COEUR D'ALENE, ID, April 10 /CNW/ - WGI Heavy Minerals, Inc. ("WGI" or
the "Company") (TSX: WG) today announced that it has requested that the
Strathcona Mineral Services report prepared in July 2002 to estimate mineral
reserves and resources at the Company's Srikurmam heavy mineral sands property
in Andhra Pradesh, India, be withdrawn. The Strathcona report was based on
WGI confirming to Strathcona that WGI was entitled to mine the beach sands on
its Srikurmam mining lease. In fact, substantially all development of this
heavy mineral sands mine has been suspended until several regulatory,
licensing and other issues can be resolved.
In July 2004, WGI's Indian subsidiary, Transworld Garnet Company Ltd.,
was advised by the Indian Department of Atomic Energy that its licence to
handle ilmenite at its mine in Tamil Nadu, India, was being revoked. Though
ilmenite is primarily used for paint pigment, it is sometimes found in the
presence of mildly radio-active materials. Ilmenite is also present in the
beach sands at the Srikurmam mine and Transworld has never had a licence to
handle ilmenite there. Accordingly, WGI has been unable to proceed with the
development of the Srikurmam mine.
In addition, WGI has become aware that Strathcona was provided with
invalid confirmation by a former employee of WGI that an environmental
regulatory approval needed to mine the Srikurmam property was in effect for
the entire leased area, which is about 95 hectares. The mining lease runs
approximately 11 kilometres along the beach and extends inland between 50 and
150 metres. The regulatory approval obtained by Transworld contained a
prohibition on mining within 100 metres of the high tide line, which would
substantially reduce the area available for mining to about 10 hectares.
Strathcona was not aware of this restriction and it is not reflected in its
report. Efforts have been made to have the restriction removed, without any
success to date.
The rules relating to the preparation of a report estimating reserves and
resources require a description of circumstances that may limit access to the
relevant ore. Given the licensing and other issues still to be resolved by
Transworld at the Srikurmam mine, WGI has requested, and Strathcona agrees,
that its report be withdrawn.
The Strathcona Mineral Services report was filed in 2003 on www.sedar and
has been described in WGI's public disclosure documents. WGI will immediately
seek to remove the report from the public file and change its disclosure
documents accordingly.
The Indian Department of Atomic Energy has recently announced that
ilmenite will cease to be on its list of restricted substances by January 1,
2007. WGI believes that this should allow it to resume the development of its
property at Srikurmam. The regulatory process, however, can be slow and
uncertain and WGI cannot be confident of when it may be allowed to mine the
Srikurmam lease.
The Company has applied for additional mining leases some of which are
adjacent to and inland from its existing lease. Some of these lease
applications have been outstanding for several years and none of them have yet
received the approval of all the relevant government authorities.
There are other licensing and permitting issues to be dealt with at the
Srikurmam property before it can commence commercial production. The existing
mining lease for the 95 hectare property allows the Company to mine 60,000
tonnes of raw sand per year. The wet gravity separation plant constructed for
this mine was designed to have the capacity to process 720,000 tonnes of raw
heavy mineral sand. The dry garnet mill has an installed capacity to produce
70,000 tonnes per annum of garnet. WGI will need to amend its licence, and/or
secure other leases and licences, in order to fill its production facilities.
The Company intends to renew its efforts to secure (i) the appropriate
environmental approvals for the existing mineral lease, (ii) new mineral
leases, and (iii) all other necessary licenses, permits and approvals, when
ilmenite has been delisted by the Indian Department of Atomic Energy and
proposed amendments to Indian mining laws and regulations become effective.
To date, WGI has invested a substantial amount to develop the Srikurmam
Project. The Company is cautiously optimistic that, with the steps currently
being taken by the Indian Department of Atomic Energy to remove ilmenite from
the list of restricted substances, and the impending changes to the mining
laws and regulations, WGI will be able to make progress in securing the
necessary mining leases, regulatory approvals, licences, permits and other
permissions to put the mine into production. The Company is an important
employer in the local region and has received support from local officials for
proceeding with the mine. If timely progress is not made, WGI may have to
write-off a material portion of its investment in this project.
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).
