Restructuring of a company often presents great scope for those investors who will do the sometimes complicated maths, and especially if combined with a phoenix-like resurrection of the business. Weatherly International (LON:WTI) – which is about to reopen two of its copper mines in Namibia and has other prospects - is such a case, and despite having risen 5-fold in four months and 3-fold in three, we think the shares have further to go. That may depend on the progress of the copper price – currently at a record $9,600/ton – but according to a recent report by Morgan Stanley - “copper has one of the most constructive outlooks among the major commodities - It is feasible that copper prices could spike well above the 2008 record high.”
Before the crash, Weatherly was developing a highly efficient copper mining and smelting business in Namibia, having acquired six mines or prospective mines, of which three were flooded (due to power shortages outside its control) and one was insolvent. Nevertheless, having invested heavily, in 2008 WTI had produced (and smelted on a toll basis) 22,000 tonnes of copper and was on course for 55,000 tonnes in 2009.
But a more than halved copper price forced it in late 2008 to place its mines under care and maintenance and in Nov the shares were suspended (for three months) while a period of retrenchment and sale of assets began. Throughout 2009 Weatherly concentrated on ensuring that its closed mines were kept in good order and on expanding and improving the toll refining operation, for which it was given financial support by key customers Dundee Precious Metals Inc and Swiss metals trader Louis Dreyfus Commodities. They recognised WTI’s excellent management and its experience in the industry and in Namibia and have supported it all through the crisis.
Having closed its mines and sold off enough assets to clear most of its liabilities, WTI by the end of 2009 had met all its commitments, and with a small amount of cash in the bank and the support of its customers, together with a copper price that had recovered to more than double its December 2008 low, began to plan to reopen at least two of its mines, while continuing to operate its smelters and to invest in them to ensure efficiency.
A collapsed share price had made it impossible…
