Breakwater plans to reopen Caribou mine

With a positive feasibility study now under its belt, Breakwater Resources (TSE) will once again be producing zinc, lead and silver at its Caribou mine. This time around, however, the company expects that revenue per ton will be three times higher.

Metallurgical tests at the Bathurst, N.B., mine, including a 240-ton pilot plant run, showed that commercially attractive lead and zinc concentrates can be produced, with much higher recoveries than those attained when the mine was previously in operation in 1990. By expanding the grinding and flotation circuits, using high-density conditioning and finer grinding, and improving the reagent scheme, Breakwater expects to be able to generate revenues of $63.05 per ton ($69.36 per tonne), an increase of 180% over what was achieved in 1990 ($22.42 per ton at current metal prices).

The reopening plan is based on a milling rate of 3,300 tons per day, which, during the first three years of operation, will result in average annual metal production of 148 million lb. of zinc, 2.1 million lb. of lead, 2.2 million oz. silver and 6,000 oz. gold. At current metal prices, $65 million in annual revenues would be produced.

The feasibility study, performed by Kilborn Inc., examined two cases. The base case assumed proven and probable reserves of 5.4 million tons plus 1 million tons classified as possible reserves. The extended case assumed that an additional 4.4 million tons of minable reserves could be upgraded from the 9.2 million tons of inferred resources.

The total preproduction capital requirement is estimated at $54.4 million. The project is expected to result in 280 new jobs.

The average operating cost over the 6-year, base case project life is $37.53 per ton ($41.20 per tonne) milled, with a rate of return of 27.7% and a projected payback period of 2.8 years (based on a zinc price of US50 cents per lb. and 100% equity financing).

The extended case, which Breakwater management considers the most realistic, is a 10-year mine life with a rate of return of 34.4%.

The company is looking to arrange financing of the project with banks, concentrate buyers and investment bankers. Production is expected to commence within 12 months of arranging financing.

“There’s a lot of interest in the reopening,” says Breakwater President Gordon Bub. “The feasibility numbers are quite impressive, and with those kinds of numbers, we shouldn’t have any trouble getting financing.” Bub says the last quarter of 1996 is Breakwater’s target date for the reopening.

Meanwhile, Breakwater has entered into an agreement with Marshall Minerals (TSE) to acquire the Restigouche base and precious metals mine, situated 7.5 miles by road from the Caribou mine. Breakwater will acquire a 100% interest by giving Marshall 1.5 million common shares and a royalty of 91 cents per ton ($1 per tonne) of ore mined and milled when the zinc price is less than US55 cents per lb., and incrementally higher if zinc prices rise above that level.

Breakwater also has the right, until June 30, 1996, to form a joint venture with Marshall for the further exploration of the latter’s land holdings surrounding the Restigouche deposit.

The agreement is conditional upon regulatory approval and confirmation that the Restigouche ore is suitable for treatment in the Caribou mill without extensive modifications.

The Restigouche deposit contains 1.2 million tons minable by open-pit methods and 550,000 tons by underground, for a total of 1.7 million tons grading 6.81% zinc, 5.38% lead, 3.15 oz. silver and 0.032 oz. gold per tonne.

East West Caribou Mining, the wholly owned subsidiary of Breakwater that operates the Caribou mine, has signed an agreement with the province of New Brunswick whereby a debt of $7.5 million owed to the province will be exchanged for a net smelter return royalty on production from the mine.