Weatherly International (WTI) have just issued their interim report, all looks on track with excellent prospects. Top class company! The dividend from the China Africa Resources (CAR) AIM flotation in April will be most welcome.
Financial
· Cash at bank US$15 million as at 31 December 2010
· Net assets of US$32.1 million as at 31 December 2010
Corporate and operational
· Successful restart at Central Operations
· US$7.0 million loan from Louis Dreyfus
· Share placement raising £4.45 million (US$ 7.0 million) in November 2010
· Sale of Kombat mine completed, US$3.2 million received in total
Post Half Year End
· Concentrator and the mines have now been fully commissioned and are operational
· Forward sales of approximately 20% of the output from Central Operations for first 18 months of production at average weighted price of US$9,500 per tonne
· First sales revenues expected March 2011
· Contract awarded to drill the Tsumeb tailings as prelude to a full feasibility study
Chairman's statement
Half Year Statement
We are pleased to report Weatherly's results for the half year ended 31 December 2010.
During this period we recorded a loss of US$3.7 million comprising operating losses before depreciation of US$3.2 million associated with the cost of maintaining and redeveloping the mines, depreciation charges of US$1.6 million, and profit of US$1.1 million from disposal of Kombat and other property.
Cash in the bank at 31 December, 2010 totalled US$15 million.
During this period our focus has been on the next stage of development of our Company. This involves not only returning our mines to production in accordance with our programme, but laying the foundations for further development and corporate growth.
Our plans for reopening the mines have involved the recruitment of senior staff and the strengthening of the boards of our operating companies in Namibia with some significant appointments. We have recruited Craig Thomas as Chief Operating Officer and two non-executive directors, Titus Haimbili and Frans Ndoroma, who join Cleophas Mutjavikua on the boards of our operating companies. We have been able to move quickly into production as a result of the measures taken to maintain the mines in good order since production ceased at the end of 2008.
We also entered into an off-take agreement with Louis Dreyfus Commodities Metals Suisse SA ('Louis Dreyfus Commodities') who also provided US$7.0 million of funding for the project.
With copper prices at a high level, the Board has adopted a cautious approach to risk management and has authorised forward selling of up to 35% of our output from the mines for a period of 18 months. To date we have contracted to sell approximately 20% of our projected output in two tranches: the first at US$9,260 per tonne and the second at US$9,750 per tonne. We shall continue to monitor copper prices and projections in the context of our overall strategy which is to guarantee minimum levels of revenue from our mines, particularly during the critical start-up period.
In November we undertook a placement of our shares raising £4.45 million (US$7.0 million) which also served as a catalyst to reshape our shareholder base. We are pleased to welcome all our new shareholders. Blackrock who participated in the placement and were allotted 12 million shares have now taken their total holding in the Company to 65.6 million shares (12.25%) having acquired a large part of the Dundee Precious Metals Inc shareholding.
Operational Update
Central Operations
Mining at Otjihase and Matchless has been under way since January and the company is now pleased to announce that all parts of the mine have been fully commissioned. This includes the concentrator, conveyor hoists and all of the machinery that is necessary to make the mine fully operational. Delivery of the concentrate to Walvis Bay is imminent and the first revenue is expected to be received in March. We believe that we have the right management, contractors and framework in place to sustain a viable and profitable operation which will serve as the platform for the future development of the Company.
Tsumeb Tailings
We are undertaking a formal investigation into the feasibility of copper production from the old tailings dump at Tsumeb. We are examining this urgently as it provides the potential to exploit an existing resource and increase our copper production with relatively low investment. Accordingly, we have awarded a contract to Dump and Dune, a South African company, to mobilise at the beginning of March, 2011. The Tsumeb tailings dump comprises residues from the old Tsumeb mining operations and contains an historical (non-compliant) resource of 16mt grading 0.71% copper. It is also known to contain significant concentrations of lead, zinc and silver. The company has engaged consultants Coffey Mining to prepare a resource statement and report that will comply with the AIM requirements. Sedgman Engineering, who is currently managing the Tschudi feasibility study, has also been engaged to determine the most suitable retreatment process that can take advantage of the existing Tsumeb concentrator and infrastructure.
Tschudi Feasibility Study
The open pit-able resource at Tschudi remains a key element in our strategy for increased copper production. Currently the base case is to produce around 10-13,000tpa of copper over a life of at least ten years.Metallurgical testwork is continuing at the AMDEL laboratories in Perth under the auspices of Study Managers, Sedgman. Results to date support the development of a stand-alone open pit operation based on either heap leaching the transitional ores followed by flotation of the primary ores or simply flotation of both ore types. Final selection of the processing route is awaiting the results of column leachwork that has been running since last year and the latest round of flotation testwork. With high precious metal prices, the recovery of silver has become an increasingly important element in determining the preferred metallurgical route.
China Africa Resources Plc
In January we signed the Implementation Agreement with East China Mineral Exploration and Development Bureau ('ECE'), for the newly formed jointly managed company, China Africa Resources Plc ('CAR'). We are now working on the detailed documentation required for the listing. This transaction, when completed, will involve the distribution of 10% of the entire share capital in CAR to our shareholders as an in specie dividend. This will leave Weatherly with a 25% interest in a very exciting growth opportunity with an ambitious Chinese partner.
Exploration
The company intends to accelerate its planned extension drilling of the Tschudi syncline. By doing so, it may be possible to incorporate any significant increases in the resource into the feasibility study without unduly delaying the final report. Drilling of Tsumeb West and other areas contained in the exploration licence is scheduled for later in the year.
Appointments
With so many projects going forward we are now in a position to recruit top mining executives to strengthen our team across the full range of our activities. We have appointed Dominic Claridge, an experienced mining engineer, to oversee the development projects at Tsumeb, Tschudi and Berg Aukas (on behalf of CAR). With an increased focus on exploration we shall be making a further appointment to oversee our exploration activities in Namibia. We are also recruiting an experienced mine manager for Central Operations to support the excellent work carried out by Craig Thomas, our Chief Operating Officer. These are all key appointments that will support the future development of the Company.
Outlook
The company is now back in production at an opportune time given the current climate of high copper, and precious metal prices. We have an excellent pipeline of projects and a more than capable team of people to see these projects to fruition. We shall be increasing our exploration efforts with the aim of adding to our already substantial JORC compliant inventory of 623,645 tonnes of copper. The spin-out of CAR with one of China's largest mineral groups, ECE, offers enormous opportunity and we are still hopeful that there will be an early resolution to our involvement in the Tambao manganese project in Burkina Faso. All in all, 2011 promises to be a very exciting year for the company.
