Breakwater earnings reflect low gold price, strong dollar

Lower gold prices and a strong dollar have made their mark on Breakwater Resources’ (TSE) half-year income. In the first six months of 1990, Breakwater earned $4.3 million (7 cents per share) compared with $5.8 million (9 cents per share) in first half of 1989. Revenue for the period was $34 million compared with $38.6 million in the first half of 1989. Lower than expected grades at the Cannon gold mine in the state of Washington contributed to the earnings’ decline. During the first half, Breakwater milled 256,632 tons of gold grading 0.27 oz. gold per ton from Cannon. During the same period last year, 256,532 tons at 0.32 oz. were milled. Breakwater received an average gold price of US$394 this year, US$403 last year. The company has sold forward 15,000 oz. of gold at US$441 per oz. through to February, 1991.

Breakwater has gradually been reducing its exposure to gold in favor of base metals. As the year progresses, the company says a larger portion of its revenues will come from zinc concentrates produced at the Caribou, Estrades, and El Mochito mines.

At Breakwater’s now wholly owned Honduras-based El Mochito mine, which reports in metric units, production is up while costs have dropped. Geological reserves at the mine stand at 5.5 million tonnes grading 8.6% zinc, 2.7% lead and 96 grams silver per tonne. This figure includes 1.2 million tonnes of reserves from the new Todos Santos deposit.

Almost 7,000 tonnes of ore have been taken from the Estrades zinc- gold orebody near Joutel, Que., which also reports in metric. The Estrades mine entered production earlier this summer. Breakwater is aiming for a 500-tonne-per-day operation by September.

Breakwater is still working on increasing mill rates at the Caribou lead-zinc-silver mine near Bathurst, N.B., and hopes to have the rate up to 2,500 tonnes per day within the next few months. Bulk underground mining methods have been successfully implemented, and zinc recoveries have improved.

Meanwhile, exploration continues at about 30 properties in Canada, the U.S. and Honduras. In 1990, Breakwater plans to spend $5.2 million on exploration either directly or through its portfolio of junior mining companies.

Peter Steen, president of Corona (TSE), has been appointed as Breakwater’s chairman. (Corona is Breakwater’s largest shareholder.) Breakwater Resources(TSE) $000s except per-share items* 6 months ended June 30 1990 1989 Revenue $33,969 $38,591 Net earnings 4,305 5,816

per share 0.07 0.09 *US dollars004