Highwood Resources first quarter report
Highwood Resources HWD
Shares issued 21,811,459 Jun 21 close $0.75
Tue 22 Jun 99 Company Review
Mr. John Smrke reviews the company
The operating and financial performance in this first quarter of the 1999 fiscal year was strong. All of management's expectations were met and indications are that this pace will continue through the next quarter. On Jan. 1, 1999, the company acquired 100 per cent of Canada Talc Ltd. and, as such, these current period financial statements include all of the revenues and expenses of that operation which, for comparative purposes, are not reflected in the 1998 figures.
Revenues for the first quarter were $4,599,652 compared with $3,465,692 for the same three-month period in 1998 without Canada Talc. Gross margin for the period was 1.3 per cent lower than the prior year as a result of operating inefficiencies at Canada Talc. These are being improved and, as time goes on, the process will be brought up to the same high standard maintained at the other company facilities. All expense categories are in line with expectations and all incremental increases reflect the impact of the Canada Talc operations and administration. Net earnings were $215,035 compared with $186,879 for the same period last year, an increase of 15 per cent.
The plans for Canada Talc as discussed in the 1998 annual report are proceeding on schedule. The most important factor that will ensure the success of its transition into Eastern Canada is the relocation of key operating personnel. These individuals will be responsible for the design and operation of both the mining and milling facilities. With this in mind, attention has been focused on a combination of the underground development as well as the redesign of the milling circuits. At the company's barite milling facility at Lethbridge, Alta., the dismantling of critical components has been carefully coordinated with construction activities at Marmora, Ont. Once this transition is complete, Canada Talc will be able to offer micronized talc products to the marketplace. Concurrent with construction, the company's marketing team continues to work to ensure that the long-term customer base of both Highwood and Canada Talc are kept well-apprised of the continuing transition within the company.
The company is currently proceeding on schedule with the design and construction at Canada Talc. The company anticipates the completion of the necessary mill modifications that will allow for the processing of 100 per cent of its barite fillers in Ontario to be complete by the end of the year. In the first quarter of next year, the underground development program will be complete and this will be complimented by the commissioning of fire circuits.
Once all of the milling modifications have been completed, the company's entire micronizing capabilities will be managed from one central facility. This will improve quality control and material handling while, at the same time, reduce operating costs. The company is confident that once the transition is complete, it will have improved its competitive advantage while, at the same time, strengthening its bottom line. The Thor Lake project represents Highwood's opportunity to enter into the rare-earth and specialty-metals arena and, as a result of this, the company has continued its permitting efforts with great diligence. The permitting process, however, has taken a much longer time than was originally anticipated. The reasons for this are many. Undermining the approval process is the fact that Native land claim issues in the area surrounding Thor Lake have not been settled by the Canadian Federal Government. As a result, many of the members of the project screening committee appear to have varied agendas and objectives. This, combined with the elevation of the company's project up to the next level of screening provided for under the Canadian Environmental Act, has substantially contributed to the delay. The company is continuing in its pursuit of the water licence and is currently reviewing the latest deficiency statement, which has recently been provided by the Regional Environmental Review Committee of the Northwest Territories. This statement responds to Highwood's environmental assessment report, which was submitted in October, 1998. Once the review is complete, the company will be in a position to determine how best to move forward with development of the project.
CONSOLIDATED STATEMENT OF EARNINGS
Three months ended March 31
1999 1998
Revenue
Sales $4,599,652 3,465,692
Cost of sales 3,582,543 2,653,327
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1,017,109 812,455
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Expenses
General and
administrative 472,319 363,769
Depreciation and
amortization 297,463 206,411
Exploration 36,218 47,297
Interest on
long-term debt 4,040 19,307
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810,040 636,784
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Income from
operations 207,069 175,671
Interest income 34,966 38,208
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Earnings before
income taxes 242,035 213,879
Income taxes
Current 12,000 12,000
Deferred 15,000 15,000
--------- ---------
Net earnings $ 215,035 186,879
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Earnings per share 1 cent 1 cent
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