Breakwater Resources Ltd.'s Second Quarter 2010 Financial And Operating Results
Net Earnings Strong Due to Improved Metal Prices, Increased Production and Price Protection StrategyTORONTO, ONTARIO -- (Marketwire) -- 08/05/10 -- Breakwater Resources Ltd. (TSX: BWR) (TSX: BWR.WT.A) realized net earnings of $24.6 million or $0.35 per share in the second quarter of 2010 compared with a net loss of $4.5 million or $0.07 per share in the second quarter of 2009.
Breakwater realized net earnings of $49.4 million during the first six months of 2010, which is the highest six-month net earnings Breakwater has realized since mid-2007.
Revenues and Production Higher
Gross sales revenue was 124% higher at $91.8 million primarily due to significantly higher metal prices, more concentrate sold and price protection gains partially offset by a stronger C$. Concentrate produced in the second quarter of 2010 increased 32% to 64,160 tonnes compared with the second quarter of 2009 due to 66%, 21% and 15% increases at Myra Falls, Toqui and Mochito respectively.
Cash
Cash and cash equivalents increased to $76.0 million at June 30, 2010, up by $10.3 million from March 31, 2010.
Net Cash Provided By (Used In) Operating Activities
Net cash provided by operating activities was $21.8 million for the three month period ended June 30, 2010 compared with cash used of $7.1 million in the same period in 2010.
Capital Expenditures
The Company invested $28.8 million in mineral properties and fixed assets in first six months of 2010. At mining operations, $11.0 million, $13.4 million, $2.2 million and $1.9 million were spent at Mochito, Toqui, Myra Falls and Langlois respectively. Corporate capital expenditures were $0.3 million primarily related to joint venture exploration payments.
Operations
Mochito
-- Rehabilitation of the 2100 level, which will improve the movement of men
and materials, is on time and budget with completion expected in the
fourth quarter of 2010
Toqui
-- The installation of the wind farm has been completed with all six wind
turbines commissioned by the first week of July
-- The paste backfill facility, which will allow for paste tailings
deposition and enhanced ore extraction through greater recovery of
current and future pillars, is expected to be complete in the third
quarter of 2010. Currently, the construction program is approximately
ten weeks behind schedule due to various issues, including those related
to the movement of materials and the availability of skilled people
following the February 2010 earthquake in Chile; and inclement weather
throughout the construction period
-- The installation of a primary ball mill will allow 15% greater
throughput and is proceeding according to plan with an expected
completion date in the fourth quarter of 2010
Myra Falls
-- Work continues to improve metallurgical recoveries in the mill with
favourable preliminary results
-- Development necessary to properly delineate the Marshall deposit is
advancing well with the first drill station expected to be established
in the fourth quarter of 2010
-- Tailings disposal facility seismic berm upgrade is on schedule and is
expected to be completed in the fourth quarter of 2010
Langlois
-- Development plans at Langlois expanded modestly for the balance of 2010
from advancing two ramps - one from surface to the top of zone 4 and one
internal to zone 3 - to including selective development of production
headings.
David M. Petroff, President and Chief Executive Officer, stated that, 'Capital expenditure programs, operating costs per tonne milled (on a production basis) and production of zinc, copper and gold are in line with 2010 guidance while production of lead and silver are ahead of 2010 guidance. We are maintaining our guidance for production, capital expenditures and costs for all of our sites with the possible exception of Toqui. At Toqui, the paste plant facility construction delay combined with the fatality in May, which temporarily closed a portion of the Estatuas mine, has resulted in the need to modify the 2010 mine plan. We have revised the Toqui mine plan for 2010, which is not expected to affect 2010 production guidance for Toqui; however, operating costs are likely to be at the top end of/or modestly above the range of US$51 to US$56 per tonne milled guidance previously provided.'
Mr. Petroff went on to say, 'Early this year, after reviewing the Company's assets, assessing its strengths and weaknesses and identifying risks and opportunities, management developed a strategic plan, which can be summed up as follows: First, the Company's existing operations will be optimized. A range of projects have been undertaken to increase productivity, reduce costs and extend mine lives. Second, resources at each site will be delineated to enable increased annual throughput - where excess mill capacity exists - and extend the life of each mine, thus benefiting from the attractive exploration targets at each of the Company's mines. Third, targets for selective acquisitions will be assessed and pursued to increase shareholder value. Principal ones include poly-metallic ore bodies with the potential to have a ten year mine life or longer. The primary area of focus for the Company is the Americas, Europe and North Africa. In the next two to four years, the goal is to become a leading base metal producer based on the Company's superior leverage to zinc, with profitable, well managed operations, and a consistent record of meeting targets. The Company intends to add one or more additional mines in that time frame and maintain an appropriate cash balance, to underpin its financial strength to weather the risks inherent in the mining industry.'
GROSS SALES REVENUE - THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
A breakdown of gross sales revenue for the three month periods ended June 30, 2010 and 2009 is set forth in the following table.
Second Quarter 2010
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Gross sales
Concentrate Payable Realized revenue
sold (tonnes) metal(1) price(1)(US$) ($000's)
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Zinc 51,583 22,493 2,179 49,018
Copper 2,820 674 6,935 4,671
Lead 7,946 4,871 2,060 10,035
Gold(2) 1,443 12,231 1,183 14,465
Silver n.a. 510,203 18.45 9,411
Price protection gain
(loss) n.a. 1,363
Other(3) n.a. 48
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63,792
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Gross sales revenue in US$ 89,011
Exchange rate 1.0314
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Gross sales revenue in C$ 91,809
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Second Quarter 2009
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Gross sales
Concentrate Payable Realized revenue
sold(tonnes) metal(1) price(1)(US$) ($000's)
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Zinc 36,205 15,801 1,413 22,319
Copper n.a. (70) n.a. (247)
Lead 5,364 3,293 1,383 4,554
Gold(2) 2,101 8,797 931 8,192
Silver n.a. 119,588 12.54 1,500
Price protection gain
(loss) n.a. n.a. n.a. (1,061)
Other(3) n.a. 41
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43,670
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Gross sales revenue in US$ 35,298
Exchange rate 1.1599
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Gross sales revenue in C$ 40,942
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(1) Payable metal and realized prices for zinc, copper and lead are per
tonne and for gold and silver are per ounce.
(2) Gold concentrate sales are principally from Toqui while payable gold is
from all operations except Mochito.
(3) Other gross sales revenue represents revaluations of prior period
concentrate receivables.
PRICE PROTECTION STRATEGY
As at August 5, 2010 the Company's hedge position consisted of:
Puts
Bought Quantity Average Price (US$) Maturity
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Zinc 2,000 tonnes $2,205 per tonne August 2010 - September 2010
Copper 2,000 tonnes $6,283 per tonne September 2010 - October 2010
Lead 4,200 tonnes $1,669 per tonne August 2010 - October 2010
Silver 710,000 ounces $16 per ounce September 2010 - December 2010
Gold 17,500 ounces $1,100 per ounce July 2010 - December 2010
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As at August 5, 2010, the Company had locked in pricing for payable zinc of 9,538 tonnes with certain customers for the second half of 2010 at a weighted average price of US$2,228 per tonne.
CONCENTRATE SALES - BREAKDOWN BY MINE
Second Quarter First Six Months
Concentrate Sold (tonnes) 2010 2009 2010 2009
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Zinc:
Mochito 18,366 13,860 36,679 27,745
Toqui 13,685 10,985 27,439 27,007
Myra Falls 19,532 11,360 39,505 27,943
Langlois(1) n.a. n.a. n.a 3,618
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51,583 36,205 103,623 86,313
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Copper
Myra Falls 2,820 - 9,588 9,235
Langlois(1) n.a. n.a. n.a. 321
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2,820 - 9,588 9,556
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Lead
Mochito 7,528 4,941 15,951 10,408
Toqui 418 423 884 423
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7,946 5,364 16,835 10,831
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Gold
Toqui 1,376 2,093 4,451 3,011
Myra Falls 67 8 76 9
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1,443 2,101 4,527 3,020
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All Metals 63,792 43,670 134,573 109,720
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(1) Due to the Company's revenue recognition policy, certain concentrate
produced prior to the temporary suspension of Langlois on November 2, 2008
was not recognized in revenue until the first quarter of 2009.
PRODUCTION RESULTS
The table below summarizes, on a production basis, the Company's metal contained in concentrate, before smelting deductions, for the periods presented.
Second Quarter First Six Months
Metal in Concentrate 2010 2009 % 2010 2009 %
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Zinc (tonnes)
Mochito 9,426 8,697 8.4 17,932 16,402 9.3
Toqui 6,589 4,651 41.7 11,312 9,743 16.1
Myra Falls 9,824 6,126 60.4 19,387 13,312 45.6
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25,839 19,474 32.7 48,631 39,457 23.3
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Copper (tonnes)
Myra Falls 1,534 846 81.3 2,862 1,667 71.7
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1,534 846 81.3 2,862 1,667 71.7
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Lead (tonnes)
Mochito 4,592 3,251 41.2 9,120 6,527 39.7
Toqui 193 356 -45.8 387 630 -38.6
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4,785 3,607 32.6 9,507 7,157 32.8
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Gold (ounces)
Toqui 6,352 9,685 -34.4 17,330 20,785 -16.6
Myra Falls 6,281 3,041 106.5 11,714 5,634 107.9
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12,633 12,726 -0.7 29,044 26,419 9.9
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Silver (ounces)
Mochito 502,584 422,875 18.8 976,035 852,021 14.6
Toqui 34,107 59,745 -42.9 73,423 130,586 -43.8
Myra Falls 202,504 95,929 111.1 424,015 199,255 112.8
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739,195 578,549 27.8 1,473,473 1,181,862 24.7
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The complete unaudited consolidated interim financial statements for the periods ended June 30, 2010, with the comparative figures for the periods ended June 30, 2009, the related notes, and management's discussion and analysis of the financial and operating results have been filed on www.sedar.com. Additionally, the documents have been made available on our website at http://www.breakwater.ca/Investors/AnnualandQuarterlyReports/default.aspx.
Contacts:
Breakwater Resources Ltd.
Ann Wilkinson, Vice-President, Investor Relations
(416) 363-4798 Ext. 277