WGI Heavy Minerals Announces 2006 Results

    COEUR D'ALENE, ID, March 27 /CNW/ - WGI Heavy Minerals, Inc. (TSX: WG)
today announced results for the fourth quarter and year ended December 31,
2006. Results have been filed and may be viewed at www.sedar.com. A summary of
key financial results for the quarter and year are as follows:


    -  Revenues increased 19% for the quarter to $5.6 million and increased
       17% for the year to a record $22.1 million.
    -  Gross margin increased to 13.6% for the quarter from 4.9% in the same
       period last year. Gross margin for the year remained relatively flat
       at 14%.
    -  The net loss for the quarter has decreased to $0.7 million from last
       year's $4.3 million loss due to the absence of asset write-downs and
       write-offs. The net loss for 2006 was $4.0 million or $0.18 per share
       compared to a loss of $9.2 million or $0.38 per share in 2005.
    -  At December 31, 2006 the Company had a cash position (including short
       term investments) of $18.3 million.

    "The Company has made modest progress this last year. We have increased
sales and improved operating performance in the latter part of the year. This
is not at all good enough but, on balance, we are pleased to have been able to
achieve this performance given the business challenges we have experienced."
stated Chairman and CEO Covell Brown.
    "While we have made good progress in furthering our applications for
modest sized garnet leases in Tamil Nadu, India, on balance, we continue to
experience great difficulty in dealing constructively with the Central and
State Indian Mining authorities and the Indian Department of Atomic Energy.
While the current and proposed stated policies encourage foreign investment
our specific experience has been otherwise. In Tamil Nadu, we expect to obtain
leases on nearly 19 acres and begin to mine them in the second half of 2007."
said Mr. Brown.
    Currently the Company is engaged in Court in Andhra Pradesh in an effort
to defend its existing leases and applications for further leases. The Company
has learned of a joint venture between a State Company (the Andhra Pradesh
Mineral Development Corporation (APMDC)) and a private shell entity, in which
the APMDC holds an 11% interest. Since this joint venture proposal has been
formalized, there have been a series of steps taken by the State government to
deprive TGI (the Company's Indian subsidiary) of the chronological priority
that it enjoys in the matter of grant of leases, which priority is given to it
by law, and to grant out-of-turn leases over the same lands, to the APMDC,
which in turn plans to utilise the lands for the joint venture.
    These actions of the State government, if pursued to fruition, would have
the effect of taking over the Company's existing lease and obviating its
chronological priority in respect of lease applications on about 5,000 hectors
of leased lands and turning its position over to the competitors who own the
private shell entity, and potentially stranding our factories in Andhra
Pradesh. Meanwhile, the thousands of workers who the Company might employ
continue without work. The Company is defending itself both administratively
and in Court that the rule of law is not being applied fairly to the Company
by the State government amongst other defences, which are also open to the
Company at law. Given that the Company is in conflict with elements of the
State government itself it is uncertain what the legal outcome may be.
    The Company continues other cases wherein we dispute Central Government
officials' actions or rulings. Typically, such cases are very difficult to get
heard, there being many requests for dates to be set over by Government
    Also, the Company filed an application for value addition to upgrade its
Andhra Pradesh facilities to a synthetic rutile facility in due course. This
application was filed both with the Department of Atomic Energy and with the
Government of Andhra Pradesh in 2004. Neither application has been acted on,
thus depriving the Indian subsidiary of the legal standing needed to obtain
ilmenite leases. One effect of ignoring the Company's application is to open
the door to activities such as those described in the preceding paragraph.
    "We have been and continue to do all we can to be good corporate citizens
in India. We have and do obey and operate according to Indian law. Indeed we
turn to the Indian Courts for justice. It remains to be seen whether the
Company, while adhering to the rules and practices governing us as a Canadian
listed Company subject to Canadian laws, can operate successfully within the
culture and practices now prevalent in the Indian and Andhra Pradesh mining
industry as currently regulated." added Mr. Brown.

    Results of Operations

    Revenues for 2006 increased 17 percent to $22.1 million, compared with
$19.0 million for 2005. Despite strengthening demand, garnet shipments, in
tons, were relatively flat. Production was constrained in India due to wet
weather and the U.S. operation had lower production because the concentration
of garnet in areas mined is lower and extreme cold temperatures in Idaho
reduced operating days.
    However, WGI realized modestly higher garnet and abrasives prices, due to
industry-wide price increases. WGI also enjoyed a greater percentage of sales
from aftermarket ultra high pressure waterjet cutting machine replacement
parts due to the realization of a full 12 months sales from this product line
versus the 9.5 months in 2005. The Company's revenues come from the following
products: Garnet (70%), Waterjet Replacement Parts (16%), and Other Abrasives
    Gross profit margins remained relatively flat at 14.0 percent in 2006,
compared with 14.1 percent in 2005. The full year of IWP revenue and the
aftermarket ultra high pressure waterjet cutting machine replacement parts
product line contributed a higher gross margin. This was offset by increased
production costs in both the U.S. and Indian mining operations.
    General and administrative expenses increased 3.3 percent year over year.
The primary reason for the increase was professional fees paid for legal and
external accounting services associated with the write-down of Indian assets
which were included in the 2005 reported results. Over $0.4 million of this
type of costs should not reoccur in 2007.
    The Company posted a net loss of $4.0 million, or $0.17 per share, for
2006, compared with a net loss of $9.2 million, or $0.38 per share, for 2005.
In 2005, the Company wrote-down assets associated with operations at Sri
Lanka, Tamil Nadu and Andhra Pradesh, India for a total charge of
$5.4 million. Excluding the cost of professional fees associated with the
write-down, the net loss for 2006 would have been $3.5 million or $0.15 per
share, compared to a loss excluding the write-downs of $3.9 million or $0.16
per share in 2005.

    4th Quarter Results

    For the fourth quarter of 2006, net sales increased 19 percent to
$5.6 million, compared with $4.7 million in the fourth quarter of 2005. Higher
garnet/abrasive volume compounded by higher prices and increased waterjet
parts sales drove the result.
    Gross profit for the fourth quarter was 13.6 percent in 2006, compared
with 4.9 percent in 2005. While adverse weather and increased fuel costs
increased production costs at both TGI and ECG, these were offset by higher
yields of finished product in both operations for the quarter.
    Total expenses for the quarter decreased by 76 percent from the year-ago
period. Decreased expenses are primarily due to the absence of write-downs in
India of which $2.5 million were taken in the fourth quarter of 2005.
    The Company recorded a foreign exchange gain of $nil in the fourth
quarter of 2006 compared to a foreign exchange gain of $0.07 million in 2005.
The Company also booked $0.08 million of stock-based compensation in the
fourth quarter of 2006, compared to $0.2 million of stock-based compensation
in the 2005 fourth quarter.
    The resulting net loss was $0.7 million, or $0.03 per share, compared to
a net loss of $4.3 million, or $0.18 per share, for the fourth quarter of
2005. Excluding the write-down in Q4 2005, the net loss for that quarter would
have been $1.7 million or $0.07 per share.

    Segmented Results

    Net sales of the Company's Indian operations increased 19 percent in 2006
to $7.2 million. This was despite slightly decreased production. Profitability
was positively affected by higher selling prices. This was more than offset by
higher operating costs per unit, higher labour and transportation costs, and
the on-going development expense at Andhra Pradesh. This segment posted a
$0.9 million loss for the year.
    The Company's European operation - Kominex - generated sales of
$7.1 million, an increase of 29 percent from the prior year. The increase was
due to significant increases in volumes across all product lines. Kominex's
earnings before tax increased to $0.40 million in 2006 compared to
$0.13 million in 2005.
    Revenue for the Company's U.S. mining operations, Emerald Creek Garnet
Ltd. (ECG), decreased 11 percent to $4.6 million, primarily due to fewer tons
produced due to production constraints and lower garnet concentrations. The
loss for the year for ECG was $1.0 million, compared to a loss of $0.3 million
in 2005.
    Revenue for the Company's U.S. manufacturing operation, IWP increased to
$3.1 million from $2.2 million in 2005. The majority of the increase was due
to the inclusion of IWP for the full year. There was also more than a
13 percent increase due to strengthening demand and a broader product
offering. The loss for the year for IWP was $0.2 million compared to a profit
of $0.1 million in 2005. Over $0.2 million of the swing in earnings is the
result of booking a reserve for slow moving inventory.

    Liquidity and Capital Resources

    Cash and short-term investments reduced by $4.3 million in 2006. This
compares to a reduction of $4.9 million for the year of 2005. Cash flow from
operating activities was a positive $0.1 million in the fourth quarter and an
outflow of $1.5 million for the year. Working capital movement is the primary
cause of the outflow of cash from operations in 2006. This was due to higher
receivables associated with higher revenues and lower payables due to timing.
    Included in the 2006 cash outflow was $0.6 million used to repurchase and
cancel 786,500 shares of the Company's stock. Net movement in debt consumed
$0.4 million cash. Capital expenditures of $1.7 million for 2006 included
$0.05 million for mineral properties and deferred development and
$1.65 million for property, plant and equipment.
    Working capital, including the current portion of long-term debt, was
$22.2 million at the end of 2006, compared to $24.8 million at year-end 2005,
translating into current ratios of 6.3 and 5.6, respectively. As of the end of
2006, the Company's debt-to-equity ratio was 17.4 percent, compared with
18.3 percent at year-end 2005. The Company cash and cash equivalents position
was $18.3 million as of December 31, 2006.


    The Company continues to look for additional land to strengthen its
reserves in Tamil Nadu and to continue to manufacture in Tamil Nadu. Recent
results have been encouraging. Should this land and necessary mining leases be
obtained on a timely basis, improvements in profitable sales are expected.
    The Andhra Pradesh project may take the Company several years to sort out
the critical issues before the Company. If the Company were to obtain all of
the licenses and permits immediately, the Company would perhaps not be in a
position to operate commercially until sometime in 2009. However, earlier
scenarios are also possible. The Company is not in a position to predict the
timing of operations in Andhra Pradesh.
    The Company is making strenuous efforts to return to profitability at its
Emerald Creek Garnet (ECG) facility through reinvestment in exploration and in
the facility and improved procedures. Significant improvements in ECG's
performance are not expected in 2007. The Company expects continued
improvement in volume and profitability from IWP. Performance in Europe has
seen increased volumes on all product lines. Sales in the Far East are growing
and the Company anticipates modest growth in sales and income for 2007.
    Modest increases in revenue are planned for 2007. The focus will be on
increasing lease holdings and the efficiency of our operations and retaining
shareholder value. Areas of opportunity have been identified and action plans
are in place in all business units of the Company to continue this
    The company is seeking useful transactional opportunities.

    WGI Heavy Minerals, Inc. is a fully integrated miner, producer, and
marketer of industrial-grade minerals and replacement parts for ultra-high
waterjet cutting systems. The Company's operations include mining and
processing facilities in Idaho, U.S. (Emerald Creek Garnet), Tamil Nadu, India
(Bengal Bay Garnet) and Ermsleben, Germany (Kominex) and a manufacturing
facility in Washington, U.S. (International Waterjet Parts).

    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)
                                                            As at      As at
                                                         December   December
    Consolidated Balance Sheet                           31, 2006   31, 2005
    Cash and Short term deposits                           18,321     22,597
    Other Current Assets                                    8,136      7,551
    Total Current Assets                                   26,456     30,149

    Property, plant and equipment                           7,279      7,802
    Goodwill and Intangible Assets                          2,049      2,136
    Other Assets                                                0         30
    Total Assets                                           35,784     40,117

    Liabilities & Equity
    Current Liabilities                                     4,226      4,801
    Long-term debt                                          1,067      1,409
    Total Liabilities                                       5,293      6,210

    Capital stock                                          53,432     54,016
    Stock-based compensation                                2,088      1,192
    Deficit                                               (24,510)   (20,540)
    Foreign currency translation account                     (519)      (761)
    Total Equity                                           30,491     33,907
    Total Liabilities & Equity                             35,784     40,117

                                                           Twelve     Twelve
                                   3 months   3 months     months     months
                                      ended      ended      ended      ended
    Consolidated Statements of     December   December   December   December
     Operations and Deficit        31, 2006   31, 2005   31, 2006   31, 2005

    Sales                             5,639      4,722     22,113     18,959
    Operating Costs                   4,281      4,012     16,601     14,654
    Depreciation, depletion
     and amortization                   593        479      2,409      1,641
    Gross Margin                        766        231      3,103      2,665
    G&A                               1,488      1,631      6,085      5,890
    Interest Income                    (238)      (212)      (861)      (696)
    Interest Expense                     53         60        189        180
    Stock based compensation             77        245        897        733
    Development costs                    93          -        227        102
    Prior year Write-down/
     write-offs                           -      2,642          -      5,364
    Other Expenses/(income)              19         41        391        271
    Total                             1,492      4,407      6,927     11,846
    Loss before taxation &
     Non-controlling interest          (727)    (4,176)    (3,824)    (9,181)
    Taxes & Non-controlling loss         11       (139)       146         62
    Loss for the period                (738)    (4,315)    (3,970)    (9,243)
    Basic and diluted loss
     per common share                $(0.03)    $(0.18)    $(0.17)    $(0.38)

                                                           Twelve     Twelve
                                   3 months   3 months     months     months
                                      ended      ended      ended      ended
    Consolidated Statements        December   December   December   December
     of Cash Flows                 31, 2006   31, 2005   31, 2006   31, 2005

    Cash flows from operating
     activities                         139        195     (1,533)       284
    Cash flows from investing
     activities                        (680)      (530)    (1,675)    (4,979)
    Cash flows from financing
     activities                         (69)        23     (1,028)      (194)
    Effect of exchange rate on
     cash and cash equivalents          (41)         0        (41)        31
    Net increase (decrease) in
     cash & ST Investments             (651)      (311)    (4,277)    (4,858)
    Cash & ST Investments
     - beginning of period           18,948     22,908     22,597     27,456
    Cash & ST Investments
     - end of period                 18,321     22,597     18,321     22,597

         All figures stated in U.S. dollars unless noted otherwise.

For further information:

For further information: Karla Wright Hayden, CFO, 1875 N. Lakewood
Drive, Suite 201, Coeur d'Alene, ID, 83814, U.S.A., (208) 666-6000 ext. 204,
Fax (208) 666-4000, www.wgiheavyminerals.com, E-Mail
karla@wgiheavyminerals.com; Covell Brown, Chairman, (208) 699-8470, E-mail
covell@wgiheavyminerals.com; Ed Kok, Investor Relations, (208) 666-6000 ext
39, E-Mail ed@wgiheavyminerals.com

Organization Profile

WGI Heavy Minerals, Incorporated

More on this organization

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890