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Weatherly posts $1.6m FY profit despite flat copper volumes

15th October 2013

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Aim-listed Weatherly International posted a $1.6-million after-tax profit for the year ended June 30, despite its copper production for the year having remained flat at 2012 levels.

The copper producer attributed its full year profit primarily to capital inflow of $2-million as a result of the settling of an outstanding insurance claim relating to the flooding of its Kombat mine – a business segment that was disposed of two years ago.

The company also benefited from a $2-million settlement of its claim for a licence to develop the Tambao mine, in Burkina Faso.

In contrast, the group swung from an operating profit of $6.97-million in 2012 to an operating loss for the year of $2.1-million.

This comprised a profit of $1.1-million – after charging depreciation of $5-million – from its central operations, which comprises two producing copper mines, Matchless and Otjihase, in Namibia.

However, this profit was offset by costs totalling $3.2-million.

In addition, Weatherly generated $1.9-million of cash from operating activities over the twelve months, which the company said would have been $4.7-million higher had all copper inventory at the Walvis Bay terminal been shipped.

“However, our offtaker left inventory with a sales value of $5.4-million at Walvis Bay, against which it made loans to the value of $4.7-million, which has resulted in inflated loan figures at the end of the year,” the company said in a statement.

Moreover, the company invested $1-million in property, plant and equipment, $2.1-million in developing the central operations and $2.7-million in completing the Tschudi feasibility study, further narrowing its margins.

As a result, earnings a share from the company contracted from R3.90 for the year ended June 30, 2012, to 36c for the last twelve months.

FLAT PRODUCTION

Weatherly produced 5 182 t of copper in concentrate from its central operations in 2013, with the loss of a production area at Otjihase owing to subsidence impelling the group to drop its production estimate for the remainder of the year.

Yearly output remained relatively flat on the 5 204 t produced in 2012.

“However, we have continued to improve operational flexibility and reduce production costs. We expect that we will achieve sustainable increased production and lower operating costs when we start to mine previously unworked orebodies,” said the group, adding that one of its strategic objectives over the year was consolidating production from central operations.

Further production uplift was expected when a new compartment, dubbed Hoffnung West, becomes available to replace the ore blocks lost through subsidence and, in the longer term, from Matchless.

Meanwhile, Weatherley took “strong action” in the second half of the year to reduce costs, with encouraging results.

“The cash costs were $6 532/t for the year and $6 041/t for June,” it reported.

Further, the company said it had revised the long-term mining plan for Matchless to accelerate production from existing areas and allow for a sequential development of Old Matchless.

Future development would gradually phase-out pillar recovery, while new, unworked orebodies would be mined in a bid to lift production. The company would also also seek ways to increase the utilisation of the concentrator, which it believed would put further downward pressure on production costs.

“The plan effectively reduces the amount of additional capital required and will now be self-funding, while still achieving the overall production plan,” said Weatherly.

TSCHUDI PROJECT

Throughout the year, the company continued to pursue the development of its Tschudi project, having completed a bankable feasibility study that indicated a robust project offering a mineral resource of 50.1-million tonnes at 0.86% copper and a reserve of 22.7-million tonnes at 0.95% copper.

Thereafter, the company finalised a $91-million loan facility with mining financier Orion Mine Finance, which would enable the copper-focused mining company to fully fund to production the 17-million-tonne-a-year project.

This followed an amendment of the loan from the original term sheet that was signed in December to a more favourable repayment term of six-and-a-half years, which came at a cost of a 1% increase in the interest rate payable.

The facility comprises a secured loan of $80-million, a project cost overrun facility of a further $8-million and $3-million to assume the existing Louis Dreyfus loan, which had been rescheduled to expire at the end of 2014.

The loan repayment was expected to be covered from cash flow from Tschudi, with no anticipated demands on cash flow from Weatherly's Central Operations.

In addition to the loan, Orion would, on an exclusive basis, buy 100% of the project's copper cathode production based on London Metals Exchange and Commodity Exchange market prices for the eleven-year life of the mine.

“The development of the new mine at Tschudi is our primary priority as it moves the company closer to its stated objective of being a 25 000 t/y copper producer,” Weatherly noted.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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