Breakwater ends year with mixed results

Zinc miner Breakwater Resources (BWR-T) posted a $13.5-million loss for 2000 despite recording its highest revenue yet: $319 million. The 16-per-share loss compares with 1999 earnings of $22.5 million, or 29 per share, on revenue of $256 million.

Earnings were hammered by writedowns, lower realized metal prices and higher treatment charges, whereas revenue rose on the back of new production from the Bouchard-Hbert and Langlois mines in Quebec. The writedown, taken in the fourth quarter and totalling $27.1 million, reflects a drop in zinc prices from the previous quarter and conforms to new regulatory guidelines.

In May, Breakwater bought Bouchard-Hebert and Langlois from Cambior (CBJ-T), only to close down the latter by year-end. Problems in the ore-pass system are being addressed and the feasibility of resuming production is under review.

Breakwater now operates six mines: Bouchard-Hbert and Langlois; Nanisivik in Nunavut; Bougrine in Tunisia; El Mochito in Honduras; and El Toqui in Chile. The company also owns the dormant Caribou mine in New Brunswick.

Combined, the mines produced the following amounts of metals in concentrate: 208,996 tonnes zinc (a record); 11,021 tonnes lead; 4,532 tonnes copper; 2.8 million oz. silver; and 20,289 oz. gold. Low-cost output from the Cambior mines overcame higher fuel and treatment costs to keep average operating and total cash costs steady at, respectively, US27.63 and US40 per lb. of payable zinc.

Breakwater expects to produce 4% more zinc in 2001, or 215,910 tonnes, as total cash costs remain steady. But zinc prices are expected to remain weak, at least for the first half, and a US1-per-lb. shift affects earnings and cash flow by $4.6 million.

Cash flow in 2000 topped $32.8 million, the second highest ever. The record of $39.5 million was set in 1999.

Losses in the final three months of 2000 totalled $29.4 million (33 per share) on $75.4 million, compared with earnings of $3.2 million (4 per share) on $61.6 million a year ago. The writedown noted above was the chief reason behind the reduction in earnings.

Breakwater spent $37.2 million on capital projects last year, twice as much as in 1999. Exploration activities, a new dense media separation plant and related mining equipment for Nanisivik, plus a new desalination plant for Bougrine, account for the extra costs.

Starting in May, the dense media plant is expected to add 6,000-10,000 tonnes zinc to Nanisivik’s yearly output. The plant will treat low-grade ore only.

Exploration at El Toqui helped boost cumulative inferred resources by 45%, to 11.4 million tonnes grading 7.5% zinc. Exploration success has also been reported at El Mochito, with two recent holes intersecting a possible new zone 130 metres below the shaft bottom.

Breakwater’s mines host 23.2 million tonnes of reserves, at 7.5% zinc, in measured and indicated resources of 27.7 million tonnes grading 8.2% zinc. This is significantly higher than a year ago, reflecting the Cambior acquisitions.

On Dec. 31, 2000, Breakwater had $25.7 million in working capital, of which $4.7 million was held in cash or equivalents. Total debt stood at $73.6 million, giving the company a net debt-to-equity ratio of 39%.