Breakwater boosts reserves (January 14, 2002)

An independent review of Breakwater Resources‘s (BWR-T) El Mochito mine in Honduras and El Toqui mine in Chile has resulted in an increase in mineral reserves and resources.

The review, which included all the company’s mines and exploration projects, is part of a cost-cutting campaign aimed at easing the financial squeeze on the company.

For the first nine months of 2001, Breakwater suffered a $102-million loss on record-low zinc prices. The bulk of the loss resulted from non-cash writedowns at the metallurgically troubled Caribou mine in New Brunswick ($53.7 million to zero) and the Nanisivik mine in Nunavut ($11.5 million).

At the end of November 2001, El Mochito’s proven and probable reserves stood at 3.4 million tonnes averaging 6.8% zinc and 1.9% lead plus 78 grams silver per tonne. That’s up about 18% from the end of 2000. Another 5.9 million tonnes (up 26%) running 7.8% zinc, 2.7% lead and 115 grams silver are classified as measured and indicated resources. In the inferred category are 793,000 tonnes grading 7.3% zinc, 4.3% lead and 102 grams silver.

Reserves

Mineral reserves and resources at El Mochito at the end of 2000 did not include reserves and resources situated outside the mineral reserve boundaries. From 1995 on, some 37% of the operation’s mill feed was derived from areas outside these boundaries. When 596,488 tonnes of ore mined between January and November 2001 are included, reserves jump by more than 1.1 million tonnes, or 1.5 years of production at the current production rate.

At El Toqui, inferred resources, which now stand at 6.4 million tonnes averaging 8% zinc plus 0.4 gram gold, enjoyed the largest boost (47%), thanks to the addition of the resources at the Concordia property, which have been reclassified as inferred. El Toqui’s proven and probable reserves climbed to 2.5 million tonnes of 8% zinc and 1.8 grams gold from about 2.2 million tonnes grading 8.4% zinc and 0.3 gram gold. Measured and indicated resources slipped to just more than 2.9 million tonnes of 8.5% zinc and 1.6 grams gold, from almost 3 million tonnes running 9.1% zinc and 0.4 gram gold. The improved gold grades are attributed to the Aserradero deposit and results from recent drilling.

Including 390,956 tonnes of reserves mined at El Toqui from January to November 2001, proven and probable reserves have increased by 711,356 tonnes, or 1.7 years of mining at the present production rate.

The review failed to turn up any material changes in mineral reserves and resources at Breakwater’s remaining operations.

During 2001, Breakwater restructured its debt and announced it would close the Nanisivik mine on Baffin Island in Nunavut in September 2002, well ahead of schedule. In mid-November, the company reached a deal with its bankers to provide a standstill on principal repayments until the end of 2002 on guarantees from major shareholder Dundee Bancorp. The zinc miner will look to the equity market to raise up to $15 million to cover the payments. Dundee has committed to take a third of any offering.

Increased production provided a glimmer of light for Breakwater during the first nine months of 2001, when Breakwater produced, in concentrate, 154,677 tonnes zinc (compared with 150,789 tonnes last year), 5,606 tonnes copper (2,757 tonnes), 10,163 tonnes lead (8,209 tonnes), 2.2 million oz. silver (2.1 million oz.) and 31,382 oz. gold (11,268 oz.).