By Hilary Mare
DESPITE a revenue increase to US$75.1 million from US$63.7 million, for the year ended 30 June, AIM-listed Weatherly International’s losses have more than tripled, to about US$40.1 million from US$10.6 million, the company reported last Monday.
Losses per share widened to US$3.64 from US$0.98.
Nevertheless, Weatherly chairperson John Bryant took some comfort in the current price of copper, noting in the company’s results statement that the price environment in which it operates “improved notably” from the previous financial year, with prices subsequent to the end of the current reporting period reaching three-year highs.
Spot copper prices at the end of the financial year were US$5 949/ ton, up from US$4 836/t at the beginning of the year.
Since 30 June, the copper price spiked as high as US$6 900/t. Despite this increase, however, there was a weakening of the dollar against the South African rand, which adversely affected costs in US dollar terms, while reducing the impact of the price increase when converted to rands. Consequently, while revenue increased 23 percent a ton, as a result of the copper price, costs increased by 13 percent, as a result of the exchange rate.
“While volatility remains quite high and the outlook uncertain, this is certainly a better position to be operating from than that which the company has dealt with for some time,” noted Bryant.
He added that progress continues to be made at the company’s key asset, the Tschudi open-pit copper mine in Namibia, despite management facing some operating challenges well beyond those foreseen prior to construction. Production in the year fell below nameplate capacity, as a result.
Weatherly Chief Executive Officer, Craig Thomas, noted that, in production terms, the year began “on a back foot”, with Tschudi needing to recover from the high groundwater inflow rates encountered in the open-pit in the last quarter of the previous year, while the copper price remained relatively flat, at five-year lows.
Thomas explained that the inflow rates “far exceeded the worst case scenarios foreseen within the bankable feasibility study (BFS), making it impossible to prepare for these excessive inflows in advance, and making it equally impossible to provide the required volumes of ore from the pits to the crushing and stacking plant, in the short-term”.
As a result, cathode production in the September quarter was 15 percent below nameplate, as the market had been advised it would be.
He added that while the groundwater issues were dealt with in the September quarter, record Tschudi production was achieved in the December quarter, and prospects were buoyed by notable improvements in the copper price in the same period.
However, slow leach rates, unforeseen by the BFS, impacted on production, while increased seasonal rainfall delays slowed short-term mitigation responses during the second half of the financial year.
Further, the negative impact on production volumes and unit costs in the March and June quarters were significant, and when combined with the expected poor first quarter result, as a result of the impact of excessive groundwater inflow, three out of the four quarters averaged almost 20 percent below nameplate production rates, Thomas said.
For the whole year, Tschudi produced 14 759 tons of cathode, which was 13 percent below the nameplate target of 17 000 tons. The C1 unit cost achieved for the year was US$5 288/t.
Following the financial year-end, copper prices have further increased, with Tschudi increasing to nameplate production levels by the end of September.
“However, subsequent to the year-end, our remedial actions are bearing fruit, and we remain cautiously optimistic that nameplate production rates will be maintained,” Bryant said.
The company also prepared for better times ahead, by cautiously advancing project development plans for Otjihase and Matchless, and seeking further growth opportunities in the region, consistent with its stated strategy of pursuing growth through developing and operating profitable medium-scale base metals mines in lower-risk parts of Africa.
“While our lossmaking financial results are of course very disappointing, I would also like to take this opportunity to thank all of our shareholders, and especially Orion, for being so supportive through the period,” Thomas said. He maintained, however, that the company looked forward to further stabilising and optimising performance at Tschudi, and to more “robustly advancing” Weatherly’s project development portfolio
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