Weatherly Namibia rescued by multimillion dollar loan

THE financially troubled British mining company Weatherly PLC, which also has operations in Namibia, secured a multimillion-dollar loan from two international companies at the eleventh hour, enabling it to expand its Tsumeb copper smelter.

Weatherly Namibia, a subsidiary of the main company, closed all four copper mines last month and laid off 634 workers due to low international copper prices after a global credit crunch hit markets last year.
‘Weatherly has entered into loan facility agreements with Chelopech Mining, a wholly owned subsidiary of Dundee Precious Metals, and Louis Dreyfus Commodities Metal Suisse SA to provide US$11,3 million (N$111 million) of new funding,’ Weatherly spokesperson Jamie Milton announced last week.
‘Chelopech has entered into an agreement to provide Namibian Custom Smelters (NCS) at Tsumeb, a wholly owned subsidiary of Weatherly, with a US$7 million (N$70 million) facility, US$1 million of which has already been advanced (earlier).’
Weatherly entered into a separate agreement with Louis Dreyfus for a US$4,3 million facility last week, consisting of US$2 million, which is effectively a prepayment made under the terms of the concentrate tolling arrangements that have been concluded, and a 12-month extension to US$2,3 million of credit currently owed to Louis Dreyfus by Weatherly.
Weatherly took over the copper-mining activities of Ongopolo Mining & Processing just over two years ago, which was on the verge of bankruptcy and could not honour its loans any more.
Ongopolo was established with Government backing by former employees of Tsumeb Corporation Ltd (TCL) a few years ago, which became defunct after a protracted strike of its workers.
Weatherly pumped some N$600 million into the Namibian copper-mining operations and took over the loan obligations of Ongopolo, some of them guaranteed by Government and some by Bank Windhoek. That bank obtained an 8,4 per cent shareholding in Weatherly Namibia in this way.
Interestingly, Government paid out N$228 million of the N$230 million loan guarantee to Bank Windhoek towards the end of last year as a ‘equity for debt swap’ according to Calle Schlettwein, Permanent Secretary in the Finance Ministry, Insight magazine reported last month.
Following the signing of the loan facility agreements last week, Weatherly will make the necessary structural adjustments following the closure of its mines in Namibia; to fund the expansion and ongoing requirements of the Tsumeb Smelter; and meet the costs of placing the Otjihase, Matchless and Tschudi mines on care and maintenance, said in a statement issued on 30 December.
‘The licences for all Weatherly’s mining assets will be maintained in good standing and an application will be submitted for a retention licence for Elbe mining.’
The terms of the loans include the extension of an existing three-year contract to process imported concentrates from Chelopech and Louis Dreyfus for a period of five years. During this period Louis Dreyfus will also be the exclusive offtaker of copper blister produced by the Tsumeb smelter and exclusive supplier of additional copper concentrates required by the smelter.
Under the terms of this contract, the Tsumeb Smelter will process up to 120 000 dry metric tonnes of concentrates in 2009, increasing to over 200 000 tonnes from 2010 onwards after commissioning the proposed oxygen plant.
In the overall restructuring of Weatherly’s debt profile, the mining company has renegotiated the terms of the US$12 million convertible loan note agreed in May 2008 with significant shareholders.
Repayment will now take place in three annual instalments with US$3 million due to be paid in May 2009, US$4 million in May 2010 and US$5 million in May 2011.
‘Weatherly intends to focus in the short term on the operation of the Tsumeb Smelter while seeking to optimise other development opportunities to be well positioned when commodity prices recover,’ the company noted.
‘With the extension of these loan facilities, Weatherly has now secured the necessary capital to fund the restructuring which the Directors believe will enable the Company to weather the current down turn in the commodities market, preserve the value inherent in our mining assets, look forward to progressing our other projects and focus on opportunities provided by the current economic environment,’ said Rod Webster, Chief Executive officer of Weatherly International.