COEUR D'ALENE, ID, June 11 /CNW/ - WGI Heavy Minerals, Incorporated (TSX: WG) today announced that the Company and its partner, Heavy Industrial Minerals India (Pvt.) Limited, have entered into an agreement to sell their investment in Transworld Garnet India (Pvt.) Limited ("TGI") for a cash consideration of 836,000,000 Ruppees, approximately US $19.5 million, to V.V. Mineral, of Tamil Nadu, India. WGI's share of the proceeds is approximately US $17.3 million consisting of its 74% equity interest and the repayment of debt financing. The exact amount of the proceeds to be received by WGI will depend upon exchange rates at the time of closing which is expected to be in August, 2008.
WGI has also signed a three-year distribution agreement with annual renewals with V.V. Mineral covering garnet, ilmenite and other minerals that may be present in the beach sands mined by V.V. Mineral. The distribution agreement provides WGI with an assured minimum supply of 60,000 metric tons annually of garnet, which is a significant increase over current production rates. Garnet grades and quality levels will be consistent with material currently supplied to WGI by TGI. Additional quantities of garnet will be supplied as V.V. Mineral's capacity expands. In addition, WGI will act as a broker for the sale of V.V. Mineral's ilmenite products and will have first opportunity to negotiate contractual arrangements for other minerals with V.V. Mineral once production begins.
The Board of Directors of WGI is currently intending that, following the closing of the sale to V.V. Mineral, the Board will distribute US $0.80 per share in cash to the Company's shareholders.
"The transaction and this partnership with V.V. Mineral are very positive steps for WGI shareholders who will benefit from the Company's exit from its problematic production operations in India while maintaining a reliable supply of minerals. This will allow WGI to focus on its core business of marketing and selling garnet," said Greg Emerson, Chief Executive Officer of WGI..
"This alliance matches V.V. Mineral, one of the leading producers of heavy minerals in India, with WGI, an experienced, global marketing, sales and distribution network for those products. WGI expects to continue supplying the quality garnet products its customers rely on through the Bengal Bay Garnet(R) and WesJet(R) brands with the improved reliability that comes with V.V. Mineral's extensive mining capabilities", said William Meyerholtz, WGI's Vice-President of Marketing and Sales, International.
The sale of Transworld Garnet to V.V. Mineral is the result of a review undertaken by a Special Committee of the Board of Directors of WGI to consider strategic alternatives for the Company. The Special Committee considered a wide range of alternatives, including a possible outright sale of WGI, and concluded that it would be in the interests of WGI shareholders to unlock the value of WGI's current investment in India through a sale of that business and the entering into of an Industrial Mineral Supply Agreement. Based on WGI's experience, the Special Committee also believed that the most likely buyer of this business would be a company with experience in the beach sands mining business in India. The Special Committee canvassed a number of potentially interested parties which led to the signing of Confidentiality Agreements with five such parties. Due diligence was undertaken and competitive bids were received from three parties. The sale to V.V. Mineral announced today is considered by the Special Committee, and the Board of Directors of WGI, to be the most attractive transaction available to WGI and therefore in the best interest of the company and its shareholders. In making this determination, the Special Committee and the Board of Directors considered a number of issues including the price to be paid, the fact that the consideration to be received is all cash, and the ability of V.V. Mineral to complete the transaction.
Filing of Dissident Proxy Circular
The Board of WGI also confirmed today that Passport Capital, LLC has filed a dissident proxy circular in connection with the Company's annual meeting, scheduled for June 25, 2008. The dissidents are seeking shareholder support for a resolution to remove the existing members of the Board of Directors and replace them with nominees to the Board proposed by the dissident.
The Company will respond to the dissident proxy circular at the appropriate time and advises shareholders to take no action in response to the dissident action until they have received the Company's response.
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.