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UPDATE - Weatherly International completes refinancing as CEO bows out

Published: 22:57 08 May 2015 AEST

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Orion Mine Finance is to pump at least £3.44mln into cash-strapped copper miner Weatherly International (LON:WTI) as part of a refinancing.

Orion will subscribe for 171.9mln shares at 2p a pop - a 21% premium to the closing price of Weatherly share prior to the suspension of the shares in February.

The newly issued shares represent 18.1% of the enlarged issued share capital of Weatherly.

Orion has also agreed to subscribe for a further £1.84mln (US$2.8mln) of shares, also at 2p a share, as part of a share placing proposed by Weatherly in the coming weeks. Orion has the option to buy another US$2.5mln (£1.64mln) of shares at the same price, provided it does not take its stake above 29.9%, which would require the company to launch a full bid at 2p a share under UK law.

Additionally, as part of the proposed placing, the company has obtained subscription commitments for a further 22.3mln shares at a price of 2p per ordinary share, which will raise around £0.46 million (US$0.69 million) subject to Weatherly shareholder approval. 

Weatherly's current largest shareholder, Logiman CC - the contractor for the plant construction at Tschudi - is on board and will subscribe for a further 16.53mln shares.

The cash injection should provide enough working capital to see it through the ramp-up stage of its Tschudi mine project in Namibia; Tschudi is scheduled to hit its design capacity in the fourth quarter of this year.

The need for additional finance comes about as a result of the slow ramp-up of operations at Tschudi, while low copper prices have not helped matters.

The third quarter of Weatherly's financial year - the first three months of 2015 - saw the first copper from Tschudi produced in February; 692 tonnes were produced in March.

Meanwhile, at Weatherly's central operations, a total of 1,822 tonnes of copper was produced in the quarter, of which 1,172 tonnes, or 64%, was produced in March.

"Although February’s first copper production was ahead of schedule, the rate of production was significantly lower than planned. This was due to lower-than-expected grades and recoveries. Also, costs were adversely affected by higher-than-expected acid consumption. This has led to an increase in the project’s working capital requirements, a factor that was compounded by the operational difficulties and losses at the Central Operations," notes broker RFC Ambrian. 

"The company has stated that the processing difficulties at Tschudi are limited to a certain ore type, which it believes it has defined and that it has now excluded from the mine plan. This material is being stockpiled and the mining rate accelerated to compensate for this. The company plans to announce an updated resource taking account of these factors in 3Q15," the broker added.

Weatherly said that it considered the option of drawing down a third tranche (Tranche C) of US$8mln from its debt facility with Orion, but concluded such a draw-down would "simply put further pressure on an already tight debt repayment schedule".

The facility agreement now provides for Tranche C to be made available only at Orion's discretion; any Tranche C loan, if made, will provide for working capital support beyond the roughly US$8 million equity committed above. 

As well as the cash injection, the company announced some management changes, with Rod Webster set to step down as chief executive officer at the end of June and return to Australia, though he will still be a non-executive director.

Craig Thomas, who is currently chief operating officer, will succeed Webster.

John Bryant, chairman of Weatherly, said: "Rod Webster has taken Weatherly from its initial listing and its Zambian copper prospects through the acquisition of the Namibian assets. These have been restructured to leave the company focusing on its copper operations.

"The on time and under budget completion of the construction of the Tschudi project is a tribute to Rod's skill and tenacity at getting a significant new project financed and built in what have proved to be increasingly difficult market conditions.  He stands down leaving the company well positioned to benefit from any upturn in global copper prices."

Trading in shares in Weatherly is currently suspended, but is expected to resume on Monday morning.

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