www.wgiheavyminerals.com
COEUR D'ALENE, ID, May 11 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the first quarter ended March 31, 2005.
Revenues for the first quarter of 2005 decreased 5.5 percent to
$4.24 million, compared with $4.49 million for the year ago period in 2004.
Despite strengthening global economic activity and firming demand, garnet
shipments, in tons, were down, due to production constraints in India.
However, WGI realized higher garnet prices, due to industry-wide price
increases, a greater percentage of sales into the higher-priced waterjet
market, and more sales with "delivered" pricing, rather than "FOB India".
Gross profit margins declined to 11.8 percent in the quarter ended
March 31, 2005, compared with 19.4 percent in the year ago period. Increased
production costs, a provision for ilmenite inventory and lower production
levels resulting in lower absorption of fixed overhead have contributed to the
decline.
General and administrative expenses increased to 27.6 percent of net
sales in 2005, compared to 21.3 percent in 2004, largely due to expenses
associated with the pending commercial startup in Andhra Pradesh, increased
professional fees related to the review of the Indian operations, including
lease applications, manufacturing process and legal structure and a provision
of possible bad debts. Additionally, the Company wrote off $686,000 in
advances to an Indian firm, posted a $20,000 foreign exchange loss in 2005,
compared to a $385,000 foreign exchange loss in 2004. The Company also booked
a charge of $175,000 for stock based compensation in the first quarter of 2005
compared to nil in the first quarter of 2004.
As a result, the Company posted a net loss of $1.54 million, or $0.06 per
share, for the first quarter of 2005, compared with a net loss of
$0.45 million, or $0.02 per share, for the first quarter of 2004.
Strong Financial Condition
The balance sheet remains strong. The Company ended the first quarter of
2005 with a debt-to-capital ratio of 10.4 percent and a net cash position of
$24.9 million. Cash flows from operations after changes in working capital on
other assets improved to $592,000 for the quarter compared to an operating
cash outflow of $901,000 for the first quarter of 2004.
Outlook
The Company expects to improve profitability at its Emerald Creek Garnet
facility in 2005, due to the greater efficiencies allowed with the new mining
permit granted in March 2005.
In India, the Company anticipates commencing production of its finished
products (dry mill) plant in Andhra Pradesh in May 2005. The Company has been
conducting trial runs and is working out typical start-up problems. For 2005,
the Company expects to produce garnet at significantly less than full capacity
in Andhra Pradesh and does not anticipate ilmenite sales.
Speaking on behalf of WGI's management team in India and throughout the
Company, WGI's Chairman, Mr. Covell Brown, made the following remarks on the
Company's outlook, "While there can be no doubt that WGI has experienced
serious setbacks in its Indian investment, the Company continues to have
useful resources and opportunities to improve on its current performance.
Although time will be required to reconfigure WGI's legal and regulatory
posture in India, recent shifts in both management personnel and working
methods offer the prospect for a fresh start in all facets of its Indian
relationships with government and the marketplace. If achieved, these changes,
and growth in the other aspects of the Company's operations, will enhance the
Company's performance and shareholder value."
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.
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WGI Heavy Minerals, Incorporated
Financial Information
(in thousands, except for per share amounts)
For the three months ended
Mar. 31, 2005 Mar. 31, 2004
$ $
Sales 4,240 4,488
Operating costs 3,373 3,276
Amortization, depreciation, and depletion 367 340
---------- ----------
500 872
Expenses
Depreciation and amortization 18 21
General and administrative 1,170 958
Foreign exchange loss 20 385
Interest and financing 25 45
Interest income (139) (185)
Board fees 112 40
Stock based compensation 175 -
Write-down of Indian advances 686 -
---------- ----------
2,067 1,264
Loss before taxation and non-controlling
interest (1,567) (392)
Provision for income taxes 2 39
---------- ----------
Loss before non-controlling interest (1,569) (431)
Non-controlling interest share of gain
(loss) of subsidiary (31) 18
---------- ----------
Loss for the period (1,538) (449)
Retained (deficit) earnings - beginning of
period (3,722) (499)
---------- ----------
Retained (deficit) earnings - end of period (5,260) (948)
---------- ----------
---------- ----------
Basic and diluted loss per share (0.06) (0.02)
---------- ----------
---------- ----------
Balance Sheet Data
Mar. 31, 2005 Dec 31, 2004
$ $
Cash and short-term deposits 24,870 27,456
Working capital 28,766 32,442
Total assets 56,853 56,833
Long-term debt 2,194 1,280
Shareholders' equity 49,302 50,818
All figures stated in U.S. dollars unless noted otherwise.
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