Breakwater sees record production and profits

The past year has been one of tremendous change and growth for Breakwater Resources (TSE). The company turned in record production and profits, became free of bank debt and paid its first semi-annual dividend of 5 cents per share, President Brian Pewsey says in the annual report.

Net earnings climbed to $4,203,000 or 19 cents per share, from $925,000 or 5 cents per share in 1986. Revenues rose 32% to $30,463,000.

The Cannon mine in Washington State (owned 49%, with Asamera Inc. 51%) milled 487,006 tons to produce 136,913 oz gold and 184,660 oz silver in 1987. Production costs totalled $170(US) per oz of gold.

During the year research began on developing a bio-oxidation-cyanide leach process to produce dore bullion at the mine site. After successful testing in a 2-ton-per-day pilot plant, a feasibility study to determine design and cost of a prototype plant is under way. If proven practical, a bio-oxidation-cyanide leach plant will be added in 1988.

Approximately $3.17 million was spent on exploration near the mine site. Geological reserves at year- end were 6.3 million tons grading 0.228 oz gold per ton, up from 5.6 million tons in 1986.

An additional 6.5 million tons grading 0.04 oz (0.04 cutoff) has been outlined at the Lovitt mine (D-Reef) located one mile south of the Cannon mine. Using a cutoff of 0.1 oz, reserves are 1.6 million tons grading 0.143 oz. Surface and underground drilling in 1988 will aim at confirming sufficient reserves to warrant development.

Breakwater’s goal of becoming a substantial gold producer was strengthened by the June acquisition of Novamin Inc. (owned 85%), which brought to the company some 72 exploration properties across Canada. Exploration spending on Novamin properties totalled $6.8 million, funded mostly from flow-through shares. Breakwater selected four properties with the highest potential of becoming producing mines. Efforts have been concentrated on the Rundle gold project near Timmins, Ont., the Tonawanda and East Amphi projects in Quebec (part of the Darius joint venture), and the O’Brien property at Cadillac, Que.

The company has entered into forward sales contracts covering 1988 production of 24,120 oz of gold at an average price of $503(US). Proceeds of $12.1 million will cover forecast costs of the Cannon mine. Working capital at year-end was $36.4 million.