Caribou, zinc price factor in Breakwater’s financials

Low zinc prices and the closure of Breakwater Resources’ (TSE) Caribou lead-zinc mine in New Brunswick have taken a heavy toll on the Vancouver company’s 1990 financial results. After announcing a $64.1-million writedown in its investment in Caribou, Breakwater reported a net loss of $75.4 million or $1.17 per share for the year ended Dec. 31, compared to a profit of $15.2 million or 26 cents a share in the same period last year. The earnings for 1989 were retroactively restated to reflect Breakwater’s merger with American Pacific Mining.

Due to production from the new Estrades zinc-gold mine in Quebec, the company’s revenues increased to $77.4 million in 1990 from $75.1 million a year earlier. The 700-ton-per-day Estrades mine produced 3,358 tons of copper and 17,696 tons of zinc concentrates from Aug. 1 to Dec. 31 at an average grade of 13.57% zinc, 0.149 oz. gold per ton.

However, Estrades’ $6.5-million contribution to revenues was offset by a $2.1-million revenue decline from the El Mochito mine in Honduras which was shut down for repairs from Sept. 23 to Nov. 12. Revenues from Breakwater’s 49% owned Cannon gold mine in Washington also dropped by $2 million because of low gold prices and a strong Canadian dollar.

The Cannon operation produced 149,327 oz. gold and 252,130 oz. silver in 1990 compared with 150,420 oz. gold and 302,731 oz. silver a year earlier. Asamera Minerals (TSE), owner of the remaining 51%, has been put up for sale by parent Gulf Canada Resources.

Breakwater is a 27% owned affiliate of Vancouver gold producer Corona (TSE). Last October, Breakwater elected to close its Caribou mine rather than spend the $15 million needed to upgrade the mill. At year-end, the company also wrote down the carrying value of some mineral properties by $10.6 million.

Breakwater shares traded recently at 67 cents in a 52-week range of $2.50 and 44 cents. Saddled with total liabilities of $96 million, including $19 million in long-term debt, management at Breakwater is looking at ways to restructure and cut costs.