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Weatherly share suspension stands amid ‘uncertain’ financial position

18th March 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Following underwhelming copper recovery at its Tschudi mine, in Namibia, and production shortcomings at its nearby Central Operations, copper producer Weatherly says the trading of its Aim-listed shares remains suspended amid an “uncertain” financial position and the outcome of ongoing talks with financier Orion Mine Finance over possible amendments to its current loan arrangements.

While confirming that it had produced the first copper cathode at the Tschudi project's electrowinning circuit, the group last month requested a temporary suspension in trading following several operational and technical issues at the low-cost openpit mine.

It added that its future financial performance was contingent on revenues received from the sale of copper and that it remained exposed to fluctuations in the copper price.

Elaborating on its existing agreement with Orion, Weatherly outlined that Orion had provided the final cash call of $4-million in respect of the $80-million Tranche B of the Tschudi loan.

Weatherly had not yet drawn down on Tranche C, which was a project overrun facility of $8-million that required the company to contribute on a dollar-for-dollar basis.

“The company's current cash reserves, which were $8.7-million on March 1, are sufficient to allow full use of this facility. The company's working capital position is reliant on Tranche C – or equivalent facilities – being made available to it as the Tschudi project ramps up to full production.

“However, these facilities may not be enough to meet the future working capital requirements should copper prices, or other operational factors affecting the company's financial position, deteriorate,” it cautioned.

TSCHUDI SHORTFALL
Weatherly reiterated on Wednesday that initial copper recoveries at its Tschudi mine were lower than expected owing to slower leach rates and higher than anticipated acid consumption.

However, mining in some of the pits was now below 30 m and there had been a “significant” increase in both leaching rates and recoveries as a result.

“Some of the shallow, more refractory ore is now being stockpiled for later treatment with the rest being blended with deeper material to improve recoveries and leach rates. Additionally, mining is being accelerated to access the deeper levels earlier than originally scheduled,” Weatherly outlined.

The company had, therefore, revised its short-term copper production schedule to take into account the impact of the lower initial production and, as a result, Tschudi was expected to reach its design capacity in the fourth quarter of the year.

Weatherly was, meanwhile, in the process of reviewing the current resource estimate for the oxide portion of the orebody, incorporating the latest grade control drilling, and was expected to have completed this by the end of the month.

The company also intended to update its resource estimate for the whole orebody and release the information to the market in the third quarter of the calendar year.

CENTRAL OPERATIONS
As outlined in January, Weatherly’s Otjihase mine had recently experienced ground control issues in the eastern part of the Kuruma block, where the majority of ore from pillar recovery was being sourced.

Following a series of ground movements, this area was closed and abandoned, leaving the Otjihase mine short of immediately available reserves.

The mine was in the process of changing over to primary mining in the new Hoffnung area, but development was still on the fringes and only low-grade material had been available.

“This, combined with other production shortcomings at the Matchless mine, resulted in both January and February being low production months,” Weatherly noted, adding that new areas had since become available and productivity had increased in the second half of February.

Adding to the group’s production woes during the current quarter, the copper price suffered a material fall from over $6 000/t at the end of December to a low of some $5 300/t at the end of January.

“While low copper prices exacerbated the impact of the poor production in January and February, Central Operations’ losses for the current quarter are expected to be within the company's available working capital,” Weatherly advised.

At the targeted run rate of about 500 t/m, Central Operations was expected to be cash-flow neutral, assuming that the copper price did not deteriorate further from the current $5 800/t.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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