Nanisivik haunts Breakwater

A US$6.7-million charge related to the final reclamation and closure of the Nanisivik mine on Baffin Island pushed Breakwater Resources (BWR-T, BWLRF-O) US$1.6 million into the red during the third quarter.

Excluding the charge, Breakwater says it would have taken home US$5.1 million in profit, compared with year-ago net earnings of US$2.4 million. On the flip side, revenue increased by 9% to US$71.9 million despite a 16% drop in concentrate sales. Cash flow from operations was halved to US$3.3 million.

During the quarter, Breakwater’s zinc-in-concentrate production slipped by 35% to 30,983 tonnes, owing to lower grades at the Bougrine mine in Tunisia and depletion of reserves at the Bouchard-Hbert mine in Quebec in February. Mining ceased at Bougrine in August.

Bouchard-Hbert’s closure also saw copper-in-concentrate production more than halved to 1,433 tonnes; lower grades and recoveries at the Myra Falls mine in British Columbia also chipped in. Likewise, gold- and silver-in-concentrate production were off about 18% and 5% at 17,822 oz. and 695,149 oz. Lead-in-concentrate production provided the lone glimmer of light increasing by 88% to 6,202 tonnes on improved grades at Bougrine and El Mochito in Honduras.

Also higher were production cash costs, which increased by US9 per lb. to US39 per lb. of payable zinc, whereas mine site operating costs climbed US$6.24 to US$43.49 per tonne milled. The company says higher costs for fuel, consumables, treatment charges and freight were partially offset by higher byproduct credits.

Breakwater’s average realized U.S.-dollar price of zinc climbed by US$308 to US$1,295 per tonne between the two fourth quarters, while the Canadian-dollar price increased by $213 to $1,558 per tonne.

Looking ahead, the removal of the remaining infrastructure, cover material installation and maintenance, removal of contaminated soil, and post-closure geotechnical and environmental monitoring at Nanisivik will continue in 2006. The monitoring will continue for at least five years.

Third quarter reclamation at the mine exceeded estimates by US$3.1 million owing to higher-than-expected volumes of waste rock and contaminated soil.

The company has also approved a revival of the Langlois mine, in Quebec, which has been closed since 2001 as a result of low zinc prices. The company expects drift development to last 15 months, with full to conceivably to follow by mid-2007.

At last count, Langlois was home to proven and probable reserves totalling 3.2 million tonnes running 10.8% zinc, 0.82% copper and 52 grams silver per tonne. The reserves are enough to sustain average annual production of 54,000 tonnes of zinc over 7 years. The reserves are contained in a larger measured and indicated resources of 5 million tonnes of 11.2% zinc, 0.79% copper and 54 grams silver.

The company expects zinc prices to show continued strength in the coming years as growing demand outpaces supply.

“We believe that Langlois is one of the top zinc development projects with very low risk. It has been well defined through drilling, well engineered and is located in one of the best political jurisdictions for a mining project in the world,” the company said in a press release.

At quarter’s end, Breakwater had cash and equivalents totalling US$24.5 million, with long-term debt of US$4.85 million. The company also had 370.5 million shares issued and outstanding and shareholders’ equity of US$146.4 million.

The lack-lustre results had shares in Breakwater 7, or 13.2%, lower at 46 in late-afternoon trading in Toronto following the news on Nov. 9. The shares are up slightly from a year-low of 32 in late August; the 52-week high is 78 attained in early March.