EDITOR: | May 16th, 2013

Great Western Minerals Group Reports First Quarter 2013 Results and 2013 Outlook

| May 16, 2013 | No Comments

Great-Western-Minerals-Group-LtdMay 15, 2013 (Source: CNW) — Great Western Minerals Group Ltd. (“GWMG” or the “Company”) (TSX.V: GWG / OTCQX: GWMGF), a leader in the manufacture and supply of rare earth-based alloys and high purity metals with a low cost, high-grade critical rare earth asset (the “Steenkampskraal Project” or “SKK”), today provided an update on the Company’s activities and financials through March 31, 2013, as well as its strategy and outlook.

First Quarter and Recent Highlights

  • Revenue for 2013 first quarter was $3.5 million, down from $4.5 million during the prior-year period, but an increase of $0.7 million, or 26%, from the sequential fourth quarter of 2012.  Company revenue was primarily attributable to its production subsidiary Less Common Metals Limited (“LCM”)
  • Operating loss decreased $2.2 million from the prior year primarily due to a $5.7 million gain on the conversion option to the Company’s convertible debt
  • Preliminary Economic Assessment (“PEA”) on SKK released during the quarter
  • Exploration expenditures and focus will be on SKK Project, while other project expenditures are being significantly curtailed
  • Company had $43.9 million in cash as of March 31, 2013

“We are making progress as we implement initiatives aimed at supporting our strategy which is to expand our opportunity as a metal and alloy producer by developing a secure source of rare earth elements through our SKK project,” stated Marc LeVier, President and CEO.  “We are also focused on reducing general overhead expenses, reducing exploration expenses and funding only required activities that support our objectives. We plan to reduce our burn rate to conserve our cash and spend on activities that de risk our project, all with the intent of achieving our goals.”

Manufacturing Services

Mr. LeVier noted, “We expanded our manufacturing capacity at our LCM facility located in Ellesmere Port, U.K., with the installation of our new strip cast furnace and also began installation of our second strip cast furnace, which we expect to complete in the second quarter of 2013.  Importantly, the facility move and equipment will more than double our previous capacity.”

Manufacturing services revenue decreased by $1.0 million, or 21.7%, for the first three months of 2013 compared with the same period in the prior year while gross profit dropped by $0.6 million, or 35.0%. The decrease in revenue was due to a combination of lower volume and price, as average prices for alloys have decreased by approximately 16% year-over-year.

For the first three months of 2013, LCM sold 55 metric tonnes of alloys compared with 67 metric tonnes of alloys for the same period in 2012.  The decrease in volume was attributable to an overall softening in the rare earth alloy market.  The Company anticipates the volume of alloys to increase during 2013 as certain qualification programs are currently ongoing with key customers.  Overall, the Company expects alloy sales volumes to be greater than 2012 levels, due to the growth in the strip cast alloys market and LCM’s new strip cast furnace.

In the short-term, the growth of the Company’s revenue from LCM may be limited by its ability to obtain the necessary rare earth materials to produce products at LCM and Great Western Technologies Inc.  Once the SKK Project has commenced production, the Company expects this limitation to be removed.

Steenkampskraal Project (SKK)

During the quarter ended March 31, 2013, the Company expended $2.4 million on various development exploration and technical reports, including the completion of an updated resource estimate, the completion of the PEA, the commencement of an expanded drill program of an estimated 65 holes (9,400 meters) of which 33 holes (4,692 meters) were completed. The Company is awaiting assay results.  The aeromagnetic and aerogeophysics surveys were also initiated in the first quarter.  Comparatively, in the first quarter of 2012, the Company expended $2.2 millionpredominantly on development drilling, engineering evaluation work and technical studies.

At SKK, the mine rezoning from agricultural to mining has been completed for the duration of the new order mining right.  At the Vredendal site, the location of a proposed separation facility, the environmental impact assessment (Basic Assessment Report or BAR) has been submitted to authorities, and is currently in a revision and review stage.

During the first quarter of 2013, the Company announced the initial results of the PEA indicating the following:

  • $555 Million after-tax net present value applying a 10% discount rate and a 28% South African corporate tax rate
  • 66% after-tax internal rate of return
  • 2.5 year estimated project payback period, on an after-tax basis, from start of underground mining production.
  • 11 year potential life of mine


The NI 43-101 compliant technical report containing the results of PEA was filed on SEDAR website on May 1, 2013.

The Company intends to continue further exploration of the mineral resources at the SKK Project and perform additional design work and metallurgical testing in order to finalize the design of the Rare Earth Chloride (“RECl”) Plant.  The PEA has assisted the Company in evaluating its timing and funding requirements for the SKK Project.  Based on the timelines in the PEA, production of mixed RECl is projected to commence within 24 months of the completion of required project financing, at a design capacity of approximately 5,000 tonnes per year of contained Rare Earth Oxides.

The Company is currently evaluating a variety of funding options as well as alternatives to reduce capital outlays.  This includes evaluating toll separation alternatives to defer certain upfront capital costs and shorten timelines. Until such time as the funding is secured, the Company will manage its current cash position to best support the progress of the SKK Project.

Liquidity Position

The Company’s cash and cash equivalents were $43.9 million at March 31, 2013, exclusive of $7.3 million held in escrow to service bond interest payments due in April and October of 2013. The cash position decreased by approximately $8.2 million from December 31, 2012.  The Company’s use of cash in operations for the three month period ended March 31, 2013 was $6.5 million compared with $7.4 million for the same period in the prior year.

The Company expects capital expense requirements other than those related to the SKK Project to begin to decrease as it completes the investments in LCM.

General and administrative expenses increased 14.4%, or $159 thousand, from the prior-year period, primarily attributable to increased travel associated with the Company’s extensive review of its sites and operations.  It is anticipated that these expenses will be reduced in the near future.

Jim Davidson, VP of Finance and Chief Financial Officer stated “We are looking at all our expenditures and will carve out or defer any expenditures that are not on the critical path or required for regulatory compliance in an effort to reduce our cash burn rate. We anticipate lowering the burn rate in the second half of 2013.”

Qualified Persons

Brent C. Jellicoe, B.Sc. (Hon.), P.Geo., Director of International Exploration for GWMG, is the Qualified Person (as defined under NI 43-101) responsible for supervising the preparation of the technical content of this news release.

Teleconference and Webcast

GWMG will host a conference call and webcast May 16, 2013 at 11:30 a.m. ET.  During the call, management will provide an update on GWMG’s first quarter results and update on strategies and outlook for 2013.  A question-and-answer session will follow.

The GWMG conference call can be accessed by calling (201) 689-8471.  The live listen-only audio webcast can be monitored on the Company’s website at www.gwmg.ca, where it will be archived afterwards.

A telephonic replay will be available from 2:30 p.m. ET the day of the teleconference until Thursday, May 23, 2013.  To listen to the archived call, dial (858) 384-5517 and enter replay pin number 413981.  A transcript will also be posted on the Company’s website, once available.

About GWMG

Great Western Minerals Group Ltd. is leader in the manufacture and supply of rare earth-based alloys and high purity metals with a low cost, high-grade critical rare earth asset. Its specialty alloys are used in the battery, magnet and aerospace industries. Produced at the Company’s wholly-owned subsidiaries, Less Common Metals Limited in Ellesmere, U.K. and Great Western Technologies Inc. in Troy, Michigan, these alloys contain transition metals including nickel, cobalt, iron and other rare earth elements. As part of the Company’s vertical integration strategy, GWMG also holds 100% equity ownership in Rare Earth Extraction Co. Limited, which controls the Steenkampskraal monazite mine. In addition to an exploration program at Steenkampskraal, GWMG also holds interests in four rare earth exploration and development properties in North America.

The company routinely posts news and other information on its website at www.gwmg.ca.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Statement 
Certain information set out in this News Release constitutes forward-looking information.  Forward-looking statements (often, but not always, identified by the use of words such as “expect”, “may”, “could”, “anticipate” or “will” and similar expressions) may describe expectations, opinions or guidance that are not statements of fact and which may be based upon information provided by third parties. Forward-looking statements are based upon the opinions, expectations and estimates of management of GWMG as at the date the statements are made and are subject to a variety of known and unknown risks and uncertainties and other factors that could cause actual events or outcomes to differ materially from those anticipated or implied by such forward-looking statements. Those factors include, but are not limited to the assumptions and estimates in the preliminary economic assessment of the Steenkampskraal project proving to be accurate over time; the construction, commissioning and operation of the proposed monazite processing facility and separation facility within  estimated parameters; mine refurbishment activities; reliance on third parties to meet projected timelines and commencement of production at Steenkampskraal; risks related to the receipt of all required approvals including those relating to the commencement of production at the Steenkampskraal mine, delays in obtaining permits, licenses and operating authorities in Canada, South Africa and China, environmental matters, water and land use risks; risks associated with the industry in general, commodity prices and exchange rate changes, operational risks associated with exploration, development and production operations, delays or changes in plans, including those estimated in the preliminary economic assessment of the Steenkampskraal project; risks associated with the uncertainty of resource estimates; health and safety risks; uncertainty of estimates and projections of production, costs and expenses; risks that future Steenkampskraal and region exploration results may not meet exploration or corporate objectives; the adequacy of the Company’s financial resources and the availability of additional cash from operations or from financing on reasonable terms or at all; political risks inherent in South Africaand China; risks associated with the relationship between GWMG and/or its subsidiaries and communities and governments in Canada and South Africa, radioactivity and related issues, dependence on one mineral project; loss of, and the inability to attract, key personnel; the factors discussed in the Company’s public disclosure record; and other factors that could cause actions, events or results not to be as anticipated. In light of the risks and uncertainties associated with forward-looking statements, readers are cautioned not to place undue reliance upon forward-looking information. Although GWMG believes that the expectations reflected in the forward-looking statements set out in this press release or incorporated herein by reference are reasonable, it can give no assurance that such expectations will prove to have been correct. Except as required by law, GWMG does not assume any obligation to update forward looking statements as set out in this news release. The forward-looking statements of GWMG contained in this News Release, or incorporated herein by reference, are expressly qualified, in their entirety, by this cautionary statement and the risk factors contained in GWMG’s Annual Information Form available at www.sedar.com.


($ in CAD)
                                                                                                                                     As of
March 31 December 31
2013      2012     
Cash and cash equivalents $ 43,900,282 $ 52,095,448
Accounts receivable 3,715,899 2,365,880
Inventories 3,949,142 4,199,561
Escrow account 7,315,200 7,163,280
Deposits and prepaid expenses 1,199,736 837,315
Current assets 60,080,259 66,661,484
Property, plant and equipment 17,056,072 16,388,314
Exploration and evaluation assets 16,646,775 17,624,225
Intangible assets 682,064 749,814
Goodwill 2,032,124 2,132,431
Non-current assets 36,417,035 36,894,784
Total assets 96,497,294 103,556,268
Short-term borrowings 699,916
Accounts payable and accrued liabilities 12,819,431 10,520,453
Current portion of provisions 719,279 1,065,175
Current liabilities 13,538,710 12,285,544
Provisions 1,831,563 1,993,766
Convertible bonds – debt 58,334,579 55,810,316
Convertible bonds – embedded conversion option 1,385,552 7,047,954
Non-current liabilities 61,551,694 64,852,036
Total liabilities 75,090,404 77,137,580
Shareholders’ Equity
Share capital 111,747,305 111,747,305
Warrants 11,702,153 11,817,308
Share based payments reserve 10,442,581 10,274,967
Accumulated other comprehensive income (loss) (7,499,458) (5,405,728)
Deficit (104,985,691) (102,015,164)
Total shareholders’ equity 21,406,890 26,418,688
Total liabilities and shareholders’ equity 96,497,294 103,556,268


($ in CAD)
For the three months ended
March 31,
2013 2012
Sales $ 3,506,343 $ 4,477,096
Cost of materials 2,342,812 2,686,160
Gross margin 1,163,531 1,790,936
General and administration 1,259,726 1,101,023
Wages and benefits 1,654,539 1,439,912
Stock based compensation 167,614 847,828
Professional fees 597,437 443,215
Investor relations 76,949 17,394
Occupancy 549,013 517,280
Depreciation and amortization 395,917 371,492
Exploration and evaluation expenditures 2,375,989 2,158,899
Impairment of property, plant and equipment 153,487
Exchange (gain) loss 18,303 92,567
Total expenses 7,248,974 6,989,610
Interest expense and finance costs (2,761,921) (31,849)
Interest income 75,329 144,614
Gain on conversion option 5,662,402
Other income (loss) 23,951 11,479
Loss before income taxes (3,085,682) (5,074,430)
Income tax recovery (expense) 115,155 (142,247)
Net loss (2,970,527) (5,216,677)
Other comprehensive income (loss):
Items that may be reclassified to profit and loss:
Unrealized gain on available for sale investments 21,059
Translation adjustment (2,093,730) (158,209)
Other comprehensive income (loss) (2,093,730) (137,150)
Total comprehensive loss (5,064,257) (5,353,827)
Basic and fully diluted loss per share 0.007 0.013
Weighted average number of shares outstanding 418,738,174 412,718,829


($ in CAD)
For the three months ended
March 31,
2013 2012
Cash provided by (used in)
Operating activities
Net loss for the year 2,970,527 5,216,677
Adjustment for:
Depreciation and amortization 395,917 371,494
Stock based compensation 167,614 847,828
Finance costs 2,686,592 (112,765)
Impairment of property, plant and equipment 153,487
Gain on conversion option (5,662,402)
Income tax recovery (expense) (115,155)
Income tax paid (262,756)
Other operating items (1,196,025) (3,017,210)
(6,540,499) (7,390,086)
Investing activities
Property, plant and equipment (1,467,740) (2,665,981)
Interest received 75,329 144,614
(1,392,411) (2,521,367)
Financing activities
Issuance of share capital, net of issuance costs 263,068
Interest paid (72,029) (31,849)
Short-term borrowings (699,916)
(771,945) 231,219
Net increase in cash and cash equivalents during the period (8,704,855) (9,680,234)
Exchange rate changes on foreign currency cash balances 509,689 (9,206)
Cash and cash equivalents, beginning of period 52,095,448 10,930,208
Cash and cash equivalents, end of period 43,900,282 1,240,768 



InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.

Copyright © 2019 InvestorIntel Corp. All rights reserved. More & Disclaimer »

Leave a Reply

Your email address will not be published. Required fields are marked *