WGI Heavy Minerals Announces Sales Growth of 18.2% Year over Year and Reports an Increase in Income of 136% for the Fourth Quarter 2010 over the same period in 2009

COEUR D'ALENE, ID, March 14 /CNW/ - WGI Heavy Minerals, Incorporated ("WGI") (TSX: WG) today reported earnings for year ending December 31, 2010 of $0.044 per share ($1.04 million) compared to earnings of $0.037 per share ($0.89 million) for 2009. Fourth-quarter earnings were $0.013 per share ($0.30 million), compared to earnings of $0.005 per share ($0.13 million) in the same period last year.

Overview
WGI achieved the highest full-year revenue in its history in 2010, reaching $34.01 million. This total surpassed the $28.78 million posted in 2009 by 18.2%. These results continue the Company's record of continuous year over year revenue growth for the last five years. Most markets for garnet and other abrasives strengthened in 2010 from previous year levels, but still suffered from sluggish growth in many parts of the world.

In 2010, the Abrasives segment achieved an income from operations-before-tax of $1.35 million. This is an increase over the $1.27 million income from operations-before-tax in 2009. The improvement is primarily driven by an increase in sales volume compounded by containment of selling, general and administrative costs. Sales of Emerald Creek Garnet improved 25.3% while Bengal Bay Garnet sales outpaced last year by 20.4%. Sales volume growth anchored the increase, gaining 30.1% year over year as markets continued their slow recovery. WGI also identified and sold to new customers. Net income for the segment was $0.99 million compared to an income of $0.95 million in 2009.

The Waterjet segment achieved a net income of $0.05 million in 2010. This is compared to a loss of $0.06 million in 2009. The result was due to increased sales as this segment is seeing slow but sustained growth. The revenue increase was offset by additional expenses associated with moving the Company's waterjet operations from Ephrata, Washington to Coeur d'Alêne, Idaho. The move consolidates the Company's administrative costs and will allow it to better manage its operations. The Company has taken this opportunity to strengthen its engineering capabilities as well as utilize excess manufacturing capacity available in the marketplace.

WGI's balance sheet remains strong with working capital of $13.98 million at December 31, 2010. This is a slight increase from December 31, 2009's working capital of $13.54 million. Earnings before interest, tax depreciation and amortization "EBITDA" for the year ended December 31, 2010 was $2.12 million, up 11.8% over 2009.

Pricing pressure remains strong as customers look for low prices in an oversupplied waterjet garnet market. Gross margins of 24.8% are down over 2009 when the Company reported gross margins of 27.3%. The decrease is due to pricing pressures and increased freight costs. Margins for the fourth quarter are relatively in line with the same quarter in 2009, at 23.9% for 2010, which is down slightly from 24.3% in 2009.

The Company's operating business units reported profits of $0.30 million in the fourth quarter of 2010, continuing the Company's goal of sustained profitability; marking seven consecutive quarters of positive earnings. Total expenses for 2010 as a percentage of sales are down over two percentage points to 20.7% of sales from 23.1 % of sales for 2009.

The Company continues to place high importance on the business relationships it has created over the last several years. Affiliations with industry leaders such as V. V. Mineral are critically important to the success of WGI Heavy Minerals. In addition, the Company actively continues to look for new, low cost, regional mineral deposits. As part of that effort the Company filed 30 placer claims on 12,960 hectares in British Columbia, Canada in the fall of 2010. Over the next 12 months the Company plans to explore these placer claims for garnet.

"We are cautiously optimistic about our future." stated Greg Emerson, President and CEO. "Our sales and marketing group is making progress in gaining new customers while our operating groups work to keep costs in line and invest for future growth. Our team is expanding our exploration activities for new regional mineral opportunities and furthering our mineral and manufacturing business partnerships."

2010 Fourth Quarter Results of Operations
Total Company revenues for the fourth quarter of 2010 climbed to $8.61 million, a 12.5% improvement over the same quarter in 2009 revenues of $7.65 million. Results were only marginally higher than the third quarter of 2010 but represented four quarters of continuous revenue growth. The Abrasives segment posted a year-over-year quarterly gain of 15.7% as the abrasives markets continued their slow recovery from the recessionary levels of 2009. The revenue increase was the result of a 24.8% surge in sales volume while prices fell 7.3% as competitors struggled to gain market share in an arena that is generally oversupplied. Waterjet parts revenues slipped 3.2% compared to the same quarter a year ago but revenue ran only slightly below our best quarter of 2010. Waterjet parts demand rebounded strongly toward the end of 2009 and has continued to grow slowly since then. Unfavourable currency exchange rates pared 4 percentage points from prices in the fourth quarter of 2010 compared to 2009. Customers continue to buy carefully and only in quantities to fulfill immediate need. There has been very little restocking by the end users of WGI products. Prices remain soft.

Gross margin for the fourth quarter came in at 23.9 percent versus 24.3 percent for the year-ago period. The primary reason for the decrease was price erosion that more than offset volume gains in most products. Productivity at the Company's mine in North America and, to a lesser extent, from the Company's European recycling operations also provided an offset to the declining prices.

Total expenses increased by $0.02 million to $1.66 million for the fourth quarter of 2010. The most significant increase was exploration costs of $0.11 million in 2010 versus $0.01 million in the same period in 2009. Selling, general and administrative were lower by $0.05 million quarter on quarter. This was primarily due to lower travel and insurance costs. The fourth quarter of 2010 produced a net income of $0.30 million versus $0.13 million in 2009, an increase of 136% over the same period in 2009.

2010 Results of Operations
WGI achieved its highest ever full-year revenue in 2010 reaching $34.01 million. This total surpassed the $28.78 million posted in 2009 by 18.2% and continued the company's record of continuous year over year revenue growth for the last five years. The 2010 improvement was led by other abrasives (+25.0%) and followed by garnet (+19.8%) and waterjet parts (+8.0%). Sales volume across all product lines combined jumped 34%. This was partially offset by weaker pricing that fell 8.1%. Most markets for garnet and other abrasives strengthened in 2010 from previous year levels, but still suffered from sluggish growth in many parts of the world. Slow growth encouraged producers to pursue market share gains and pricing continued to weaken as the year progressed. Waterjet parts markets also grew from their depressed levels of 2009 but many original equipment manufacturers (OEMs) became more aggressive in selling parts as sales of new machines lagged. During the year, unfavourable trends in currency exchange rates reduced revenues 2% compared with rates in 2009.

Gross profit increased $0.58 million year on year. Annual gross margins fell from 27.3% in 2009 to 24.8% in 2010. The largest contributor to the decline has been price erosion in garnet offset by productivity gains from mining and to a lesser extent from recycling operations.

Total expenses have increased $0.39 million from 2009. The most significant increase was in exploration costs ($0.23 million) as projects were undertaken in three separate areas. In addition, realized foreign exchange movement generated a loss in 2010 contrasted with a gain in 2009. Sales, General and Administrative expenses increased $0.06 million year on year. This is primarily due to of increases in selling and marketing expenses utilized in gaining and retaining customers offset by lower professional fees associated with bringing legal counsel in-house.

Financially, the Company's consolidated balance sheet remains strong, with cash, cash equivalents and marketable securities in the amount of $6.20 million. Net revenue increased over 2009 primarily due to increased volumes more than offsetting a decline in prices and negative currency fluctuations. The Company has reported earnings of $1.04 million and a total cash inflow of $0.94 million from operations including changes in working capital for the year.

Outlook
WGI expects to grow its garnet and waterjet businesses in 2011 through increase in market share and new business. Sales are expected to increase more than 10 percent over 2010 primarily through increased volumes of garnet and abrasives. Logistic costs, as well as pricing competition, are expected to continue to push margins below 2010 levels. How the current unrest in the Middle East will affect our business is unknown. The region is an important part of our business and should the current unrest cause disruption in commerce in 2011 our sales would be adversely affected.

2011 will be a year of further operational improvements in addition to the identification of new resources through expanded mineral exploration. The Company will look to partner or invest with other companies to develop smaller metal and mineral deposits not attractive to the larger mining companies. WGI will investigate larger regional garnet/ilmenite deposits where the Company can use its expertise to bring new multi mineral resources into operation. Marketing efforts will continue to expand as the Company competes in garnet and ilmenite markets that are currently over supplied. Waterjet part product offerings will be expanded through continued engineering efforts to expand our product portfolio. The Company will continue to cross sell garnet and waterjet parts to existing customers thereby increasing our value to the customer.

The Company continues to strive to keep selling, general and administrative costs in line with revenues. As a percentage of revenues SG&A is expected to decline in 2011 while exploration costs are expected to increase significantly. EPS is expected to remain in line with 2010.

About WGI
The principal business of WGI Heavy Minerals, Incorporated is the processing and sale of industrial abrasive minerals and the sourcing, assembly and sale of ultra-high pressure waterjet cutting machine replacement parts and components. The Company, through its subsidiaries, markets and sells abrasive products and services and waterjet replacement parts globally.

This news release contains forward-looking statements concerning the business, operations, and financial performance and condition of WGI Heavy Minerals, Incorporated. A number of the matters discussed and statements made in the press release contain forward-looking statements reflecting current expectations regarding future assets. When used in this press release, the words "believe", "anticipate", "intend", "estimate", "expect", "project", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. These forward-looking statements are based on current expectations and are naturally subject to risks, uncertainties, and changes in circumstances beyond management's control that may cause actual results to differ materially from those expressed or implied by such forward-looking statements. Factors that may cause such differences include but are not limited to: exploration and development risks; risks related to permits and title to property; risks related to foreign countries and regulatory requirements; operating hazards; foreign currency fluctuations; competition; fluctuations in the market price of mineral commodities and transportation costs; uncertainty as to calculations of mineral deposit estimates; uninsured risks; and dependence upon key management personnel and executives. Actual results may differ materially from those expressed here. You should not place undue reliance on such forward-looking statements. The Company is under no obligation to update or alter such forward-looking statements, whether as a result of new information, future events, or otherwise.