COEUR D'ALENE, ID, Aug. 14 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the six-month period ended June 30, 2005.
The second quarter of 2005 continued to be a transitional period for WGI
Heavy Minerals, Incorporated ("the Company"), as it works to constructively
resolve licensing, permitting, and commercial production issues in India.
Revenues for the second quarter of 2005 decreased 3.5 percent to $5.25
million, compared with $5.44 million for the year-ago period.
Gross profit margins were stable, at 13.9 percent, in the quarter ended
June 30, 2005, compared with 13.8 percent in the year-ago period.
General and administrative expenses increased to 29.3 percent of net
sales in the second quarter of 2005, compared to 18.4 percent in 2004, largely
due to increased professional fees related to the review of the Indian
operations, including lease applications, manufacturing processes, legal
structure and salary expenses. The Company posted a $22,000 foreign exchange
loss in the second quarter of 2005, compared to a $529,000 foreign exchange
loss in the second quarter of 2004. The Company also booked a $299,000 charge
for the write-down of Indian and Sri Lankan assets, and $221,000 of
stock-based compensation in the second quarter of 2005, compared to $27,000 of
stock-based compensation in the year-ago period.
As a result, the Company posted a net loss of $1.25 million, or $0.05 per
share, for the second quarter of 2005, compared with a net loss of $0.75
million, or $0.03 per share, for the second quarter of 2004.
Strong Financial Condition
The balance sheet remains strong. The Company ended the second quarter of
2005 with a debt-to-capital ratio of 11.3 percent and a net cash position of
$23.6 million. Cash flows from operations after changes in working capital and
other assets decreased to $111,000 for the quarter compared to an operating
cash inflow of $272,000 for the second quarter of 2004. However, for the
six-month period cash flows from operations after changes in working capital
and other assets improved to $481,000 for the quarter compared to an operating
cash outflow of $346,000 for the same period of 2004
Outlook
The Company does not expect to return to profitability in the second half
of 2005. The Company is using its best efforts to preserve cash. There are
capital expenditures in India from earlier commitments that will require some
drawdown in cash balances.
The Company expects improved volume and profitability at its Emerald
Creek Garnet facility in the second half 2005, due to the greater efficiencies
allowed with the new mining permit granted in March 2005. The Company also
expects continued improvement in volume and profitability from IWP.
While performance in Europe has been hurt by a lack of available product
from India, the Company anticipates relatively stable levels of sales and
income for the second half of 2005.
Volume for the Company's India operation, TGI, is expected to remain
stable in the second half of the year. However, the Company also expects
rising costs associated with permitting and licensing issues. The Company is
currently analyzing its operations in India in order to develop a plan to
achieve profitability.
The Company recognizes it is exposed to Country Risk to its assets and
operations as a result of Indian Government policies and actions. If the
needed licenses and permits and outlets for garnet lean tailings rich in
ilmenite production are not restored on a timely basis a material write down
of the Company's Indian assets will be needed. The amount is not determinable
now.
Covell D. Brown, Chairman, offered the following remarks on the Company's
condition: "Our objectives for 2005 included "To sort out the legal, political
and administrative context in India..." We are actively engaged in that
process. I have spent weeks in India, meeting with officials and the Canadian
High Commission in an effort to:
1. Understand the issues and the Indian Governments' positions on various
aspects of licensing and permissions and the reasons therefore and to
2. Attempt to find mutually acceptable solutions that will both allow us
to perform as good corporate citizens in India and to operate
profitably."
"As of now, we do not have the solutions we seek. In almost every case,
we have discovered unanticipated complexities in governmental processes and
the Company's status related thereto. You will find a statement concerning
Country Risk in this quarter's Management Discussion and Analysis."
"We are making improvements in our operations and in our managerial
processes but here too it is still early days. Our legal matters in India, in
particular, have benefited from changes in our legal representatives."
"It remains factual that WGI has both holdings and opportunities that
offer the possibility of useful returns to our shareholders. We are doing all
that can be done at this time to make good on that possibility. Both our
patience and perseverance will be required for success."
WGI Heavy Minerals, Inc. is a fully integrated miner, producer, and
marketer of industrial-grade minerals. The Company's operations include mining
and processing facilities in Washington and Idaho, U.S. (International
Waterjet Parts & Emerald Creek Garnet), and Tamil Nadu and Andhra Pradesh,
India (Bengal Bay Garnet).
This press release contains forward-looking statements concerning the
business, operations and financial performance and condition of WGI Heavy
Minerals, Incorporated. A number of the matters discussed and statements made
in the press release contain forward-looking statements reflecting current
expectations regarding future assets. When used in this press release, the
words "believe", "anticipate", "intend", "estimate", "expect", "project" and
similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such words. These
forward-looking statements are based on current expectations and are naturally
subject to risks, uncertainties and changes in circumstances beyond
management's control that may cause actual results to differ materially from
those expressed or implied by such forward-looking statements. Factors that
may cause such differences include but are not limited to: exploration and
development risks; risks related to permits and title to property; risks
related to foreign countries and regulatory requirements; operating hazards;
foreign currency fluctuations; competition; fluctuations in the market price
of mineral commodities and transportation costs; uncertainty as to
calculations of mineral deposit estimates; uninsured risks; and, dependence
upon key management personnel and executives. Actual results may differ
materially from those expressed here. You should not place undue reliance on
such forward-looking statements. The Company is under no obligation to update
or alter such forward-looking statements whether as a result of new
information, future events or otherwise.
<<
WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
$ $ $ $
Sales 5,249,184 5,440,781 9,488,803 9,928,802
Operating costs 4,087,165 4,360,781 7,459,565 7,636,796
Depreciation, depletion
and amortization 432,688 329,491 800,047 669,565
----------- ----------- ----------- -----------
729,331 750,509 1,229,191 1,622,441
Expenses
Depreciation and
amortization 19,526 19,191 37,803 40,426
General and
administrative 1,536,932 1,002,656 2,788,181 1,999,346
Foreign exchange loss 22,004 528,764 42,204 914,075
Interest and financing 50,221 32,665 74,956 77,930
Interest income (160,189) (151,464) (299,492) (336,041)
Board fees 48,267 8,772 78,267 8,772
Write-down of Indian
and Sri Lankan assets
(note 2) 298,936 - 984,936 -
Loss on disposal of
equipment 13,521 - 13,521 90
Stock-based compensation 221,240 26,739 396,223 26,739
----------- ----------- ----------- -----------
2,050,458 1,467,323 4,116,599 2,731,337
Loss before taxation and
non-controlling interest (1,321,127) (716,814) (2,887,408) (1,108,896)
Provision for income taxes
Current (8,966) - (9,275) -
Future (13,763) (35,824) (15,481) (75,235)
----------- ----------- ----------- -----------
(22,729) (35,824) (24,756) (75,235)
----------- ----------- ----------- -----------
Loss before non-
controlling interest (1,343,856) (752,638) (2,912,164) (1,184,131)
Non-controlling interest
share of (earnings)
loss of subsidiary 91,139 6,362 121,709 (11,518)
----------- ----------- ----------- -----------
Loss for the period (1,252,717) (746,276) (2,790,455) (1,195,649)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted loss
per common share
(note 3) ($0.05) ($0.03) ($0.11) ($0.05)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted loss
per common share
(Canadian dollars) ($0.06) ($0.04) ($0.14) ($0.06)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Balance Sheet Data
June 30, 2005 Dec 31, 2004
$ $
Cash and short-term deposits 23,574 27,456
Working capital 27,196 32,442
Total assets 56,148 56,833
Long-term debt 2,083 1,280
Shareholders' equity 48,331 50,818
All figures stated in U.S. dollars unless noted otherwise.
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