TIDMPOL
RNS Number : 2955M
Polo Resources Limited
26 April 2018
26 April 2018
Polo Resources Limited
("Polo" or the "Company")
WEATHERLY INTERNATIONAL PLC - INVESTMENT UPDATE
Polo Resources Limited (AIM: POL), the multi-sector investment
company with interests in oil, gold, coal, copper, phosphate,
lithium, iron and vanadium, notes that its investee company,
Weatherly International Plc ("Weatherly") (AIM: WTI) has announced
its update for the quarter ended 31 March 2018 and the Berg Aukas
and Kitumba acquisitions. Weatherly also announced that it has
retained advisers to evaluate strategic options with respect to the
potential sale of the entire issued, and to be issued, share
capital of Weatherly; the restructuring of Weatherly's debt; the
disposal of certain company asset(s); or the raising of capital via
equity issuance.
Quarterly Operations and Production Update
Summary
-- Tschudi copper cathode production of 4,161 tonnes, bringing
year to date production to 13,005 tonnes Cu, being 2% ahead of
nameplate.
-- Tschudi C1 costs increased to US$5,608 per tonne for the
quarter, due largely to strengthening of the Namibia dollar.
-- Dewatering in the open pit mine continues to be managed and
work is ongoing to assess the life of mine beyond 2020.
Tschudi Production Performance
Production results for the quarter ended 31 March 2018:
Quarter Quarter Quarter Quarter
ended Jun-17 ended Sept-17 ended Dec-17 ended Mar-18
---------------- -------------- --------------- -------------- --------------
Total (Ore
+ Waste)
Mined (000
tonnes) 6,051 6,314 5,869 4,395
---------------- -------------- --------------- -------------- --------------
Ore Tonnes
stacked
(000 tonnes) 726 666 733 775
---------------- -------------- --------------- -------------- --------------
Ore Stacked
grade (per
cent) 0.99 0.78 0.65 0.73
---------------- -------------- --------------- -------------- --------------
Copper Cathode
Produced
(tonnes) 3,386 4,105 4,739 4,161
---------------- -------------- --------------- -------------- --------------
C1 Cost*
(US$/t) 6,344 5,402 4,551 5,608
---------------- -------------- --------------- -------------- --------------
*C1 costs means direct operating cash costs including costs
incurred in mining and processing (labour, power, reagents,
materials) plus local G&A, and distribution costs. Excluded
from C1 costs are Group overheads, care and maintenance costs at
Otjihase, deductions from gross sales price (offtake fees and
government royalties), depreciation and interest.
Tschudi production for the March 2018 quarter was 4,161 tonnes
of copper cathode, or 98% of nameplate. This brings year to date
production to 13,005 tonnes Cu or 2% ahead of nameplate after three
quarters of the financial year. Mining and stacking of slower
leaching mixed ore resumed as planned, with mining volumes being
reduced due to seasonal rains, as expected. Stacking was largely
unaffected by the rains due to stacking on new leach pads rather
than upon previously leached ore and because healthy levels of
stockpiled ore had been placed on the ROM pad in preparation for
the wet season.
Tschudi C1 unit costs for the quarter increased to US$5,608 per
tonne as a result of the expected lower quarterly cathode
production plus the stronger Namibia dollar compared to the
previous quarter. Tschudi C1 unit costs stand at US$5,145 per tonne
for the financial year to date.
Forced aeration of some panels has commenced, as part of ongoing
testing of how leach rates for mixed and sulphide ore may be
improved under modified operating conditions, designed to increase
bacterial activity in the heap. However, it is expected to take to
the end of the financial year until any conclusions can be
drawn.
Dewatering Update
As described in Weatherly's Interim Results announced on 19
March 2018, open pit groundwater inflows in the Tschudi open pit,
and the costs of dealing with them, continue to increase as pit
mining proceeds to greater depths. However, the flow rates are
currently being managed adequately, to ensure a reliable supply of
ore for stacking.
Updated estimates of likely water inflow rates for the Pit 5
stage, which is currently being mined, have been produced by
independent consultants from Strategic Water Management WA and RPS
Group plc. Weatherly is continuing to work on quantifying the
impact of the costs of dealing with these inflows upon Tschudi's
economic reserve and life of mine. At this stage, it is expected
that the costs of dealing with the escalating volumes of water may
have a significant impact upon the economic life of mine.
At current copper prices, the bulk of the remaining economic
value of the Tschudi project is contained within Pit 5 due to
relatively high strip ratios and generally lower grades in the pit
pushbacks that make up the rest of the current reserve. Mining and
stacking of the current Pit 5 will be largely complete by the
middle of calendar year 2020. A modified design for Pit 5 is being
examined which may extend this to the end of 2020.
As more information is gained on the additional groundwater
inflow rates into the expanded pit, it may prove to be the case
that the cost of pumping the increasing volumes of groundwater
increases to such a degree that much, or possibly even all, of the
ore beyond Pit 5 cannot be economically mined and processed at
current copper prices.
Additional studies will be conducted to determine how water
management costs may be reduced and how inflow rates for mining
beyond Pit 5 can be best predicted in order to assess what portion
of the balance of the current reserves can be economically mined.
These studies will be completed ahead of any decisions being
made.
Update on Berg Aukas and Kitumba Acquisitions
Summary
-- The 2014 Berg Aukas Pre-Feasibility Study ("PFS") has been
updated for improved metal prices and for revised operating and
capital cost estimates.
-- Updated financial metrics include post-tax NPV of US$74
million, post-tax IRR of 35% and total capital cost of US$54.1
million.
-- An application has been submitted for approval by the
Namibian Competition Commission of Weatherly's purchase of 65% of
China Africa Resources Namibia Limited ("CARN"), and applications
have been submitted for renewal of the two Berg Aukas mining
licenses which expire in March 2019.
-- Orion has not granted permission for Weatherly to extend the
Backstop Date (being 4 April 2018) in respect of the acquisition of
Kitumba, but will allow Weatherly to seek alternative funding to
pursue the transaction.
Berg Aukas Update
On 5 February 2018, Weatherly announced that it had entered into
a binding agreement to increase its ownership of CARN from 25% to
90% by purchasing shares from Hong Kong East China Non-Ferrous
Mineral Resources Co Ltd ("ECE").
CARN is a private Namibian company which owns 100% of the
high-grade Berg Aukas underground zinc-lead-vanadium project ("Berg
Aukas"). Berg Aukas is located approximately 19km east of the town
of Grootfontein in northern Namibia. The Berg Aukas mine operated
as a low tonnage, high grade producer of zinc, lead and vanadium
between 1958 and 1978, and hosted an estimated 2.3Mt at an average
grade of 15% Zn, 3.9% Pb and 0.85% V2O5 over this period. The mine
ceased operations in 1978 due to depressed zinc prices and
significant resources remain in situ. The majority of the remaining
resource is located between the 14 and 19 levels (approximately
400m to 590m below surface) where extensive development is already
in place providing good access to the orebodies.
Weatherly and ECE entered into a binding agreement whereby
Weatherly will purchase all of ECE's shares in CARN for cash
consideration of US$600,000, increasing Weatherly's ownership of
CARN from 25% to 90%.
The transaction is subject to regulatory approval in Namibia
from the Namibian Competition Commission. The application for that
approval was submitted in March 2018. If that approval is not
received by 22 June 2018, the share purchase agreement can be
terminated by ECE. Weatherly currently expects that the approval
will be received before 22 June 2018, but cannot offer any
assurance that this will occur.
Pre-Feasibility Study Update
In 2014, the previous owners of Berg Aukas published a PFS which
was based on the following resources and reserves:
-- JORC-compliant Mineral Resource Estimate of 1.23Mt @ 15.47%
Zn, 3.84% Pb and 0.33% V2O5 (Indicated classification) using a
cut-off grade of 3.0% Zn.
-- JORC-compliant Ore Reserve Estimate of 1.7Mt @ 11.16% Zn, 2.76% Pb and 0.23% V2O5 (Probable classification) at a 5% Zn equivalent cut-off.
On 5 February 2018, Weatherly announced that it had initiated an
update of the PFS for Berg Aukas, which has now been completed by
independent South African consultants, Minxcon (Pty) Ltd
("Minxcon"), being the same consulting firm which prepared the
original PFS report, in 2014. This update examined the impact of
improved metal prices and an update of capital and operating costs
for the project. The mining, processing and product marketing
assumptions were not revised for this update, and the resource and
reserve estimates also remain unchanged.
The updated study estimates that the overall project NPV (for
100% of Berg Aukas and using a discount rate of 10%) has increased
to US$74 million post-tax and that the post-tax IRR has increased
to 35%. These outcomes were estimated using a zinc price of US$3260
per tonne, a lead price of US$2,490 per tonne and an exchange rate
of 12.9 NAD/USD, which were prevailing six month average spot
values in mid-March 2018. No value was attributed to the vanadium
content. The total capital cost estimated by Minxcon is US$54.1
million.
The PFS published in 2014 assumed prices of US$2,000 per tonne
for zinc and lead and also assumed no credit was received for the
vanadium content. Detailed results from the 2014 PFS were announced
by the previous owners on 27 May 2014 and can be found at the
following link.
https://polaris.brighterir.com/public/china_africa_resources/news/rns/story/rdm708r
CARN holds two mining licenses covering the Berg Aukas project,
which are due to expire on 31 March 2019. CARN has duly applied for
renewal of those licenses one year prior to their expiry, as is
required under Namibian mining legislation.
Kitumba Update
On 3 April 2018, Weatherly announced that it had entered into an
amendment and restatement agreement (the "Amendment and Restatement
Agreement") in relation to its existing debt facility with Orion
Mine Finance (Master) Fund I LP ("Orion"), which included certain
changes resulting in Weatherly having reduced flexibility on the
use of cash generated from the mine and provided Orion with certain
approval rights on Weatherly's expenditure. These amendments
include explicit requirements for Orion's approval of any actions
taken or not taken in relation to the agreements for the
acquisition of the Kitumba project in Zambia ("Kitumba") announced
on 12 December 2017 and the acquisition of Berg Aukas.
On 12 December 2017, Weatherly announced that it had entered
into a binding agreement to purchase 100% of Kitumba from
ASX-listed Intrepid Mines Limited ("Intrepid"). As Intrepid had not
received the requisite Zambian regulatory approvals for the
transaction to proceed by the backstop date for the transaction,
being the next working day after 31 March 2018 (the "Backstop
Date"), on 4 April 2018, Weatherly announced that the Backstop Date
in the binding agreement for the acquisition of Kitumba had passed
and that Intrepid had requested an extension from Weatherly.
Discussions continued with Intrepid regarding the extension of
the loan whilst, in line with the Amendment and Restatement
Agreement, Weatherly duly requested approval from Orion to extend
the Backstop Date. Orion subsequently informed Weatherly that it
will not grant such approval and, on 24 April 2018, both Weatherly
and Intrepid announced that the agreement for the acquisition of
Kitumba had lapsed because Weatherly was unable to agree to an
extension to the Backstop Date.
However, Orion have agreed to allow Weatherly to seek
alternative financing for the Kitumba transaction and Weatherly is
engaged in discussions with Intrepid in this regard. Further
announcements will be made as and when appropriate.
Intrepid has notified Weatherly that the requisite consents for
the transfer of Kitumba's shares to Weatherly have now been
received from the Ministry of Mines and Minerals Development in
Zambia and from the Zambian Competition and Consumer Protection
Commission. The consent from the Ministry of Mines and Minerals
Development remains conditional upon payment by Intrepid of
Property Transfer Tax on the transaction.
Orion Loan Repayments
Further to Weatherly's confirmation on 3 April 2018 that it had
rescheduled debt repayments that were due on 31 March 2018,
Weatherly confirms that remains unlikely to generate sufficient
surplus cash to meet all loan repayments when due, particularly in
the near term, and continues to be involved in negotiations with
Orion to agree a long-term restructuring of Weatherly's secured
debt facilities, which includes instigating the strategic review
announced by Weatherly today.
Strategic Review and Formal Sale Process
Weatherly reports that it has engaged Numis Securities Limited
("Numis") and Treadstone Resource Partners ("Treadstone") as its
financial advisers to lead a review of strategic alternatives for
Weatherly and its assets where all opportunities for maximising
shareholder value will be considered (the "Strategic Review"),
alongside Strand Hanson, its existing nominated adviser and if
required, independent financial adviser for the purposes of Rule 3
of the City Code on Takeovers and Mergers (the "Code").
The scope of the options being considered under the Strategic
Review include, but are not limited to, the sale of the entire
issued, and to be issued, share capital of Weatherly; the
restructuring of Weatherly's debt; the disposal of certain company
asset(s); or the raising of capital via equity issuance.
As part of the investigation into the potential sale of the
entire issued, and to be issued, share capital of Weatherly, Numis
has consulted with the Takeover Panel ("the Panel") and the Panel
has agreed that any discussions with third parties may be conducted
within the context of a "formal sale process" (as referred to in
the Code). Accordingly, the Panel has granted a dispensation from
the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code,
such that any potential offeror which agrees with the company to
participate in the process will not be required to be publicly
identified under Rule 2.4(a) or (b) and will not be subject to the
28 day deadline referred to in Rule 2.6(a), for so long as it is
participating in the process. Weatherly confirms that it is not in
discussions with, or in receipt of an approach from, any potential
offeror at the date of the announcement. Following this
announcement, Weatherly is now considered to be in an "offer
period" as defined in the Code, and the dealing disclosure
requirements set out below will apply.
Parties with an interest in making a proposal should contact
Numis or Treadstone through the contact details set out at the end
of this announcement. It is currently expected that any party
interested in participating in the formal sale process will, at the
appropriate time, enter into a non-disclosure agreement and
standstill arrangement with Weatherly on terms satisfactory to the
Board of Weatherly. Weatherly then intends to provide such
interested parties with certain information on the business,
following which interested parties shall be invited to submit their
proposals. It is expected that the formal sale process will
conclude within six months of the date of this announcement.
However, further updates in relation to the timetable of the
process will be communicated in due course.
There can be no certainty that an offer will be made, nor as to
the terms on which any offer will be made.
The Board of Weatherly reserves the right to alter or terminate
the process at any time and, in such cases, will make an
announcement as appropriate. The Board of Weatherly also reserves
the right to reject any approach or terminate discussions with any
interested party at any time.
The appointment of Numis and Treadstone and the commencement of
the strategic review process is required pursuant to the Amendment
and Restatement Agreement in relation to its existing debt
facility, entered into between Weatherly and Orion as announced on
3 April 2018.
The full details of these announcements can be found at
http://weatherlyplc.com/.
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
For further information, please contact:
Polo Resources Limited
- Kudzayi Denenga, Investor
Relations +27 (0) 787 312 919
Allenby Capital Limited (Nominated
adviser & joint broker)
- John Depasquale +44 (0)20 3328 5657
Liberum Capital (Broker)
- Henry Freeman +44 (0) 20 3100 2000
Blytheweigh (Public relations)
- Tim Blythe, Nick Elwes,
Camilla Horsfall +44 (0) 207 138 3204
About the Company
Polo Resources Limited is a multi-sector investment company
focused on investing in undervalued companies and projects with
strong fundamentals and attractive growth prospects. For complete
details on Polo, please refer to: www.poloresources.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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