For US$48 million, zinc miner
The deal also includes zinc and copper hedging obligations, as well as a working capital position of US$11.7 million.
Situated 30 km northeast of Rouyn-Noranda, the underground Bouchard-Hebert mine exploits a massive-sulphide deposit containing proven and probable reserves of 5.3 million tonnes grading 4.73% zinc and 0.71% copper, plus 1.2 grams gold and 38.3 grams silver per tonne.
The underground Langlois mine, 213 km north of Val d’Or, also exploits massive-sulphide orebodies. Proven and probable reserves there are estimated at 5.6 million tonnes grading 9.45% zinc, 0.56% copper, 0.1 gram gold and 43.4 grams silver, including 2.8 million tonnes of 10.1% zinc in the as-yet-undeveloped zone 97.
The mills at Bouchard-Hebert and Langlois process ore at daily rates of 2,900 and 1,800 tonnes, respectively, and both operations produce zinc and copper concentrates.
For the year ended Dec. 31, 1999, the two mines produced concentrate containing 145 million lbs. zinc, 18 million lbs. copper, 29,300 oz. gold and 761,000 oz. silver.
During 1999, the two operations generated a total cash flow of about C$25 million. The average cash cost was US39 per lb. of payable zinc, net of byproduct credits.
The acquisition of Bouchard-Hebert and Langlois is subject to several conditions, namely:
– Breakwater’s obtaining financing (it has about C$30 million left from a recently granted US$42.5-million line of credit);
– Cambior’s obtaining written consents and the discharge of security interests in Bouchard-Hebert and Langlois mines from its lenders;
– the assignment of base metal hedging and other material contracts in favour of Breakwater; and
– receipt of all required regulatory approvals.
Breakwater has already deposited US$2 million as a downpayment, and the remainder is expected to be paid in cash by April 17, 2000.
Cambior says the US$48-million in proceeds, minus US$1 million in fees and expenses, will be allocated under its creditor agreements in order to pay accrued fees and interest (US$5 million), as well as to improve its gold hedging position (US$8 million) and repay a portion of its outstanding loans (US$30 million). The remaining US$4 million will be retained by Cambior as working capital.
Thus, Cambior’s debt to its financial creditors will be reduced to US$182 million from US$212 million. A requirement to reduce obligations by US$75 million before June 30, 2000, will have been partly met with these payments, leaving a balance of US$32 million to be generated by June 30, 2000.
In addition, Cambior says its sale of the Bouchard-Hebert and Langlois operations will generate a pretax book loss of about US$120 million, a sum that will be incorporated into the company’s 1999 year-end results.
Cambior states that while it intends to continue reducing its debt by disposing of base metal assets, it will still consider alternative actions.
Once the deal for the two Quebec mines is completed, Breakwater expects to have an annual production capacity of 550 million lbs. zinc, 18 million lbs. copper, 27 million lbs. lead, 30,000 oz. gold and 2.5 million oz. silver, expressed in terms of contained-metal production.
In 1999, Breakwater’s four operating zinc mines — El Mochito in Honduras, El Toqui in Chile, Nanisivik on Baffin Island, and Bougrine in Tunisia — produced 383 million lbs. zinc, 24 million lbs. lead, 4,900 oz. gold and 2.1 million oz. silver.
Total year-end reserves at these four mines, plus the suspended Caribou zinc operation in New Brunswick, stood at 15.9 million tonnes grading 7.8% zinc, 1.9% lead and 51 grams silver. Additional resources at the five properties were pegged at 26.5 million tonnes of 8.3% zinc, 2.1% lead and 63 grams silver.
Meanwhile, Breakwater has reported more exploration success at El Toqui, where recent drilling targetted four areas: southeast of the San Antonio mine; east and south of the Mallin-Monica mine; west of the Dona Rosa mine; and to the extreme west in the Estatuas area.
Highlights from 27 new holes at El Toqui include:
– 5.2 metres of 10.61% zinc, 1.08% lead, 0.9 gram gold and 56 grams gold in hole DMS-6;
– 8 metres of 10.66% zinc and 3 grams silver in hole SAE-1;
– 7.5 metres of 12.56% zinc and 4 grams silver in hole SAE-9; and
– 7 metres of 10.09% zinc in hole SAE-14. (This hole, a 180-metre stepout from SAE-02, has extended the San Antonio ore horizon by 380 metres into an area previously thought to be barren.)
Also, two holes drilled by previous operators suggest that El Toqui mineralization extends a further 2 km to the southeast.
Followup drilling is under way, and a 30,000-metre diamond drilling contract has been awarded.
Breakwater says these latest results confirm the presence of a large and continuous zinc-mineralized manto and that a “large resource picture is developing.”
As a result of this success, Breakwater has begun engineering work to expand the El Toqui operations by a minimum of 25% to 1,500 tonnes per day. The company expects the expansion will cost $1 million and be completed by year-end.
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