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investors waiting for news of bid at Weatherly International

Published: 09:00 21 Apr 2008 AEST

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Weatherly International has struggled to generate investor excitement since completing the acquisition of three Namibian mining centres in 2006 - Otjihase, Tsumeb, and Kombat - involving five mines, three concentrators, and a smelter complex at Tsumeb for £3.5 million in cash and £5.5 million in shares. Since then, the company has concentrated on getting these assets back into profitable action.

Rod Webster, Chief Executive, certainly appears up to the task: a mining engineer by profession, and former senior executive with TSX and AIM listed, Africa-focused copper producer, First Quantum Minerals - which currently has a market capital of around £2.7 billion. Rod knows a thing or two about copper mining! 

Namibia is a pretty good place to do business, too. Fitch rates the country as "investment grade", the political situation is stable, the mining laws favour foreign direct investment and the infrastructure is excellent. Fortunately, Namibia is located on the western coast of Africa, offering good export routes into Europe and the Americas; this gives Weatherly an advantage with its combination of copper mining and its specialty smelter (which processes ?difficult ores? from other mines).

In February, Weatherly's apparent lack of appeal to investors changed overnight when the company confirmed it had received a preliminary approach. Shares in the group quickly moved higher, hitting 25 pence - almost 10 pence higher than before the news broke. Since the announcement, the price of copper has been robust to say the least, trading at just under $4/pound spot. Many copper miners and smelters will tell us, given the chance, that business is viable anywhere over $1.50/pound, some at even much lower levels. This continued robust outlook for copper demand versus limited increases in supply and dwindling stockpiles at the London Metal Exchange, has invariably had a part to play in Weatherly?s yet to be named suitors. So what does Weatherly have in its basket of goodies?

 A quick tour of the assets acquired includes:

Otjihase Mine

Has reserves of twelve million tonnes of 1.86% copper ore and a mine life of fourteen years. Backfilling a mined-out area at Otjihase is in progress, so that pillars of high grade ore can be extracted. The Matchless mine has reserves of one million tonnes of 3.0% copper ore, and another million tonnes of 2.5% copper ore, with total mine life of ten years. Output from the Otjihase mining centre is expected to rise from 2,687 tonnes of copper metal in 2007, to around 10,000 tonnes in 2008.


Tsumeb Mining Centre

The Tsumeb West mine has reserves of 0.7 million tonnes of 2.3% copper and 11g/t silver ore, with a mine life exceeding five years. The Tschudi mine has 43 million tonnes of 0.8% copper and 11g/t silver ore, plus underground reserves of 1.0 million tonnes of 1.5% copper and 15g/t silver ore, with a mine life exceeding four years. One concentrator at Tsumeb has been re-commissioned and work has started on the second concentrator, which will mean that ore from both mines can be treated ? with an annual capacity of about 800,000 tonnes of ore. The Tsumeb mining centre is expected to produce 5,400 tonnes of copper in 2008.

Kombat Mining Centre

Consists of the Kombat and Berg Aukas mines, plus the Gross Otavi prospect. This is a small, rich, shallow lead-copper deposit, which will probably operate as a satellite mine to the Kombat concentrator. The main underground Kombat mine was dewatered and brought into production in 2007; however, mining was suspended in December 2007 because of underground flooding, due to the disruption of the electricity supply from the beleaguered South African electricity utility, Eskom. Weatherly is currently in discussions with the Namibian Government on discuss ways to secure a reliable power supply in order to resume dewatering and mining at Kombat ? and to supply potable water to the surrounding area.

The Berg Aukas Mine was closed and flooded in 1978, with a reserve of 1.7 million tonnes of 17% zinc, 5.0% lead and 0.6% vanadium oxide ore, and a forecast mine life of at least five years. Weatherly aims to have the mine working in 2010, producing 40,000 tonnes of zinc, 12,000 tonnes of lead and 1000 tonnes of vanadium oxide a year, in concentrate. This target is subject to verification of resources and reserves, completion of a feasibility study and a reliable power supply.

The Tsumeb Smelter

Comprises of three furnaces, was originally built to smelt local copper and lead ore, and is now a stand-alone business which produces blister copper, lead dust, and arsenic trioxide ? used in wood preservative. The construction and commissioning of the Tsumeb Ausmelt furnace is proceeding on schedule and this will increase smelting capacity to around 35,000 tonnes of copper metal a year. Stage two of the re-commissioning programme will increase capacity to approximately 50,000 tonnes of copper ? with the potential to increase to 100,000 tonnes thereafter. The Tsumeb smelter can process complex ores, and three-year contacts have been signed to smelt copper concentrates with high levels of arsenic.

A Mountain of Tailings

Weatherly also has a joint venture for producing copper from tailings which will start with a project at Tsumeb, and the company has disposed of its ?non-core tailing dumps?. Weatherly awaits developments in Zambia over a legal dispute about a copper prospect, and in Burkina Faso, work has started on a feasibility study for the Tambao manganese deposit, in which Weatherly could acquire a majority interest.


Interim results for Weatherly were published at the end of March. For the year ending 30th June 2007, Weatherly posted a net profit of US$12.4 million on turnover of US$63.1 million. In the six months to 31 December 2007, the company made net loss of US$1.2 million on revenue of US$41.5 million. The interims may not have shown a profit, but the company said it was happy with this situation, as the loss was largely due to a well flagged up investment programme in its mining and smelting operations.  Crucially, there was little given away on the progress of the potential bidder. Until there is, Weatherly continues to develop its assets, but investors are sitting on the edge of their seat awaiting an update on the potential bid.

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