Weatherley International operations update February 8th 2011

RNS just released from Weatherley (WTI), I'll look at the new presentation at http://www.rns-pdf.londonstockexchange.com/rns/8296A_1-2011-2-7.pdf with great interest. Explains the 7.5% increase yesterday, clearly a leak. Looks like everything is progressing to plan.

TIDMWTI

RNS Number : 8296A

Weatherly International PLC

08 February 2011

Weatherly International Plc ("Weatherly" or the "Company")

Central Operations Update and Investor Relations Presentation

Central Operations
As previously announced on 12 January 2011, mining activities have resumed at both the Otjihase and Matchless mines with ore being blasted and stockpiled awaiting commissioning of the concentrator. The commissioning of the concentrator is progressing well and the plant will resume normal operation in accordance with the programme. Weatherly expects to have sufficient quantities of concentrate to commence transport to Walvis Bay in March with the first revenues to be realised from concentrate sales shortly thereafter.

Both the Matchless ore haulage and Otjihase concentrate haulage contracts have been awarded to local company, Kraft Holdings, which now completes the award of all outstanding major contracts.

Forward Sales of Copper
Further to the previous announcement on 14 January 2011, Weatherly announces that its wholly owned subsidiary, Ongopolo Mining Limited ('Ongopolo'), has entered into an additional forward sales contract with Louis Dreyfus Commodities Metals Suisse S.A. ('Louis Dreyfus Commodities').

Weatherly has contracted with Louis Dreyfus Commodities for an additional 950 tonnes of contained copper to be delivered progressively over a 17 month period commencing in May 2011 at a fixed price of US$9 750/tonne. In total, Weatherly has therefore contracted forward sales for a total of 1,925. This represents approximately 20% of anticipated production over the period covered by the two contracts.

Investor Relations Presentation
Weatherly is pleased to provide shareholders with the Company's latest presentation which is being made available today at the Mining Indaba conference in Cape Town, South Africa.

To view the full presentation, please paste the following link into your web browser:

http://www.rns-pdf.londonstockexchange.com/rns/8296A_1-2011-2-7.pdf

Weatherly International finally gets some positive momentum

Nice 7.5% rise on Copper Miner, Weatherley International (WTI) today to 14p. The markets are beginning to realise that with a market capitalisation of £76 million, WTI is very much undervalued. With copper hitting an all time high and  the Otjihase and Matchless mines gearing up production, there's plenty of news flow in the short term to look forward to. The fact that shareholders will get shares in CAR (China Africa Resources) when it floats on AIM in April has been missed by many. Though the company is close to hitting its 52 weeks high, a share price in the 25p-30p looks reasonable on valuation grounds within the next 2-3 months. There were some chunky buys in the afternoon, several 250K's and 1 million at 16.20 indicating institutional buying.

As a reminder from my previous post on WTI on January 30th, http://contrarianinvestoruk.blogspot.com/2011/01/weatherly-international-namibian-copper.html

SWOT
Strengths
Producing copper assets at  Otjihase (3.2 million tonnes at 1.6% JORC) and Matchless mines (0.7 million tonnes at 1.8% JORC) with minimum 5 year mine life
Copper price strong at close to $9500 per tonne
Low cost of production $3,258 per tonne at Otjihase and Matchless
No exploration risk
$140 million of losses able to offset future production
Good institutional shareholder base e.g. Gartmore and Blackrock
Namibian government large shareholder which may derisk licences etc.

Weaknesses
Success geared to copper price
Activity focused on one country - Namibia (but low risk for Africa)
Blighted history
AIM listed so volatile

Opportunities
Investors in Weatherley will get shares in CAR (China Africa Resource) when CAR is floated in AIM in Spring 2011-  Weatherly will distribute 10% of its 35% shareholding in CAR to its shareholders as a dividend in specie.
Good development pipeline e.g. Berg Aukas, Tschudi open pit
Continued weakening of dollar boosts commodity prices priced in U.S. dollars

Threats
Delay in listing of China Africa Resources
Namibian political situation (considered low risk)
Delays in production ramp up at Otjihase and Matchless copper mines
Further fund raising (low risk due to forward selling contract with Louis Dreyfus Commodities Metals
Collapse in copper demand and price e.g. China

Outlook
If every falls into place during Q1 2011, things look very positive for Weatherley given its undemanding rating and low market capitalisation of just £68 million. With full scale production from Otjihase and Matchless of over 4000 tonnes in 2011 and close to 8000 tonnes in 2012 plus some interesting development projects such as Tschudi coming on stream in 2013 . So this should be a year to put its past mistakes behind it and look forward to 2012 and 2013. If we conservatively assume net profit of $4,500 per tonne of copper in 2012 and production of 7500 tonnes, that would make earnings of $34 million (£21.5 million).

The usual risks of investing in Africa have been reduced by Rod Webster's excellent work in getting the Namibian government to have a large shareholding and thus incentive for future success.

Weatherly International purchase

With a 6 percent fall today on Weatherley International (WTI) I have taken the opportunity to buy into this interesting Namibian copper play. It's been on my watch list for a while and the drop looks Market Maker driven (on general market sentiment) as the sell volume hasn't been excessive.