JOHANNESBURG (miningweekly.com) – Copper producer Weatherly International produced 1 822 t of copper in the quarter ended March 31, with the Tschudi copper mine, in Namibia, contributing 692 t for the three months after production started in February.

Despite a difficult first two months of the year, the group’s nearby Central Operations produced 1 050 t of copper at a cost of $7 763/t and delivered 988 t to metal trader Louis Dreyfus at a weighted average price of $5 910/t, Weatherly noted in a trading update this week.

“Central Operations is expected to operate on a broadly break-even basis at these levels of production and at current copper prices,” it maintained, adding that it continued to investigate ways in which the Central Operations could be recapitalised to fully realise the potential of the underground mines and processing capability.

The crushing and stacking section at Weatherley’s infant Tschudi mine was, meanwhile, commissioned over the quarter, followed by the start of leaching, which culminated in the first copper cathode being stripped on February 16.

An initial 80 t of copper cathode was stripped in February, increasing to 692 t in the month of March. This further increased to 813 t of copper cathode in April.

“No sales were recorded in the quarter, as sufficient lots were required to be put together for bulk transportation,” Weatherly confirmed.

Following the quarter-end, shipping of copper cathode began in April, with 970 t delivered during the month at a weighted average price of $5 731/t of copper.

CAPPED RECOVERIES
Weatherly reiterated that initial production from the uppermost part of the Tschudi orebody had been negatively impacted by underestimation of the extent of a leached cap containing significant carbonate and clay content, as well as partly refractory copper oxides.

This resulted in lower and slower copper recoveries than expected, as well as higher-than-expected acid consumption in the heap leach.

The company said it had now undertaken “considerable” work to define the extent of this material and to optimise the processing strategy for it.

Mining in the western part of the orebody had already reached greater than 30 m depth and, with future mining progressing to the east, the impact of this “problematic material” on ongoing operations would be limited.

“The company has undertaken a mining optimisation plan, which includes accelerating mining in 2015 and 2016 to ensure a sufficient supply of ore to support the plant's designed level of copper output of 17 000 t/y.

“The additional mining volumes will increase the company's operating costs during this period; however, management has been successful in negotiating a 7.5% discount to current rates on the additional mined volumes with the mining contractor Basil Read,” the group stated.

Apart from the ore-related issues in the heap leaching noted above, Weatherly noted that the processing plant continued to perform to expectations since commissioning. 

“Based on comprehensive commissioning trials prior to handover, it is expected to comfortably accommodate production at the design capacity of 17 000 t/y of cathode once there is sufficient material in the heap leach,” it said.

However, as a result of the issues detailed previously, the initial ramp-up in production would continue to be constrained in the current quarter, while the mining rate increased and the amount of stacked ore under leach reached the required levels. 

Weatherly expected to achieve 70% of the plant’s design capacity in the third quarter of 2015 and design capacity of 1 400 t/m by the last quarter of the year.

The revised target for the full year was thus 10 000 t of cathode.

FUNDING STRETCH
Looking to the group’s balance sheet, Weatherly said the combination of factors affecting revenue during the ramp-up period had put the company at the “limits” of its available funding.

“The key factors were the copper price, the slow ramp-up resulting from the technical issues detailed above and losses incurred by Central Operations in January and February,” it held.

As announced in March, the company had now fully drawn down on Tranche B of its debt facility with Orion Mining Finance and the amortisation of this tranche was scheduled to start in November.

Weatherly had not drawn down on Tranche C and its cash reserves had been used to fund the current working capital shortfall while discussions with Orion progressed. The company's cash reserves were $6.3-million at the end of the quarter.

Weatherly outlined in its trading update that, while drawing down on Tranche C with Orion would, in isolation, have resolved the company's immediate funding requirement at Tschudi, it was felt that, without an increase in copper price, such a drawdown would simply put further pressure on an already tight debt repayment schedule.

“Discussions between the company and Orion have consequently led to agreement of an equity subscription from Orion. While formally uncommitted at the current time, pricing of any advance with respect to Tranche C will be agreed between Orion and Weatherly at the time of such request. Weatherly currently understands that this will likely be at a material premium to the pricing of Tranche B,” it explained.

SHARE DEAL
In summary, the company and Orion had agreed that Orion would subscribe for 171.9-million ordinary shares in the company at a subscription price of 2p apiece for about  $5.2-million, or 18.1% of the enlarged issued share capital of the company.

The copper producer believed that, with the additional equity support from Orion and the further placees, as well as the Orion debt facilities, it was expected that Tschudi's working capital requirements through the ramping up of production would be met.

“However, there can be no certainty that, should copper prices deteriorate further or should there be any further delays to the Tschudi ramp-up, then there may be a requirement for further working capital by the group,” it cautioned.

Orion had further committed to subscribe, subject to Weatherly shareholder consent, for a further $2.8-million of a subsequent equity subscription.

Weatherly advised on Friday that CEO Rod Webster would be retiring at the end of June and would be succeeded by COO Craig Thomas.