WGI Heavy Minerals, Incorporated

WGI Heavy Minerals, Incorporated

May 15, 2006 17:52 ET

WGI Heavy Minerals Announces First Quarter 2006 Results

COEUR D'ALENE, IDAHO--(CCNMatthews - May 15, 2006) - WGI Heavy Minerals, Incorporated (TSX:WG) today announced results for the first quarter ended March 31, 2006.

Results of Operations - Comparison of First Quarter 2006 with First Quarter 2005

Revenues for the first quarter of 2006 increased 21.2 percent to $5.14 million, compared with $4.24 million for the first quarter period in 2005 due to higher prices, strong growth across the entire product line at the Company's Kominex subsidiary and the addition of the IWP business. Despite strengthening global economic activity and firming demand, garnet shipments, in tons, were lower by roughly 3 percent, due to production constraints in the U.S. and India, caused by wet weather, lower production (declining quantity/quality of reserves), extreme cold temperatures and equipment down-time in Idaho. The addition of IWP added $0.6 million to revenues in the first quarter of 2006.

Gross profit margins decreased to 6.6 percent in the first quarter of 2006, compared with 11.8 percent in the first quarter of 2005. The addition of IWP contributed a higher gross margin percent, offset by increased production costs, rising fuel costs, and lower absorption of fixed costs due to production constraints in the mining sector.

General and administrative expenses decreased to 26.0 percent of net sales in the first quarter of 2006, compared to 27.6 percent in the first quarter of 2005. General and administrative expenses compared to the first quarter of 2005 increased 14.2 percent year over year due to the increase in professional fees and the full quarter addition of IWP general and administrative expenses of $0.19 million. The Company posted a $0.04 million foreign exchange gain in the first quarter of 2006 as a result of the strengthening Canadian dollar, as compared to a $0.02 million foreign exchange loss in the first quarter of 2005. The Company expensed development expense with respect to Andhra Pradesh of $0.06 million in the first quarter of 2006 versus the restated $0.88 million in the first quarter in 2005. The Company also booked $0.1 million of stock-based compensation in the first quarter of 2006 compared to $0.2 million in the first quarter of 2005.

Income tax expense for the quarter was $0.08 million is the result of profits generated by the Company's subsidiary, Kominex located in Europe.

As a result, the Company posted a net loss of $1.2 million, or $0.05 per share, for the first quarter of 2006, compared with a restated net loss of $2.4 million, or $0.10 per share, for the first quarter of 2005.

Segment Information

ECG revenues decreased 14.9 percent over the first quarter of the prior year, on 7 percent higher prices offset by a 24 percent decrease in sales tonnage. The loss for the first quarter for ECG was $0.43 million, compared to earnings of $0.13 million in the first quarter of 2005.

IWP revenues for a full quarter totalled $0.8 million in 2006 versus 2005 revenues for one half month of $0.2 million. Information for IWP for the first quarter of 2005 is not a full quarter as IWP was acquired on March 14, 2005. IWP gross profit improved to 36% in the first quarter of 2006 from 34% in the first quarter of 2005. IWP income for the first quarter of 2006 totalled $0.02 million.

The Company's European operation - Kominex - generated sales of $1.6 million, an increase of 36 percent from the first quarter in the prior year, due to improved sales of garnet from India, mixed corundum and waterjet products. Gross profit for Kominex for the first quarter of 2006 totalled 20% compared to 11% in the same period in 2005. Kominex's earnings before tax for the first quarter increased to $0.2 million compared to breakeven in the first quarter of 2005.

Revenue of the Company's Indian operations increased 5 percent in the first quarter of 2006, on 10 percent less garnet production. Profitability was affected by higher selling prices, offset by higher operating costs per unit: higher mining labour 6%, mining transportation 61% and milling fuel costs 56%.

Strong Financial Condition

The balance sheet remains strong. The Company ended the first quarter of 2006 with a debt-to-equity ratio of 17.5 percent and a cash position of $21.1 million. Cash outflows from operations after changes in working capital and other assets amounted to $0.78 million comparable to an operating cash outflow of $0.28 million for the first quarter of 2006 and 2005, respectively.

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 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

For the three months ended
Mar. 31, Mar. 31,
2006 2005
As restated
-Note 3
$ $
Sales 5,136,407 4,239,619
Operating costs 4,156,005 3,372,400
Amortization, depreciation,
and depletion 639,631 367,359
------------ ------------
Gross Profit 340,771 499,860

Depreciation and amortization 16,203 18,277
General and administrative 1,335,403 1,169,796
Foreign exchange (gain)/loss (40,377) 20,200
Interest and financing 52,253 24,735
Interest income (198,373) (139,303)
Board fees 65,519 111,453
Stock based compensation 130,367 174,983
(Gain)/loss on disposal of equipment (2,054) -
Write-down of Indian advance - 686,000
Development expense of Andhra Pradesh 62,097 875,003
------------ ------------
1,421,038 2,941,144
------------ ------------

Loss before taxation and
non-controlling interest (1,080,267) (2,441,284)
------------ ------------

Provision for income taxes 77,558 2,027
------------ ------------

Loss before non-controlling interest (1,157,825) (2,443,311)

Non-controlling interest
share of gain (loss) of subsidiary - (30,570)
------------ ------------

Loss for the period (1,157,825) (2,412,741)

Deficit - beginning of period (20,539,757) (18,127,016)
------------ ------------

Deficit - end of period (21,697,582) (20,539,757)
------------ ------------
------------ ------------

Basic and diluted loss per share (0.05) (0.10)
------------ ------------
------------ ------------

Balance Sheet Data Mar. 31, Dec 31,
2006 2005
$ $
Cash and short-term deposits 21,146 22,597
Working capital 23,656 24,755
Total assets 38,359 40,117
Long-term debt 1,957 1,931
Shareholders' equity 32,661 33,907

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

Contact Information