Despite recent setbacks, Breakwater Resources (TSE) believes its ability to produce low-cost, “clean” concentrates will secure its position as significant international zinc producer in the long term. “The longer-term outlook for zinc prices is strong, especially when eastern European and Soviet countries experience economic recovery and begin modernization of their physical plants,” the company said in a press release.
In the meantime, however, higher oil prices and recessionary fears have taken their toll on the zinc price, which recently fell below 60 cents on the spot market.
Consequently, Breakwater has seen its 9-month earnings plummet to $6.5 million (10 cents per share) from $13.9 million (22 cents per share) in the first nine months of 1990.
The zinc producer, 27.4% owned by Corona (TSE), is also feeling the weight of a $30-million non- recourse bank loan at the Caribou mine in New Brunswick, where the company recently suspended operations (T.N.M., Nov. 5/90).
But at the El Mochito mine in Honduras, where production has been interrupted by mechanical difficulties, Breakwater says it will soon be back to full production, at an increased throughput of 2,000 tonnes per day. Production is also looking encouraging at the Estrades mine in Quebec, where grades have been higher and capital costs $1.4 million lower than expected.
Breakwater says that when it acquired El Mochito last March, the company evaluated the possibility of building a zinc smelter in the Middle East. The plan was scuttled when Iraq invaded Kuwait in August.
“Once the Gulf Crisis has been resolved we expect these negative influences to disappear,” the company said. At that stage, and assuming an increase in zinc prices over the long term, Breakwater expects to be shipping concentrates from El Mochito, Estrades, Caribou and possibly Conroy in Ireland to the proposed smelter.
Breakwater Resources (TSE)*
9 months ended Sept. 30 1990 1989 Revenue $51,785 $61,120 Net earnings 6,543 13,859
per share 0.10 0.22
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