Event
A week after receiving a dissident proxy circular from hedge fund Passport Capital (see prior post “WGI Heavy Minerals (WG: TSX) and its Activist shareholder – Passport Capital" June 3, 2008), WGI Heavy industries announces today that it has entered into an agreement to sell their investment in Transworld Garnet India (Pvt.) Limited for a cash consideration of 836,000,000 Ruppees, approximately US $19.5 million, to V.V. Mineral, of Tamil Nadu, India. WGI's share of the proceeds is approximately US $17.3 million consisting of its 74% equity interest and the repayment of debt financing.
The news release also says that WGI has “signed a three-year distribution agreement with annual renewals with V.V. Mineral covering garnet, ilmenite and other minerals that may be present in the beach sands mined by V.V. Mineral. The distribution agreement provides WGI with an assured minimum supply of 60,000 metric tons annually of garnet, which is a significant increase over current production rates. Garnet grades and quality levels will be consistent with material currently supplied to WGI by TGI. Additional quantities of garnet will be supplied as V.V. Mineral's capacity expands. In addition, WGI will act as a broker for the sale of V.V. Mineral's ilmenite products and will have first opportunity to negotiate contractual arrangements for other minerals with V.V. Mineral once production begins.”
“The Board of Directors of WGI is currently intending that, following the closing of the sale to V.V. Mineral, the Board will distribute US $0.80 per share in cash to the Company's shareholders.”
Takeaways From The Event
Whether or not this announcement was precipitated by Passport Capital’s dissident proxy to replace WGI’s directors and management with directors of its own choosing, I do not know. I do believe that pressure from Passport Capital on the company’s management is a good thing. With WGI Heavy Minerals (WG: TSX) currently trading at the $0.80 level and the company announcing a cash distribution of US $0.80 per share, I smell an opportunity.
Link to news release: http://www.newswire.ca/en/releases/archive/June2008/11/c2712.html
Investment Risks
Without limitations, some of the risks include reserves and resource risk, development risks, permitting risks, off-take agreements, commodity price risks, geo-political risks, exchange rates, weather related impacts etc.
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Last update : 11-06-2008 07:51
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