Breakwater set to purchase Caribou lead-zinc operation

Breakwater Resources (TSE) recently took another step toward its stated goal of diversifying from gold into base metal production. Having already secured the El Mochito polymetallic mine in Honduras, Vancouver-based Breakwater has agreed to acquire the Caribou lead-zinc mine in New Brunswick for about $10.8 million.

But there are a number of hurdles to be overcome before Breakwater undertakes an $18- to $25- million development program designed to expand production at Caribou to 2,500 from 2,000 tonnes per day.

The company must obtain regulatory and corporate approval for a share exchange deal which would see a subsidiary of Breakwater amalgamating with the mine’s current owner Bathurst Base Metals.

Controlled by British financier Howard Miller, Bathurst Base Metals helped to refinance the project after Caribou’s former Australian owner East West Minerals was forced to shut down the operation in July, 1989. As a lack of development work rendered the operation unable to reach its 124,000-tonne- per-month production targets, Breakwater was hired to manage the project and complete further development work.

Now that mining operations have resumed, President Brian Pewsey is also waiting to receive a favorable fairness opinion from New York-based independent engineering consultant Behre Dolbear.

The agreement is also contingent on Bathurst obtaining the 10% project interest still held by East West Minerals and on Bathurst coming to terms with East West’s Australian bankers.

In addition, Breakwater is seeking the necessary financing needed to pay for the continued development of a 304-metre, 3-compartment shaft and underground workings. But, during a telephone interview with The Northern Miner, Pewsey appeared optimistic about the agreement and the operation’s future prospects.

“Geologically, the mine is located in a very favorable area,” said Pewsey who believes that reserves are sufficient to sustain a mining operation for at least 10 years.

The Caribou mine is estimated to contain proven reserves of 1.9 million tonnes grading 1.93% zinc and 3.58% lead. An additional 10 million tonnes of similar grade material is listed in the probable, possible and drill-inferred categories.

If Bathurst lives up to the terms of the agreement, shareholders will be offered one common share of Breakwater for each 3.75 shares of Bathurst. Pending regulatory approval, the transaction would increase the number of Breakwater shares outstanding to 67.5 million from 63 million, after allowing for the cancellation of Breakwater’s 17% stake in Bathurst.

“We want to increase our concentrate tonnage as part of our overall goal of becoming involved in base metal production,” said Pewsey. Future output from Caribou, El Mochito and the optioned Estrades massive sulphide project near Joutel, Que., would boost Breakwater’s zinc concentrate production to about 300,000 tonnes by 1992, according to Pewsey. The company’s other chief asset is a 49% stake in the Cannon gold mine in Washington State, which produces about 4.7 tonnes (150,000 oz.) gold annually.