In 2008, things looked very uncertain for mining company Weatherly Plc. However, as CEO Rod Webster tells Jane Bordenave, overcoming a crisis has led to even greater opportunities.
Weatherly Plc is a British-based copper mining company working primarily in Namibia. It has two mining projects currently in operation—Otjihase and Matchless—both located in central Namibia; and a further two in the north of the country expected to come into production within the next three or four years.
To say that Weatherly had a difficult start in life is something of an understatement. The business was founded in 2005 by CEO Rod Webster as a cash shell, with the intention of using it to invest primarily in Zambia. “We did have a project in Zambia,” says Webster, “however, we were unfortunately unable to get a licence to develop it into a working mine.” Unabashed by this setback, he set about taking advantage of a new opportunity in Namibia: during the hold-up with the licensing process in Zambia, a struggling mining company called Ongopolo had come to his attention.
“The firm had four small underground mines, the best two being Otjihase and Matchless in the centre of the country. However what really piqued our interest was that they also had a smelter.” After carrying out due diligence, it became clear that the company was in distress and Weatherly expressed its interest in carrying out a turnaround exercise. Once its offer was accepted, a heavy restructuring programme was carried out, accompanied by a cash injection. “We gave ourselves a two to three year timeframe in which to turn the company around and make it into a viable, fully integrated copper mining and smelting business.”
Everything was going to plan until the final quarter of 2008 when, just as the project was peaking, the global economy was plunged into recession. “The timing was a perfect storm—as a small company, we did not have the cash reserves to see us through the financial crisis. We were left with no choice but to immediately close down the mines,” Webster explains.
The assets were put into good standing on a care and maintenance basis; however, a different approach was taken with the smelter. “We contacted a number of end users to finance the continuing operation of this asset and turned it into an import-export operation.”
By taking this approach, Weatherly was able to keep its business ticking over until the global economic situation began to recover in 2009. It then arranged to sell the smelter to one of the companies who had been funding it previously, Dundee Precious Metals. “Whereas for us this was a marginal and essentially loss-making operation, for Dundee Precious Metals it was a vital part of their process. Both of us decided that it made sense for them to take it on.” After paying off creditors and paying a dividend to shareholders, Weatherly then had sufficient cash available to return to its core business of mining, re-opening Otjihase and Matchless.
The final outcome of this period of turbulence was that Weatherly in fact emerged better off than it had been at the very start. “For the first time we had a completely clean slate,” says Webster. “We were able to redevelop everything exactly as we wanted it, instead of being in the situation where we had taken over something and inherited the baggage of the past. It gave us a real opportunity going forward.”
Having redeveloped its two existing assets, the company has now seized the opportunity to progress its business further. A new project it is working on individually is Tschudi, an open-pit copper mine situated in the north of Namibia, approximately 20 kilometres west of the town of Tsumeb. “Tschudi is currently undergoing a feasibility study, which is being managed by Sedgman from their Perth office,” explains Webster. “We expect the study to be completed later this year.” Once the project is up and running, it is expected to produce between 10 and 13,000 tonnes of copper per year.
Another current project is Berg Aukas—a lead zinc asset. Before it sold the smelter, Weatherly had been approached by the East China Mineral Exploration and Development Bureau Non-Ferrous, known as ECE, offering to take over the company. The offer was rejected; but Weatherly nonetheless maintained a relationship with ECE that is now beginning to blossom. The two firms have launched a joint venture under the name China Africa Resources (CAR), with the objective of developing Berg Aukas. ECE holds 65 per cent of the new company’s shares and has provided the funding, while Weatherly will manage the project through the initial stages. “We hope to list China Africa Resources within the next month and plan to take the mine through the feasibility stages over the next 12 to 18 months.”
It is clear that Webster sees this not as a one-off, but as a starting point for something bigger. “Having launched this business, we plan to continue to be involved in developing more and more projects. Our Chinese partners of course also want China Africa Resources to expand, as it is a prime vehicle for them to enter more strongly into the African market.”
For all its projects, Weatherly will continue to rely upon its base of preferred suppliers. “The main inputs into our processes are fairly straightforward and not highly subject to change,” says Webster, “so we have taken the view that for these items—such as explosives, grinding material and fuel—we will use preferred suppliers who we will contract on a one to three year basis. For smaller components, we work on a monthly, non-contract basis, procuring them ourselves as we need them.”
After the initial rough ride, how does Webster see Weatherly’s future? “More than anything, I see us as a larger company—we want to be three to five times our current size by 2016. We hope to achieve that both by further developing our existing assets and by expanding into areas such as Burkina Faso. The more we grow, the greater the opportunities that will present themselves, both corporate and geological, and that is what we are ultimately aiming for,” he concludes.
