www.wgiheavyminerals.com
COEUR D'ALENE, ID, Nov. 4 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the three-month and nine-month periods ended
September 30, 2005.
With respect to the Company's investments in India, the third quarter of
2005 continued to be a transitional period for WGI Heavy Minerals, as it works
to constructively resolve licensing, permitting, and commercial production
issues in India.
Third-Quarter Performance
Revenues for the third quarter of 2005 decreased 35.7 percent to
$4.75 million, compared with $7.39 million for the year-ago period, due to the
lack of ilmenite sales in 2005. Excluding ilmenite, revenues increased
24 percent to $4.75 million in the third quarter of 2005 from $3.83 million in
the third quarter of 2004. Revenues expanded 40 percent for the Company's U.S.
operations, from $1.22 million in the third quarter of 2004 to $1.71 million
in the third quarter of 2005. The Company's European operation also generated
rapid sales growth, amounting to a 38 percent increase, to $1.47 million in
the third quarter of 2005 from $1.07 million in the year-ago period. Sales of
the Company's Indian garnet operations grew marginally from $1.54 million to
$1.57 million, while total sales in India declined 69 percent, due to the lack
of ilmenite shipments.
Despite rising fuel costs, gross profit margins improved from
16.7 percent in the third quarter of 2004 to 25.4 percent in the third quarter
of 2005, as a result of improved operating efficiencies at its U.S.
operations, the inclusion of IWP waterjet operations and modest price
increases.
General and administrative expenses increased to 30.9 percent of net
sales in the third quarter of 2005, compared to 16.2 percent in the year-ago
period, largely due to absence of ilmenite sales, which totaled $3.56 million
in the third quarter of 2004. The Company posted a $23,000 foreign exchange
gain in the third quarter of 2005, compared to a $310,000 foreign exchange
gain in the third quarter of 2004. The Company also booked $92,000 of
stock-based compensation in the third quarter of 2005, compared to $80,000 of
stock-based compensation in the year-ago period.
As a result, the Company posted a net loss of $0.30 million, or $0.01 per
share, for the third quarter of 2005, compared with net earnings of
$0.24 million, or $0.01 per share, for the third quarter of 2004.
Nine-Month Performance
Revenues for the first nine months of 2005 decreased 17.8 percent to
$14.2 million, compared with $17.3 million for the year-ago period, due to the
lack of ilmenite sales, which totaled $4.56 million in the first nine months
of 2004.
Gross profit margins increased to 17.1 percent for the nine-month period
ended September 30, 2005, compared with 16.5 percent in the year-ago period.
Modestly increased selling prices and the addition of IWP contributed to the
increase in gross margins, somewhat offset by increased production costs and
the write-down of ilmenite inventories.
General and administrative expenses increased to 29.9 percent of net
sales in the first nine months of 2005, compared to 18.5 percent in 2004,
largely due to increased bad debts, salary expenses, and professional fees
related to the review of the Indian operations, which has involved revisiting
lease applications, manufacturing processes, and the legal structure. The
Company posted a $20,000 foreign exchange loss in the first three quarters of
2005, compared to a $604,000 foreign exchange loss in the year-ago period, as
the Company converted the majority of its funds to U.S. dollars by the end of
2004. The Company also booked a $985,000 charge for the write-down of assets
in Sri Lanka and advances for product to an Indian company in 2005. Stock-
based compensation increased in the first nine months of 2005 to $488,000,
compared to $107,000 in the year-ago period, due to additional grants of stock
options.
As a result, the Company posted a net loss of $3.09 million, or $0.13 per
share, for the nine-month period ended September 30, 2005, compared with a net
loss of $0.95 million, or $0.04 per share, for the same period last year.
Strong Financial Condition
Financially, the Company's consolidated balance sheet remained strong.
The Company ended the third quarter of 2005 with a debt-to-equity ratio of
11.19 percent and a net cash and short-term deposit position of $22.9 million.
Outlook
The Company does not expect to return to profitability in the fourth
quarter of 2005.
While the Company is using its best efforts to preserve cash, there will
be capital expenditures in India from earlier commitments that will require
some drawdown in cash balances.
The Company expects continued improvement and profitability at its
Emerald Creek Garnet facility in the fourth quarter of 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 sales and income for the
fourth quarter of 2005.
Volume for the Company's India operation, TGI, is expected to remain
stable through the remainder of the year. However, the Company also expects
rising costs associated with permitting and licensing issues, as well as
rising operating costs.
The Company continues to work on the diplomatic, legal and operating
challenges in India in order to develop a plan to achieve profitability.
"WGI has now completed the initial phase of the assessment of its
operations worldwide and operating improvements are beginning in all portions
of the Company," said Covell Brown Chairman and CEO. "We are installing a new
corporate value system emphasizing integrity, customer satisfaction,
empowerment of individual managers and employees, openness in communications
and respect for all with whom we associate, both within WGI and outside the
Company. We believe that our value system is fundamental to sustained success
and the generation of shareholder value and will become a strategic asset. As
we see it, WGI is beginning the construction of a more successful enterprise
as this is written, the first worldwide meeting with management is being
completed, a normal course issuer bid has been announced and the entire WGI
management has dedicated itself to the creation of a successful enterprise."
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 currently
determinable.
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 For the
three months ended nine months ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
$ $ $ $
Sales 4,748,105 7,388,115 14,236,908 17,316,917
Operating costs 3,181,783 5,841,941 10,641,348 13,478,737
Depreciation,
depletion and
amortization 361,946 309,307 1,161,993 978,872
----------- ----------- ----------- -----------
1,204,376 1,236,867 2,433,567 2,859,308
Expenses
Depreciation and
amortization 26,784 18,819 64,587 59,245
General and
administrative 1,471,267 1,196,369 4,259,448 3,195,717
Foreign exchange
loss (gain) (22,540) (309,821) 19,664 604,254
Interest and
financing 45,228 38,360 120,184 116,290
Interest income (183,676) (156,748) (483,168) (492,789)
Board fees 53,183 17,419 131,450 26,189
Write-down of Indian
and Sri Lankan
assets (note 2) 100 - 985,036 -
Loss on disposal of
equipment 754 - 14,275 90
Stock-based
compensation 92,131 80,216 488,354 106,955
----------- ----------- ----------- -----------
1,483,231 884,614 5,599,830 3,615,951
(Loss) earnings before
taxation and
non-controlling
interest (278,855) 352,253 (3,166,263) (756,643)
Provision for income
taxes
Current 17,152 12,863 26,427 12,863
Future 19,904 130,375 35,385 205,610
----------- ----------- ----------- -----------
37,056 143,238 61,812 218,473
----------- ----------- ----------- -----------
(Loss) earnings before
non-controlling
interest (315,911) 209,015 (3,228,075) (975,116)
Non-controlling
interest share of
loss of subsidiary 17,283 34,888 138,992 23,370
----------- ----------- ----------- -----------
(Loss) earnings for
the period (298,628) 243,903 (3,089,083) (951,746)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted
(loss) earnings per
common share (note 3) ($0.01) $0.01 ($0.13) ($0.04)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic and diluted
(loss) earnings per
common share (Canadian
dollars) ($0.02) $0.01 ($0.16) ($0.05)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Balance Sheet Data
Sept. 30, Dec 31,
2005 2004
$ $
Cash and short-term
deposits 22,908 27,456
Working capital 26,727 32,442
Total assets 55,528 56,833
Long-term debt 1,856 1,280
Shareholders' equity 47,890 50,818
All figures stated in U.S. dollars unless noted otherwise.
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