Vancouver —
Under a letter of intent, WGI will buy Titanium Fields Resources and U.S. Titanium, owners of Sierra Rutile, for about US$90 million, from Jean-Raymond Boulle, Gondwana (Investments) and Patricia Parvin. The purchase price will be paid in the form of WGI shares, convertible notes and cash.
Sierra Rutile operated from 1979 until 1995, when civil unrest and armed conflict in the country forced it to close. The mine had been producing about 25% of the world’s rutile and a significant amount of ilmenite, and was the largest single source of tax revenue for Sierra Leone.
Rutile and ilmenite are feedstocks for the production of titanium dioxide pigments used in paint, paper and plastics.
In the year before the closure, the mine generated US$60 million in revenue and US$23 million in operating cash flow. Since the closure, more than US$110 million of maintenance and debt servicing has been undertaken to keep the infrastructure intact.
Democratic elections and relative political stability in Sierra Leone in recent years have made it possible to reopen the mine. Investment guarantees and commitments of about US$55 million have been secured from U.S. and European government foreign loan agencies.
The initial phase involves the rehabilitation and refurbishing of a dredge and development of the orebodies by late 2005. Production is slated to commence in 2006 at the annual rate of 110,000 tonnes rutile and 20,000 tonnes ilmenite.
A second phase of expansion will see the addition of a second dredge, upgrades to power-generating facilities, and an increase in annual output to about 210,000 tonnes rutile and 45,000 tonnes ilmenite.
The 580-sq.-km. of mineral leases covering the mine have historical proven and probable reserves of 278 million tonnes grading 1.43% recoverable rutile. An additional resource of 185 million tonnes grading 1.2% recoverable rutile has been outlined. These reserve and resource figures predate, and are not compliant with, National Instrument 43-101.
WGI will pay US$30 million in cash on closing the deal, plus a US$30-million convertible note paying 5% interest (convertible at $10 per share for three years, then at $12 per share thereafter) and issue 4.8 million shares at a deemed value of $8.25 per share.
WGI is a major producer of garnet from operations in Idaho and India. Garnet is used in electronics, water filtration and as an abrasive.
In its second quarter, WGI suffered a 21% drop in revenues to $5.4 million, compared with $6.7 million in the corresponding period of 2003. An increase in garnet sales was offset by reduced ilmenite sales over the quarter. The company posted a net loss of almost $750,000 or 3 per share, compared to earnings of more than $300,000 (or 2 per share) in the second quarter of 2003.
The company has 23.9 million shares outstanding and was recently trading in the $8 range.
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