's ordinary shares on AIM has now resumed.

  

The measures taken by the Board throughout 2008 helped contribute to the posting of record mine production in the quarter ended 30 September 2008 of 2,643 tonnes of copper, compared with 2,162 tonnes in the previous quarter. However, the sharp decline in world copper prices from circa US$8,000 in June 2008 to circa US$3,000 in November 2008, well below Weatherly's production cost per tonne of approximately US$5,000, called into question the viability of the company's mining operations.

Weatherly undertook a number of cost cutting measures which initially consisted of the closure of Tsumeb West and placing the Matchless mine on care and maintenance, as well as redundancies at Otjihase and Tschudi. However, continuing falls in the copper price compelled management to place these last two mines on care and maintenance also. All mine closures were conducted in an orderly manner with appropriate compensation being paid to our redundant employees. Further measures have been taken to reduce overheads at our operations office in Namibia and at our head office in London, including the departure of our Chief Financial Officer, Paul Craven. 

Weatherly will continue to operate the Tsumeb smelter to process imported concentrates under Namibia Custom Smelters and has now successfully completed arrangements for an US$11.3 million loan facility which will provide funding for the smelter's expansion and its ongoing requirements and for redundancy payments. 

As a result of these rigorous and carefully considered measures, the Board is cautiously confident that Weatherly is positioned to survive the current exceptionally difficult market conditions, and to sustain and ultimately realise the full value inherent in its key assets when these conditions improve.

Wolf Martinick

Chairman

26 February 2009

  Chief Executive's review

Overview

The main challenges that faced Weatherly during the year ended 30 June 2008 were volatile commodity prices and the security of power supply in southern Africa. Our response was to position the company to deal with these issues by investing capital to increase production and reduce operating costs, and by installing back-up power supplies. Weatherly's main assets have been the copper mines and smelter acquired from their former owner, Ongopolo. 

By the financial year-end four mines were operational - the fifth, Kombat, having been suspended due to power shortages - and the first phase of the Tsumeb smelter expansion was performing according to schedule. However, further falls in the copper price post year end led to the closure of Tsumeb West and the placement of our remaining three mines on care and maintenance pending an improvement in prices. The smelter continued to operate on a standalone basis to process processing imported concentrates.

Financial review

In the year ended 30 June 2008, the company's revenues increased 67% from US$63.1 million to US$105.5 million. Gross profit was US$5.1 million (2007: US$ 7.21 million). Net loss, due to the asset impairment of all mines and other assets written down of US$50.84 million, was US$54.07 million or US 13.15 cents per basic share. Cash in the bank as at 30 June 2008 was US$5.4 million. As at 31 January 2009, the company had cash in the bank of US$2.4million. 

In April 2008, Weatherly completed a US$12 million fundraising by the issue of secured convertible loan notes. The proceeds of the fundraising were used to complete the Tambao feasibility study and to upgrade existing assets in Namibia, including the refurbishment of diesel generators to provide Weatherly with alternative sources of power to the national grid. 

Operational review

Weatherly operates as a holding company for its mining arm, Weatherly Mining Namibia ("WMN"), and its smelting arm, Namibia Custom Smelters ("NCS"). 

Mining

Weatherly Mining Namibia's mines fed three concentration plants located in the central and northern regions of Namibia. Combined milling capacity was approximately two million tonnes of ore per annum, of which less than two thirds were being utilised. Our short to medium term strategy was to expand the production of the existing mines and to develop new satellite mines to fully utilise the available capacity. 

Mine and development status during 2007/08

Location	Mine (target) capacity (tpa)	Concentrator (nameplate) capacity (tpa)
Central operations
Otjihase	500,000	1,000,000
Matchless	150,000	Utilises Otjihase concentrator
Elbe	Evaluation
Northern operations		850,000
Tsumeb West	120,000	Utilises Tsumeb concentrators
Tschudi underground	360,000	Utilises Tsumeb concentrators
Tschudi open pit	Evaluation
Kombat operations		400,000
Asis Far West	Care and maintenance
Gross Otavi	Exploration
Berg Aukas	Feasibility

Weatherly Mining Namibia's production for 2007/08 is shown in the table below.

Area	Milled (t)	Grade (%)	Recovery (%)	Copper (t)	Cash cost $/t Cu
Central Operations	482,576	1.16	92.23	5,362	5,935(1)
Kombat Operations	-	-	-	1,274	n/a (2)
Northern Operations	277,727	0.92	66.16	1,697	n/a (2)

Includes all smelting, refining and realisation costs net of precious metal credits

Pre-production only

As stated above, the Kombat Operations were closed as a result of flooding caused by irregular power supply from NamPower, which led to the decision to shut the mine. In October 2008, following a sharp fall in the copper price, Tsumeb West was closed and Matchless placed on care and maintenance . Further price falls led to similar measures being taken at Otjihase and Tschudi in November 2008, with the last day of operations being 20 December 2008. These properties will remain on care and maintenance until copper prices recover sufficiently to make resumption of mining operations economically viable. 

Tsumeb Tailings (Weatherly 50%, Everclear Solutions Inc. 50%)

Weatherly is working with joint venture partners Everclear Solutions Inc. (Everclear) to recover copper, lead, zinc and silver from the Tsumeb tailings dam. During the financial year, Everclear successfully demonstrated its proprietary technology on a bench scale basis, and then moved to construct a small plant on site. Everclear was again able to demonstrate that the process, technically at least, is capable of electro-winning copper and other metals from the tailings. Everclear intends to install a larger plant on site in 2009 to demonstrate both the commercial and technical aspects as a prelude to a full feasibility study. 

Zambia

Both the application for the extension of PLLS 252 (exploration licence) and the granting of a retention licence for PLLS 240(tailings project) have been rejected and, as a consequence, the Zambian assets have been written down to zero.

We continue to pursue our legal rights to licence area PLLS 239 (old Luanshya copper mines), which was granted by the Republic of Zambia's Ministry of Mines and Minerals Development in April 2005 to our wholly owned subsidiary, Puku Minerals Limited. The case has been completed and the judgment is awaited. The book value of this licence was written off in previous years and significant uncertainty still exists over whether renewal will be granted.

Burkina Faso

The company is involved in the development of a high-grade manganese deposit in Burkina Faso through its Dubai partner, Wadi Al Rawda Industrial Developments (Wadi). Weatherly assisted Wadi in the preparation of a feasibility study which has been submitted to the Burkina Faso government for assessment, together with an Environmental Impact Statement and an application for a mining licence.  

Reserves and resources

The mine reserves, resources and historical reserves are contained in tables subsequent to the report. Tables A and B have been prepared in accordance with the criteria contained in the SAMREC/JORC reporting standards, whereas table C is a non-compliant "historical" statement. 

Smelting 

The Tsumeb smelter is one of only four commercial smelters currently operating in Africa. It is linked by rail to the Central and Northern Operations, and to the Atlantic port of Walvis Bay. 

Smelter production in tonnes of blister (98.6% copper) for 2007/08 is contained in the table below.

	Q3 2007	Q4 2007	Q1 2008	Q2 2008	Total 2007/08
Weatherly concentrates (includes local purchases)	1,880	2,196	2,020	2,249	8,345
Third party concentrates	3,145	1,871	943	1,826	7,785
Third party blister and matte	468	1,155	794	81	2,498
Total copper blister (tonnes)	5,493	5,222	3,757	4,156	18,628

Early in 2007, the decision was taken to change the operating philosophy of the Tsumeb smelter. Historically, it had been an integral part of the mining operations and in 2006 Weatherly rebuilt the small reverbatory furnace to accommodate its own mine production. The furnace operated effectively but, because of its small throughput, had relatively high operating costs. In order to reduce costs and fully utilise the existing infrastructure of the original, much larger plant, it was decided to expand the plant using imported concentrates to supplement internal production. The company targeted concentrates that would warrant a premium to be processed; such concentrates are typically low in copper and high in precious metals (gold and silver) and contain penalty elements such as arsenic.

As a result of this decision, Weatherly created Namibia Custom Smelters to operate as a stand-alone and profitable custom smelter. The process was initiated through:

Signing of long-term contracts with two suppliers - Chelopech Mining EAD ("Chelopech"), a wholly owned subsidiary of Dundee Precious Metals ("DPM") from its mine in Bulgaria and Louis Dreyfus Commodities Metal Suisse SA ("Louis Dreyfus") for concentrates from Peru;

Signing of "back to back" contracts with several international chemical companies for the sale of arsenic trioxide (the refined by-product from smelting);

Restructuring the smelting workforce to meet the new challenges of an independent smelting business. This involved a top-down reorganisation with a number of redundancies and re-deployments as well as new recruits to operate the new furnace. This was successfully completed in late 2007.

The first concentrates from Bulgaria and Peru were trialled in February and May 2008 respectively, using the existing reverbatory furnace as an interim measure before the Ausmelt furnace became operational. Since the financial year end, the Ausmelt furnace has been commissioned and is now fully operational. Although delayed a number of times by the late arrival of key components and the renegotiation of commercial terms with concentrate suppliers, the project was completed within budget. Costs associated with the Ausmelt furnace are incremental which means that the smelter has, for the first time, the flexibility to deal with varying concentrate supply.

The next important step will be the commissioning of the oxygen plant in early 2010, which is expected to increase capacity by a further 60% with an accompanying reduction in costs. This will be funded from the loan facility and from cash flow from the smelter.  

In December 2008, at the time of the completion of the loan facility, the three -year contracts with Chelopech and Louis Dreyfus Commodities were extended to five years ending December 2013. During this period, Louis Dreyfus will also be the exclusive offtaker of copper blister produced by the Tsumeb smelter. Under the terms of this contract, the smelter will process up to 120,000 dry metric tonnes (dmt) of concentrates in 2009, increasing to over 200,000 dmt from 2010 onwards following commissioning of the oxygen plant. 

The terms of the US$12 million convertible loan note agreed with significant shareholders in May 2008 were renegotiated at this time. Repayment will now take place in three annual instalments with US$3 million due to be paid in May 2009, US$4 million in May 2010 and US$5 million in May 2011. The conversion price has been reduced from 23.5p to 8p and the noteholders have waived previous acts of default under the terms of the original note. The company can choose to delay the May 2009 instalment to 2010 but would pay interest at an increased rate of 18%pa.

Marketing, sales and treasury

Generally, Weatherly sells all its copper production on delivery to the Walvis Bay terminal to traders on a four-month forward London Metals Exchange (LME) price. All metal sales, concentrate purchases and tolling contracts were reviewed at the end of 2007 and new frame contracts were agreed with two trading houses, Republic House and Louis Dreyfus. The average weighted copper price achieved for 2007/08 was US$7,785 per tonne. Copper prices throughout the year ranged from a high of US$8,730 per tonne to a low of US$6,380 per tonne. Weatherly also sold 28,673 ounces of gold and 229,503 ounces of silver contained in the copper blister. Average gold price for the year was US$823 per ounce and silver US$15 per ounce. Precious metals accounted for 27% of revenue.

Namibia is a rand currency area and local costs are affected by fluctuations in the rand/US dollar exchange rate. During 2007/08, the average exchange rate was 7.312 with movements from 6.426 to 8.244. 

As at 30 June 2008, Weatherly held cash reserves (in sterling and US dollars) equivalent to US$5.4 million. 

The company maintained a copper floor price protection programme and, as at 30 June 2008, had in place "puts" for 800 tonnes of copper per month until January 2009 at US$5,000 per tonne. These "puts" expired at the end of calendar year 2008 and the company received payments of US$2.74 million in respect of these hedges.

Divestments

In January 2008, Weatherly sold a series of options on its smelter slag dumps to AIM-quoted Emerging Metals Limited. EML has been created to acquire and develop minor and noble metals such as germanium, gallium and Indium which EML believes will become increasingly scarce as demand for these metals increases. The consideration was a combination of cash, shares in EML and options to acquire further shares in EML if certain criteria are met. The shares and options that were received as part of the consideration had, by 30 June 2008, increased in value by US$7.7 million. This amount is split between the options increase value of US$2.9 million which is put to the profit and loss and the share increase value of US$4.8 million put through to the equity reserve; a detailed explanation of this appears in note 18 to the financial statements. On 20 February 2009 the value of EML was 6p per share. If this had been the price at 30 June 2008, it would have meant that a gain of US$0.3 million would have been put through the equity reserve account compared to the gain of US$4.7million put through at 30 June 2008. 

Safety record

The number of lost time accidents increased in 2007/8 from the previous year which was an all-time low for these operations. Management is allocating increased resources to improve the situation, which has its roots in the safety culture prior to Weatherly's involvement. Management is strongly committed to improving this situation in the coming year.

2007/8	2007/8	2006/7
Fatalities	0	2
Reportable (1)	13	5
Disabling (2)	27	16

(1) More than 14 days lost

(2) Between 1 and 14 days lost

Environment 

Weatherly is committed to maintaining the highest environmental standards as part of its overall business philosophy. The gaseous emissions from the smelter are constantly monitored and it remains fully compliant with government and statutory requirements. During the forthcoming year, the company will be reviewing its environmental monitoring, management and reporting systems to ensure it continues to maintain the highest standards.

Outlook

Given the events since the end of the financial year, particularly the severe downturn in copper prices, the company has had to take a number of difficult actions in response. This has included the closure of its mines and establishment of the Tsumeb smelter as an independent business treating only imported concentrates. Copper prices are not expected to recover until there is a turnaround in the global economy and this could take some time. However, the completion of our $11.3 million loan facility of which US$3.9 million remained committed but undrawn as at 31 January 2009 which will ensure funding for the smelter's ongoing requirements and expansion programme, which will continue to generate revenue for the company. 

Weatherly's immediate objectives are to ensure that all its Namibian mines and Namibian development projects are kept on care and maintenance in such a way that the full value of the assets is retained, and that the mines can reopen quickly should copper prices recover. The smelter will continue to generate substantial and sustainable profits, sufficient to meet its operating and debt servicing requirements. 

Weatherly intends to take advantage of the downturn to reassess its mine strategies, and to optimise its plans in advance of any resumption of mining activity whilst at the same time realising asset values as appropriate. On a corporate level, the company will be looking to advance its involvement in the promising manganese project in Burkina Faso and, subject to availability of funding, to acquire new resource assets in order to build a larger and stronger company in the long term.

While the current severe downturn is an immediate setback to the company's fortunes, it also presents potential competitive opportunities. The challenge for Weatherly and its management will be to make the most of those opportunities. In responding quickly to these tough market conditions and taking the decisive actions we have, I believe the company is well positioned to do so.

Rod Webster

Chief Executive Officer

26 February 2009

  

TABLE A

Weatherly Mining Namibia : Ore Reserves as at 30 June 2008
Deposit	Reserve	Reserve Tonnes and Grade				Contained Metal
	Category	Tonnes	Cu (%)	Ag (g/t)	Au (g/t)	Cu (t)	Ag (kg)	Au (kg)
Otjihase	Proven	2,430,750	1.75	6.80	0.34	42,632	16,518	822
	Probable	287,602	1.01	7.57	0.15	2,895	2,177	42
	Total	2,718,352	1.67	6.88	0.32	45,527	18,695	864
	Proven	-	-	-	-	-	-	-
Matchless (West Ext.)	Probable	781,991	1.67	-	-	13,059	-	-
	Total	781,991	1.67	-	-	13,059	-	-
Tschudi (Underground)	Proven	739,900	1.33	12	-	9,867	8,701	-
	Probable	748,800	1.17	11	-	8,761	8,087	-
	Total	1,488,700	1.25	11	-	18,628	16,788	-
Tsumeb West	Proven	-	-	-	-	-	-	-
	Probable	513,230	1.59	13	-	8,160	6,672	-
	Total	513,230	1.59	13	-	8,160	6,672	-
Grand Total (Proven + Probable)		5,502,273	1.55	7.66	0.16	85,374	42,155	864

TABLE B

Weatherly Mining Namibia : Mineral Resources as at 30 June 2008
Deposit	Resource	Insitu Tonnes and Grade				Insitu Metal
	Category	Tonnes	Cu (%)	Ag (g/t)	Au (g/t)	Cu (t)	Ag (kg)	Au (kg)
Otjihase	Measured	3,748,881	2.37	8.92	0.42	88,817	33,454	1,590
	Indicated	2,816,936	1.99	6.73	0.35	56,125	18,960	986
	Inferred	4,729,622	1.49	6.34	0.22	70,427	29,972	1,057
	Total	11,295,439	1.91	7.29	0.32	215,369	82,386	3,633
	Measured	-	-	-	-	-	-	-
Matchless	Indicated	651,659	2.09	-	-	13,620	-	-
Western Extension	Inferred	230,460	2.32	-	-	5,346	-	-
	Total	882,119	2.15	-	-	18,966	-	-
Tschudi	Measured	13,333,000	0.82	10	-	108,897	129,985	-
	Indicated	26,312,000	0.83	11	-	217,863	285,446	-
	Inferred	3,531,000	0.84	11	-	29,625	38,875	-
	Total	43,176,000	0.83	11	-	356,385	454,306	-
Tsumeb West	Measured	83,400	2.45	13	-	2,043	1,084	-
	Indicated	520,400	2.24	20	-	11,680	10,417	-
	Inferred	413,200	1.88	16	-	7,757	6,757	-
	Total	1,017,000	2.11	18	-	21,480	18,258	-
Kombat Asis West	Measured	4,790	2.74	8.34	-	131	40	-
	Indicated	241,654	2.07	16.43	-	5,006	3,971	-
	Inferred	377,000	3.10	34.00	-	11,837	12,800	-
	Total	623,444	2.72	26.96	-	16,974	16,811	-
Grand Total : All Categories		56,994,002	1.10	10.03	0.06	629,174	571,761	3,633

All reserves and resources in tables A and B above have been updated by a competent person (A Thompson BSE (Hons) Geology, General Manager Technical Services Weatherly Mining Namibia,  Member of South African Council for Natural Scientific Professions Reg No. 400052/86) in accordance with the Australian Code of Reporting Mineral Resources and Reserves (JORC).

TABLE C

Weatherly Mining Namibia : Historical Resources
Deposit	Tonnes	Cu (%)	Pb (%)	Zn (%)	Ag (g/t)	Au (g/t)	V (%)	Ge (ppm)	Cu (t)	Pb (t)	Zn (t)	Ag (kg)	Au (kg)	Remarks
Old Matchless Mine	1,060,000	2.50	-	-	-	-	-	-	26,500	-	-	-	-	Remaining resource/reserve calculated by Gold Fields in 1984
Elbe (A-Gossan)	5,910,000	1.20	-	0.97	8.30	0.45	-	-	70,920	-	57,327	49,053	2,660	Resource calculated by Gold Fields in 1989
Tsumeb Mine (Open Pit)	150,000	2.96	-	-	61.00	-	-	-	4,440	-	-	9,150	-	Remaining resource/reserve calculated by Gold Fields in 1984
Uris Mining Area	180,000	2.27	-	-		-	-	-	4,086	-	-	-	-	Remaining resource/reserve calculated by Gold Fields in 1984
Kombat Central (Open Pit)	115,000	1.08	0.10	-	8.00	-	-	-	1,242	115	-	920	-	Model refining required
Kombat East	70,009	1.62	1.01	-	13.42	-	-	-	1,132	706	-	939	-	Historical remnant ore
Kombat Lead	465,224	0.33	2.14	-	15.00	-	-	-	1,535	9,955	-	6,978	-	Recalculated using new diamond drilling data
Kombat Asis Far West	2,214,639	2.29	-	-	-	-	-	-	50,715	-	-	-	-	Historical resource calculated by TCL
Gross Otavi Central	160,000	1.54	5.85	-	15.40	-	-	-	2,464	9,360	-	2,464	-	Historical resource calculated by Gold Fields
Harasib	1,240,000	-	1.66	2.67	-	-	-	-	-	20,584	33,108	-	-	Historical resource calculated by Gold Fields
Berg Aukas	1,650,000	-	4.60	17.40	-	-	0.60	-	-	75,900	287,100	-	-	Remaining resource/reserve calculated by Gold Fields in 1987
Total : Deposit Resources	13,214,872	1.23	0.88	2.86	5.26	0.20	-	-	163,034	116,620	377,535	69,504	2,660
Kombat Tailings	10,600,000	0.21	0.19	-	2.00	-	-	-	22,260	20,140	-	21,200	-	Remaining resource/reserve calculated by Gold Fields in 1984
Tsumeb Tailings	16,000,000	0.71	-	-	-	-	-	-	113,600	-	-	-	-	Remaining resource/reserve calculated by Gold Fields in 1994
Tsumeb Slag Dumps	2,000,000	-	-	9.03	-	-	-	262.00	-	-	180,600	-	-	Zinc Ox feasibility in 2003
Total : Dump Resources	28,600,000	0.48	0.07	0.63	0.74	-	-	-	135,860	20,140	180,600	21,200	-
Note:
Reserves contained in table C are 'historical' and although most were prepared at the time in accordance with South African reporting standards (SAMREC) they will not comply with current standards until a further process of independent verification has been carried out.

Directors' report

Principal activity and review of the business

The principal activity of Weatherly International plc during the year was to act as a holding company for the group's activities in mining and production of base metals, primarily copper. 

The subsidiary and associated undertakings principally affecting the profits or net assets of the group in the year are listed in note 17.

A review of business can be found in the Chairman's statement and the Chief Executive's review.

The directors

The directors during the year ended 30 June 2008 and changes since were:

W G Martinick (non-executive)
R J Webster
P G Craven	Resigned 9 February 2009
J Bryant (non-executive)
P Redmond (non-executive)	Resigned 10 July 2008
A Stephens (non-executive)	Appointed 10 July 2008

Going concern

Since the year end there have been a number of events that have had a major impact on the company and its operations. 

Firstly, copper prices fell from around US$8,800 to around US$3,000 as a result of the global economic downturn, making our copper mines in Namibia uneconomic. The directors concluded that copper prices were unlikely to recover in the short term and took the decision to close the company's mines. 

Secondly, the company negotiated and entered into new long term (5-year) contracts to smelt concentrate from Louis Dreyfus and Chelopech in the Tsumeb smelter, so securing its throughput and revenues subject to these suppliers continuing to be able to provide contracted amounts of copper concentrate.

 

Thirdly, the company has secured loans totalling US$11.3 million from Chelopech and Louis Dreyfus of which US$3.9 million remained committed but undrawn as at 31 January 2009 which has enabled it to pay the redundancy costs associated with the closure of the mines, to fund the future improvements scheduled at the smelter and to provide additional working capital. The repayment conditions attached to the loans put constraints on the free cash flows from the revenues deriving from the smelter until repayment of the loans. The loan also includes a provision for a monthly management fee of US$150,000 payable to Weatherly International for the operation of its head office.

Finally, as part of this financial restructuring, the conditions attached to the existing convertible note holders were renegotiated. The strike price for conversion was reduced from 23.5p to 8p and the terms of repayment were restructured so that US$3 million plus interest is payable in May 2009, US$4 million plus interest in May 2010, and US$5 million plus interest in May 2011. The payment to be made in May 2009 can be deferred for 12 months subject to the application of a higher rate of interest.

In the light of these substantial changes to our business, the directors have reviewed the business model and the assumptions contained within it and believe them to be reasonable. However, there are a number of uncertainties around the assumptions that have the potential to negatively impact on the company's ability to deliver the forecast cash flows. 

These are:

Continued supply of concentrates, as per contracted amounts, from Chelopech and Louis Dreyfus is entirely outside the control of the company, and any significant reduction in this supply will negatively impact the company's profitability.

The smelter is assumed to operate at or near to 90% capacity with copper concentrates provided by Chelopech and Louis Dreyfus. The directors believe that this is a reasonable assumption given the smelter's unique ability to treat concentrates with a high arsenic content and the lack of alternatives. Additionally, the smelter's operational flexibility allows it to continue to generate positive revenues at capacities below design capacity.

Settlement of Weatherly Mining's creditors in Namibia (approximately US$5million) and the repayment of the first tranche of the convertible loan note principal of US$3 million due in May 2009, if not deferred until May 2010, is dependent on the realisation of funds raised from the sale of the company's assets, real estate, and plant and equipment in Namibia. The directors believe that sufficient funds will be raised to fund these liabilities and loan principal but there is no assurance that this will be the case. The interest payment of US$690,000 due in May 2009 will be paid from current funds.

Weatherly Mining owes N$9.8 million (approximately US$1 million) in royalties to the Namibian Government up to 30 June 2008. It is the aim that the monies be paid. Weatherly Mining has filed for relief for royalties for the period 1 July 2008 up until the mines ceased operation, and the company expects the relief to be granted by the government in due course. However, there is no assurance that this will be the case.

No settlement of creditors (US$2.5 million) arising under the terms of the compromise agreement negotiated as part of the original mine acquisition in 2006. As the mines have been closed, the directors do not consider these monies to be payable and no provision has been made in respect of this liability.

In November 2008, the company became aware of a potential claim in the amount of £3.5million against the company from a third party in relation to an alleged previously unknown financial obligation. Since that date, a thorough investigation has been conducted. As a result, the company believes that, should this claim be pursued, it has a robust defence and would pursue a counterclaim for loss and damages against the other party. In these circumstances the directors do not believe that any provision for this contingent liability should be made.

On the basis of the foregoing projections and assumptions, the directors consider that the group will continue to operate within its currently available funds and the proceeds from the projected sale of assets, and that it is appropriate to prepare the financial statements on the going concern basis.

Results and dividends

The consolidated loss for the year, after taxation, is US$54.07 million (2007: US$27.97 million profit). No dividends were recommended by the directors during the year.

Zambia

Both the application for the extension of PLLS 252 (exploration licence) and the granting of a retention licence for PLLS 240(tailings project) have been rejected and, as a consequence, the Zambian assets have been written down to zero.

We continue to pursue our legal rights to licence area PLLS 239 (old Luanshya copper mines), which was granted by the Republic of Zambia's Ministry of Mines and Minerals Development in April 2005 to our wholly owned subsidiary, Puku Minerals Limited. The case has been completed and the judgment is awaited. The book value of this licence was written off in previous years and significant uncertainty still exists over whether renewal will be granted.

Kombat

In early December Eskom, the South African power company, blacked out the whole of the Namibian grid without warning. Kombat is a wet mine, typically pumping in excess of 2,500 cubic metres of water per hour, and the loss of power meant the mine was unable to control water levels. Given Namibia's heavy reliance on South Africa for power, NamPower could not guarantee future supply, and under these circumstances the decision was ultimately taken to suspend operations at the mine. We were unable to conclude an agreement with NamWater and NamPower that would defray the expense of dewatering the mine. As a result of this we have reconsidered our priorities for development. Under these circumstances the decision was taken to write down the value of the mine in the 2007/08 accounts. 

An assessment of the various options open to the company has concluded that the development and reopening of the Berg Aukas mine, approximately 80 km east of Kombat, using the Kombat processing plant and infrastructure was more attractive than reopening the Kombat mine itself. Berg Aukas, which produced lead, zinc and vanadium, was closed in 1978 and since then has remained dormant. Consultants RSG(SA) have worked on the project for most of the year, collating data and developing an electronic ore body model to form the basis of a full feasibility. The reserves at the time of closure were recorded as 1.7mt grading 17% zinc, 5% lead and 0.6% vanadium oxide. The current evaluation is focused on the case for establishing a shallow decline mine in the upper levels which would operate for the first two years while the deeper levels of the mine are dewatered and rehabilitated. Ore would undergo preliminary upgrading on site before being trucked to the Kombat concentrator where saleable lead, zinc and vanadium concentrates would be produced. Consultants Logikal of Perth have been appointed as managers of the feasibility and RSG(SA) and Intermet have been appointed as its geological and metallurgical consultants.

Other impaired mining assets

As a result of the severe economic downturn beyond the year end, the company decided to close all its existing mines. Accordingly, the Board believes the basis of accounting at 30 June 2008 has changed and it has taken the decision to write off the various mine assets, primarily consisting of the development expenditure. This additional impairment totalled US$22.6 million.

Key performance indicators

Production

The Board monitors monthly production against budgeted figures, while management monitors it on a daily basis. Production "head grades" are monitored by management on a shipment basis and the Board monitors ore grades on a monthly basis. For the year ended 30 June 2008, 791,130 tonnes of ore were extracted (2007: 462,442 tonnes), producing 8,345 tonnes of copper (2007: 5,726 tonnes). The smelter produced 18,628 tonnes of blister copper (2007: 22,711 tonnes).

Finance

The liquidity requirements of the company are monitored on a weekly basis by management, monthly and quarterly by the Board, and semi-annually by external parties. The current asset ratio at the year end was 1.02 (2007:1.31).

Performance

The Board monitors 71 comparable AIM-quoted stocks against Weatherly's share price; the review relating to 30 June 2008 ranked Weatherly 29th in the league of the best performing stocks in that comparison.

Key risk factors and mitigations

The Board believes that the principal risks associated with Weatherly's business activities are set out in the Directors' Report under "Going concern". In addition to those outlined, there are several additional risks listed as follows:

Production

Increasing production remains fundamental to value growth, and management closely monitors group development and production plans. Variances to budget are analysed and corrective measures taken where necessary.

Medium and long term production forecasts are made on a monthly basis and any potential shortfall in targets is addressed.

Human resources

Management: Our leadership capabilities have been enhanced by bringing in additional key management personnel during the year. The Board monitors and assesses the performance of senior staff through personal target setting. These individual management targets are directly aligned with the overall targets of the group.

Workforce: During the year Weatherly employed around 900 staff at its various sites, and the company supplemented the established skill base by introducing contract mining specialists to increase productivity and technological innovation at the mines.

Project development risk

All potential projects are subject to an investment appraisal procedure that involves the Board at the key stages of initiation, mandate and sanction. Projects are assessed by their strategic fit and contribution to earnings. All projects are scrutinised for consistency of assumptions and accuracy of modelling prior to presentation to the Board.

Commodity and market risk

During the year Weatherly took out put options over the production of copper at a strike price of US$5,000 per tonne. The put options expired on 31 December 2008, and no further options have been purchased. Management assesses the forecast price curves for copper each month and a comparison is made to the budget price.

Risks relating to investing in Namibia

Political: Namibia is considered one of the lowest-risk economies in the African continent. The Government pursues a consistent strategy of encouraging investment in the country and is keen to keep the climate attractive for foreign investors. Weatherly maintains strong links with the President, Prime Minister, Minister for Mines, and other Government members and officials. The Board reviews the strategic impact of political changes within the country on an ongoing basis.

Black Economic Empowerment: There is currently no Black Economic Empowerment legislation embodied in Namibian law. Weatherly monitors proposed legislative changes and maintains a positive and proactive dialogue with the country's legislators.

Exchange controls: The company maintains a consistent and compliant approach to exchange regulations within Namibia.

Currency and exchange rate fluctuations: Weatherly manages its treasury function through its London office. Treasury balances the needs of the Namibian subsidiary against fluctuations in the currency and optimises transfer through its advisers, drawing down funds on a prudent basis.

Infrastructure: Weatherly's operations are serviced by good regional infrastructure, and the Board reviews its infrastructure requirements on an ongoing basis. Any challenges relating to the supply of electricity, water or rail links are incorporated into investment decisions and addressed as needed in the overall projects. Any infrastructure requirements outside the project scope are addressed through dialogue with the Government and the relevant parastatal institutions.

Substantial holdings

Shareholdings of 3% and more of the issued share capital of the company were extracted from the shareholders' register at close of business on 6 February 2009 as follows:

Number of ordinary 0.5p shares

RAB Capital 97,308,695 24.00%

Matterhorn Investment Management LLP 71,170,952 17.56%

Bank Windhoek (Namibia) 33,948,233 8.38%

R J Webster 27,343,800 6.75%

W G Martinick 19,263,200 4.75%

Ezenet Ltd 18,281,200 4.51%

CSFB Direct 14,882,000 3.67%

G.I.P.F. (Namibia) 13,102,023 3.23%

Post balance sheet events

Board changes

Alan Stephens (age 54) was appointed a non-executive director with effect from 10 July 2008, replacing Peter Redmond who resigned on the same date.

Following the closure of our mines and completion of revised tolling agreements for the Tsumeb smelter, and as part of the restructuring of the company, Paul Craven stepped down as Chief Financial Officer of Weatherly on 9 February 2009. It is proposed to seek shareholder approval at our Annual General Meeting for a payment of £30,000 to be made to Mr Craven for loss of office.

Contingent liability 

In November 2008, the company became aware of a potential claim in the amount of £3.5 million against the company from a third party in relation to an alleged previously unknown financial obligation. Since that date, a thorough investigation has been conducted. As a result, the company believes that, should this claim be pursued, it has a robust defence and would pursue a counterclaim for loss and damages against the other party. In these circumstances the directors do not believe that any provision for this contingent liability should be made.

Mine closures

On 19 November 2008, Weatherly announced that in response to the severe 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. On 1 December 2008, the company announced that it was also suspending operations at its remaining mines, Otjihase and Tschudi.

These decisions were taken in light of the significant and sustained decline in world copper prices. Prices have declined from approximately US$8,400 per tonne in July 2008 to a current level of around US$3,300 per tonne and consensus forecasts do not indicate there will be a recovery in the medium term. 

Loan facility agreements

On 30 December 2008, Weatherly announced that it had entered into loan facility agreements with Chelopech and Louis Dreyfus to provide the company with US$11.3 million of new funding. 

Chelopech has entered into an agreement to provide Namibia Custom Smelters ("NCS"), a wholly owned subsidiary of Weatherly which operates the Tsumeb smelter, with a US$7 million facility, US$1 million of which had already been advanced.

The company has signed a separate agreement with Louis Dreyfus for a US$4.3 million facility consisting of US$2 million which is effectively a prepayment made under the terms of the concentrate tolling arrangements that have been concluded, and a rescheduling of the US$2.3 million of credit owed to Louis Dreyfus by Weatherly.

Following the signing of these loan facility agreements, Weatherly has made the necessary structural adjustments arising from the closure of its mines, and is positioned to fund the expansion and ongoing requirements of the Tsumeb smelter. The licences for all Weatherly's mining assets will be maintained in good standing, and extension to exploration licences sought as they fall due. 

The terms of the loans include the extension of the three-year contract to process imported concentrates from Chelopech and Louis Dreyfus for a period of five years up to December 2013. During this period, Louis Dreyfus will also be the exclusive offtaker of copper blister produced by the Tsumeb smelter and exclusive supplier of additional copper concentrates required by the smelter. Under the terms of this contract, the Tsumeb smelter will process up to 120,000 dry metric tonnes (dmt) of concentrates in 2009, increasing to over 200,000 dmt from 2010 onwards after commissioning of the planned oxygen plant. 

In the overall restructuring of the company's debt profile, Weatherly has renegotiated the terms of the US$12 million convertible loan note agreed in May 2008 with significant shareholders. Repayment will now take place in three annual instalments with US$3 million due to be paid in May 2009, US$4 million in May 2010 and US$5 million in May 2011. The conversion price has been reduced from 23.5 pence to 8 pence and the note holders have waived previous acts of default under the terms of the original loan note.

Having taken measures to secure its assets in the face of the current commodities downturn, Weatherly intends to focus in the short term on the operation of the Tsumeb smelter while seeking to optimise its growth potential in order to be well positioned when commodity prices recover.

Change in value of investment

On 20 February 2009 the value the investments held by the entity fell to £0.06 per share. If this had been the price at 30 June 2008, it would have meant that a gain of US$0.3 million would have been put through the equity reserve account instead of the gain of US$4.7million put through at 30 June 2008. 

Future developments

Discussion of future developments can be found in the Chairman's statement and the Chief Executive's review.

Company's policy on payment of creditors

It is the group's policy to settle terms of payment with suppliers when agreeing the terms of each transaction, to ensure that suppliers are made aware of these terms of payment, and to endeavour to adhere to them. Trade creditors of the group at 30 June 2008 were equivalent to 123 days' purchases (2007: 110 days), based on the average daily amount invoiced by suppliers during the period.

Exchange rates

The following rates have been used in the compilation of the financial statements and notes supporting the accounts: year-end US dollar to sterling exchange rate is 1.9954 with the average rate for the year 2.0044. The year-end US dollar to South African rand (ZAR) rate is 7.9645, with the average rate for the year 7.3123. (The currency in Namibia is the Namibian dollar which is pegged 1:1 to the South African rand)

	Translation	2008	2007
Year end	1 USD - GBP	1.9954	2.0039
Average	1 USD - GBP	2.0044	1.9141
Year end	1 USD - ZAR	7.9645	7.0760
Average	1 USD - ZAR	7.3123	7.2190

  Statement of directors' responsibilities - group

The directors are responsible for preparing the annual report and the group financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors have to prepare financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgments and estimates that are reasonable and prudent;

state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as the directors are aware:

there is no relevant audit information of which the company's auditor is unaware; and

the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Auditor

Grant Thornton UK LLP have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

By order of the Board:

Rod Webster

Chief Executive Officer

26 February 2009

  

Consolidated income statement

For the year ended 30 June 2008

				Year ended 30 June 2008		Year ended 30 June 2007
	Note			US$,000		US$,000
Revenue	5			105,449		63,158
Cost of sales				(100,393)		(55,946)
Gross profit				5,056		7,212
Other operating income				1,331		1,608
Administrative expenses				(11,736)		(7,518)
Discount on acquisition				-		17,725
(Loss)/profit on sales of assets	9			(187)		9,530
Release of environmental liability	9			2,178		-
Fair value of financial instruments through profit and loss	10			1,666		-
Impairment of assets	31			(50,837)		-
Operating (loss)/profit				(52,529)		28,557
Finance costs - environmental provision	11			(116)		(592)
Foreign exchange loss				(720)		(345)
Finance costs	11			(1,253)		-
Finance income				549		350
(Loss)/profit on ordinary activities before income tax				(54,069)		27,970
Income tax expense	12			-		-
(Loss)/profit on ordinary activities after income tax				(54,069)		27,970
Allocated as follows:
(Loss)/profit attributable to equity shareholders of parent entity				(52,393)		27,371
Minority interest	27			(1,676)		599
				(54,069)		27,970
Total and continuing (loss)/earnings per share
Basic (US cents per share)	14			(13.15)		8.20
Diluted (US cents per share)	14			(13.15)		8.13

Continuing operations

All activities are continuing operations. None of the group's activities were discontinued during the current year or in previous periods. 

Consolidated balance sheet

At 30 June 2008

				As at		As at
				30 June 2008		30 June 2007
	Note			US$,000		US$,000
Assets
Non-current assets
Property, plant and equipment	16 (a)			65,238		94,909
Investment properties	16 (b)			1,282		1,534
Intangible assets	15			560		6,175
Investments	17(b)			9,575		-
Total non-current assets				76,655		102,618
Current assets
Inventories	19			8,779		1,504
Trade and other receivables	20			23,780		8,493
Cash and cash equivalents				5,385		13,280
Total current assets				37,944		23,277
Total assets				114,599		125,895
Current liabilities
Trade and other payables	24			35,742		9,587
Unsecured creditors subject to a compromise on acquisition	24			1,523		6,963
Bank borrowings				-		1,204
Total current liabilities				37,265		17,754
Non-current liabilities
Trade and other payables	25			123		381
Unsecured creditors subject to a compromise on acquisition	25			2,370		4,321
Loans	21, 22			12,469		-
Deferred revenue	18, 23			4,944		-
Provisions	26			133		4,248
Total non-current liabilities				20,039		8,950
Total liabilities				57,304		26,704
Net assets				57,295		99,191
Equity
Issued capital				3,519		3,043
Share premium				71,702		53,665
Merger reserve				18,471		18,471
Capital redemption reserve				454		454
Share-based payments reserve				775		271
Other reserves				4,291		-
Foreign exchange reserve				(7,435)		3,100
Retained earnings				(34,441)		17,952
Equity attributable to shareholders of the parent company				57,336		96,956
Minority interests	27			(41)		2,235
				57,295		99,191

.......................................................................

On behalf of the Board:

R J Webster

Chief Executive Officer

Approved by the Board on 26 February 2009

Consolidated statement of changes in equity

For the year ended 30 June 2008

	Issued capital	Share premium	Merger reserve	Capital redemp-tion reserve	Share-based payment reserve	Foreign exchange reserve	Other reserve	Retained earnings	Subtotal	Minority interest	Total equity
	$,000	$,000	$,000	$,000	$,000	$,000	$,000	$,000	$,000	$,000	$,000
At 1 July 2006	2,779	27,983	6,151	-	48	-	-	(9,419)	27,542	-	27,542
Exchange differences on translation of foreign operations	-	-	-	-	-	3,100	-	-	3,100	-	3,100
Minority interest recognised directly in equity	-	-	-	-	-	-	-	-	-	1,636	1,636
Net income recognised directly into equity	-	-	-	-	-	3,100	-	-	3,100	1,636	4,736
Profit for the period	-	-	-	-	-	-	-	27,371	27,371	599	27,970
Total recognised income and expense	-	-	-	-	-	3,100	-	27,371	30,471	2,235	32,706
Issue of shares	718	25,682	12,320	-	-	-	-	-	38,720	-	38,720
Repurchase of deferred shares	(454)	-	-	454	-	-	-	-	-	-	-
Share based payments	-	-	-	-	223	-	-	-	223	-	223
At 30 June 2007	3,043	53,665	18,471	454	271	3,100	-	17,952	96,956	2,235	99,191
Exchange differences on translation of foreign operations	-	-	-	-	-	(10,535)	-	-	(10,535)	(600)	(11,135)
Fair value movement in investments	-	-	-	-	-	-	4,760	-	4,760	-	4,760
Net income recognised directly into equity	-	-	-	-	-	(10,535)	4,760	-	(5,775)	(600)	(6,375)
Loss for the period	-	-	-	-	-	-	-	(52,393)	(52,393)	(1,676)	(54,069)
Total recognised income and expense	-	-	-	-	-	(10,535)	4,760	(52,393)	(58,168)	(2,276)	(60,444)
Issue of shares	476	18,037	-	-	-	-	-	-	18,513	-	18,513
Share-based payments	-	-	-	-	504	-	-	-	504	-	504
Equity component of compound financial instument	-	-	-	-	-	-	(469)	-	(469)	-	(469)
At 30 June 2008	3,519	71,702	18,471	454	775	(7,435)	4,291	(34,441)	57,336	(41)	57,295

 

Consolidated cash flow statement

For the year ended 30 June 2008 

				Year ended		Year ended
		Note		30 June 2008		30 June 2007
				US$,000		US$,000
Cash flows from operating activities
(Loss)/Profit for the period				(54,069)		27,970
Adjusted by:
Depreciation of property, plant and equipment				5,138		6,742
Discount on acquisition				-		(17,725)
Share-based payment expenses				504		223
Profit on sale of assets				(1,991)		(9,240)
Charge for environmental provision				-		592
Impairment of assets				50,837		-
Fair value adjustment through profit and loss account				(2,899)		-
Fair value adjustment of put options				1,233		-
Finance charge				1,253		-
Interest received				(549)		(350)
				(543)		8,212
Movements in working capital
Increase in inventories				(7,275)		(313)
(Increase)/decrease in trade and other receivables				(14,537)		1,960
Increase/(decrease) in trade and other payables				26,030		(12,148)
Net cash generated by /(used in) operating activities				3,675		(2,289)
Cash flows from investing activities
Interest received				549		441
Payments for property, plant and equipment				(35,795)		(33,372)
Receipts from sales of property, plant and equipment				601		10,759
Purchase of shares in subsidiary				-		(20,000)
Net cash acquired in subsidiary undertaking				-		14,893
Payments to acquire investments - acquisition costs				-		(1,942)
Proceeds from sale of Tsumeb dumps		18		2,886		-
Net cash used in investing activities				(31,759)		(29,221)
Cash flows from financing activities
Proceeds from issue of equity shares				20,007		27,205
Associated costs of issue of equity shares				(1,494)		(1,237)
Financing of creditors compromise on acquisition				(7,391)		(3,057)
Interest paid and finance charges				(1,253)		(91)
Commodity contracts				(1,234)		-
Convertible note proceeds				11,250		-
Net cash generated by financing activities				19,885		22,820
Decrease in cash				(8,199)		(8,690)
Reconciliation to net cash
Net cash at 1 July				12,076		18,842
Decrease in cash				(8,199)		(8,690)
Foreign exchange gains				1,508		1,924
Net cash at 30 June				5,385		12,076
Cash at bank				5,385		13,280
Bank overdraft				-		(1,204)
Net cash at 30 June				5,385		12,076

  

Notes 

For the year ended 30 June 2008

1. NATURE OF OPERATIONS AND GENERAL INFORMATION

Weatherly International plc and subsidiaries' ("the group's") principal activities include the mining, smelting and sale of copper.

Weatherly International plc is the group's ultimate parent company. It is incorporated and domiciled in Great Britain. The address of Weatherly International plc's registered office, which is also its principal place of business, is Marble Arch Tower, 55 Bryanston Street, London W1H 7AJ. Weatherly International plc's shares are listed on the Alternative Investment Market of the London Stock Exchange.

Weatherly International's financial statements are presented in United States dollars (US$), which is also the functional currency of the parent company.

These consolidated financial statements were approved for issue by the Board of directors on 26 February 2009.

2. FIRST TIME ADOPTION

The opening IFRS balance sheet as at the date of transition on 1 July 2006 has been prepared in accordance with the measurement and recognition rules of IFRS 1 "First time adoption of International Financial Reporting Standards". The most significant optional exemptions adopted are as follows:

a)	IAS 21 The effects of foreign exchange differences
	Cumulative translation differences on foreign operations which existed at the time of the transition can be transferred into the retained earnings, and the foreign exchange reserve therefore shows only differences arising after transition (IFRS 1 "First time adoption of IFRS").
b)	IFRS 3 Business combinations
	Business combinations prior to the date of transition to IFRS need not be restated (IFRS 1 "First time adoption of IFRS"). Business combinations prior to the date of transition were dealt with by the purchase method of accounting.
c)	IFRS 2 Share-based payments
	IFRS 2 Share-based payments has not been applied to share options granted after 7 November 2002 but which had vested by 1 July 2006, the date of transition to IFRS

.

Future periods

At the date of authorisation of these financial statements, the following standards and interpretations (which have not been applied in these financial statements) were in issue but not yet effective:

IAS 1 Presentation of financial statements (revised 2007) (effective 1 January 2009)

IAS 23 Borrowing costs (revised 2007) (effective 1 January 2009)

Amendment to IAS 32 Financial instruments: presentation and IAS 1 Presentation of financial statements - puttable financial instruments and obligations arising on liquidation (effective 1 January 2009)

IAS 27 Consolidated and separate financial statements (revised 2008) (effective 1 July 2009)

Amendment to IFRS 2 Share-based payment - vesting conditions and cancellations (effective 1 January 2009)

Amendments to IFRS 1 First-time adoption of International Financial Reporting Standards and IAS 27 Consolidated and separate financial statements - costs of investment in a subsidiary, jointly controlled entity or associate (effective 1 January 2009)

Amendment to IAS 39 Financial instruments: recognition and measurement - eligible hedged items (effective 1 July 2009)

Improvements to IFRSs (effective 1 January 2009, other than certain amendments effective 1 July 2009)

IFRS 3 Business combinations (revised 2008) (effective 1 July 2009)

IFRS 8 Operating segments (effective 1 January 2009)

IFRIC 12 Service concession arrangements (effective 1 January 2008)

IFRIC 13 Customer loyalty programmes (effective 1 July 2008)

IFRIC 14 IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction (effective 1 January 2008)

IFRIC 15 Agreements for the construction of real estate (effective 1 January 2009)

IFRIC 16 Hedges of a net investment in a foreign operation (effective 1 October 2008)

The directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements of the group except for additional segment disclosures when IFRS 8 comes into effect for periods commencing on or after 1 January 2009, and the amendments to the presentations of the primary statements when IAS 1 (revised) comes into effect.

  3. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain properties and financial instruments. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and entities controlled by the company (its subsidiaries) made up to 30 June each year. Control is achieved where the company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the group's equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority in excess of the minority's share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority's interest in the subsidiary's equity are allocated against the interests of the group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of an acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current assets held for sale and discontinued operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group's interest in the net fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Intangible assets

Exploration and evaluation expenditure

Exploration and evaluation (E & E) expenditure costs comprise costs associated with the acquisition of mineral rights and mineral exploration and are capitalised as intangible assets pending determination of the feasibility of the project. They also include certain administrative costs that are allocated to the extent that those costs can be related directly to operational activities.

If an exploration project is deemed successful based on feasibility studies, the related expenditures are transferred to development and production (D & P) assets and amortised over the estimated life of the ore reserves on a unit of production basis. Where a project is abandoned or considered to be no longer economically viable, the related costs are written off in the income statement.

Computer software

Computer software is accounted for using the cost model, whereby capitalised costs are amortised on a straight line basis over their estimated useful lives (three years), as these are considered finite. Purchased software and the direct cost associated with the customisation and installation thereof is capitalised. Acquired computer software licences are capitalised on the basis of the cost incurred to acquire and install the specific software.

  3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Costs associated with maintaining computer software, i.e., expenditure relating to patches  and other minor updates as well as their installation, are expensed as incurred.

The amortisation charge reported in profit and loss is included in the income statement line item "administrative expenses". Expenditure incurred to restore or maintain the originally assessed future economic benefits of existing software systems is recognised in profit and loss.

Revenue recognition

Revenue represents the amounts derived from the sale of copper and other metals in the production of copper which fall within the group's ordinary activities, stated net of value added tax.

Sales of goods are recognised when goods are delivered and title has passed.

Interest income is reported using the effective interest method. Dividends received are recognised when the right to receive payment is established.

Leases

Operating leases

Where the group is a lessee in a lease which does not transfer substantially all the risks and rewards of ownership from the lessor to the group, the total lease payments are charged to the income statement on a straight-line basis over the period of the lease.

The group does not act as a lessor.

Foreign currency translation

The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in US dollars, which is the functional currency of the company and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in profit or loss in the period in which they arise except for:

exchange differences which relate to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency borrowings;

exchange differences on transactions entered into to hedge certain foreign currency risks (see below under financial instruments/hedge accounting); and 

exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the net investment.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Exchange differences arising, if any, are classified as equity and recognised in the group's foreign currency translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities are taken to equity and, as previously described, the group has claimed the transitional exemption from retrospective application of IAS21 "The effects of changes in foreign exchange rates". This means that equity will show any post-transition foreign exchange differences. Post-transition differences initially brought to equity are realised in the income statement on disposal of the business.

  3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Income taxes

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interest in joint ventures, except where the group is able to control the reversal of the temporary difference and it is expected that the temporary difference will not reverse in the foreseeable future. In addition, tax losses available to be carried forward as well as other income tax credits to the group are assessed for recognition as deferred tax assets.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Property, plant and equipment

Non-mining assets

Property, plant and equipment are recorded at cost net of accumulated depreciation and any provision for impairment. Depreciation is provided using the straight line method to write off the cost of the asset less any residual value over its useful economic life as follows: 

Freehold buildings		15 years
Plant and machinery		3 to 15 years
Development costs		life of mine
Freehold land		not depreciated

Development and production expenditure

When exploration and evaluation work shows a mine to be commercially viable, the accumulated costs are transferred to property, plant and equipment. Mining plant and equipment consist of buildings, plant and machinery, which are depreciated over the shorter of the estimated useful life of the asset or the life of the mine.

Mining property for mines in production, including pre-stripping costs, is written off on a unit of production basis over the life of the mine.

Asset residual values and useful lives are reviewed annually and amended as necessary. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the fixed asset may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount exceeds the higher of the asset's fair value less costs to sell or value in use.

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Development costs relating to major programmes at the existing mines are capitalised. These costs consist primarily of expenditure to expand the capacity of the operating mine. Day-to-day mine development costs to maintain production are expensed as incurred. Initial development and production costs, which include site establishment costs, are capitalised until production reaches 60% of budgeted commercial levels of production, at which time the accumulated costs are transferred to property, plant and equipment. Mining plant and equipment consists of buildings, plant and machinery, which are depreciated over the shorter of the estimated useful life of the asset or the life of the mine.

Expenditure on advances to companies solely for exploration activities and the group's own regional exploration activities prior to evaluation are capitalised, unless no further future benefit is considered likely. Exploration expenditure to define mineralisation at existing ore bodies or within the vicinity of existing ore bodies is considered mine development costs and is capitalised until production reaches 60% of budgeted commercial levels of production. 

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation, is stated at its fair value at the balance sheet date. Gains or losses arising from changes in the fair value of investment property are included in profit or loss for the period in which they arise.

Impairment

At each balance sheet date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Inventories

Inventories are stated at the lower of cost and net realisable value, using the average cost or first-in first-out principle as appropriate. Cost includes all direct expenditure and related overheads incurred to the balance sheet date. Cost is determined on the following bases:

Copper concentrate is valued at the average total production cost at the relevant stage of production;

Copper on hand is valued on an average total production cost method; and

Consumable stores are valued on a moving average cost basis.

Net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling expenses.

Financial instruments

The group uses financial instruments comprising cash, trade receivables, trade payables, convertible debt, derivatives and other equity investments that arise from its operations.

Financial assets

Financial assets are classified as either financial assets at fair value through profit or loss, loans and receivables, held to maturity investments or available for sale financial assets, as appropriate. Financial assets are assigned to their different categories by management on initial recognition, depending on the purpose for which they were acquired. 

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value less bank overdrafts repayable on demand.

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that a trade receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. 

When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

Derecognition of financial instruments occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each balance sheet date, whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.

Financial liabilities and equity

The group's financial liabilities include bank overdrafts, loans, unsecured creditors, convertible debt and trade and other payables. Financial liabilities are recognised when the group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in "finance costs" in the income statement. 

All loans and borrowings are initially recognised at the fair value net of issue costs associated with the borrowing. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement. Gains and losses on derecognition are recognised in finance charges.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is that rate which exactly discounts estimated future cash payments through the expected life of the financial liability or, where appropriate, a shorter period.

Trade payables are recognised initially at their fair value and subsequently measured at amortised costs less settlement payments.

Equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments are recorded at the proceeds received net of direct issue costs. The group has in issue only ordinary shares and the conditions of the shares are such that they are accounted for as equity.

Financial assets

Financial assets are divided into the following categories: loans and receivables; financial assets at fair value through profit or loss, and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which they were acquired. The designation of financial assets is re-evaluated at every reporting date at which a choice of classification or accounting treatment is available.

All financial assets are recognised when the group becomes a party to the contractual provisions of the instrument. Financial assets other than those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs. Financial assets categorised as at fair value through profit or loss are recognised initially at fair value with transaction costs expensed through the income statement.

Financial assets at fair value through profit or loss include financial assets that are held for trading which include derivatives. Subsequent to initial recognition, the financial assets included in this category are measured at fair value with changes in fair value recognised in the income statement.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement.

  3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Provision against trade receivables is made when there is objective evidence that the group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

Available-for-sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. All financial assets within this category are measured subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.

In the case of impairment of available-for-sale assets, any loss previously recognised in equity is transferred to the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement. Impairment losses recognised previously on debt securities are reversed through the income statement when the increase can be related objectively to an event occurring after the impairment loss was recognised in the income statement.

An assessment for impairment is undertaken at least at each balance sheet date.

A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred and that transfer qualifies for derecognition.  A financial asset is transferred if the contractual rights to receive the cash flows of the asset have been transferred or the group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the group transfers substantially all the risks and rewards of ownership of the asset, or if the group neither retains nor transfers substantially all the risks and rewards of ownership but does transfer control of that asset.

Derivative financial instruments 

The group uses derivative financial instruments including copper put options to hedge its risks associated with commodity price fluctuations. Since 1 July 2006, such derivative financial instruments have been initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value, and the movement is credited or debited to the profit and loss account.  Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The group also has listed options that are considered derivative financial instruments. These instruments are measured at fair value at the balance sheet date, and the movement is credited or debited to the profit and loss account.

Financial liabilities

Financial liabilities are obligations to pay cash or other financial assets and are recognised when the group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value, and all transaction costs are recognised immediately in the income statement. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

Financial liabilities categorised as at fair value through profit or loss are remeasured at each reporting date at fair value, with changes in fair value being recognised in the income statement. All other financial liabilities are recorded at amortised cost using the effective interest method, with interest-related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Financial liabilities are categorised as at fair value through profit or loss where they are classified as held-for-trading or designated as at fair value through profit or loss on initial recognition. All derivatives are classified as held-for-trading. A financial liability is derecognised only when the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.

Provisions

Provisions are recognised when the present obligations arising from legal or constructive commitment resulting from past events are expected to lead to an outflow of economic resources from the group which can be estimated reliably.

Provisions are measured at the present value of the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date.

  3. SIGNIFICANT ACCOUNTING POLICIES (continued)

The group provides for rehabilitation and environmental obligations, and the increase in the present value of the rehabilitation provision is capitalised to property, plant and machinery.

All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Equity

Equity comprises the following:

"Issued capital" represents the nominal value of equity shares.

"Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

"Merger reserve" represents the excess over nominal value of the fair value of shares issued in a share for share exchange satisfying the conditions of section 131 of the Companies Act 1985.

"Capital redemption reserve" represents the nominal value of shares redeemed.

"Share-based payment reserve" represents equity-settled share-based employee remuneration until such share options are exercised.

"Other reserve" represents the equity component of the secured convertible loan notes which have both a debt and equity component the revaluation of investments through equity.

"Foreign exchange reserve" represents the differences arising from translation of investments in overseas subsidiaries.

"Retained earnings" represents retained profits less retained losses.

Share-based payments

Equity-settled transactions

The group operates equity-settled share-based compensation plans for remuneration of its employees.

All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the share option awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (e.g. profitability or sales growth targets).

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the relevant employees become fully entitled to the award. Fair value is determined by an external valuer using an appropriate pricing model. In valuing equity-settled transactions, no account is taken of any vesting conditions, other than market conditions linked to the price of the shares of the company.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied. 

At each balance sheet date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period has expired and management's best estimate of the achievement or otherwise of non-market conditions and the number of equity instruments that will ultimately vest; or in the case of an instrument subject to a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.

Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised in the income statement for the award is expensed immediately. Any compensation paid up to the fair value of the award at the cancellation or settlement date is deducted from equity, with any excess over fair value being treated as an expense in the income statement.

All equity-settled share-based payments are ultimately recognised as an expense in the profit and loss account with a corresponding credit to "other reserve".

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs, up to the nominal value of the shares issued, are reallocated to share capital with any excess being recorded as additional share premium.

  3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Employee benefits

Defined contribution pension scheme

The pension costs charged against profits are the contributions payable to the scheme in respect of the accounting period.

The group pays contributions to personal pension schemes of employees, which are administered independently of the group.

4. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group's accounting policies, described in note 3, the directors are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 

Critical judgments in applying the group's accounting policies

The following are the critical judgments, apart from those involving estimations (which are dealt with separately below), that the directors have made in the process of applying the group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.

Going concern

Since the year end there have been a number of events that have had a major impact on the company and its operations. 

Firstly, copper prices fell from around US$8,800 to around US$3,000 as a result of the global economic downturn, making our copper mines in Namibia uneconomic. The directors concluded that copper prices were unlikely to recover in the short term and took the decision to close the company's mines. 

Secondly, the company negotiated and entered into new long term (5-year) contracts to smelt concentrate from Louis Dreyfus and Chelopech in the Tsumeb smelter, so securing its throughput and revenues subject to these suppliers continuing to be able to provide contracted amounts of copper concentrate.

 

Thirdly, the company has secured loans totalling US$11.3 million from Chelopech and Louis Dreyfus of which US$3.9 million remained committed but undrawn as at 31 January 2009 which has enabled it to pay the redundancy costs associated with the closure of the mines, to fund the future improvements scheduled at the smelter and to provide additional working capital. The repayment conditions attached to the loans put constraints on the free cash flows from the revenues deriving from the smelter until repayment of the loans. The loan also includes a provision for a monthly management fee of US$150,000 payable to Weatherly International for the operation of its head office.

Finally, as part of this financial restructuring, the conditions attached to the existing convertible note holders were renegotiated. The strike price for conversion was reduced from 23.5p to 8p and the terms of repayment were restructured so that US$3 million plus interest is payable in May 2009, US$4 million plus interest in May 2010, and US$5 million plus interest in May 2011. The payment to be made in May 2009 can be deferred for 12 months subject to the application of a higher rate of interest.

In the light of these substantial changes to our business, the directors have reviewed the business model and the assumptions contained within it and believe them to be reasonable. However, there are a number of uncertainties around the assumptions that have the potential to negatively impact on the company's ability to deliver the forecast cash flows. 

These are:

Continued supply of concentrates, as per contracted amounts, from Chelopech and Louis Dreyfus is entirely outside the control of the company, and any significant reduction in this supply will negatively impact the company's profitability.

The smelter is assumed to operate at or near to 90% capacity with copper concentrates provided by Chelopech and Louis Dreyfus. The directors believe that this is a reasonable assumption given the smelter's unique ability to treat concentrates with a high arsenic content and the lack of alternatives. Additionally, the smelter's operational flexibility allows it to continue to generate positive revenues at capacities below design capacity.

Settlement of Weatherly Mining's creditors in Namibia (approximately US$5million) and the repayment of the first tranche of the convertible loan note principal of US$3 million due in May 2009, if not deferred until May 2010, is dependent on the realisation of funds raised from the sale of the company's assets, real estate, and plant and equipment in Namibia. The directors believe that sufficient funds will be raised to fund these liabilities and loan principal but there is no assurance that this will be the case. The interest payment of US$690,000 due in May 2009 will be paid from current funds.

Weatherly Mining owes N$9.8 million (approximately US$1 million) in royalties to the Namibian Government up to 30 June 2008. It is the aim that the monies be paid. Weatherly Mining has filed for relief for royalties for the period 1 July 2008 up until the mines ceased operation, and the company expects the relief to be granted by the government in due course. However, there is no assurance that this will be the case.

No settlement of creditors (US$2.5 million) arising under the terms of the compromise agreement negotiated as part of the original mine acquisition in 2006. As the mines have been closed, the directors do not consider these monies to be payable and no provision has been made in respect of this liability.

In November 2008, the company became aware of a potential claim in the amount of £3.5million against the company from a third party in relation to an alleged previously unknown financial obligation. Since that date, a thorough investigation has been conducted. As a result, the company believes that, should this claim be pursued, it has a robust defence and would pursue a counterclaim for loss and damages against the other party. In these circumstances the directors do not believe that any provision for this contingent liability should be made.

On the basis of the foregoing projections and assumptions, the directors consider that the group will continue to operate within its currently available funds and the proceeds from the projected sale of assets, and that it is appropriate to prepare the financial statements on the going concern basis.

Carrying value of property, plant and equipment

All mining assets are amortised where the mine operating plan calls for production from well-defined mineral reserves over proven and probable reserves.

For mobile and fixed plant, the straight-line method is applied over the estimated useful life of the asset which does not exceed the estimated mine life based on proven and probable mineral reserves as the useful lives of these assets are considered to be limited to the life of the relevant mine.

The calculation of amortisation could be impacted to the extent that actual production in the future is different from current forecast production based on proven and probable mineral reserves. This would generally result to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral reserves.

These factors could include:

changes in proven and probable mineral reserves;

the grade of mineral reserves may vary significantly from time to time;

differences between actual commodity prices and commodity price assumptions;

unforeseen operational issues at mine sites;

changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange rates; and

changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight line basis, where those lives are limited to the life of the mine.

The recoverable amounts of cash-generating units and individual assets have been determined based on the higher of value-in-use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the copper price assumption may change, which may then impact the estimated life of mine determinant and may then require a material adjustment to the carrying value of property, plant and equipment.

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. They are significantly affected by a number of factors including published reserves, resources, exploration potential and production estimates, together with economic factors such as spot and future copper prices, discount rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (continued)

Capitalisation of exploration and development costs

The group capitalises exploration and development costs directly attributable to the exploration for, acquisition, construction or production of qualifying assets. Costs relating to the Burkina Faso exploration project have been capitalised and will continue to be treated this way until the project status changes from exploration/development to operation.

The group assesses the stage of each mine construction project to determine when a mine moves into the production stage. The criteria used to assess the start date are determined based on the unique nature of each mine construction project such as the complexity of plant and its location. The group considers various relevant criteria to assess when the mine is substantially complete and ready for its intended use and moves into the production stage. The criteria would include, but are not limited to, the following:

the level of capital expenditure compared to the construction cost estimates;

completion of a reasonable period of testing of the mine plan and equipment;

ability to produce copper in saleable form; and

ability to sustain ongoing production of copper.

Fair value of derivatives and other financial instruments

The directors use their judgment in selecting an appropriate valuation technique for financial instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. For derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the instrument. Other financial instruments are valued using a discounted cash flow analysis based on assumptions supported, where possible, by observable market prices or rates. 

Convertible loan note treatment

As described in note 22, the directors use their judgment in selecting an appropriate valuation technique for financial instruments not quoted in an active market. The convertible loan notes were a compound instrument with a debt and equity component. Management valued the debt element using the estimated market rate of interest for a pure debt instrument. This resulted in a negative equity residual value that the Board believes is appropriate as the instrument was issued primarily to existing shareholders, and was in substance a distribution. This negative equity component of US$0.469 million has been debited to other reserve as a component of shareholder equity.

Foreign exchange differences on intra-group balances

Loans to Namibian subsidiaries in substance form part of Weatherly's net investment in its foreign operations; as such, exchange differences are classified as equity and put through the foreign currency translation reserve.

Investment in Emerging Metals Limited 

The shares acquired as part of the consideration for the options over the Tsumeb slag dumps are classed as a financial asset fair valued through  equity. 

5. REVENUE

An analysis of the group's revenue is as follows:

			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
Continuing operations
Sale of goods			105,449		63,158
Total revenue			105,449		63,158

  

6. BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the group is currently organised into three divisions - Mining, Smelting and Administration. These divisions are the basis on which the group reports its primary segment information.

Principal activities during the period were as follows:

Mining

Smelting

Basis for inter-segment transfer price: the transfer price is a third party arms length price based on the London Metals Exchange price, calculated by the percentage of copper in concentrate.

Segment information about these businesses is presented below. 

Year end 30 June 2008 segment reporting

					Mining		Smelting		Other activites and corporate		Consolidation adjustments and elimina-tions		Consolidated
					Year ended		Year ended		Year ended		Year ended		Year ended
					30 June 2008		30 June 2008		30 June 2008		30 June 2008		30 June 2008
By business					US$,000		US$,000		US$,000		US$,000		US$,000
Sales and other operating revenues
External sales					40		116,421		-		(11,012)		105,449
Inter-segment sales					33,156		-		-		(33,156)		-
Segment revenues					33,196		116,421		-		(44,168)		105,449
Interest and other revenues					98		-		451		-		549
Total revenues					33,294		116,421		451		(44,168)		105,998
Segment results
Profit and loss before depreciation, interest and tax					(4,497)		4,934		(7,187)		10,025		3,275
Depreciation					(4,924)		-		(10)		(204)		(5,138)
Finance costs and other finance expense					(4,330)		(693)		3,074		580		(1,369)
Impairment of assets					(50,837)		-		-		-		(50,837)
Profit/(loss) for the year					(64,588)		4,241		(4,123)		10,401		(54,069)
Assets and liabilities
Segment assets					80,072		26,228		54,143		(45,844)		114,599
Total assets					80,072		26,228		54,143		(45,844)		114,599
Segment liabilities					(72,828)		(27,292)		(13,570)		56,386		(57,304)
0
Total liabilities					(72,828)		(27,292)		(13,570)		56,386		(57,304)
Other segment information
Capital expenditure
Intangible assets					65		-		495		-		560
Property, plant and equipment					35,190		-		45		-		35,235

6. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued)

Year end 30 June 2007 segment reporting

					Mining		Smelting		Other activities and corporate		Consolidation adjustments and elimina-tions		Consolidated
					Year ended		Year ended		Year ended		Year ended		Year ended
					30 June 2007		30 June 2007		30 June 2007		30 June 2007		30 June 2007
By business					US$,000		US$,000		US$,000		US$,000		US$,000
Sales and other operating revenues
External sales					32		63,126		-		-		63,158
Inter-segment sales					40,885		-		-		(40,885)		-
Segment revenues					40,917		63,126		-		(40,885)		63,158
Interest and other revenues					-		-		350		-		350
Total revenues					40,917		63,126		350		(40,885)		63,508
Segment results
Profit and loss before depreciation, interest & tax					30,851		(1,622)		(2,884)		(8,766)		17,579
Depreciation					(6,538)		-		-		(204)		(6,742)
Finance costs and other finance expense					(3,305)		-		1,714		999		(592)
Discount on acquisition					(7,446)		-		-		25,171		17,725
Profit/(loss) for the year					13,562		(1,622)		(1,170)		17,200		27,970
Assets and liabilities
Segment assets					96,729		7,723		101,556		(80,163)		125,845
Total assets					96,729		7,723		101,556		(80,163)		125,845
Segment liabilities					(36,610)		(2,849)		(1,816)		14,571		(26,704)
Total liabilities					(36,610)		(2,849)		(1,816)		14,571		(26,704)
Other segment information
Capital expenditure
Property, plant and equipment					33,372		-		-		-		33,372
Acquisition of subsidiary undertaking					-		-		35,161		-		35,161

Geographical segments

The group's operations are located in Namibia and the UK. The Mining and Smelting divisions are located in Namibia, while the Administration function is carried out in London. All expenses relating to share-based payments relate to the head office function in London. All of the group's revenue is generated in Namibia, but sales are made to customers internationally, primarily in Switzerland.

  

7. OPERATING (LOSS)/PROFIT

			Year ended		Year ended
This is stated after charging/(crediting):			30 June 2008		30 June 2007
			US$,000		US$,000
Management fees			-		(88)
Depreciation of owned assets			5,138		6,742
Impairment of property, plant and equipment			44,662		-
Impairment of intangible assets			6,175		-
Staff costs (see note 8)			17,623		15,743
Operating lease payments			294		284
Profit on sale of property, plant and equipment (see note 16)			(1,991)		(9,530)
Auditor's remuneration			251		132

8. STAFF COSTS

 

			Year ending		Year ending
The average number of employees, including directors			30 June 2008		30 June 2007
			No.		No.
Group:
Staff and directors			875		913
			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
Their aggregated remuneration comprised:
Wages and salaries			16,299		14,608
Social security costs			95		51
Pension contributions			576		668
Share-based payments			653		416
			17,623		15,743

  8. STAFF COSTS (continued)

 

			30 June 2008		30 June 2007
			US$,000		US$,000
Directors' emoluments			1,440		702
Pension contributions			27		-
			1,467		702
In respect to the highest paid director:
Aggregate emoluments			592		322

Aggregate emoluments disclosed above do not include any amounts for the value of warrants to acquire ordinary shares in the company granted to or held by the directors. 

(c) Key management personnel

			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
Senior management remuneration			1,569		728
Senior management share-based payments			519		416

Senior management personnel include all employees able to directly influence the strategic direction of the business.

  

9. OTHER GAINS AND LOSSES

			Year ending		Year ending
			30 June 2008		30 June 2007
			US$,000		US$,000
Loss on sale of assets			(187)		-
Profit on sale of exploration licenses			-		9,530
Release of environmental liability			2,178		-
Profit on sale of assets			1,991		9,530

10. FAIR VALUE OF FINANCIAL INSTRUMENTS THROUGH PROFIT AND LOSS

			30 June 2008		30 June 2007
			US$,000		US$,000
Derivative instruments	Note
Put options (held for trading)	23		(1,233)		-
Share options relating to EML (FVTPL)	18		2,899		-
					-
Total fair value gains and losses of financial instruments through profit and loss			1,666		-

11. FINANCE COSTS

			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
Interest on bank overdrafts and loans			1,253		-
Charge for environmental provision (see note 26)			116		592
Total interest expense			1,369		592

12. INCOME TAX EXPENSE

			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
(Loss)/profit before tax			(54,069)		27,970
UK corporation tax @ 29.5% (2007: 30%)			(15,950)		8,391
Tax effects of:
Expenses not allowable for tax purposes			(203)		(2,926)
Capital profits not taxable			(908)		(3,949)
Impairment of asset			1,822		-
Other adjustment			1,019		(28)
Pre-acquisition profits not allowable			-		2,234
Differences in local tax rates			(5,571)		1,562
Excess of capital allowances over depreciation			7,286		(3,729)
Tax losses utilised in period			(2)		(2,598)
Tax losses not for future utilisation			169		977
Tax losses for future utilisation			12,338		66
Total income tax expense			-		-
Unrecognised deferred tax provision
Accelerated capital allowances			14,791		24,806
Share-based payments			-		(81)
Tax losses - UK			(1,702)		(842)
Tax losses - Namibia			(44,137)		(25,658)
Unrecognised deferred tax asset			(31,048)		(1,775)
These deferred tax assets are unrecognised as there is uncertainty around their utilisation.

The unrecognised deferred tax asset has no expiry period.

13. DIVIDENDS AND OTHER APPROPRIATIONS

No dividends or appropriations were declared, proposed or payable at 30 June 2008.

  

14. (LOSS)/EARNINGS PER SHARE

The calculation of basic and diluted (loss)/earnings per ordinary share is based on the following data:

			Year ended		Year ended
			30 June 2008		30 June 2007
			US$,000		US$,000
(Loss)/profit for the year attributable to equity			(52,393)		27,371
Basic (loss)/earnings per share (US cents)			(13.15)		8.20
Diluted (loss)/earnings per share (US cents)			(13.15)		8.13

Basic earnings per share has been calculated by dividing the (loss) /profit for the year attributable to ordinary shareholders by the weighted average number of shares in issue throughout the year; the diluted earnings per share has been calculated by dividing the (loss) /profit for the year attributable to ordinary shareholders by the weighted average number of shares including the effect of share options in issue. In the current year the share options and warrants are anti-dilutive due to the loss for the year.

The weighted average number of ordinary shares used in the calculation of the basic and diluted (loss)/earnings per share for each year was calculated as follows:

			30 June 2008		30 June 2007
Issued ordinary shares at start of year			356,646,567		230,904,593
Shares issued during the year			48,680,499		125,741,974
Issued ordinary shares at end of year			405,327,066		356,646,567
Weighted average number of ordinary shares at end of year - basic earnings per share			398,431,898		333,749,965
Effect of share options in issue			7,330,789		3,082,894
Weighted average number of ordinary shares at end of year - diluted earnings per share			405,762,687		336,832,859

  

15. INTANGIBLE ASSETS

Year ended 30 June 2007
			Computer software		Exploration		Mining licences		Total
			US$,000		US$,000		US$,000		US$,000
Cost:
At 1 July 2006			-		-		6,175		6,175
Additions			-		-		-		-
Disposals			-		-		-		-
Net book value at 30 June 2007			-		-		6,175		6,175
Year ended 30 June 2008
			Computer Software		Exploration		Mining licences		Total
			US$,000		US$,000		US$,000		US$,000
Cost:
At 1 July 2007			-		-		6,175		6,175
Additions			65		495		-		560
Disposals			-		-		-		-
Impairment loss			-		-		(6,175)		(6,175)
Net book value at 30 June 2008			65		495		-		560

An upgrade to accounting software was undertaken during the year. Both the application for and the extension of the exploration licence PLLS 252 and retention licence of the tailings (PLLS 240) have been rejected and as a consequence the Zambian assets have been written down to zero. Capitalised exploration costs relate to the Burkina Faso project.

  

16. PROPERTY, PLANT & EQUIPMENT

a)

					Freehold property		Plant and machinery		Development costs		Totals
					US$,000		US$,000		US$,000		US$,000
Cost:
At 1 July 2006					-		-		-		-
Acquisition of subsidiary undertaking					45,171		23,095		300		68,566
Additions					-		12,957		20,415		33,372
Disposals					-		(842)		(1,000)		(1,842)
Exchange adjustment					1,305		70		(18)		1,357
At 30 June 2007					46,476		35,280		19,697		101,453
Depreciation:
At 1 July 2006					-		-		-		-
Provided during the year					(2,750)		(3,992)		-		(6,742)
Disposals					-		323		-		323
Exchange adjustment					(55)		(70)		-		(125)
At 30 June 2007					(2,805)		(3,739)		-		(6,544)
Net book value at 30 June 2007					43,671		31,541		19,697		94,909
Cost:
At 1 July 2007					46,476		35,280		19,697		101,453
Additions					613		13,330		21,292		35,235
Disposals					(637)		(2,025)		-		(2,662)
Transfer					(2,000)		(1,089)		3,089		-
Exchange adjustment					(5,536)		(4,736)		(3,683)		(13,955)
At 30 June 2008					38,916		40,760		40,395		120,071
Depreciation:
At 1 July 2007					(2,805)		(3,739)		-		(6,544)
Provided during the year					(845)		(4,070)		(135)		(5,050)
Disposals					-		127		-		127
Impairment loss					-		(4,390)		(40,272)		(44,662)
Exchange adjustment					445		839		12		1,296
At 30 June 2008					(3,205)		(11,233)		(40,395)		(54,833)
Net book value at 30 June 2008					35,711		29,527		-		65,238

  

16. PROPERTY PLANT AND EQUIPMENT (continued)

b)  Investment properties

			Investment properties
			US$,000
Cost or valuation:
At 1 July 2006			-
Acquisition of subsidiary undertaking			1,503
Exchange adjustment			31
At 30 June 2007			1,534
Depreciation:
At 1 July 2006			-
Provided during the year			-
Exchange adjustment			-
At 30 June 2007			-
Net book value at 30 June 2007			1,534
Cost or valuation:
At 1 July 2007			1,534
Exchange adjustment			(171)
At 30 June 2008			1,363
Amounts uthori off:
At 1 July 2007			-
Provided during the year			(88)
Exchange adjustment			7
At 30 June 2008			(81)
Net book value at 30 June 2008			1,282

  

17. INVESTMENTS

a) SUBSIDIARIES

The company's investments at the balance sheet date in the share capital of companies include the following:

Name	% Holding	Nature of business	Country of incorporation	Class of shares
Weatherly (SL) Limited	100	Holding company	St Lucia	1,000 ordinary US$1
WM Exploration Limited	100	Dormant	England and Wales	200 ordinary 1p
Puku Minerals Limited (owned by Weatherly (SL) Limited)	100	Mineral exploration	Zambia	100 ordinary US$1
Weatherly (Namibia SL) Limited	100	Holding company	St Lucia	125,381,946 ordinary 20p
Weatherly (Namibian Custom Smelters) Limited	100	Holding company	St Lucia	1,000 ordinary £1
Weatherly Management Services Limited	100	Management services	England and Wales	1 ordinary £1
Weatherly Mining Namibia Limited	97	Mineral exploration, development and production	Namibia	20,000,000 ordinary N$1 1,000 redeemable preference shares N$1
Weatherly International Trustee Company Limited	100	Trustee company	England and Wales	1 ordinary £1
The following entities are 100% owned by Weatherly Mining Namibia Limited:
Ongopolo Mining Limited		Mineral exploration and development	Namibia	95,590,000 ordinary N$0.387
Tsumeb Specimen Mining (Pty) Limited		Dormant	Namibia	4,000 ordinary US$1
Ongopolo Cement Company (Pty) Limited		Mining and production	Namibia	100 ordinary US$1
The following entity is 100% owned by Weatherly (Namibia Custom Smelters) Limited:
Namibia Custom Smelters (Pty) Limited		Smelting operations	Namibia	100 ordinary N$1

b) INVESTMENTS

30 June 2008	Note		US$ ,000
Acquired in the year and fair value at year end
Shares issued at £0.05 per share	18		6,555
Fair value of share options	18		3,020
Total investments			9,575

The value of this investment is fair valued at 30 June 2008 and the movement in the value has been credited to equity.

  

18. DEFERRED REVENUE

On 31 January 2008, Ongopolo Mining Limited (OML), a 97% subsidiary of Weatherly International plc, granted an option over the Tsumeb dumps to Emerging Metals Limited (EML).

The consideration paid by EML for the Tsumeb Option comprised £1,421,000 in cash and 21,899,698 ordinary shares of EML issued to Weatherly at par value of £0.05 per share. An option was also granted to Weatherly to subscribe for up to 13,705,179 ordinary shares at £0.05 per share, exercisable at any time for five years from the date of completion of the Tsumeb Option Agreement. A summary is as follows:

30 June 2008	US$ ,000
Cash	2,886
Shares issued at £0.05 per share	2,161
Fair value of share options	354
Foreign exchange	(457)
Total deferred revenue	4,944

The grant of the Tsumeb Option was subject to a number of conditions, which were satisfied on 29 January 2008. The exercise term of the Tsumeb Option will expire 30 months after the date of the satisfaction of the conditions, such period comprising a total of 24 months for completion of an initial programme of work, plus six months for a decision by EML on whether to proceed with commercial production from any portion of the Tsumeb slag stockpiles and announcement of that decision to AIM.

Under the Tsumeb Option Agreement, OML provides EML with a number of warranties regarding the Tsumeb slag stockpiles. In particular, OML guarantees to EML that:

it has the requisite power and authority to enter into and perform the Tsumeb Option Agreement;

it is, and will remain during the Tsumeb Option Period, the legal and beneficial owner of 100 per cent of the Tsumeb slag stockpiles; and

no further consent, approval or uthorization of any governmental agency or other person is required by it for the entry into and performance of its obligations under the Tsumeb Option Agreement.

A summary of the EML accounting treatment of shares and options is as follows:

30 June 2008	US$ ,000		US$ ,000		US$ ,000		US$ ,000		US$ ,000
	Acquired during year		Fair value to profit and loss account		Fair value to equity reserve account		Foreign exchange difference		Year end
EML shares issued at £0.05 per share	2,161		-		4,760		(366)		6,555
EML share options	354		2,899		-		(233)		3,020
	2,515		2,899		4,760		(599)		9,575

Fair value of shares to equity reserve account

EML issued 21,899,698 shares to OML on 31 January 2008. The Board views this as a strategic investment and believes that it is appropriate that fair value movement be put to the equity reserve account.

 

The shares were valued as follows: 

	31 January 2008		30 June 2008
Share price £	0.05		0.15 **
No. Outstanding	21,899,698		21,899,698

**  EML listed on AIM on 1 July 2008. The closing price on that day was used as a proxy for 30 June 2008, as management believe that this is reasonable.

On 20 February 2009 the value of EML was £0.06 per share. If this had been the price at 30 June 2008, it would have meant that a gain of US$0.3 million would have been put through the equity reserve account instead of the gain of US$4.7 million put through at 30 June 2008. 

  

19. INVENTORIES

			Consolidated
			30 June 2008		30 June 2007
			US$,000		US$,000
Stockpiles at mine			7,728		324
Consumables			1,051		1,180
			8,779		1,504

The difference between purchase price or production cost of inventories and their replacement cost is not material.

20. RADE AND OTHER RECEIVABLES

			Consolidated
			30 June 2008		30 June 2007
			US$,000		US$,000
Trade receivables			23,524		6,937
Prepayments and other receivables			89		1,507
VAT			167		49
			23,780		8,493

As at 30 June 2008 there were no trade receivables past due.

21. BORROWINGS

			30 June 2008		30 June 2007
			US$,000		US$,000
Secured borrowing at amortised cost
Convertible loan notes	22		12,469		-
Bank overdrafts			-		1,204
			12,469		1,204
Total borrowings
Amount due for settlement within 12 months			-		1,204
Amount due for settlement after 12 months			12,469		-

			US Dollars		Namibian Dollars		Total
			US$,000		US$,000		US$,000
30 June 2008
Convertible loan notes			12,469		-		12,469
			12,469		-		12,469
30 June 2007
Bank overdrafts			-		1,204		1,204
			-		1,204		1,204

  

The other principal features of the group's borrowings are as follows:

Bank overdrafts are repayable on demand. The overdraft in 2008 is US$ nil (2007: US$ 1.2 million which was secured against a US$2.2 million bond held with Barclays Bank plc. This was repaid during 2008 and the security released by the bank). The average effective interest rate on bank overdrafts is approximately nil% (2007: 14.25%) per annum and is determined at market rates.

Convertible loan notes, see note 22.

The weighted average interest rates paid during the year were as follows:

			30 June 2008		30 June 2007
			%		%
Bank overdrafts			-		14.25
Convertible loan notes			9.00		-

22. CONVERTIBLE LOAN NOTES

The convertible loan notes were issued on 7 May 2008 at an issue price of US$1 per note. The notes are convertible into ordinary shares of the company at any time between the date of issue of the notes and their settlement date. On issue, the loan notes were convertible at 1 share per US$1 loan note. Attached to each loan note was a warrant which had a conversion price of US$0.5059 per ordinary share. The convertible loan notes are secured by fixed and floating charges over the assets and undertakings of the company, and the company has given certain covenants to the investors in relation to activities outside the ordinary course of business while the secured convertible loan notes remain outstanding.

If the notes have not been converted, they will be redeemed on 6 May 2010 at par. Interest of 9% will be paid annually until this date.

The net proceeds received from the issue of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the group as follows:

			US Dollars		Namibian Dollars		Total
			US$,000		US$,000		US$,000
30 June 2008
Convertible loan notes			12,469		-		12,469
			12,469		-		12,469
30 June 2007
Bank overdrafts			-		1,204		1,204
			-		1,204		1,204

1 US$750,000 of the proceeds were received after balance date.

The equity component is US$469,000 due to the terms of the issue, so a debit has been made to the equity reserve.

The interest charged for the year is calculated by applying an effective interest rate of 6.88% to the liability component for the period since the loan notes were issued. The interest charged on the liability component to the end of the year has been included as a creditor (see above, note 21). The liability component is measured at amortised cost.

Management has valued the debt element using the estimated market rate of interest for a pure debt instrument. This resulted in a negative equity residual value that management believes is appropriate as the instrument was issued primarily to existing shareholders. This negative equity component of US$0.469 million has been debited to other reserve as a component of shareholder equity.

  23 DERIVATIVE FINANCIAL INSTRUMENTS

		Current
		30 June 2008		30 June 2007
		US$,000		US$,000
Derivatives carried at fair value
Put options at cost		1,234		-
Fair value through profit and loss account		(1,233)		-
		1		-

To mitigate the risk of a significant fall in the copper price, Weatherly took out put options over the production of copper at a strike price of US$5,000 per tonne.

The options were valued by the counterparty bank at year end and this valuation has been used. The result of the valuation is to expense through the profit and loss account effectively the entire cost of purchasing the put options; given that the purpose of the options is to mitigate downside risk by ensuring a minimum price level of US$5,000, it appears reasonable that these options had no value at year end.

Fair value of options through profit and loss account

EML issued 13,705,179 options to OML on 31 January 2008. The options were valued through the profit and loss account as they are classed as a derivative and are required to be fair valued. They were valued at that date accordingly. Below are the assumptions used to calculate the options; using the Black Scholes model, the fair value movement of these options put through the profit and loss account was US$2.9 million.

 

	31 January 2008		30 June 2008
Dividend yield (%)	-		-
Expected volatility (%)	18.332		18.753
Risk-free interest rate (%)	4.392		5.201
Share price at grant date £	0.05		0.05
Share price (market value)£	0.05		0.15
Exercise price £	0.05		0.05
Fair value £	0.0131		0.1104
No. Outstanding	13,705,179		13,705,179

24. TRADE AND OTHER PAYABLES - CURRENT

			Consolidated
			30 June 2008		30 June 2007
			US$,000		US$,000
Trade payables			34,697		7,699
Other payables and accruals			1,045		1,888
			35,742		9,587
Unsecured payables subject to a compromise on acquisition 1			1,523		6,963
			1,523		6,963

1 As part of the acquisition of Ongopolo, the company reached an offer of compromise with unsecured payables to repay the amounts due over five years, without interest accruing. Amounts falling due after more than one year have been discounted over the 5-year period. An offer of compromise is broadly similar in effect to a scheme of arrangement with creditors under the Companies Act 1985. The offer of compromise was sanctioned by the High Court of Namibia.

25. TRADE AND OTHER PAYABLES - NON-CURRENT

			Consolidated
			30 June 2008		30 June 2007
			US$,000		US$,000
Unsecured payables subject to a compromise on acquisition 1			2,370		4,321
Other payables			123		381
			2,493		4,702

1 Per explanation in note 24.

26. PROVISIONS 

Provisions for environmental liability			30 June 2008
			US$,000
Opening balance			4,248
Charge for the year - interest (Charge for environmental liability)			116
Exchange adjustment			319
Derecognition of liability			(4,248)
Transfer from asset			1,743
Profit on derecognition of environmental trust			2,178
Provision for environmental liability			133
Closing balance			133

Provision for environmental liabilities

During the year, the company carried out an environmental review and sought legal advice to establish the environmental liability of Weatherly and the environmental liability of the Environmental Trust. Legal advice indicated that Weatherly's environmental liability is limited to $N1 a tonne of ore. As a result, the Environmental Trust was deconsolidated from the group's accounts, resulting in a profit on de-recognition of US$2.178 million.

27. MINORITY INTEREST

				US$,000
At 1 July 2006				-
Share of Weatherly Mining Namibia profit				599
Share of net assets on acquisition				1,636
At 1 July 2007				2,235
Share of Weatherly Mining Namibia loss				(1,676)
Exchange Adjustment				(600)
At 30 June 2008				(41)

Minority interest represents 3% of Weatherly Mining Namibia: 2% is held aside for employees and 1% relates to shareholders prior to acquisition on 19 July 2006. 

28. CAPITAL COMMITMENTS

			30 June 2008		30 June 2007
			US$,000		US$,000
Capital commitments
Contracted for but not yet recognised in the financial statements			1,500		10,809
			1,500		10,809

29. POST BALANCE SHEET EVENTS

Board changes

Alan Stephens (age 54) was appointed a non-executive director with effect from 10 July 2008, replacing Peter Redmond who resigned on the same date.

As part of the extensive restructuring of the company, Paul Craven stepped down from his position as Chief Financial Officer on 9 February 2009.

Contingent liability 

In November 2008, the company became aware of a potential claim in the amount of £3.5million against the company from a third party in relation to an alleged previously unknown financial obligation. Since that date, a thorough investigation has been conducted. As a result, the company believes that, should this claim be pursued (at the present time there is no indication that it will be), it has a robust defence and would pursue a counterclaim for loss and damages against the other party. In these circumstances the directors do not believe that any provision for this contingent liability should be made.

29. POST BALANCE SHEET EVENTS (continued)

Mine closures

On 19 November 2008, Weatherly announced that in response to the severe 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. On 1 December 2008, the company announced that it was also suspending operations at its remaining mines, Otjihase and Tschudi.

These decisions were taken in light of the significant and sustained decline in world copper prices. Prices have declined from approximately US$8,800 per tonne in July 2008 to a current level of around US$3,000 per tonne and consensus forecasts do not indicate there will be a recovery in the medium term. 

Loan facility agreements

On 30 December 2008, Weatherly announced that it had entered into loan facility agreements with Chelopech Mining EAD ("Chelopech"), a wholly owned subsidiary of Dundee Precious Metals ("DPM"), and Louis Dreyfus Commodities Metal Suisse SA ("Louis Dreyfus") to provide the company with US$11.3 million of new funding. 

Chelopech has entered into an agreement to provide Namibia Custom Smelters ("NCS"), a wholly owned subsidiary of Weatherly which operates the Tsumeb smelter, with a US$7 million facility, US$1 million of which had already been advanced.

The company has signed a separate agreement with Louis Dreyfus for a US$4.3 million facility consisting of US$2 million which is effectively a prepayment made under the terms of the concentrate tolling arrangements that have been concluded, and a 12-month extension to US$2.3 million of credit currently owed to Louis Dreyfus by Weatherly.

Following the signing of these loan facility agreements, Weatherly has made the necessary structural adjustments arising from the closure of its mines, and is positioned to fund the expansion and ongoing requirements of the Tsumeb smelter. The licences for all Weatherly's mining assets will be maintained in good standing and an application will be submitted for a retention licence for Elbe.

The terms of the loans include the extension of the three-year contract to process imported concentrates from Chelopech and Louis Dreyfus for a period of five years. During this period, Louis Dreyfus will also be the exclusive offtaker of copper blister produced by the Tsumeb smelter and exclusive supplier of additional copper concentrates required by the smelter. Under the terms of this contract, the Tsumeb smelter will process up to 120,000 dry metric tonnes (dmt) of concentrates in 2009, increasing to over 200,000 dmt from 2010 onwards after commissioning of the planned oxygen plant. 

In the overall restructuring of the company's debt profile, Weatherly has renegotiated the terms of the US$12 million convertible loan note agreed in May 2008 with significant shareholders. Repayment will now take place in three annual instalments with US$3 million due to be paid in May 2009, US$4 million in May 2010 and US$5 million in May 2011. The conversion price has been reduced from 23.5 pence to 8 pence and the note holders have waived previous acts of default under the terms of the original loan note.

Having taken measures to secure its assets in the face of the current commodities downturn, Weatherly intends to focus in the short term on the operation of the Tsumeb smelter while seeking to optimise its growth potential in order to be well positioned when commodity prices recover.

Change in value of investment

On 20 February 2009 the value the investments held by the entity fell to £0.06 per share. If this had been the price at 30 June 2008, it would have meant that a gain of US$0.3 million would have been put through the equity reserve account instead of the gain of US$4.7million put through at 30 June 2008. 

30. CONTINGENT LIABILITIES

Please refer to note 29 above. 

  

31. IMPAIRMENT OF ASSETS 

Summary of impairment for the year ended 30 June 2008

	US$,000
Kombat operation	22,082
Other assets	22,580
Zambian assets	6,175
Total impairment	50,837

Kombat

Weatherly management undertook an impairment review and concluded that the assumptions made during the interim reporting period were no longer valid. The Board resolved to write off the development expenditure and assets relating to Kombat, which will be held on care and maintenance until it is decided how to proceed with this asset.

Key to carrying the Kombat development costs and assets were negotiations taking place between the Namibian Government, NamPower, and NamWater. It was hoped that these negotiations would achieve a positive outcome for the Kombat mine by ensuring that stable electricity supplies would be provided to prevent further disruption to dewatering the mine. No agreement was reached and consequently carrying of the development costs and assets was no longer deemed to be appropriate.

The impairment to Kombat development costs is US$20 million and to related property, plant and equipment US$2.1 million. The impairment review was made using a value in use calculation with a discount rate of 13%.

Impairment of other assets

As a result of events, including the current economic downturn and severe drop in copper prices subsequent to 30 June 2008, the assumption that the mining assets were being valued at 30 June 2008 was perceived by the Board no longer to be correct. The mining assets had changed from being valued on a "value in use basis" to a "fair value less costs to sell basis". As a result of management's assessment of their value, the assets were impaired by US$22.6 million. This impairment was recognised as part of the mining segment and cash generating unit in note 6. 

Zambia

Both the application for the extension of PLLS 252 (exploration licence) and the granting of a retention licence for PLLS 240(tailings project) have been rejected and, as a consequence, the Zambian assets have been written down to zero.

We continue to pursue our legal rights to licence area PLLS 239 (old Luanshya copper mines), which was granted by the Republic of Zambia's Ministry of Mines and Minerals Development in April 2005 to our wholly owned subsidiary, Puku Minerals Limited. The case has been completed and the judgment is awaited. The book value of this licence was written off in previous years and significant uncertainty still exists over whether renewal will be granted.

32. OTHER RELATED PARTY TRANSACTIONS

Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

During the year, the group paid amounts to the net value of US$nil (2007: US$2,894) for fees and commissions to Merchant Capital plc and Merchant House Group plc. Mr P Redmond is a director of these companies.

An amount of US$46,000 was paid during the year and at year end an amount of US$16,350 was in creditors relating to Martinick Bosch Sell Pty Ltd. a related company of Wolf Martinick. These fees were in relation to the environmental impact assessment study undertaken as part of the bankable feasibility study for the Tambao manganese project in Burkina Faso.

ENDFR TFMMTMMATTTL

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Related Shares:

Weatherly International Plc