Acquisitions could follow Breakwater financing

Breakwater Resources (BWR-T) may be looking at acquiring other operations following a US$42.5-million financing.

The financing cleared Breakwater’s existing $31-million debt, and leaves the company with $30 million to cover future spending. Breakwater had about $78 million in current assets at the end of 1999, but some $57 million of that was tied up in inventories and prepaid expenses.

The cash infusion will allow the company to look at possible purchases. Breakwater, which, in the past four years, has been positioning itself as a zinc producer, could conceivably bid on the northwestern Quebec base metal assets of gold miner Cambior (CBJ-T), which is looking to turn some of its operations into ready cash to cover failed gold hedging.

Full years of production from two recently acquired mines, combined with increased production from both its older ones, propelled Breakwater to a profit of $22.5 million in 1999, compared with a loss of $53.9 million in 1998.

The company saw its revenues grow substantially in 1999, having experienced full production at the Bougrine mine in Tunisia and the El Toqui mine in Chile. Gross revenue rose to $256 million in 1999, up from $176.1 million in the previous year.

Realized prices for zinc, Breakwater’s principal commodity, were up by 9% at an average US$1,100 per tonne, and silver prices were also higher. Lead prices, which fell about 8% to US$485 per tonne, offset the gain slightly.

Cash production costs at El Toqui declined drastically to about US$950 per tonne from US$1,230. A program of mill modifications, started in late 1998 when the mill was shut down, is being credited with the turnaround.

The operation went from a $8.5-million operating loss in 1998 to a $2.4-million operating profit last year, while a drilling program added 590,000 tonnes to blocked reserves; this more than replaced the year’s 392,000 tonnes milled. Breakwater is now considering a mill expansion to handle 1,500 tonnes daily.

The Bougrine mine, bought from Inmet Mining (IMN-T) in 1997, milled 430,000 tonnes in 1999 to produce concentrates bearing a total of 42,300 tonnes zinc and 5,800 tonnes lead. Cash production costs for zinc fell to US$800 per tonne from the previous year’s US$900.

Both Nanisivik, in Nunavut Territory, and the El Mochito mine, in Honduras, showed operating profits in 1999, with costs remaining steady at Nanisivik and declining slightly at El Mochito. Production was up slightly at both mines, due to greater mill throughput and higher head grades.

Nanisivik milled 803,000 tonnes of ore to produce 58,300 tonnes zinc and 520,000 oz. silver, all in concentrate. Work there replaced about 1.3 million tonnes of ore, leaving reserves about 500,000 tonnes higher at the end of 1999.