Weatherly International PLC Project Development Update at Tschudi and Otjihase (9897P)

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RNS Number : 9897P

Weatherly International PLC

24 November 2016

24 November 2016

Weatherly International plc

("Weatherly" or "the Company")

Project Development Update at Tschudi and Otjihase

Weatherly International plc (AIM: WTI) provides the following update on project development opportunities at Tschudi and Otjihase.

Summary

-- Tschudi nameplate production rates of 1,417 tonnes per month (tpm) have been re-attained during October, two months earlier than forecast.

-- As part of the potential Tschudi expansion project to 20 thousand tonnes per annum (20ktpa), the Tschudi Solvent Extraction (SX) and Electro-Winning (EW) plants have already demonstrated the capacity to operate at 20ktpa rates with significantly reduced capital expenditure requirements.

-- At Otjihase and Matchless, safe and productive underground mining skills development is critical to unlocking the opportunity to resume production at sustainable unit costs in future.

-- The Company has identified a low-risk and potentially incrementally cash-generative opportunity to commence with its skills development programme at Otjihase. The Company plans to study the opportunity further before taking a decision to proceed.

-- The Company intends investigating the potential for such skills development to support a strategic goal of achieving 10-12ktpa of contained copper in concentrate from the underground mines at C1 costs below US$2/lb.

-- The Company has entered into a Cooperation Agreement with the holder of the Ongombo prospecting license, a prospective copper deposit in close vicinity to the Otjihase mine and concentrator.

   --     An updated Investor Presentation has been posted on the Company's website. 

Craig Thomas, CEO of Weatherly, commented:

"Further operational optimisation at Tschudi, plus project development at Otjihase and Matchless offer significant potential value for Weatherly.

"The mineral resources at Otjihase and Matchless plus the installed processing plant capacity present a valuable opportunity for the Company to resume production at higher production rates and lower unit costs than were achieved during the period from 2011 to 2015.

"Such an opportunity however will be critically dependent on the development of underground mining operator skills. The Company has identified a low-risk opportunity to start a skills development programme in a manner which could be incrementally cash-generative at current spot prices within six months of commencement.

"We continue to prudently advance project work in both areas and look forward to updating the market in due course."

Tschudi nameplate production re-attained early

In October the Company repeated its Tschudi guidance from July that nameplate production rates of 1,417tpm would be re-attained by December 2016, following the reduced production in the June and September 2016 quarters due to excessive groundwater inflow to the pit. The Company is now pleased to announce that nameplate rates were in fact re-attained in October, two months earlier than forecast.

20ktpa Tschudi Expansion Opportunity Update

In December 2015, the Company announced that the opportunity to expand Tschudi production capacity to 20ktpa would require expenditure of US$1.2M. In the same update, the Company reported that life-of-mine C1 cost estimates had improved to US$1.75/lb for production of 17ktpa, with expected modest improvements in Life of Mine C1 unit cost to US$1.72/lb under the 20ktpa scenario.

Subsequent optimisation of the operating parameters used within the Solvent Extraction and Electro-Winning plants have now reduced this capital estimate to US$0.2M. Focus for the expansion opportunity evaluation has now shifted to evaluating mining, pad development, stacking, and leach scheduling paths to sustain such a potential expansion and quantifying potential operating cost savings from the expansion.

Otjihase and Matchless Project Development Update

The mineral resources at Otjihase and Matchless plus the installed processing plant capacity present a valuable opportunity for the Company. Success will be dependent on achieving higher production rates and lower unit costs than were achieved during the period from 2011 to 2015. This will be critically dependent on safer and more productive underground mining execution capability and operator skills development in this area is the critical requirement to unlock the opportunity.

The geology and processing characteristics of the Otjihase and Matchless orebodies are well understood and off-take agreements remain in place for the high-quality concentrate which can be produced. While some further geological resource development work may be required over time, for example to upgrade the historical estimate at Old Matchless to a JORC Mineral Resource Estimate and to upgrade and extend the Matchless Western Extension resource estimate down plunge, the critical-path to implementing a sustainable restart of operations lies with underground mining skills development.

The Company has identified a potential opportunity to commence a skills development programme in a manner which could be incrementally cash-generative at current spot prices within six months of commencement, partially offsetting current care and maintenance costs being incurred at the sites. Ultimately it is envisaged that a period of up to two years may be required to develop the requisite improvements in underground mining operator skills and to train sufficient Namibians to the best international standard and fully realise the potential of Otjihase and Matchless.

Under the proposal, small scale mining and campaign processing would be conducted by a small team in the first scheduled primary mining area at Otjihase. All of this mining would be conducted in ore and the programme would commence with the establishment of productive and safe primary mining systems. These systems would provide multiple benefits including:

   --     developing the training materials required and "training the trainers"; 

-- advancing access deeper into the future production area which is expected to expose higher ore grades and open up additional working areas required for future production rate increases and additional training operations - effectively we would be "building the classrooms";

-- reducing longer-term commercial risks via a low-risk proof-of-concept demonstration that the improved safety, productivity and unit costs required can be achieved before attempting to scale them up; and

-- producing small volumes of ore which can be concentrated at Otjihase and sold in order to fully fund the ongoing skills development plus generate a modest incremental cashflow benefit at current spot prices.

Detailed evaluation and refinement of the training programme proposal is underway. Key factors in the evaluation will be assessing the risks of the programme not achieving incremental cashflow neutrality or better, and the ability to terminate the programme if key safety and productivity milestones are not met on schedule.

The current strategic goal envisaged for such a restart would be safe and sustainable production from the Otjihase Concentrator of 10-12ktpa of copper in concentrate at C1 unit costs of below US$2/lb. Due to the large amount of underground access infrastructure in place plus the fact that the Otjihase concentrator is well maintained and capable of treating up to 800ktpa of ore, the capital expenditure required to deliver such an outcome is expected to be very low, and would likely rank as one of the lowest capital intensity copper production opportunities in the world. A robust and low-risk plan to develop the requisite underground mining skills is the key to unlocking this potential.

Cooperation Agreement signed with holder of Ongombo exploration license

The Company announces that it has entered into a Cooperation Agreement with Mr Wilhelm Shali, holder of Exclusive Prospecting License 5772 covering the Ongombo prospect area within 25km of the Otjihase concentrator. The agreement clarifies the intention of the two parties to work together to seek to develop mining prospects in the vicinity of the Otjihase concentrator which may otherwise not be viable. The parties will initially share technical information on their respective projects. Previous holders of prospecting licenses over the Ongombo project reported JORC-compliant resources of 10.5Mt @ 1.6% Cu in 2012, and the current holder has been conducting additional exploration work.

Posting of new Investor Presentation

The Company advises that an updated Investor Presentation has been uploaded to the Weatherly International website.

Weatherly has previously advised that if copper prices remain at current levels it is unlikely that the Company and its subsidiaries will generate sufficient surplus cash to meet all loan repayments when due. This remains the case and the Company continues to positively engage with Orion Mine Finance (Master) Fund I LP on the subject.

For further information please contact:

   Weatherly International plc                                       [phone] 

Craig Thomas, Chief Executive Officer

Kevin Ellis, CFO and Company Secretary

   RFC Ambrian Limited                                                     [phone] 

(Nominated Adviser & Broker)

Nominated adviser contact: Stephen Allen or Bhavesh Patel

Broker contact: Kim Eckhof

Blytheweigh [phone]

(Financial PR) Tim Blythe / Camilla Horsfall / Nick Elwes

About Weatherly

Weatherly is an AIM listed copper mining company operating in Namibia in southern Africa. Its principal assets are one operating open pit copper mine called Tschudi and two underground copper projects called Otjihase and Matchless.

These assets will enable Weatherly to achieve its medium term goal of establishing a mining business capable of sustaining approximately 30,000 tonnes per annum of copper production.

This information is provided by RNS

The company news service from the London Stock Exchange

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November 24, 2016 02:00 ET (07:00 GMT)