Caribou shaft-sinking begins Breakwater set to buy mine .bBy Peter

As Breakwater Resources (TSE) prepared this week to become owner as well as manager of the Caribou lead/zinc mine 50 km west of here, work crews were getting to grips with many of the problems experienced by previous operators. If new contracts are not signed at the nearby Brunswick Mining & Smelting (TSE) lead-zinc operations or at Cominco Ltd.’s (TSE) Trail, B.C. complex, prices of both metals are expected to rise from current levels (US$0.39 and US$0.80 per lb respectively). Breakwater President Brian Pewsey is confident that at a break-even zinc price of US$0.55-0.65 per lb., the mine can be operated profitably.

When The Northern Miner drove up to the mine site, contractor Redpath was in the midst of a $30 million development program designed to keep a newly converted 2,500-ton-per-day mill running at full tilt. Amid uncomfortably warm temperatures, work crews were putting the finishing touches to a new headframe and preparing to sink a 471- metre production shaft.

Until the shaft is completed next March, ore is being trucked to surface via a 1,500-metre ramp. If everything goes according to plan, the mine should be capable of churning out 130,000 tonnes of concentrates annually by 1991.

Combined with output from Breakwater’s El Mochito mine (99,000 tonnes) in Uruguay and the soon-to-be producing Estrades project (30,000 tonnes) in Quebec, Caribou is expected to make the Vancouver company what Pewsey called “a meaningful zinc producer.”

Management at Breakwater made a commitment to zinc after failing to purchase the 51% stake it doesn’t already own in the Cannon gold mine in Washington State.

“We feel bullish on the price of zinc at least for the rest of this year,” said Pewsey, who is confident the majority of East West Minerals NL minority shareholders would agree to a transaction which would pave the way for Breakwater to acquire the mine.

Australia-based East West bought Caribou from Atlantic Richfield and Cominco in December 1986, and later constructed a 2,000- ton-per-day concentrator. However, because of a lack of cash and sufficient development to keep the operation running, East West’s 90%- owned subsidiary East West Caribou Mining was shut down last August after only seven months of production.

In October, 1989, British financier Howard Miller agreed to bankroll the project through his privately owned company Bathurst Base Metals after being introduced to East West Caribou President Cameron Glover by Ned Goodman, chairman of Corona Corp. (TSE). Corona owns 27.6% of Breakwater, which was hired to manage the new development plan. Pending East West shareholder approval, a subsidiary of Breakwater will merge with Bathurst Base Metals on the basis of one share of Breakwater for every 3.75 shares of Bathurst.

However, closure of the transaction rested on East West shareholders agreeing to sell the company’s 90% stake in East West Caribou Mining to Bathurst Base Metals at a June 29 meeting in New South Wales, Australia. If they voted in favor, East West would retain a 10% net profits interest in the operation.

Meanwhile, Peter Taggart, Breakwater’s vice-president operations, said he is pleased with the way the startup has progressed even though the Caribou deposit has a reputation of being one of the most difficult (in the Bathurst camp) to treat.

The deposit consists of six stratabound massive sulphide lenses that are stacked diagonally around the nose of a fold structure. The lenses occur over a strike length of 1,300 metres and to a depth of at least 1,200 metres, according to chief geologist Richard Cavalero.

According to Cavalero, sulphide reserves to a depth of 1,000 metres are estimated at 60 million tonnes of 0.5% copper, 1.6% lead, 4.3% zinc, 51.43 gram silver and 1.715 gram gold per tonne.

Geologicial reserves within those lenses stand at 12.3 million tonnes of grade 7.67% zinc and 3.74% lead, 102.86 gram silver and 1.37 gram gold. While 1.9 million tonnes of grade 7.93% lead and 3.58% zinc have been placed in the proven category, Taggart says he expects sufficient reserves to be proven up to keep the operation running for at least 10 years.

Breakwater has dealt with the metallurgical problem by shutting down the mill and converting it to produce bulk instead of select concentrates. Material is ground down in the plant’s regrind mill to a miniscule 15 microns while rock bolts and other steel objects from the underground workings are now being recovered by a large electromagnet.

Since the mill was re-opened April 9, it has churned out 22,068 tonnes of finely ground bulk concentrate containing 9-11% lead, 35-37% zinc and 200 gram silver per tonne.

“Mine tonnages (extracted so far) are in excess of what we really require,” said Taggart, who isn’t ruling out the possibility of increasing mill throughput by 500-tonnes- per-day.

Having driven the ramp to a depth of 220 metres below surface, Breakwater is using a mixture of mechanized cut and fill and blast hole stoping in two sub-level stopes above and below level 2. “The ramp will be extended down to a vertical depth of 318 metres by the time the shaft is completed,” said mine engineer Kevin Bullock. In late June, when The Northern Miner toured the underground workings, about 50% of material mined consisted of development muck. But as five sub-levels are currently being developed between levels two and three, the ratio of ore mined from development is expected to drop to 25% by Christmas.

Ore is hauled to surface by 30-ton trucks before it is transferred to the mill stock pile in 35-ton trucks. With the shaft in place, overall costs are expected to drop to $47.18 per tonne from $64.73, before stabilizing at $46.28 per tonne. Future plans also call for the shaft to be deepened to a depth of 900 metres (level 10) starting in 1993.

Assuming the Breakwater- Bathurst merger closes as scheduled, Breakwater will take on responsiblity for $47 million in longterm debt (consisting of a $30 million bank loan and $15 million in silver certificates). while increasing its issued share capital from 64 million to 69.4 million shares. (The shares traded recently at $1.75 in a 52-week range of $3.60 and $1.49.)

As the lending banks have agreed to defer repayment of loans for up to six years if cash flow isn’t available, Pewsey is still looking around for other projects that would increase Breakwater’s position in the zinc market.