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3mo results
World Wide Minerals Ltd WWS
Shares issued 58,839,225 Jun 23 close $0.14
Wed 24 Jun 98 Company Review
An anonymous director reviews the company
Sales in the quarter totalled $6.7-million resulting in an operating profit
of about $150,000. Based on contracts in place, an additional $6.2-million
of sales revenue will be generated in the second quarter resulting in an
operating profit of about $450,000. To date, no deliveries are scheduled
for the second half of 1998 although marketing efforts are continuing.
Contracted sales beyond 1998 exceed $37-million. It is the company's sales
strategy to emphasize base price, multi-year sales contracts, which provide
a more stable future commitment profile and resultant delivery prices.
The company recorded a consolidated net loss of $516,000 or 1 cent per
share for the three months ended March 31, 1998 compared to consolidated
net income of $458,000 or 1 cent per share for the corresponding 1997
period. Results of operations for the first quarter of 1998 include sales
of uranium concentrate totalling $6,686,000 on which the company realized
an operating profit of $152,000 before charges for general corporate,
interest and other costs. Continuing costs associated with recovery of the
company's investment in Kazakhstan have been expensed as incurred following
the provision for impairment in investment at year end.
Effective March 6, 1998 World Wide arranged a new $9.5-million loan under a
restated loan agreement with Dundee Bancorp. This represents an increase
from the original $5.0-million loan made available by Dundee, which had a
maturity on March 31, 1998. The increased loan will mature July 31, 1998,
bears interest at the rate of the Canadian bank prime rate plus 3 per cent
per year and is secured by assets of the company that do not represent
security for the facility provided by Deutsche Bank AG. In addition to
interest on the loan, Dundee also will be entitled to receive a cash fee of
$500,000 upon the company's successful recovery of its loan receivable from
investment in uranium mines in Kazakhstan. The net proceeds of the
increased loan from Dundee were used to refinance the original $5.0-million
loan, to repay additional advances made by Dundee, to pay accrued interest
on the loan advances, to finance operating costs of the company's uranium
mine development in Mongolia and for general corporate purposes as well as
to finance the purchase price for a management group to purchase the
8,631,415 shareholding, representing 16.3 per cent of the then outstanding
shares of World Wide, previously held by an affiliate of Dundee. The price
paid to Dundee was 29 cents per share.
Effective March 6, 1998, the company issued 5,400,000 shares to WM Mining
Company LLC, having a total value of $1,252,000, in settlement of a
$700,000 note payable, to acquire a 10 per cent interest in World Wide
Mongolia Mining and to satisfy a future obligation to issue 2,000,000
shares.
During the quarter the company repaid $6,498,000 of the revolving inventory
financing facility placed with Deutsche Bank AG. A further $6,143,000 will
be repaid from proceeds of uranium sales during the second quarter. At
March 31, 1998, the company owed certain fees to the bank. However,
Deutsche Bank has deferred payment pending completion of further financing
by the company.
The company has been informed by the government of Kazakhstan that the
government recognizes that it has a responsibility to repay the company's
investment in that country. Any proceeds from settlement of these issues
will be employed as part of the capital of the company when received. As a
result of recent negotiations with the government of Kazakhstan, the
company may realize a significant portion of its investment in cash. Any
cash proceeds realized will be used to finance the cost of recovery of its
investment, development of the Dornod mine, repayment of the $9.5-million
note payable to Dundee and for general corporate purposes.
At March 31, 1998 the company had a working capital deficiency of
$9,695,000-million, largely as a result of the provision for impairment in
investment in Kazakhstan at year end. The ability of the company to proceed
with the development of the Dornod mine and manage its continuing corporate
activities is dependent upon the company raising sufficient funds through
its capital raising efforts. At March 31, 1998, the company did not have
adequate capital to continue such development. Although management is
confident that it can arrange financing to meet its liquidity needs, there
can be no assurance that any such financing will be concluded. The company
is actively seeking project financing for development of the Dornod mine;
however, the project's location in a developing country and the inherent
risk in completing mine development, provide limited access to traditional
sources of mine finance. This has been made more difficult because of the
company's treatment in Kazakhstan. Management anticipates that any provider
of project financing will request a component of equity financing be
obtained as well.
Steps had been taken in late 1997 to commence action against the government
of Kazakhstan in the U.S. Federal Court arising out of the illegal
termination of the company's management agreement for the TGK project.
These plans were suspended when positive action appeared to be forthcoming;
however, the apparent willingness to settle the issues did not bear fruit
by the time that the 1997 financials were being finalized, at which time a
provision was taken for the impairment of this investment in accordance
with generally accepted accounting principles. At that time the action was
commenced in the U.S. Federal Court, claiming $220-million in damages.
Since filing the legal action, further progress has been made through
discussions held with representatives of the government of Kazakhstan who
have been directed by the prime minister to resolve the matter of
compensation in an out of court settlement.
STATEMENT OF EARNINGS
Three months ended March 31
(U.S. dollars)
1998 1997
Revenue $6,689,000 $ 289,000
---------- ----------
Expenses
Cost of sales 6,535,000 -
General and
admin 705,000 258,000
Kazakhstan
negotiation
costs 147,000 -
Amortization 13,000 8,000
Interest 355,000 -
Foreign currency
gain (550,000) (435,000)
---------- ----------
7,250,000 (169,000)
---------- ----------
Net income
(loss) $ (516,000) $ 458,000
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