An independent feasibility study of
The revised mine plan calls for annual production of 450,000 tonnes over seven years, based on proven and probable reserves of 2.9 million tonnes grading 11.2% zinc and 0.7% copper, plus 0.1 gram gold and 52.9 grams silver per tonne.
Resources in the measured and indicated resource categories total 4.9 million tonnes running 11% zinc, 0.7% copper, 0.1 gram gold and 53.1 grams silver. Another 1.5 million tonnes of 8.1% zinc, 0.5% copper, 0.1 gram gold and 37.1 grams silver are listed as inferred.
Life-of-mine production is expected to total 305,000 tonnes zinc, 16,000 tonnes copper, 1.8 million oz. silver and 2,000 oz. gold. Recovery rates are projected at 94% for zinc, 79% for copper, 36% for silver and 29% for gold.
The feasibility pegs capital costs at $33.1 million, whereas total operation costs over the life of the mine are estimated at $57.56 per tonne milled.
Assuming metal prices of US50 per lb. for zinc, US80 per lb. for copper, US$5 per oz. for silver and US$300 per oz. for gold, the project’s total net pretax cash flow is likely to approach $70 million. The internal rate of return is 24% and the net present value is $26.4 million, at an 8% discount rate.
The company says a decision to reopen the mine will depend on an improvement in zinc prices and the arranging of financing. Construction and development work would take about 18 months.
The project’s economics are sensitive to changes in the price of zinc, which is currently hovering around a 14-year low of US36.4 per lb. A 10% change in the price causes a change of $28.5 million in the project’s net pretax cash flow.
The feasibility plan focuses on the mining of high-grade ore, though this could be expanded to include lower-grade material if metal prices increase sufficiently.
Higher head grade
Under the new plan, the average zinc head grade is pegged at 11.2%, considerably higher than the head grades of 6.4-7.9% achieved during the last four years of production. The increase reflects: the inclusion of high-grade material in Zone 79; a higher cutoff grade; the proposed mining of a higher-grade shaft pillar.
No more ore passes are planned for Zone 97; instead, a fleet of 20-tonne trucks will haul ore from stoping areas to the shaft area. Also, pre-development, designed to ensure continuous production of higher-grade material, is proposed for several sublevels in Zone 97. Mining in this zone will be conducted usin overhand benching techniques with a reduced stoping height to control dilution.
Breakwater acquired the Langlois and Bouchard-Hbert mines from
Operations at Langlois were suspended in November 2000 because of high treatment charges and low zinc prices. Prior to its closure, the mine produced 14,519 tonnes zinc-in-concentrate at a cost of US52 per lb. zinc.
In other news, Breakwater’s creditors have granted the company a one-month extension, to the end of October, to raise US$16 million. Raising the funds was a condition of a deal reached during the summer, when Breakwater’s creditors agreed to release US$1.5 million in credit to the company for every US1 rise in the price of zinc. If the price falls, the reverse holds true and the credit line decreases.
So far, Breakwater has raised US$6 million through deferred delivery contracts with one of its customers. The remainder is to come from a rights offering of 23.1 million shares priced at 50 apiece.
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