5th Mar 2007 07:03
Weatherly International PLC05 March 2007 Weatherly International plc05 March 2007 Weatherly International plc Interim Results Chairman's Statement Results for the period In announcing the results for the six-month period to 31 December 2006, I amdelighted to report a maiden interim profit for the Weatherly Group. The interim profit shown in the accounts was US$2.3 million on turnover ofUS$31.2 million. The interim profit was US$4.5 million before the amortisationof goodwill. This profit was achieved as a result of a rapid turnaround of ourrecently acquired Namibian subsidiary, Ongopolo Mining & Processing Ltd, throughthe focus and commitment of management and operational teams and the restorationof production from the Tsumeb smelter and the Otjihase copper mine. The rise in revenue from the Tsumeb smelter since its August refurbishment isdue to improved supply from our Otjihase mine, increased toll treatment in oursmelter and favourable copper prices. At Otjihase, mining output has beenrestored to profitable levels while preparations are being made for larger scalepillar extraction; limited production is now taking place at Kombat whileevaluation of future production potential takes place. A number of otherpotentially profitable projects are also under review. Ongopolo production andprojects are more fully considered in the accompanying Operational Review. On 16 January 2007, we completed the sale, for cash and shares, of certainnon-core exploration assets in Namibia which is expected to realiseapproximately US$10 million in cash. Comments on the financial statements We have previously been reporting in sterling. We are also reporting ourfinancial activities in US dollars as all our operational revenues are generatedin this currency. The financial statements do not show comparative figures for precedingaccounting periods. The London Stock Exchange granted Weatherly an exemptionfrom this requirement as the comparative figures related to the Group before itcommenced its operational activities in July 2006. I will also comment on the item of intangible assets in the balance sheet. Thegreater part of this amount is for goodwill which is brought to account in theconsolidated statements to reflect the fair value (carrying value) of the netassets of Ongopolo in July 2006 against the fair value of the consideration paidby Weatherly at that time. Goodwill has arisen as the net assets at the date of acquisition weresignificantly less than the consideration paid due to a variety of factors whicharose prior to our acquisition of Ongopolo. Indeed, Weatherly made theacquisition of Ongopolo as we could see that there was potential to improve itsproduction capability over time especially given the independent assessment andvaluation of US$158.5 million by RSG Global Pty Limited carried out on ourbehalf in April 2006 (included in full in the Admission Document of 22 June2006). We are reviewing the value of the Namibian assets to ensure the values arerecorded appropriately in the annual accounts to 30 June 2007. Luanshya We continue to pursue our legal rights to licence area PLLS 239 issued in April2005 to our wholly owned Zambian company, Puku Minerals Limited. Legal advicefrom lawyers remains unchanged, continuing to support the validity of our claim. This dispute has no impact on our ability to treat the tailings on licence PLLS240 for the recovery of copper and licence PLLS 252 is also unaffected. Puku isin the process of applying for retention licences in relation to all threeareas. Although there is no dispute, save for PLLS 239, there can be noguarantee of successful renewal. The value of the mineral exploration licencesremains under review. The year ahead The Directors are encouraged by the results for the first half of our financialyear and believe that further progress will be made in the current half yeardespite the recent reduction in the copper price as compared with 2006. Weatherly has an experienced and motivated team in Ongopolo who will help us todevelop our operations in Namibia, revitalise Ongopolo and seek other localopportunities. Finally, I would like to thank the workforce, management and my colleagues onthe Board for their understanding and commitment to our operations and goals. Wethank our various consultants and advisers, contractors and service suppliersfor their contributions and support. Wolf G MartinickChairman5 March 2007 Operational Review Weatherly completed the acquisition of Ongopolo on 19 July 2006 and immediatelyset about rebuilding the production of Ongopolo from the depressed levels at thetime of its acquisition to the current economically sustainable levels. The steps under way to further increase our production are outlined below. Refurbishing smelter The first step undertaken was the refurbishment of the smaller, number 1 copperfurnace at Tsumeb. This was completed in August after a shutdown of four weeks,both within budget and ahead of schedule. The furnace now operates at anannualised rate of approximately 30,000 tonnes of blister copper. During the half year to December 2006, the smelter produced 12,861 tonnes ofblister averaging 98.6% copper. Of this output 3,113 tonnes of copper, 4,417 kgof silver and 58.6 oz of gold was attributable to production from Ongopolo's ownmines, principally Otjihase. Apart from some minor purchases, the bulk of theremaining 9,748 tonnes came from tolling agreements with the minerals trader,Republic House. Republic House was successful in sourcing concentrates fromDikilushi (DRC), Kansanshi and Chibuluma (Zambia) which kept the smelter runningat full capacity throughout the period following the rebuild. Expanding mine production The next step is to increase Ongopolo's internal mine production to 20,000annual tonnes of contained copper. A high proportion of Ongopolo's costs arefixed, and it is expected that the threefold increase in production willsubstantially reduce the unit cost of production thus ensuring the mines remainprofitable even at much lower copper prices. Based on existing resources, thislevel of production can be sustained for at least another five years. Otjihase Total ore mined at Otjihase was 243,111 tonnes grading 1.14% copper delivering12,255 tonnes of concentrate grading 20.64% copper to the Tsumeb smelter. At Otjihase, the emphasis is on backfilling large sections of the mine so thathigh grade pillars can be extracted safely. The backfilling program is expectedto be sufficiently advanced by the middle of 2007 to allow mining of the pillarsto get under way. At Matchless, the small satellite mine that feeds the Otjihase concentrator, theemphasis is on upgrading power, improving ventilation and changing the miningmethod. It is planned that the rate of ore production at Matchless will doubleover the next six months. We anticipate an overall boost in production to around 10,000 annual tonnes ofcontained copper with the increased performance at Matchless and the highertonnages and grades from the Otjihase pillars. Kombat A number of changes have been made to our underground strategy at Kombat. TheAsis Far West evaluation shaft was closed after a review of the drilling resultsconfirmed that there would be insufficient ore to mount a 'stand-alone'operation. Any successful future mining at Asis Far West will have to beundertaken in conjunction with mining of the partially flooded Kombat West/AsisWest shafts. The focus is now on the Kombat West mine where we are upgrading the pumpingfacilities and securing the upper levels as a prelude to embarking on a fulldewatering of the lower levels. If dewatering is successful, production cancommence almost immediately given the existing below water resource base of734,000 tonnes grading 2.8% copper. In the meantime, production is under way at two surface pits east of the KombatWest mine. The initial development work is being carried out on a contractbasis. The work is expected to accelerate as new equipment arrives on site. Drilling of the areas adjacent to the producing pits has revealed the potentialfor more widespread mineralisation running east towards the Asis Ost mine. Thispotential is being addressed as a separate project known as the Multi PitProject, further described below. Other than small tonnages from the initial surface pits, no significantproduction at Kombat is anticipated until mid 2007 when the underground workingsare expected to be dewatered. Tsumeb The Tsumeb West and Tschudi operations are two former mining and explorationsites in the Tsumeb area. The main focus is at Tschudi, approximately 20 kilometres due west of Tsumeb.This is a tabular ore body that extends over a known strike length of around 2.5kilometres. The most recent resource model, prepared by Mintek Inc in 2002estimated a total resource of 43.4 million tonnes grading at 0.83% copper and10.5 grams per tonne silver using a cut-off of 0.2 % copper. Historical reservesprepared by Goldfields of Namibia using a 1% cutoff calculated 10 million tonnesat 1.4% copper. The October 2006 RSG Global study confirmed the viability ofunderground mining. Initial development will be completed by July 2007, withproduction targeted to steadily increase to an annualised rate of around 350,000tonnes of ore. The other operation at Tsumeb West, targeted to produce 150,000 tonnes perannum, is well under way and continues to stockpile ore. Tsumeb West is the siteof Weatherly's training school for young miners where trainees are actuallyinvolved in the mining operation. Commissioning of the concentrator is scheduled for June 2007 with full capacityof 500,000 tonnes annually being reached soon after. The Tschudi and Tsumeb Westmines are together expected to contribute around 5,000 annual tonnes of copperwhen in full production. Future development of copper and base metals projects Having established a profitable base during the first six months of operations,Weatherly is evaluating a number of new projects for 2007. Kombat Multi Pit Project There is potential to establish a series of open pits extending east for almost4 kilometres from the Kombat West shaft to the Asis Ost mine. Average gradesfrom historic drilling suggest mineralisation of around 1% copper, with amixture of oxide and sulphide ore. The mineralisation is present over a widthaveraging some 200 metres and up to 200 metres in depth above the undergroundworkings. The aim is to complete the scoping of the Multi Pit Project in the secondquarter of 2007. This would be followed by infill drilling and feasibility workduring the next twelve months. If the potential for multiple pits is confirmed,Weatherly is likely to commit to refurbishing the second, much larger, furnaceat the Tsumeb smelter. This would increase Ongopolo's yearly smelting capacityto 110,000 tonnes of copper metal. Dumps and Residues Ongopolo owns a large number of dumps known to contain a considerable quantityof metal, primarily copper, lead and zinc. Of immediate interest is the Tsumebtailings dam, which has a historical resource of 13 million tonnes grading 0.46%copper, 0.9% lead. Also of interest are the zinc-rich slag stockpiles left overfrom the lead blast furnace operations. Preliminary test work carried out by the AIM listed company, AppliedIntellectual Capital plc ("AIC") on samples from both sources has shown that asignificant proportion of the metals contained can be directly leached andelectro-plated. Discussions to reach a commercial agreement with AIC to allowprocess piloting are in hand. Test work and evaluation is proceeding and shouldbe completed during 2007. Berg Aukas Zinc Mine The Berg Aukas zinc mine is one of a number of dormant assets owned by Ongopolo.It is located some 18 kilometres east of Grootfontein and approximately 80 roadkilometres from the Tsumeb smelter. The mine ceased operation in 1978 with mostof the orebody below the 500m level still intact. The mine is of particularinterest as most of the equipment necessary to reopen it, head-frame, winders,pumps and pipes, is available from the Asis Far West site. The remainingreserves are currently being modelled by mining consultants RSG Global Pty Ltdin Johannesburg. Rod WebsterChief Executive Officer5 March 2007 WEATHERLY INTERNATIONAL PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE PERIOD 1 JULY 2006 TO 31 DECEMBER 2006 2006 2006 Notes US $' 000 £' 000 Turnover 31,182 16,445Cost of Sales (25,034) (13,203) Gross profit 6,148 3,242 Administrative expensesAmortisation of goodwill (2,159) (1,139)Other administrative expenses (3,071) (1,620) Total administrative expenses (5,230) (2,759) Other operating income 2 1,492 787 Operating profit 2,410 1,270 Net interest 83 44 Profit on ordinary activities before taxation 2,493 1,314 Tax on profit on ordinary activities - - Profit on ordinary activities after taxation 2,493 1,314 Minority interest (167) (88) Net profit attributable to shareholders 2,326 1,226 Earnings per share 3 0.711 cents 0.375 p Diluted earnings per share 3 0.705 cents 0.371 p WEATHERLY INTERNATIONAL PLCCONSOLIDATED BALANCE SHEETAT 31 DECEMBER 2006 Notes 2006 2006 US $' 000 £' 000 Fixed AssetsIntangible assets 4 49,065 25,044Tangible assets 5 30,632 15,634 79,697 40,678 Current AssetsStocks 2,590 1,322Debtors 4,607 2,351Cash at bank 10,952 5,589 18,149 9,262 Creditors 6 (18,589) (9,488)- amounts falling due within one year Net current liabilities (440) (226) Total assets less current liabilities 79,257 40,452 Creditors 6 (10,029) (5,119)- amounts falling due after more than one year Provisions for liabilities and charges (3,968) (2,025) Net assets 65,260 33,308 Capital and ReservesCalled up share capital 2,874 1,699Share premium account 46,608 26,301Merger reserve 18,471 9,950Capital redemption reserve 454 238Other reserve 86 44Profit and loss account (3,159) (4,886) Shareholders' funds 65,334 33,346 Minority interest (74) (38) Shareholders' funds less minority interest 65,260 33,308 WEATHERLY INTERNATIONAL PLCCONSOLIDATED CASH FLOWFOR THE PERIOD 1 JULY 2006 TO 31 DECEMBER 2006 2006 2006 US $' 000 £' 000 Operating profit 2,410 1,270Depreciation 794 419Amortisation 2,159 1,139Increase in stock (1,403) (716)Decrease in debtors 5,831 3,120Decrease in creditors (7,719) (4,005)Increase in provision for liablilities and charges 147 72Charge for share based payments 38 18 Net cash inflow from operating activities 2,257 1,317 Return on investments and servicing of financeInterest receivable 391 206Interest payable (91) (51) Net interest 300 155 Capital expenditurePurchase of fixed assets (15,616) (7,970) AcquisitionsPurchase of shares in subsidiary (24,234) (11,735)Less cash acquired with subsidiary 7,107 3,628 Net cash outflow from acquisitions (17,127) (8,107) Net cash outflow before financing (30,186) (14,605) FinancingShare capital issued 18,492 10,006Loans repaid (349) (178) Net cash inflow from financing 18,143 9,828 Decrease in cash (12,043) (4,777) RECONCILIATION TO NET CASH Net cash at 1 July 18,897 10,374 Decrease in cash (12,043) (4,777)Exchange differences 4,098 (8)Net cash at 31 December 10,952 5,589 WEATHERLY INTERNATIONAL PLCNOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD 1 JULY 2006 TO 31 DECEMBER 2006 1. GENERAL The Group's interim accounts for the six months to 31 December 2006 areunaudited. The accounts include the results of Ongopolo Mining and ProcessingLimited ("Ongopolo") acquired on 19 July 2006. The results for the period are reported in US dollars and in sterling. The London Stock Exchange has waived the requirement for inclusion ofcomparative financial results for the period to 31 December 2005. The financial information set out in this statement does not constitutestatutory accounts within the meaning of the Companies Act 1985.The accountshave been prepared in accordance with the applicable accounting standards andunder the historical cost convention. The principal accounting policies of theGroup have remained unchanged from those set out in the Group's June 2006 annualreport and for those it anticipates adopting in its June 2007 financialstatements. Copies of the interim accounts are available from Weatherly's registered officeand may be ordered through the Company's website at www.weatherlyplc.com 2. OTHER OPERATING INCOME Other operating income has arisen since the acquisition of Ongopolo. Thesignificant elements comprise the sale of excess electricity and water from itsmining operations and property rent. 3. EARNINGS PER SHARE Earnings per ordinary share have been calculated using the weighted averagenumber of shares in issue during the relevant financial period. The weightedaverage number of shares in issue in 2006 was 327,300,052. Diluted earnings per ordinary share have been calculated using the total of allpotential shares granted up to the balance sheet date. The dilutive effect ofoptions was to increase the number of shares in issue to 330,051,713. 4. INTANGIBLE ASSETS Intangible assets comprise mineral exploration licence costs in Zambia andgoodwill arising on consolidation of Ongopolo in Namibia. Goodwill is amortised over ten years. 5. TANGIBLE ASSETS Tangible assets comprise land, buildings, equipment, capitalised development andpre-production mining costs of the operations in Namibia. 6. CREDITORS As part of the acquisition of Ongopolo, the Company reached an offer ofcompromise with unsecured creditors to repay the amounts due over five years,without interest accruing. An offer of compromise is broadly similar in effectto a scheme of arrangement with creditors under the Companies Act 1985. Theoffer of compromise was sanctioned by the High Court of Namibia. Included within creditors is the amount owing to unsecured creditors under thecompromise agreement; Amounts falling due within one year $ 5,575,295Amounts falling due after more than one year $ 8,766,486 $14,341,781 7. POST BALANCE SHEET EVENTS On 16 January 2007, an agreement was completed for the sale of certain assetsnamely the Khorixas mining lease, the entitlement to the 15% stake in theOndundu Joint Venture and the final 10% of the Valencia Prospect Licence inexchange for approximately US$10 million in cash and shares. For further information contact: John Norris, Weatherly International plc: +44 (0) 20 7917 2989 +44 (0) 7929 778 251 Jonathon Flory / Stephen Pickup, Libertas Capital: +44 (0) 20 7569 9650 Allan Piper, First City Financial Public Relations: +44 (0) 20 7436 7486 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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