Breakwater Resources Ltd.
TSX : BWR
TSX : BWR.WT.A

Breakwater Resources Ltd.

February 25, 2010 18:02 ET

Breakwater Resources Ltd.'s 2009 Year-End and Fourth Quarter Financial and Operating Results

TORONTO, ONTARIO--(Marketwire - Feb. 25, 2010) - Breakwater Resources Ltd. (TSX:BWR)(TSX:BWR.WT.A) is a mining, exploration and development company which produces zinc, copper, lead and gold concentrates. During 2009, the Company's concentrate production was derived from mines located in Canada, Chile and Honduras. The Company also owns base metal and gold exploration properties in Canada, Honduras, Chile and Tunisia. On November 2, 2008, the Company temporarily suspended operations at Langlois due to the decline in commodity prices and the general deterioration of the economic outlook globally. The unforeseen temporary suspension of Langlois affects all aspects of the Company's financial results which makes comparisons between years difficult.

The reporting currency is Canadian dollars ("C$" or "$") and all amounts disclosed are in Canadian dollars unless otherwise indicated.

Throughout 2009 management tenaciously focused on: cost containment; extraction of higher value mineralized material; spending a minimum of capital required to operate the mines; and, raising additional capital. The price of zinc bottomed in February and gradually moved increasingly higher for the balance of the year. By mid-2009 any concern that Breakwater would not survive had been put to rest and by the end of the year, the Company had $41.1 million in the bank, working capital of $70.7 million and a portion of future earnings protected by the purchase of zinc put options giving shareholders the benefit of higher zinc prices.

HIGHLIGHTS

Fourth Quarter

The Company realized net earnings of $5.4 million or $0.01 per share in the fourth quarter of 2009 compared with a net loss of $53.5 million or $0.12 per share in the fourth quarter of 2008. The main items affecting the movement to net earnings were:

- $50.4 million (US$36.0 million) or 50% lower gross sales revenue due to a 63% decrease in concentrate sold and a stronger C$ partially offset by higher realized prices for all metals

- $26.7 million or 67% lower treatment and marketing costs primarily due to lower concentrate sales, more favourable smelter terms and lower freight rates

- $58.8 million or 77% lower direct operating costs primarily due to lower concentrate sales and the unforeseen temporary suspension of mining activities at Langlois

- $12.0 million or 72% lower depreciation and depletion primarily due to the temporary suspension of Langlois and lower concentrate sales

- $8.2 million or 77% lower investment and other income primarily due to the sale of the Lapa Royalty and an adjustment to royalty income in 2008 which did not recur in 2009

- $35.5 million lower write-down of mineral properties and fixed assets primarily due to 2008 write-downs of the Myra Falls and Mochito mines

- $6.7 million higher income and mining tax provision primarily due to higher tax provisions at Mochito, Toqui and Langlois

Concentrate produced in the fourth quarter of 2009 decreased by 6% to 61,757 tonnes compared with the fourth quarter of 2008 largely due to the temporary suspension of Langlois.

On December 30, 2009, the Company entered into two royalty agreements whereby the Company sold a "Basic Royalty" on a portion of the payable zinc production, over the life of the Myra Falls mine. The Company received $69.4 million which included royalty income of $62.6 million and fees and interest of $6.8 million. Of the funds received, $62.6 million were placed with a financial institution, for which the Company took back a restricted promissory note. The remaining funds of $6.8 million are available for working capital purposes.

At December 31, 2009, the Company estimated that inventories shipped but not recognized for revenue purposes had earnings before tax of $10.3 million on 8,748 tonnes of concentrate compared with earnings before tax of $3.7 million on 11,469 tonnes of concentrate at September 30, 2009.

Year

The Company realized net earnings of $0.8 million or $0.00 per share in 2009 compared with a net loss of $88.3 million or $0.20 per share in 2008. Included in the $0.8 million net earnings was $4.4 million of price protection program costs related to the purchase of zinc put options, which largely expired out-of-the-money, to protect the minimum price on certain zinc sales while retaining further price increase exposure. The unforeseen temporary suspension of operations at Langlois in the fourth quarter of 2008 significantly impacts the comparability of the 2009 and 2008 year-over-year results. The main items affecting the movement to net earnings were:

- $171.7 million (US$176.0 million) or 43% lower gross sales revenue due to a 42% decrease in concentrate sold and lower realized prices for all metals sold except gold partially offset by a weaker C$

- $71.1 million or 52% lower treatment and marketing costs primarily due to lower concentrate sales, more favourable smelter terms and lower freight rates

- $125.6 million or 55% lower direct operating costs primarily due to lower concentrate sales and cost improvements at all operations

- $24.4 million lower depreciation and depletion primarily due to the temporary suspension of mining activities at Langlois in 2008

- $14.5 million lower investment and other income primarily due to gains on sale of investments and the Lapa Royalty in 2008

- $10.9 million negative movement in foreign exchange expense (income) primarily due to the fluctuations in the C$/US$ exchange rate

- $15.4 million lower exploration expenses primarily due to significantly less exploration activity at all operations and at the Company's joint venture properties

- $46.5 million lower write-down of mineral properties and fixed assets primarily due to 2008 write-downs of the Myra Falls and Mochito mines as well as a write-off of the Company's 20% interest in the Caribou joint venture

- $11.9 million lower income and mining tax provision primarily due to $21.4 million of future tax assets written off in 2008

Concentrate produced in 2009 decreased by 32% to 214,660 tonnes largely due to Langlois being placed on temporary care and maintenance in November 2008.

On April 9, 2009, the Company closed a public offering for gross proceeds of $20 million (the "Offering"). A total of 200,000,000 units were issued at a price of $0.10, with each unit ("Unit") comprising one common share ("Common Share") and one-half of a warrant (a "Warrant"). Each whole Warrant entitles the holder to purchase one Common Share at a price of $0.12 per share until April 9, 2014. The Common Shares continue to trade under the symbol "BWR" and the Warrants began trading on the Toronto Stock Exchange (the "TSX") on closing under the symbol "BWR.WT.A". The Company granted to the underwriters an over-allotment option to purchase up to 30,000,000 additional Units at a price of $0.10 for each additional Unit on the same terms and conditions of the Offering. On April 16, 2009, the Company completed the sale of an additional 30,000,000 Units for gross proceeds of $3,000,000, pursuant to the exercise of the underwriters' over-allotment option (the "Over-Allotment Exercise"). Net proceeds of the Offering, including the over-allotment option, was approximately $21.4 million. Dundee Corporation purchased 57,960,000 Units under the Offering (equal to 25.2% of the total number of Units that were issued on closing plus the Units issued in respect of the Over-Allotment Exercise) to maintain its approximate 25.2% equity interest in the Company.

In 2009, the Company entered into three royalty agreements whereby the Company sold a "Basic Royalty" on a portion of the payable zinc production, over the life of the Myra Falls mine. The Company received $95.6 million which included royalty income of $86.1 million and fees and interest of $9.6 million. Of the funds received, $86.1 million were placed with a financial institution, for which the Company took back a restricted promissory note. The remaining funds of $9.6 million were available for working capital purposes.

The collective bargaining agreement at Myra Falls was renewed during 2009 for three years and has an expiry date of September 30, 2012.



SELECTED ANNUAL INFORMATION

Statement of Operations and Statement of Cash
Flow Data Years ended December 31,
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($ millions except for share and per share
numbers) 2009 2008
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Gross sales revenue 226.4 398.1
Treatment and marketing costs 64.6 135.8
--------------------------
Net revenue 161.8 262.3
Total operating costs 132.8 280.9
--------------------------
Contribution (loss) from mining activities 29.0 (18.6)
--------------------------
Write-down of mineral properties and fixed
assets - 46.5
--------------------------
Net earnings (loss) 0.8 (88.3)
--------------------------
Basic earning (loss) per Common Share 0.00 (0.20)
Diluted earnings (loss) per Common Share 0.00 (0.20)
Net cash provided by (used in) operating
activities 11.7 (5.8)
Capital expenditures 30.2 76.8
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Basic weighted-average number of Common Shares
outstanding (000's) 622,183 441,378
Number of Common Shares outstanding (000's) 684,237 446,843



Balance Sheet Data As at December 31,
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($ millions) 2009 2008
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Cash and cash equivalents 41.1 20.3
Working capital 70.7 32.0
Total assets 595.3 495.2
Total debt 10.8 6.8
Total long-term liabilities 219.6 116.2
Shareholders' equity 313.3 309.7


STATEMENT OF OPERATIONS REVIEW - THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009 AND 2008

Gross Sales Revenue

Sales of concentrate fluctuate period-to-period due to production levels, shipping volumes, ship schedules, price determination terms, and risk and title transfer terms with the Company's various customers. The Company has a relatively conservative revenue recognition policy (see below) and the recognition of sales can be as much as six months after the date of concentrate production. The Company's sales are primarily denominated in US$.



Concentrate Sold Fourth Quarter Year
(tonnes) 2009(1) 2008(2) 2009(1) 2008(2)
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Zinc:
Mochito 12,888 13,928 59,295 55,316
Toqui 4,597 16,618 41,652 73,488
Myra Falls 15,133 21,197 54,721 68,361
Langlois - 29,078 3,618 81,730
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32,618 80,821 159,286 278,895
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Copper
Myra Falls 1,943 9,436 16,318 23,500
Langlois - 4,152 322 11,818
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1,943 13,588 16,640 35,318
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Lead
Mochito 1,929 6,610 18,439 20,669
Toqui 458 2,087 1,578 6,828
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2,387 8,697 20,017 27,497
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Gold
Toqui 1,368 1,192 6,677 4,894
Myra Falls 85 1 94 1
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1,453 1,193 6,771 4,895
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All Metals 38,401 104,299 202,714 346,605
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(1) Due to the Company's revenue recognition policy, certain concentrate
produced prior to the temporary suspension on November 2, 2008 was not
recognized in revenue until the first quarter of 2009.
(2) On November 2, 2008, Langlois operations were temporarily suspended.



Fourth Quarter 2009
Concentrate Realized Gross sales
sold Payable price(2) revenue
(tonnes) metal(2) (US$) ($000's)
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Zinc 32,618 14,564 2,119 30,861
Copper 1,943 488 6,249 3,050
Lead 2,387 1,385 2,313 3,204
Gold(3) 1,453 6,964 1,094 7,622
Silver n.a. 216,068 17.75 3,836
Price protection loss n.a. (1,497)
-------- ---------
38,401
--------
--------
Gross sales revenue in US$ 47,076
Exchange rate 1.0567
---------
Gross sales revenue in C$ 49,744
---------
---------


Fourth Quarter 2008
Concentrate Realized Gross sales
sold Payable price(2) revenue
(tonnes) metal(2) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 80,821 36,183 1,331 48,149
Copper 13,588 3,044 4,020 12,235
Lead 8,697 5,276 1,189 6,271
Gold(3) 1,193 10,393 803 8,345
Silver n.a. 765,344 10.54 8,069
Price protection loss -
-------- --------
104,299
--------
--------
Gross sales revenue in US$ 83,069
Exchange rate 1.2050
----------
Gross sales revenue in C$ 100,101
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----------

(1) On November 2, 2008, Langlois operations were temporarily suspended.
(2) Payable metal and realized prices for zinc, copper and lead are per
tonne and for gold and silver are per ounce.
(3) Gold concentrate sales are principally from Toqui while payable gold is
from all operations except Mochito.


Concentrate sold decreased 63% in the fourth quarter of 2009 compared with the fourth quarter of 2008. The 65,898 tonne decrease in 2009 was due to a decrease of 33,230 tonnes at Langlois and 68%, 28% and 44% fewer tonnes sold at Toqui, Mochito and Myra Falls respectively. In payable metal terms, zinc, copper, lead, gold, and silver sold decreased by 60%, 84%, 74%, 33% and 72% respectively.

Realized prices denominated in US$ increased for all metals in the fourth quarter of 2009 with the most significant increase for zinc and lead at 59% and 95% respectively. The Company periodically hedges against fluctuations in metal prices and foreign exchange rates using forward sales or options. The Company has not applied hedge accounting historically; therefore, mark-to-market gains or losses have been included in gross sales revenue at the end of each period.

During the fourth quarter of 2009, the Company purchased zinc put options at a cost of $1.2 million to guarantee a minimum price on a portion of its zinc production for 2010. During the fourth quarter of 2009, the Company recorded $1.6 million of costs related to the marking-to-market of the puts outstanding at December 31, 2009 and the expiry of put option contracts in the fourth quarter.

Gross sales revenue decreased by US$36.0 million or 43% in the fourth quarter of 2009 due to the significant decline in sales volumes noted above. A stronger C$ resulted in a decrease in the average C$/US$ exchange rate of 12% in the fourth quarter of 2009. In C$ terms, gross sales revenue decreased $50.4 million or 50% in the fourth quarter of 2009 compared with the fourth quarter of 2008



2009(1)
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Concentrate Realized Gross sales
sold Payable price(3) revenue
(tonnes) metal(3) (US$) ($000's)
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Zinc 159,286 70,152 1,545 108,358
Copper 16,640 3,653 4,475 16,348
Lead 20,017 12,183 1,654 20,147
Gold(4) 6,771 35,959 956 34,368
Silver n.a. 1,729,954 14.09 24,367
Price Protection Loss (4,034)
Other(5) n.a. (441)
--------- ---------
202,714
---------
---------
Gross sales revenue in US$ 199,113
Exchange rate 1.1372
---------
Gross sales revenue in C$ 226,438
---------
---------


2008(2)
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Concentrate Realized Gross sales
sold Payable price(3) revenue
(tonnes) metal(3) (US$) ($000's)
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Zinc 278,895 122,047 1,882 229,724
Copper 35,318 7,440 6,042 44,950
Lead 27,497 16,235 1,930 31,331
Gold(4) 4,895 37,209 873 32,486
Silver n.a. 2,646,450 14.69 38,884
Price Protection Loss -
Other(5) n.a. (2,231)
--------- ---------
346,605
---------
---------
Gross sales revenue in US$ 375,144
Exchange rate 1.0612
---------
Gross sales revenue in C$ 398,110
---------
---------

(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.
(2) On November 2, 2008, Langlois operations were temporarily suspended.
(3) Payable metal and realized prices for zinc, copper and lead are per
tonne and for gold and silver are per ounce.
(4) Gold concentrate sales are principally from Toqui while payable gold is
from all operations except Mochito.
(5) Other gross sales revenue represents revaluations of prior period
concentrate receivables.


Concentrate sold in 2009 decreased 42% to 202,714 tonnes. The 143,891 tonne decrease was due to decreases of 89,608 tonnes, 35,303 tonnes and 20,729 tonnes at Langlois, Toqui and Myra Falls respectively partially offset by a 1,749 tonne increase at Mochito. In payable metal terms sales of all metals in 2009 were lower than in 2008.

Zinc, copper, lead and silver prices, denominated in US$, decreased by 18%, 26%, 14% and 4% respectively in 2009 compared with 2008 while realized prices for gold increased by 10%.

During 2009, the Company purchased zinc put options at a cost of $4.5 million to guarantee a minimum price on a portion of its zinc production during 2009 and 2010. During 2009, the Company recorded $4.4 million of costs related to the marking-to-market of the puts outstanding at December 31, 2009 and the expiry of put option contracts during 2009. The put options outstanding at December 31, 2009 had a fair market value of $0.1 million and their value is recorded in other receivables. In 2010, the Company purchased zinc put options on a portion of its zinc production for the first half of 2010 at a cost of $1.1 million. At February 25, 2010, the Company's zinc put option position consisted of:



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Strike price per tonne
Period Tonnes (weighted average)
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To March 31, 2010 12,400 US$1,902 (US$0.863/lb.)
Q2 2010 18,600 US$1,874 (US$0.850/lb.)
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Gross sales revenues decreased US$176.0 million or 47% in 2009 compared with 2008. In C$ terms, gross sales revenue decreased $171.7 million in 2009 compared with 2008.

The Company's revenue recognition policy requires that, among other things, final pricing of concentrate inventories be known prior to the recognition of revenue. Using commodity prices and exchanges rates prevailing at December 31, 2009, the following schedule provides details regarding inventories shipped but not recognized for revenue purposes and the related provisional payments.



Earnings Weighted-
Net smelter Inventory before Provisional average
Concentrate return value taxes payments months to
(DMT) ($000's) ($000's) ($000's) ($000's) settlement
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Zinc 1,917 1,659 750 909 1,264 1.5
Gold 3,106 9,618 5,282 4,336 9,014 1.9
Lead 3,725 8,905 4,270 4,635 8,832 1.0
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8,748 20,182 10,302 9,880 19,110
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As at December 31, 2008, the Company estimated that inventories shipped but not recognized for revenue purposes had earnings before tax of $0.8 million consisting of $10.9 million of net smelter return less $10.1 million of inventory value on 25,407 tonnes of concentrate.

The following table provides the average metal prices and exchange rates for the periods indicated.



Fourth Quarter Year
Average Metal Prices & Exchange Rate 2009 2008 2009 2008
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Zinc (US$/tonne) 2,214 1,185 1,655 1,875
Copper (US$/tonne) 6,648 3,905 5,150 6,956
Lead (US$/tonne) 2,293 1,245 1,719 2,091
Gold (US$/ounce) 1,102 796 973 872
Silver (US$/ounce) 17.58 10.20 14.65 15.02
C$/US$ exchange rate 1.0563 1.2124 1.1409 1.0675
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Treatment and Marketing Costs

Treatment and marketing costs decreased 67% to $13.0 million in the fourth quarter of 2009 from $39.7 million in the fourth quarter of 2008 primarily due to the tonnes of concentrate sold decreasing by 63%, lower freight rates and more favourable smelter terms. Treatment and marketing costs for the fourth quarter of 2009 were 26% of gross revenue compared with 40% in 2008. As a percentage of gross sales revenue, the decrease was largely due to higher metal prices, lower freight rates and more favourable smelter terms.

Treatment and marketing costs decreased 52% to $64.7 million in 2009 from $135.8 million in 2008 primarily due to 42% fewer tonnes of concentrate sold, lower freight rates and more favourable smelter terms. Treatment and marketing costs as a percentage of gross sales revenue in 2009 were 29% compared with 34% in 2008 primarily due to the significantly lower freight rates and more favourable smelter terms partially offset by the impact of lower metal prices.

Direct Operating Costs

Direct operating costs were 77% lower in the fourth quarter of 2009 at $17.3 million compared with $76.2 million in the fourth quarter of 2008. The decreased costs were primarily due to lower concentrate sales and the temporary suspension of Langlois. On a cost per tonne of concentrate sold basis, direct operating costs decreased to $451 in the fourth quarter of 2009 from $730 in 2008 primarily due to the factors noted above.

Direct operating costs were 55% lower in 2009 at $103.7 million compared with $229.3 million in 2008 primarily due to 42% fewer tonnes of concentrate sold and the temporary suspension of Langlois. The average direct operating cost per tonne of concentrate sold decreased to $512 in 2009 compared with $662 in 2008 due to the factors noted above. Also see details of direct operating costs under each mine's Expenses in the Production Results section of this news release.

Depreciation and Depletion

Depreciation and depletion decreased $12.0 million or 72% in the fourth quarter of 2009 compared with the corresponding period in 2008 primarily due to $6.0 million lower depreciation at Langlois due to the temporary suspension of operations, lower concentrate sales and a lower asset base at Myra Falls due to the write-down described below.

Depreciation and depletion decreased $24.4 million in 2009 compared with 2008 primarily due to $19.8 million lower depreciation related to the temporary suspension of operations at Langlois, lower concentrate sales and lower asset base at Myra Falls due to the $25.3 million write-down at December 31, 2008.

Reclamation and Closure Costs

Reclamation and closure costs increased slightly in the fourth quarter of 2009 compared with the corresponding period in 2008.

Reclamation and closure costs increased $1.9 million in 2009 compared with 2008. The increase was primarily due to a $1.8 million increase in 2009 of reclamation cost related to exploration oil and gas wells acquired with the purchase of Myra Falls in 2004.

General and Administrative

General and administrative expenses increased by $4.4 million in the fourth quarter of 2009 compared with 2008. The increase was primarily due to increased bonuses, salaries, severances, benefits and a reversal of bonus accrual in 2008 which did not recur in 2009.

General and administrative expenses increased by $1.5 million in 2009 compared with 2008. The increase was primarily due to increased bonuses, salaries and severances partially offset by decreased consulting fees, travel expenses and legal expenses.

Interest and Financing

Interest and financing costs increased by $1.1 million in the fourth quarter of 2009 and increased by $0.5 million in 2009 compared with the same periods in 2008 primarily due to higher royalty costs associated with the Myra Falls royalty transactions.

For further information on the Myra Falls royalty transactions please see the Company's most recent audited consolidated financial statement filed on SEDAR at www.sedar.com or available at the Company's website at www.breakwater.ca.

Investment and Other Income

Investment and other income was $8.2 million lower in the fourth quarter of 2009 compared with 2008. The decrease was due to a gain on sale of the Lapa Royalty of $7.7 million and an adjustment of $3.6 million to royalty income in 2008 which did not recur in 2009.

For 2009, investment and other income was $14.5 million lower than 2008. The decrease was primarily due to a $7.6 million gain on sale of investments and $7.7 million gain on sale of the Lapa Royalty which occurred in 2008.

Foreign Exchange Expense (Income)

Foreign exchange expense was $1.0 million in the fourth quarter of 2009 compared with income of $3.7 million in 2008. The decrease in foreign exchange expense (income) was primarily due to the impact of the strengthening C$ versus the US$ in the fourth quarter of 2009 compared with a stronger US$ in the fourth quarter of 2008.

For 2009, foreign exchange expense (income) was $10.9 million higher with an expense of $5.7 million compared with income of $5.2 million in 2008. The change in foreign exchange expense (income) was primarily due to the strengthening of the C$ versus the US$ in 2009 compared with a weakening C$ in 2008.

Exploration

Exploration expenses decreased by $2.7 million in the fourth quarter of 2009 compared with 2008 primarily due to significant lower spending at the Company's joint venture properties. In 2009, exploration expenses decreased by $15.4 million primarily due to significantly lower exploration activities at all of the Company's operations and joint venture properties.

Please refer to the exploration section of each mine for details of the exploration activities in 2009.



Exploration Fourth Quarter Year
($ millions) 2009 2008(1) 2009 2008(1)
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Mochito 0.9 0.8 1.2 2.6
Toqui 0.2 0.1 0.6 1.0
Myra Falls - - - 1.0
Langlois (0.5) 0.3 - 3.9
Non-operating - - - 0.5
Corporate - 2.1 - 8.2
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Total 0.6 3.3 1.8 17.2
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(1) On November 2, 2008, Langlois operations were temporarily suspended.


Write-down of Mineral Properties and Fixed Assets

In the fourth quarter of 2008, the Company wrote down the carrying value of the mineral properties and fixed assets at Myra Falls, Mochito, certain non-producing properties and a number of exploration properties as noted below. For the year ended December 31, 2008, the Company wrote-down the carrying value of the mineral properties and fixed assets at Myra Falls, Mochito, its 20% joint venture interest in the Caribou property and certain non-producing properties by $25.3 million, $8.3 million, $11.0 million and $1.3 million respectively. Additionally in 2008, $0.6 million of exploration properties were written-off.

Other Non-Producing Property Costs

Other non-producing property costs increased by $0.9 million and $4.9 million in the fourth quarter of 2009 and the 2009 year respectively compared with the equivalent periods in 2008 primarily due to $1.4 million and $5.9 million of care and maintenance costs respectively at Langlois in 2009.

Income and Mining Tax Provision

In the fourth quarter of 2009, income and mining tax provision increased by $6.7 million compared with the respective 2008 period primarily due to higher tax provisions at Mochito, Toqui and Langlois.

For the year, the tax provision decreased from $18.5 million in 2008 to $6.6 million in 2009. In 2008, future tax write-offs of $13.4 million and $8.0 million were taken at Langlois and Myra Falls respectively, which did not recur in 2009. Please refer to the income and mining tax provision sections for each mine in the Production section of this news release for additional details.

LIQUIDITY AND FINANCIAL POSITION REVIEW

Working Capital

Working capital at the end of 2009 was $70.7 million compared with $32.0 million at the end of 2008, an increase of $38.7 million.

Current Assets

Total current assets increased by $31.8 million to $133.1 million at December 31, 2009 compared with December 31, 2008. The main components of current asset changes were:

- Cash and cash equivalents increased by $20.8 million primarily reflecting higher cash flow from operating activities, lower expenditures on mineral properties and fixed assets and financing activities

- Concentrate inventory increased by $20.0 million primarily due to the tonnes of concentrate in inventory increasing by 12,047 tonnes to 61,133 tonnes at December 31, 2009 and the value of those tonnes increasing to $684 per tonne at December 31, 2009 from $444 per tonne at December 31, 2008

Current Liabilities

Current liabilities decreased by $6.9 million to $62.4 million at December 31, 2009 compared with December 31, 2008. The main components of the current liabilities changes were:

- Accounts payable and accrued liabilities decreased by $15.4 million primarily due to a $7.5 million decrease in accounts payable and accrued liabilities at Langlois related to the temporary suspension of operations and a decrease of $10.8 million of provisional payments refundable to customers partially offset by severance and bonus accruals and cash received from customers for inventory not shipped

- Provisional payments for concentrate inventory shipped and not priced, which represent payments received for concentrate shipments that were not recognized as revenue, increased by $8.6 million. The balance at December 31, 2009 was $19.1 million compared with $10.5 million at December 31, 2008. Refer to the table in Gross Sales Revenue section of this MD&A for additional details

Provisional payments for concentrate inventory shipped and not priced are based on prices prevailing on the date of payment. Recognition of sales can be as much as six months after the date of concentrate production based on contract terms. In the event that prices deteriorate significantly, a portion of the provisional payment may have to be repaid to the customer.

Restricted Reclamation Investments

At December 31, 2009, the Company had restricted reclamation investments of $31.6 million compared with $35.0 million at December 31, 2008. Reclamation deposits of $10.9 million and $20.7 million are held under a safe keeping agreement and a trust indenture respectively to fund future reclamation requirements at Myra Falls.

Restricted Promissory Notes

The Company held six restricted promissory notes at December 31, 2009 totalling $168.4 million compared with three restricted promissory notes totalling $80.9 million at December 31, 2008. All promissory notes are related to Myra Falls royalty transactions completed in 2004, 2005, 2008 and 2009. The interest earned and a portion of the principal of these restricted promissory notes will be used to meet the Company's royalty obligations.

Deferred Income

Deferred income of $9.7 million at December 31, 2009 consisted of deferred indemnity agreement fees and prepaid interest income related to the Myra Falls royalty transactions in 2004, 2005, 2008 and 2009 which will be recognized as income over the terms of the five agreements. During 2009, the Company entered into three additional royalty transactions which increased deferred income by $9.6 million.

Royalty Obligations

The royalty obligations of $164.5 million at December 31, 2009 relate to the royalty amounts received from the 2004, 2005, 2008 and 2009 Myra Falls royalty transactions. The three 2009 royalty transactions increased royalty obligations by $86.1 million. See reclamation deposits and restricted promissory notes above.

For further information on the Myra Falls royalty transactions referred to above please see the Company's most recent audited consolidated financial statement filed on SEDAR at www.sedar.com or available at the Company's website at www.breakwater.ca.

Long-term Debt

Long-term debt increased by $6.2 million to $8.0 million at December 31, 2009 primarily due to a $5.8 million (US$5.5 million) loan entered into in the third quarter of 2009 to finance a wind power plant at Toqui and the movement of a certain debt from short-term to long-term.

Reclamation, Closure Cost Accruals and Other Environmental Obligations

Reclamation, closure cost accruals and other environmental obligations represent the Company's obligation for reclamation and severance costs accrued for its mine sites. At December 31, 2009, total reclamation; closure cost accruals and other environmental obligations were $34.8 million compared with $31.3 million at December 31, 2008.

Of the $34.8 million, $5.4 million is classified as current and is expected to be spent over the next 12 months at Nanisivik, Bouchard-Hebert, Bougrine and Myra Falls. The Company spent $1.1 million in reclamation and closure costs in the fourth quarter of 2009 compared with $2.5 million in the fourth quarter of 2008 and spent $2.9 million in 2009 compared with $5.4 million in 2008. As there is currently no law, regulation or contract in Honduras related to reclamation and closure costs, GAAP does not permit the Company to set up a liability for reclamation at the Mochito mine. Closure and reclamation costs for Mochito are estimated to be $7.1 million (US$6.8 million).



Reclamation and Closure Cost Accruals and Other Environmental
Obligations at December 31, 2009
($ millions) Current Long-term Total
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Myra Falls 0.7 19.4 20.1
Mochito(1) - 1.0 1.0
Toqui - 7.4 7.4
Langlois - 1.2 1.2
Bouchard-Hebert 2.5 0.1 2.6
Nanisivik 1.4 0.4 1.8
Bougrine 0.8 - 0.8
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Total 5.4 29.5 34.9
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(1) Reclamation and closure cost accruals for Mochito relate to accrued
severances.


Employee Future Benefits

Employee future benefits payable relate to Myra Falls and increased $0.4 million in 2009 to $1.4 million at December 31, 2009. The increase was primarily due to an $11.5 million increase in accrued benefit obligations and a $0.5 million decrease in unamortized past service cost partially offset by a $6.4 million increase in unamortized actuarial loss and a $5.2 million increase in the fair value of plan assets. The $5.2 million or 17% increase in the fair value of plan assets was primarily due to the impact of the significant volatility in the financial markets experienced in 2009 on plan asset values. Any deterioration of the financial markets in the future could increase the $15.7 million defined benefit pension plan deficit resulting in greater contributions after the next required actuarial valuation. The $6.4 million increase in unamortized actuarial loss was primarily due to a change in the discount rate used from 7.5% to 6.5%.

Included in employee future benefits is a defined benefit pension plan for the Myra Falls unionized employees. Actuarial reports valuing this defined benefit pension plan are prepared every three years with December 31, 2007 being the most recent valuation. Due to issues related to the conversion to International Financial Reporting Standards, the Company intends to perform an actuarial valuation effective December 31, 2009 which will not be completed until mid-2010. The Company's minimum contribution until the next valuation for the defined benefit pension plan is approximately $2.3 million per annum consisting of $0.8 million for current service costs and $1.5 million for annual special payments.

Future Income Tax Liabilities

Future income tax liabilities increased $2.8 million to $6.0 million at December 31, 2009. The increase was primarily due to a $1.9 million increase in Quebec mining duties liability at Langlois in 2009 and a $0.9 million increase at Toqui related to timing differences.

Shareholders' Equity

Shareholders' equity at December 31, 2009 was $313.3 million compared with $309.7 million at December 31, 2008. The increase of $5.6 million was primarily due to the units offering and net earnings partially off set by other comprehensive losses.



Other
compreh- Total
Shareholders' ensive share-
Equity Capital Contributed Retained income holders'
($000's) stock Warrants surplus earnings (loss) equity
----------------------------------------------------------------------------
As at December
31, 2008 212,374 8,538 4,925 80,568 3,257 309,662
Common Shares
issued to a
third party 12 - - - - 12
Unit offering 16,865 4,519 - - - 21,384
Value ascribed
to options
exercised
under stock-
based
compensation 21 - (21) - - -
Expiry of
Warrants - (8,538) 7,163 - - (1,375)
Exercise of
Warrants 795 (196) - - - 599
Employee share
option plan
proceeds of
options
exercised 29 - - - - 29
Employee share
purchase plan 329 - - - - 329
Stock-based
compensation - - 926 - - 926
Other
comprehensive
loss - - - - (19,086) (19,086)
Net earnings - - - 809 - 809
----------------------------------------------------------------------------
As at December
31, 2009 230,425 4,323 12,993 81,377 (15,829) 313,289
----------------------------------------------------------------------------


In 2009, the Company issued the following: 230,000,000 Common Shares and 115,000,000 warrants pursuant to the Offering; 100,000 Common Shares to a third party; 4,992,500 Common Shares pursuant to warrants exercised; 150,000 Common Shares following the exercise of employee share options; 2,151,603 Common Shares pursuant to the Company's employee share purchase plan and 7,055,000 options pursuant to the Company's share option plan.

Capital Expenditures

The Company invested $30.2 million in mineral properties and fixed assets in 2009. At mining operations, $13.0 million, $14.2 million, $1.6 million and $0.1 million were spent at Mochito, Toqui, Myra Falls and Langlois respectively. For details of these expenditures, please refer to the financial results discussion for each mine. Corporate capital expenditures of $1.3 million primarily related to earn-in payments made on certain joint venture properties.

Financial Capability

With the existing working capital, the current metal prices and current C$/US$ exchange rate, the Company expects to be able to carry out its operating, capital, exploration and environmental programs in 2010. The Company's financial capability is sensitive to operating performance, metal prices, smelter treatment charges and the C$/US$ exchange rate.

PRODUCTION RESULTS

The table below contains the Company's production for the periods presented.



Fourth Quarter Year
All Mines 2009 2008(1) 2009 2008(1)
----------------------------------------------------------------------------
Tonnes Milled 425,820 486,727 1,673,434 2,272,740
Zinc (%) 6.6 6.4 5.9 6.7

Concentrate Production (tonnes)
Zinc:
Mochito 20,339 12,198 68,552 53,757
Toqui 9,799 15,253 40,665 64,776
Myra Falls 17,549 14,161 57,838 66,051
Langlois - 11,175 - 71,868
----------------------------------------------------------------------------
47,687 52,787 167,055 256,452
----------------------------------------------------------------------------
Copper:
Myra Falls 3,802 4,039 14,404 21,569
Langlois - 1,475 - 10,661
----------------------------------------------------------------------------
3,802 5,514 14,404 32,230
----------------------------------------------------------------------------
Lead:
Mochito 7,230 4,943 22,110 18,865
Toqui 345 1,193 1,927 5,395
----------------------------------------------------------------------------
7,575 6,136 24,037 24,260
----------------------------------------------------------------------------

Gold:
Toqui 2,693 1,549 9,162 2,895
Myra Falls - - 2 -
----------------------------------------------------------------------------
2,693 1,549 9,164 2,895
----------------------------------------------------------------------------
Total 61,757 65,986 214,660 315,837
----------------------------------------------------------------------------
----------------------------------------------------------------------------
C$ operating costs, production
basis ($000's) 30,612 40,657 119,417 192,806
C$ operating cost per tonne
milled (production basis) 72 84 71 85

(1)
On November 2, 2008, Langlois operations were temporarily suspended.


Concentrate produced in the fourth quarter of 2009 decreased by 4,229 tonnes to 61,757 tonnes primarily due to Langlois being placed on care and maintenance during the fourth quarter of 2008 as well as lower planned zinc and lead concentrate production at Toqui and lower copper concentrate production at Myra Falls partially offset by higher zinc concentrate production at Mochito and Myra Falls, higher lead concentrate production at Mochito and higher gold production at Toqui.

Concentrate produced in 2009 decreased by 32% to 214,660 tonnes largely due Langlois being placed on care and maintenance during the fourth quarter of 2008 as well as lower planned zinc concentrate production at Toqui and Myra Falls, lower lead concentrate production at Toqui and lower copper concentrate production at Myra Falls partially offset by higher zinc and lead concentrate production at Mochito and higher gold production at Toqui.

Aggregate operating costs on a production basis decreased in the fourth quarter of 2009 compared with 2008 primarily due to the temporary suspension of Langlois in 2008 and fewer tonnes milled at Myra Falls partially offset by the impact of a stronger C$ on the costs for Mochito and Toqui.

On a production basis, aggregate operating costs and operating costs per tonne milled decreased in 2009 compared with 2008 primarily due to the temporary suspension of Langlois, reduced operating costs at all mines and the impact of a weaker C$ on the costs for Mochito and Toqui. Also see details under each mine's production in the respective production results section of this news release.

The table below summarizes, on a production basis, the Company's metal contained in concentrate, before smelting deductions, for the periods presented.



Fourth Quarter Year
Metal in Concentrate 2009 2008(1) % 2009 2008(1) %
----------------------------------------------------------------------------
Zinc (tonnes)
Mochito 10,683 6,470 65% 36,370 28,462 28%
Toqui 4,815 7,518 -36% 19,635 31,992 -39%
Myra Falls 9,113 7,659 19% 30,900 35,762 -14%
Langlois - 6,046 - - 38,620 -
----------------- ---------------------
24,611 27,693 -11% 86,905 134,836 -36%
----------------- ---------------------
Copper (tonnes)
Myra Falls 893 895 - 3,349 5,024 -33%
Langlois - 281 - - 1,994 -
----------------- ---------------------
893 1,176 -24% 3,349 7,018 -52%
----------------- ---------------------
Lead (tonnes)
Mochito 4,798 3,305 45% 14,471 12,545 15%
Toqui 172 670 -74% 1,025 2,796 -63%
----------------- ---------------------
4,970 3,975 25% 15,496 15,341 1%
----------------- ---------------------
Gold (ounces)
Toqui 13,102 9,758 34% 44,079 23,085 91%
Myra Falls 5,873 2,870 105% 15,526 13,994 11%
----------------- ---------------------
18,975 12,628 50% 59,605 37,079 61%
----------------- ---------------------
Silver (ounces)
Mochito 540,972 431,849 25% 1,855,018 1,894,835 -2%
Toqui 51,470 94,899 -46% 233,382 343,457 -32%
Myra Falls 222,309 134,897 65% 578,008 661,228 -13%
Langlois - 43,424 - - 298,863 -
----------------- ---------------------
814,751 705,069 16% 2,666,408 3,198,383 -17%
----------------- ---------------------

(1) On November 2, 2008, Langlois operations were temporarily suspended.


Mochito

(i) Mochito Financial Results



Fourth Quarter Year
($000's) 2009 2008 2009 2008
----------------------------------------------------------------------------
Gross sales revenue 17,666 20,411 89,273 98,596
Treatment and marketing costs (4,700) (6,933) (25,417) (28,978)
------------------------------------
Net revenue 12,966 13,478 63,856 69,618
Direct operating costs (4,851) (15,309) (36,691) (42,463)
Depreciation and depletion (2,195) (3,750) (14,150) (10,033)
Reclamation and closure costs (300) (389) (1,307) (1,314)
------------------------------------
Contribution (loss) from mining
activities 5,620 (5,970) 11,708 15,808
Exploration (900) (821) (1,219) (2,609)
Write-down of mineral properties and
fixed assets - (8,327) - (8,327)
------------------------------------
4,720 (15,118) 10,489 4,872
Income and mining tax (provision)
recovery (1,683) 1,928 (2,689) (3,270)
------------------------------------
Net earnings (loss) 3,037 (13,190) 7,800 1,602
------------------------------------
------------------------------------

Capital expenditures 3,553 8,315 12,977 28,091
------------------------------------
------------------------------------


Revenue:

The following tables and discussion provide details of Mochito's gross sales revenue for the periods indicated:



Fourth Quarter 2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 12,888 5,776 2,011 11,618
Lead 1,929 1,150 2,327 2,677
Silver n.a. 133,180 18.03 2,402
--------- --------
14,817
---------
---------
Gross sales revenue in US$ 16,697
Exchange rate 1.0580
--------
Gross sales revenue in C$ 17,666
--------
--------


Fourth Quarter 2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 13,928 6,144 1,129 6,938
Lead 6,610 4,175 1,248 5,210
Silver n.a. 457,899 9.97 4,565
--------- --------
20,538
---------
---------
Gross sales revenue in US$ 16,713
Exchange rate 1.2212
--------
Gross sales revenue in C$ 20,411
--------
--------

(1) Payable metal and realized price(s) for zinc and lead are per tonne
and for silver is per ounce.


Concentrate sold in the fourth quarter of 2009 was 28% lower primarily due to a decrease in lead concentrate sales. This decrease in concentrate sales was offset by a significant increase in the realized prices of all the metals produced at Mochito and resulted in flat sales revenues in US$ terms. A strengthening C$ resulted in gross sales revenue in C$ terms decreasing by 13% in the fourth quarter of 2009.



Year 2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 59,295 26,615 1,564 41,625
Lead 18,439 11,390 1,638 18,657
Silver n.a. 1,323,888 14.24 18,858
Other(2) n.a. 33
--------- ---------
77,734
---------
---------
Gross sales revenue in US$ 79,173
Exchange rate 1.1276
---------
Gross sales revenue in C$ 89,273
---------
---------
Year 2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 55,316 24,422 1,771 43,244
Lead 20,669 12,856 2,023 26,006
Silver n.a. 1,736,421 14.61 25,377
Other(2) n.a. (1,168)
--------- ---------
75,985
---------
---------
Gross sales revenue in US$ 93,459
Exchange rate 1.0550
---------
Gross sales revenue in C$ 98,596
---------
---------

(1) Payable metal and realized price(s) for zinc and lead are per tonne and
for silver is per ounce.
(2) Other gross sales revenue represents revaluations of prior period
concentrate receivables.


Concentrate sold in 2009 was 2% higher than in 2008 primarily due to the timing of shipments. Despite greater concentrate sales, lower metal prices and the mix of metals sold resulted in a 15% decrease in gross sales revenues in US$ terms. A weakening of the C$ resulted in gross sales revenue in C$ terms decreasing by 9% in 2009.

Expenses:

Aggregate treatment and marketing costs quarter-over-quarter decreased by 32% primarily due to lower concentrate sales partially offset by more favourable smelter terms and lower freight rates.

For the full year, treatment and marketing costs were lower than in 2008 both in aggregate terms and per tonne sold primarily due to more favourable smelter terms and lower freight rates partially offset by a weaker C$ and increased concentrate sales.

Direct operating costs decreased $10.5 million or 68% in the fourth quarter of 2009 due to the 28% decrease in concentrate sold and lower ground control costs partially offset by higher hydro rates and labour costs. Direct operating cost per tonne of concentrate sold were $327 in the fourth quarter of 2009 compared with $745 in 2008 primarily due to higher head grades.

Direct operating costs for 2009 decreased primarily due to lower ground control costs partially offset by higher hydro rates, labour costs and the 2% increase in concentrate sold.

Depreciation and depletion for the fourth quarter of 2009 decreased $1.6 million or 41% and for the year increased by $4.1 million or 41% when compared with the respective periods in 2008. The decrease for the fourth quarter of 2009 was primarily due to the 28% decrease in concentrate sold. The increase in 2009 was primarily due to the depreciation of capital spares and lower reserves used for depletion purposes.

Exploration expenses in the fourth quarter of 2009 and for the 2009 year were lower compared with the respective periods in 2008. Please refer to the exploration section below for additional details.

Income and mining tax provisions for the fourth quarter of 2009 increased to $1.7 million in 2009 compared to a recovery of $1.9 million in 2008. For the 2009 year, the tax provision was $2.7 million compared to $3.3 million in 2008. The decrease for the fourth quarter and 2009 year were due to lower earnings at Mochito.

Capital Expenditures:

At Mochito, $13.0 million was invested in 2009 as follows: $1.3 million for tailings facilities; $1.2 million for repair and upgrades of roads; $4.6 million for mine development; $3.7 million for various infrastructure projects; and, $2.2 million for capital spares.

(ii) Mochito Production

Mochito's production is set out in the following table:



Fourth Quarter Year
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 187,806 162,083 726,818 646,845
Zinc (%) 6.5 4.6 5.7 5.0
Lead (%) 3.0 2.5 2.4 2.4
Silver (g/t) 104 94 93 103
Concentrate Production
Zinc (tonnes) 20,339 12,198 68,552 53,757
Recovery (%) 87.4 87.3 87.8 88.6
Grade (%) 52.5 53.1 53.0 53.0
Lead (tonnes) 7,230 4,943 22,110 18,865
Recovery (%) 85.4 82.8 83.6 82.4
Grade (%) 66.4 66.8 65.5 66.5
Metal in Concentrates
Zinc (tonnes) 10,683 6,470 36,370 28,462
Lead (tonnes) 4,798 3,305 14,471 12,545
Silver (ounces) 540,972 431,849 1,855,018 1,894,835

US$ operating costs, production basis
($000's) 10,197 9,289 38,449 35,761
US$ operating cost per tonne milled
(production basis) 54 57 53 55


Production of zinc in concentrate was 65% higher in the fourth quarter of 2009 compared with the same period in 2008 due to more tonnes milled at a significantly higher zinc head grade. Production of lead in concentrate in the fourth quarter of 2009 was 45% higher than the same period in 2008 due to higher lead grades, higher mill throughput and improved recoveries. Production of zinc in concentrate in 2009 was 28% higher than 2008 primarily due to more tonnes milled at a higher zinc head grade. Production of lead in concentrate in 2009 was 15% higher than 2008 primarily due to more tonnes milled.

Compared with previously disclosed guidance, mill throughput was higher than target with higher zinc grades and lower lead and silver grades than planned resulting in higher zinc and lower lead and silver production on a metal contained in concentrate basis.

(iii) Mochito Drilling

Exploration efforts during 2009 concentrated on finding additional deposits accessible from existing mine workings by extensional drilling along known mineralized trends.

A total of 25,901 metres was drilled from underground during 2009. Definition and valuation drilling accounted for 14,910 metres while exploration and extensional drilling accounted for 10,991 metres.

There are three principal mineral trends that remain open at Mochito as well as numerous secondary mineral trends that remain prospective. Exploration results during 2009 were very favourable on the extension of all three of the main mineral trends and exploration efforts will continue to focus on these trends in 2010; namely, the northeast extension of the Porvenir trend (Deep North and Deep East), the northeast extension of the Salva Vida trend (Santa Rita and Santa Barbara) and the northern extensions of the Barbasco-Imperial and Port Royal trends.

(iv) Mochito Outlook

Ground control issues have affected the mine over the last several years necessitating the mining of mineralized material in unaffected areas. While these issues are thought to be largely resolved, a recurrence could result in the 2010 production being lower than anticipated. The current labour agreement with Mochito employees expires October 1, 2010. Meeting the 2010 production guidance for Mochito assumes a successful conclusion to labour negotiations.

Toqui

(i) Toqui Financial Results



Fourth Quarter Year
($000's) 2009 2008 2009 2008
----------------------------------------------------------------------------
Gross sales revenue 10,111 18,763 60,179 96,056
Treatment and marketing costs (1,727) (9,265) (17,704) (40,187)
------------------------------------
Net revenue 8,384 9,498 42,475 55,869
Direct operating costs (3,855) (10,985) (18,864) (36,879)
Depreciation and depletion (1,014) (3,117) (6,331) (9,372)
Reclamation and closure (costs) recovery (192) (125) (718) 449
------------------------------------
Contribution (loss) from mining
activities 3,323 (4,729) 16,562 10,067
Exploration (182) (128) (642) (943)
------------------------------------
3,141 (4,857) 15,920 9,124
Income and mining tax recovery
(provision) (913) 626 (2,633) (2,051)
------------------------------------
Net earnings (loss) 2,228 (4,231) 13,287 7,073
------------------------------------
------------------------------------
Capital expenditures 7,269 3,135 14,171 20,890
------------------------------------
------------------------------------


Revenue:

The following tables and discussion provide details of Toqui's gross sales revenue for the periods indicated:



Fourth Quarter 2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 4,597 1,919 1,892 3,630
Lead 458 235 2,241 527
Gold 1,368 4,507 1,117 5,037
Silver n.a. 21,219 17.38 369
--------- --------
6,423
---------
---------
Gross sales revenue in US$ 9,563
Exchange rate 1.0573
--------
Gross sales revenue in C$ 10,111
--------
--------

Fourth Quarter 2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 16,618 6,968 1,256 8,749
Lead 2,087 1,101 963 1,061
Gold 1,192 6,227 795 4,953
Silver n.a. 67,229 9.98 671
--------- --------
19,897
---------
---------
Gross sales revenue in US$ 15,434
Exchange rate 1.2157
--------
Gross sales revenue in C$ 18,763
--------
--------
(1) Payable metal and realized prices for zinc and lead are per tonne and
for gold and silver are per ounce.


Total concentrate sold in the fourth quarter of 2009 was 68% less than in the fourth quarter of 2008 primarily due to lower planned production levels and the timing of shipments. Lower concentrate sales were partially offset by higher realized prices for all metals produced at Toqui resulting in a 38% decrease in gross sales revenue in US$ terms. A 13% decrease in the exchange rate resulted in 46% lower gross sales revenue in C$ terms.



Year 2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 41,652 16,881 1,425 24,060
Lead 1,578 793 1,879 1,490
Gold 6,677 27,370 960 26,272
Silver n.a. 97,090 14.24 1,383
Other(2) n.a. (359)
-------- ---------
49,907
--------
--------
Gross sales revenue in US$ 52,846
Exchange rate 1.1388
---------
Gross sales revenue in C$ 60,179
---------
---------


Year 2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 73,488 29,926 2,020 60,460
Lead 6,828 3,379 1,576 5,325
Gold 4,894 25,780 876 22,591
Silver n.a. 218,054 14.54 3,171
Other(2) n.a. (127)
-------- ---------
85,210
--------
--------
Gross sales revenue in US$ 91,420
Exchange rate 1.0507
--------
Gross sales revenue in C$ 96,056
--------
--------
(1) Payable metal and realized prices for zinc and lead are per tonne and
for gold and silver are per ounce.
(2) Other gross sales revenue represents revaluations of prior period
concentrate receivables.


Tonnes of concentrate sold decreased by 41% in 2009 compared with 2008 primarily due to lower planned production levels and the timing of shipments. Lower concentrate sales and a lower zinc price resulted in a 42% decrease in gross sales revenue in US$ terms. An 8% increase in the exchange rate resulted in 37% lower gross sales revenue in C$ terms.

Expenses:

Treatment and marketing costs were 81% lower on an aggregate basis in the fourth quarter of 2009 compared with the fourth quarter of 2008 primarily due to 68% fewer tonnes of concentrate sold, more favourable smelter terms, lower freight rates and a stronger C$. As a percentage of gross revenue, treatment and marketing costs decreased to 17% from 49% in the same period in 2008 primarily due to the factors noted above.

For the full year, treatment and marketing costs were lower than in 2008 both in aggregate terms and per tonne sold primarily due to a decrease in concentrate sold, more favourable smelter terms and lower freight rates partially offset by a weaker C$.

Direct operating costs in the fourth quarter of 2009 were 65% lower than in the same period of 2008 primarily due to 68% lower tonnes of concentrate sold compared to 2008, the impact of cost savings initiatives and lower diesel prices.

Direct operating costs in 2009 were 49% lower than in 2008 primarily due to lower tonnes of concentrate sold, the impact of cost savings initiatives and lower diesel prices.

Income and mining tax provision for the fourth quarter of 2009 and year increased by $1.5 million and $0.6 million respectively primarily due to higher earnings before tax.

Capital Expenditures:

Toqui capital expenditures of $14.2 million in 2009 consisted primarily of: $4.6 million for development; $3.5 million for a thickened tailings facility to be completed in 2010; $3.6 million in instalment payments for a wind power plant; $1.0 million for mobile equipment; and, $1.0 million for definition drilling.

(ii) Toqui Production

Toqui's production is set out in the following table:



Fourth Quarter Year
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 130,857 130,893 496,686 519,379
Zinc (%) 4.4 6.6 4.7 7.0
Lead (%) 0.3 0.9 0.4 0.9
Silver (g/t) 31 31 24 28
Gold (g/t) 4.2 3.1 3.7 1.9
Concentrate Production
Zinc (tonnes) 9,799 15,253 40,665 64,776
Recovery (%) 85.8 88.1 86.0 88.8
Grade (%) 49.1 48.0 48.3 49.1
Lead (tonnes) 345 1,193 1,927 5,395
Recovery (%) 59.9 65.6 59.9 61.2
Grade (%) 50.0 56.1 53.2 51.8
Gold (tonnes) 2,693 1,549 9,162 2,895
Recovery (%) 59.1 56.1 60.0 55.5
Grade (g/t) 117.0 127.4 110.7 142.3
Metal in Concentrates
Zinc (tonnes) 4,815 7,518 19,635 31,992
Lead (tonnes) 172 670 1,025 2,796
Gold (ounces) 13,102 9,758 44,079 23,085
Silver (ounces) 51,470 94,899 233,382 343,457

US$ operating costs, production basis
($000's) 6,217 5,744 21,900 24,269
US$ operating cost per tonne milled
(production basis) 48 44 44 47


Production of zinc in concentrate was 36% lower in the fourth quarter of 2009 compared with the same period in 2008 due to lower planned zinc grades and recoveries. Production of lead in concentrate in the fourth quarter of 2009 was 74% lower due to lower planned lead grades. Production of gold in concentrate in the fourth quarter of 2009 was 34% higher due to higher planned gold grades. Production of zinc in concentrate in 2009 was 39% lower than 2008 due to lower planned zinc grades and recoveries. Production of lead in concentrate in 2009 was 63% lower due to lower planned lead grades. Production of gold in concentrate in 2009 was 91% higher due to higher planned gold grades.

As the price of zinc exceeded expected prices in 2009, the Company did not reduce throughput as projected but continued to mine zinc bearing deposits in addition to the gold bearing deposits. Mining the zinc deposits in addition to the gold deposits in the fourth quarter of 2009 resulted in higher cash flows and lower costs per tonne than planned.

(iii) Toqui Drilling

Exploration potential in the Toqui district is considered excellent for identifying additional mineral reserves and mineral resources. Since acquiring the Toqui mine in 1997, the Company has systematically explored the region and has identified several areas which have expanded the mineral reserves and mineral resources in the area of the mine. Despite this, the Toqui region generally remains under-explored.

During 2009, 11,330 metres were drilled from underground in 128 holes and no surface drilling was carried out.

The underground drill campaign included infill drilling and definition drilling. The bulk of the campaign was targeted on further defining the Mina Profunda deposit as well as on areas below the Aserredero and Dona Rosa deposits in search of similar gold deposits. Sectors drilled were Sector 9, Falla 4, Aserradero lower calcarious sandstone ("LCS") and Mallin Sur LCS. These sectors are indicating mineralization but will require further drilling. In Aserredero Norte, the drilling of the LCS has been successful and additional tonnage has been added to Toqui's gold resources.

Underground drilling was also carried out in Estatuas and Concordia Sur adding tonnage to the reserve.

(iv) Toqui Outlook

The 2010 mine plan at Toqui is focused on mining the gold bearing deposits together with the zinc bearing deposits and assumes the thickened tailings facility and the wind power plant are installed and operational in the second half of 2010. Toqui's current labour agreement expires October 1, 2010. Meeting the 2010 production guidance for Toqui assumes a successful conclusion to labour negotiations.

Myra Falls

(i) Myra Falls Financial Results



Fourth Quarter Year
($000's) 2009 2008 2009 2008
----------------------------------------------------------------------------
Gross sales revenue 23,534 33,915 78,377 109,404
Treatment and marketing costs (6,553) (10,392) (20,351) (32,886)
-------------------------------------
Net revenue 16,981 23,523 58,026 76,518
Direct operating costs (8,612) (31,934) (46,990) (88,247)
Depreciation and depletion (233) (2,562) (1,398) (7,031)
Reclamation and closure costs (305) (178) (3,004) (1,466)
-------------------------------------
Contribution (loss) from mining
activities 7,831 (11,151) 6,634 (20,226)
Exploration - (7) - (1,033)
Write-down of mineral properties and
fixed assets - (25,300) - (25,300)
-------------------------------------
7,831 (36,458) 6,634 (46,559)
Income and mining tax (provision)
recovery (162) 291 (162) (7,873)
-------------------------------------
Net earnings (loss) 7,669 (36,167) 6,472 (54,432)
-------------------------------------
-------------------------------------

Capital expenditures 541 420 1,645 3,670
-------------------------------------
-------------------------------------


Revenue:

The following tables and discussion provide details of Myra Falls' gross sales revenue for the periods indicated:



Fourth Quarter
----------------------------------------------------------------------------
2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 15,133 6,869 2,273 15,613
Copper 1,943 488 6,249 3,050
Gold 85 2,457 1,052 2,585
Silver n.a. 61,669 17.27 1,065
------------ -------------------
17,161
------------ -------------------
------------ -------------------
Gross sales revenue in US$ 22,313
Exchange rate 1.0547
--------
Gross sales revenue in C$ 23,534
--------
--------

Fourth Quarter
----------------------------------------------------------------------------
2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 21,197 9,869 1,441 14,221
Copper 9,436 2,360 4,108 9,694
Gold 1 3,729 816 3,041
Silver n.a. 125,065 13.38 1,674
------------ --------
30,634
------------
------------
Gross sales revenue in US$ 28,630
Exchange rate 1.1846
--------
Gross sales revenue in C$ 33,915
--------
--------

(1) Payable metal and realized prices for zinc and copper are per tonne and
for gold and silver are per ounce.


Concentrate sold in the fourth quarter of 2009 was 44% lower than in the fourth quarter of 2008. Lower concentrate sales were partially offset by significant higher realized zinc, copper and gold prices and resulted in 22% lower revenue for the quarter in US$ terms. An 11% lower exchange rate resulted in gross sales revenue decreasing 31% in C$ terms to $23.5 million.



Year 2009
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 54,721 24,996 1,631 40,762
Copper 16,318 3,596 4,495 16,164
Gold 94 8,563 943 8,075
Silver n.a. 299,461 13.45 4,028
Other(2) n.a. (335)
------------ --------
71,133
------------
------------
Gross sales revenue in US$ 68,694
Exchange rate 1.1410
--------
Gross sales revenue in C$ 78,377
--------
--------

Year 2008
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 68,361 31,061 1,851 57,483
Copper 23,500 5,401 5,873 31,718
Gold 1 10,144 867 8,791
Silver n.a. 359,767 15.58 5,605
Other(2) n.a. (1,341)
------------ --------
91,862
------------
------------
Gross sales revenue in US$ 102,256
Exchange rate 1.0699
--------
Gross sales revenue in C$ 109,404
--------
--------

(1) Payable metal and realized prices for zinc and copper are per tonne and
for gold and silver are per ounce.

(2) Other gross sales revenue represents revaluations of prior period
concentrate receivables.


Concentrate sold in 2009 was 23% lower than in 2008. Lower concentrate sales and lower realized zinc and copper prices resulted in revenues for the year decreasing by 33% in US$ terms. A 7% higher exchange rate resulted in gross sales revenue decreasing 28% in C$ terms to $78.4 million.

Expenses:

In the fourth quarter of 2009, treatment and marketing costs were 37% lower on an aggregate basis primarily due to 44% lower concentrate sales, lower freight rates, more favourable smelter terms, lower exchange rate. As a percentage of gross revenue, in the fourth quarter of 2009, treatment and marketing costs decreased to 28% from 31% in the same period in 2008 primarily due to higher realized metal prices and the factors noted above.

In 2009, treatment and marketing costs were 38% lower on an aggregate basis primarily due to 23% lower concentrate sales, lower freight rates and more favourable smelter terms partially offset by a higher exchange rate. As a percentage of gross revenue, in 2009 treatment and marketing costs decreased to 26% from 30% in the same period in 2008 primarily due to lower realized metal prices and the factors noted above.

Direct operating costs in the fourth quarter of 2009 were 73% lower than in the same period of 2008 primarily due to 44% lower concentrate sales, cost reductions achieved in 2009, reduced write-downs related to marking inventory to the lower of cost and net realizable value and reduced restructuring expenses partially offset by increased pension expenses.

Direct operating costs in 2009 were 47% lower than in 2008 primarily due to 23% lower concentrate sales, and cost reductions achieved in 2009, reduced write-downs related to marking inventory to the lower of cost and net realizable value and reduced restructuring expenses partially offset by increased pension expenses.

Income and mining tax provisions for the fourth quarter of 2009 were $0.2 million compared with a recovery of $0.3 million in 2008. The increase was due to an adjustment for mining taxes. For 2009, the income and mining tax provision decreased by $7.7 million primarily due to an $8.0 million write-down of a future tax asset in 2008 which did not recur in 2009.

Capital Expenditures:

Myra Falls' capital expenditures in 2009 of $1.6 million consisted primarily of $0.3 million for the tailings disposal area, $0.4 million in ramp development, $0.5 million for mobile equipment and $0.3 million related to mine infrastructure.

(ii) Myra Falls Production

The following table sets forth Myra Falls' production for the periods presented:



Fourth Quarter Year
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 107,157 126,140 449,930 592,072
Zinc (%) 9.6 6.9 7.8 6.9
Copper (%) 1.3 1.0 1.1 1.1
Gold (g/t) 2.3 1.2 1.6 1.2
Silver (g/t) 81 43 52 45
Concentrate Production
Zinc (tonnes) 17,549 14,161 57,838 66,051
Zinc Recovery (%) 88.9 87.5 88.4 87.1
Zinc Grade (%) 51.9 54.1 53.4 54.1
Gold Recovery (%) 18.7 23.2 21.0 24.8
Gold Grade (g/t) 2.7 2.4 1.7 2.7
Copper (tonnes) 3,802 4,039 14,404 21,569
Copper Recovery (%) 65.9 72.7 67.9 74.1
Copper Grade (%) 23.5 22.2 23.3 23.3
Gold Recovery (%) 52.1 38.9 39.3 35.9
Gold Grade (g/t) 31.3 13.9 19.2 12.0
Gold (tonnes) 0.1 - 2.0 -
Recovery (%) 9.1 - 8.1 -
Grade (g/t) 395,151 - 28,999 -
Metal in Concentrates
Zinc (tonnes) 9,113 7,659 30,900 35,762
Copper (tonnes) 893 895 3,349 5,024
Gold (ounces) 5,873 2,870 15,526 13,994
Silver (ounces) 222,309 134,897 578,008 661,228

C$ operating costs, production basis
($000's) 12,674 14,176 50,905 75,724
C$ operating cost per tonne milled
(production basis) 118 112 113 128


Production of zinc in concentrate was 19% higher in the fourth quarter of 2009 compared with the same period in 2008 due to higher head grades and recoveries despite fewer tonnes milled. Production of copper in concentrate in the fourth quarter of 2009 was similar to the same period in 2008 due to higher head grades despite lower recoveries and fewer tonnes milled. Production of zinc in concentrate in 2009 was 14% lower than 2008 due to fewer tonnes milled despite higher recoveries and head grades. Production of copper in concentrate was 33% lower in 2009 compared with the same period in 2008 due to fewer tonnes milled and lower recoveries.

In 2009, the Company entered into three royalty agreements whereby the Company sold a basic royalty on a portion of the payable zinc production over the life of the Myra Falls mine. The Company received $95.6 million, which included royalty income of $86.1 million and fees and interest of $9.6 million.

Under the terms of the royalty agreements, the Company is required to make basic royalty payments at fixed amounts per tonne of payable zinc produced. In addition, the Company granted net profit interests for the three royalty agreements respectively in years 2015 through 2019 if the average price of zinc in a given calendar year exceeds US$4,250, US$4,500 or US$4,750 per tonne respectively. Of the cash received, $86.1 million was placed with a financial institution, for which the Company took back promissory notes. Interest earned from the promissory notes will be used to fund the expected basic royalty payments during the initial years of the royalty agreements. Over the remaining years of the royalty agreements, interest and principal from the promissory notes will be used to fund the basic royalty payments.

The balance of the funds received of $9.6 million will be used for general corporate purposes. Under certain circumstances the Company has the right, by way of a call option, to acquire the partnership units which own the royalty agreements for the lower of market value or for the outstanding amount of the promissory note.

The collective bargaining agreement at Myra Falls was renewed during 2009 for three years and has an expiry date of September 30, 2012.

(iii) Myra Falls Drilling

The 2009 diamond drilling program consisted of evaluating and delineating the perimeter of the Battle and HW deposits. In 2009, the total metres drilled were 14,416 with 8,275 metres drilled in the Battle deposit and 6,141 metres drilled in the HW deposit. The South Flank lens, located at the eastern end of the HW deposit was a principal target during the year and will continue to be a focus of exploration in 2010. The Battle drill program delineated a new lens (108) associated with an intrusive contact west of known mineralization. Exploration for additional mineralization along this contact is planned for 2010. The definition drill program, which is directed toward infill work for mining purposes, has led to the delineation of a Battle Upper lens area which was previously interpreted as non-mineralized.

A program of access development to establish diamond drill platforms is planned for 2010. This includes development on 24 level to provide drill access for the Marshall zone in the north west area of the mine. Planned development within the Price mine will gain access to drill positions from which the area between the west end of the Price mine down to the east end of the South Flank lens can be explored. A second major target is the Trumpeter lens which lies north and east of the HW lens. This target can be tested through an extension of an existing drift in the Price mine. In addition to these major development and drill projects, the peripheral diamond drill programs around the HW and Battle deposits are planned to be ongoing throughout 2010.

(iv) Myra Falls Outlook

The 2010 plan at Myra Falls is focused on mining in the Battle/Gap, the HW and the South Flank deposits and assumes that normal weather patterns prevail throughout 2010.

Langlois

On November 2, 2008, the Company temporarily suspended operations at Langlois due to unforeseen economic developments and the mine is being maintained on a care and maintenance basis. Langlois personnel have developed a re-opening plan which anticipates a minimum of six months of pre-production development in order to enable increased production rates. The Company will continue to closely monitor economic and market conditions as they relate to any decision to continue the temporary suspension or to restart the mine.

The following table provides details of Langlois' gross sales revenue for the periods indicated:



Year 2009(1)
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(3) revenue
(tonnes) metal(3) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 3,618 1,660 1,151 1,911
Copper 322 57 3,221 184
Silver n.a. 26 818 21
Gold n.a. 9,515 10.29 98
Other(4) n.a. 220
------------ --------
3,940
------------
------------
Gross sales revenue in US$ 2,434
Exchange rate 1.2293
--------
Gross sales revenue in C$ 2,992
--------
--------

Year 2008(2)
----------------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(3) revenue
(tonnes) metal(3) (US$) ($000's)
----------------------------------------------------------------------------
Zinc 81,730 36,638 1,871 68,537
Copper 11,818 2,039 6,489 13,232
Silver n.a. 332,209 14.24 4,731
Gold n.a. 1,285 860 1,104
Other(4) n.a. 404
------------ --------
93,548
------------
------------
Gross sales revenue in US$ 88,008
Exchange rate 1.0687
--------
Gross sales revenue in C$ 94,054
--------
--------

(1) Due to the Company's revenue recognition policy, certain concentrate
produced prior to the temporary suspension on November 2, 2008 was not
recognized in revenue until the first quarter of 2009.

(2) On November 2, 2008, Langlois operations were temporarily suspended.

(3) Payable metal and realized prices for zinc and copper are per tonne and
for gold and silver are per ounce.

(4) Other gross sales revenue represents revaluations of prior period
concentrate receivables.


For additional information on Langlois' 2008 results, please refer to the Company's 2008 financial report which can be found on SEDAR at www.sedar.com or available on the Company's website at www.breakwater.ca.

Langlois Outlook

While the unforeseen suspension of operations at Langlois is considered temporary, management is taking a cautionary approach. To this end, the Company has initiated a project to advance two ramps, one from surface to the top of zone 4 and one internal to zone 3. The capital to be spent will be $4.6 million which is expected to be provided in the form of loans and a training and employment grant from a consortium of local, regional and provincial government agencies. In the interim Langlois will remain on care and maintenance. The Company continues to closely monitor conditions to determine when production should recommence with a view to reopening the mine as economic circumstances permit.

NON-GAAP RECONCILIATIONS

Operating cost per tonne milled on a production basis is a performance indicator. It is a non-GAAP measure and because there is no standard method for calculating it, operating costs per tonne milled on a production basis is not a reliable way to compare the Company against other companies. It can however allow an understanding of how production costs have changed from year-to-year and the impact on cash flows.



Three Months Ended
December 31, 2009 Myra
($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs
per financial statements 4,851 3,855 8,612 15 17,333
Adjustment to production
basis 6,392 3,386 4,070 n.a. 13,848
Less: stock-based
compensation (4) (2) (8) (15) (29)
Less: royalty adjustment n.a. (540) n.a. n.a. (540)
---------------------------------------------------
Operating costs on
production basis (C$) 11,239 6,699 12,674 - 30,612
---------------------------------------------------
---------------------------------------------------
Average exchange rate 1.1022 1.0775 1.0627 n.a. 1.0802
Operating costs on
production basis (US$) 10,197 6,217 11,926 n.a. 28,340
---------------------------------------------------
---------------------------------------------------
Tonnes milled 187,806 130,857 107,157 n.a. 425,820
---------------------------------------------------
---------------------------------------------------
Operating cost per tonne
milled - US$ 54 48 111 n.a. 67
Operating cost per tonne
milled - C$ 60 51 118 n.a. 72

(1) On November 2, 2008, Langlois operations were temporarily suspended.



Three Months Ended
December 31, 2008 Myra
($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs
per financial statements 15,309 10,985 31,934 17,897 76,125
Adjustment to production
basis (4,094) (3,941) (17,713) (9,640) (35,388)
Less: stock-based
compensation (9) (19) (44) (15) (87)
Add: royalty adjustment n.a. 8 n.a. n.a. 8
---------------------------------------------------
Operating costs on a
production basis (C$) 11,206 7,033 14,177 8,242 40,658
---------------------------------------------------
---------------------------------------------------

Average exchange rate 1.2063 1.2244 1.3470 1.4419 1.3001
Operating costs on
production basis (US$) 9,289 5,744 10,524 5,717 31,274
---------------------------------------------------
---------------------------------------------------

Tonnes milled 162,083 130,893 126,140 67,611 486,727
---------------------------------------------------
---------------------------------------------------
Operating cost per tonne
milled - US$ 57 44 83 85 64
Operating cost per tonne
milled - C$ 69 54 112 122 84

(1) On November 2, 2008, Langlois operations were temporarily suspended.



Year Ended December 31, Myra
2009 ($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs
per financial statements 36,691 18,864 46,990 1,191 103,736
Adjustment to production
basis 7,130 7,272 3,986 (1,134) 17,254
Less: stock-based
compensation (13) (44) (71) (57) (185)
Less: royalties n.a. (1,388) n.a. n.a. (1,388)
---------------------------------------------------
Operating costs on a
production basis (C$) 43,808 24,704 50,905 - 119,417
---------------------------------------------------
---------------------------------------------------

Average exchange rate 1.1394 1.1280 1.1409 n.a. 1.1377
Operating costs on
production basis (US$) 38,449 21,900 44,619 n.a. 104,968
---------------------------------------------------
---------------------------------------------------
Tonnes milled 726,818 496,686 449,930 n.a. 1,673,434
---------------------------------------------------
---------------------------------------------------
Operating cost per tonne
milled - US$ 53 44 99 n.a. 63
Operating cost per tonne
milled - C$ 60 50 113 n.a. 71

(1) Due to the Company's revenue recognition policy, certain concentrate
produced prior to the temporary suspension on November 2, 2008 was not
recognized in revenue until the first quarter of 2009.



Year Ended December 31, Myra
2008 ($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs per
financial statements 42,463 36,878 88,247 61,734 229,322
Adjustment to production
basis (4,234) (9,605) (12,230) (8,672) (34,741)
Less: stock-based
compensation (54) (138) (293) (61) (546)
Less: royalties n.a. (1,229) n.a. n.a. (1,229)

---------------------------------------------------
Operating costs on a
production basis (C$) 38,175 25,906 75,724 53,001 192,806
---------------------------------------------------
---------------------------------------------------

Average exchange rate 1.0675 1.0675 1.0675 1.0675 1.0675
Operating costs on
production basis (US$) 35,761 24,269 70,936 49,650 180,616
---------------------------------------------------
---------------------------------------------------

Tonnes milled 646,845 519,379 592,072 514,444 2,272,740
---------------------------------------------------
---------------------------------------------------

Operating cost per tonne
milled - US$ 55 47 120 97 79
Operating cost per tonne
milled - C$ 59 50 128 103 85

(1) On November 2, 2008, Langlois operations were temporarily suspended.


SUMMARY OF QUARTERLY RESULTS

2008
---------------------------------------------------
---------------------------------------------------
Q1 Q2 Q3 Q4
----------------------------------------------------------------------------
Gross sales revenue ($ millions) 81.9 115.1 101.0 100.1
Net earnings (loss) ($ millions) (6.9) 8.1 (36.1) (53.5)
Basic earnings (loss) per share $ (0.02) $ 0.02 $ (0.08) $ (0.12)
Weighted-average number of
Common Shares outstanding
(millions) 425.8 446.4 446.5 446.8
Diluted earnings (loss) per share $ (0.02) $ 0.02 $ (0.08) $ (0.12)
C$/US$ realized exchange rate 1.0047 1.0100 1.0457 1.2050
Average realized zinc price (US$/t) 2,409 2,205 1,830 1,331
Average realized zinc price (C$/t) 2,420 2,227 1,914 1,604
Concentrate tonnes sold(1) 59,210 95,188 87,978 104,229
Concentrate tonnes produced(1) 73,481 86,856 89,514 65,986

2009
---------------------------------------------------
---------------------------------------------------
Q1 Q2 Q3 Q4
----------------------------------------------------------------------------
Gross sales revenue ($ millions) 64.1 40.9 71.6 49.7
Net earnings (loss) ($ millions) (6.5) (4.5) 6.5 5.4
Basic earnings (loss) per share (0.01) $ (0.01) $ 0.01 $ 0.01
Weighted-average number of
Common Shares outstanding
(millions) 447.7 678.4 678.9 683.6
Diluted earnings (loss) per share (0.01) $ (0.01) $ 0.01 $ 0.01
C$/US$ realized exchange rate 1.2499 1.1599 1.0947 1.0567
Average realized zinc price (US$/t) 1,156 1,413 1,678 2,119
Average realized zinc price (C$/t) 1,445 1,639 1,837 2,239
Concentrate tonnes sold(1) 66,051 43,670 54,590 38,401
Concentrate tonnes produced(1) 49,803 48,512 54,588 61,757

(1) On November 2, 2008, Langlois operations were temporarily suspended. Due
to the Company's revenue recognition policy, certain concentrate
produced prior to the temporary suspension on November 2, 2008 was not
recognized in revenue until the first quarter of 2009.


The quantity and mix of concentrates sold directly affects gross sales revenue. The recognition of revenue from the sale of concentrate can vary from quarter-to-quarter for the reasons discussed in the "Gross Sales Revenue" section of this news release. As all sales are based in US$, the US$'s movement against the C$ impacts the realized C$ gross sales revenue.



CONTRACTUAL OBLIGATIONS

Contractual Obligations
($ millions) Payments Due by Period
----------------------------------------------------------------------------
----------------------------------------------------------------------------
greater greater
less than than than
1 year 1-3 years 4-5 years 5 years Total
----------------------------------------------------------------------------
Capital leases 0.4 0.5 0.1 - 1.0
Operating leases 1.0 1.0 - - 2.0
Debt 2.2 4.8 1.9 1.3 10.2
Accrued benefit
obligations (1) 2.6 10.4 11.9 17.0 41.9
Reclamation(1) 5.4 2.8 - 26.6 34.8
Royalty obligations(1) - - 62.0 102.0 164.0
----------------------------------------------------------------------------
Total 11.6 19.5 75.9 146.9 253.9
----------------------------------------------------------------------------
----------------------------------------------------------------------------

(1) Accrued benefit obligations, reclamation and royalty obligations have
funding sources from pension plan assets ($35.3 million), restricted
reclamation investments ($31.6 million) and restricted promissory notes
($168.4 million) respectively. See the Company's 2009 audited
consolidated financial statements for additional details.


TRANSACTION WITH RELATED PARTIES

In the second quarter of 2009, Dundee Corporation, a significant shareholder of the Company, purchased 57,960,000 units under the Offering to maintain its approximate 25.2% equity interest in the Company.

In 2009, Dundee incurred $61,000 of legal fees on behalf of the Company relating to various financing alternatives. The Company has agreed to reimburse Dundee for these amounts which remained unpaid as at December 31, 2009.

OUTSTANDING SHARE DATA AND FULL DILUTION CALCULATION

The Company is authorized to issue an unlimited number of Common Shares and 200,000,000 preferred shares, issueable in series. There are no preferred shares outstanding. Each Common Share entitles the holder of record thereof to one vote at all meetings of shareholders of the Company, except at meetings at which only holders of another class or series of shares of the Company are entitled to vote. The table set forth below summarizes the Capital Stock.




Common Shares or Securities Convertible into Common
Shares February 25, 2010
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Issued and outstanding 687,922,628
Share options outstanding (weighted-average exercise
price $0.74) 12,530,740
Warrants issued at $0.12, expire on April 9, 2014 -
traded on TSX 106,511,000
----------------------------------------------------------------------------
Future fully diluted 806,964,368
----------------------------------------------------------------------------
----------------------------------------------------------------------------


CONCLUSION RELATING TO DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was performed under the supervision of and with the participation of management, including the President and Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as defined in the Multilateral Instrument 52-109. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that the design and operation of the Company's disclosure controls and procedures were effective as at December 31, 2009.

CAUTION ON FORWARD-LOOKING INFORMATION

This news release contains certain statements which constitute forward-looking information. These forward-looking statements are not descriptive of historical matters and may refer to management's expectations or plans. These statements include but are not limited to statements concerning the Company's business objectives and plans; future trends in the Company's industry; future production costs and volumes; mineral grades, reserve and resource estimates and types; sales volumes and realized prices; capital spending plans; exploration plans; expansion plans; expected market fundamentals and prices; availability of equipment and supplies; expected plant availability; success of process changes; the Company's processing technologies; global economic growth and industrial demand; production of base metal concentrates by the Company's operations; future metal prices and treatment and freight charges; future royalties payable; changes in global metal and concentrate inventories; currency exchange rates; costs of energy, materials and supplies; the outcome of disputes and legal proceedings in which the Company is involved; future effective tax rates; and, future benefit costs.

Inherent in forward-looking statements are risks and uncertainties beyond the Company's ability to predict or control, including risks that may affect the Company's operating or capital plans, including risks generally encountered in the development and operation of mineral properties and processing facilities such as unusual or unexpected geological formations, unanticipated metallurgical difficulties, ground control problems, process upsets and equipment malfunctions; risks associated with labour disturbances and unavailability of skilled labour; fluctuations in the market prices of the Company's principal products, which are cyclical and subject to substantial price fluctuations; risks created through competition for mining properties; risks associated with lack of access to markets; risks associated with mineral reserve and resource estimates, including the risk of errors in assumptions or methodologies; risks posed by fluctuations in exchange rates and interest rates, as well as general economic conditions; risks associated with environmental compliance and permitting, including those created by changes in environmental legislation and regulation; risks associated with the Company's dependence on third parties in the provision of transportation and other critical services; risks associated with aboriginal title claims and other title risks; social and political risks; risks associated with government and non-government actions; and, risks associated with legal proceedings.

Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this news release. Such statements are based on a number of assumptions which may prove to be incorrect, including, but not limited to, the following assumptions: that there is no material deterioration in general business and economic conditions; that there is no fluctuation of interest rates and foreign exchange rates; that the supply and demand for, deliveries of, and the level and volatility of prices of zinc, copper, lead, gold and silver develop as expected; that the Company receives regulatory and governmental approvals for its development projects and other operations on a timely basis; that the Company is able to obtain financing for its development projects on reasonable terms; that there is no unforeseen deterioration in the Company's costs of production or production and productivity levels; that the Company is able to continue to secure adequate transportation for its products; that the Company is able to procure mining equipment and operating supplies in sufficient quantities and on a timely basis; that engineering and construction timetables and capital costs for the Company's development and expansion projects are not incorrectly estimated or affected by unforeseen circumstances; that costs of closure of various operations are accurately estimated; that there are no unanticipated changes to market competition; that the Company's reserve estimates are within reasonable bounds of accuracy (including with respect to size, grade and recoverability) and that the geological, operational and price assumptions on which these are based are reasonable; that environmental and other proceedings or disputes are satisfactorily resolved; and, that the Company maintains its ongoing relations with its employees and with its business partners and joint venturers and representatives of communities in which it operates.

Readers are cautioned that the foregoing list of important factors and assumptions is not exhaustive. Forward-looking statements are not guarantees of future performance. Events or circumstances could cause the Company's actual results to differ materially from those estimated or projected and expressed in, or implied by, these forward-looking statements. Readers should also carefully consider the matters discussed under "Risk Factors" in the Company's most recent Annual Information Form. Given these uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing list of factors, whether as a result of new information or future events or otherwise, except as may be required under applicable laws.



BREAKWATER RESOURCES LTD.
Consolidated Balance Sheets
(Expressed in thousands of Canadian dollars)
(Unaudited)
----------------------------------------------------------------------------
As at December 31 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets

Current
Cash and cash equivalents 41,080 20,328
Restricted cash 775 761
Short-term investments 150 142
Accounts receivable - concentrate 2,717 614
Other receivables 10,558 12,451
Concentrate inventory 41,791 21,816
Materials and supplies inventory 33,860 37,278
Prepaid expenses and other current assets 2,156 5,748
Income and mining tax receivable 31 1,550
Future income tax assets - 621
----------------------------------------------------------------------------
Total current assets 133,118 101,309

Restricted reclamation investments 31,615 35,026
Mineral properties and fixed assets 262,153 277,990
Restricted promissory notes 168,365 80,886
----------------------------------------------------------------------------
595,251 495,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current
Accounts payable and accrued liabilities 32,706 48,058
Provisional payments for concentrate inventory shipped
and not priced 19,110 10,512
Short-term debt including current portion of long-term
debt 2,193 4,854
Income and mining taxes payable 2,998 264
Current portion of reclamation, closure cost accruals and
other environmental obligations 5,387 5,622
----------------------------------------------------------------------------
Total current liabilities 62,394 69,310

Deferred income 9,656 5,924
Long-term lease obligations 586 125
Royalty obligations 164,493 78,449
Long-term debt 8,049 1,851
Reclamation, closure cost accruals and other
environmental obligations 29,452 25,685
Employee future benefits 1,359 994
Future income tax liabilities 5,973 3,211
----------------------------------------------------------------------------
Total liabilities 281,962 185,549
Shareholders' equity 313,289 309,662
----------------------------------------------------------------------------
595,251 495,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Operations and Retained Earnings
(Expressed in thousands of Canadian dollars except share and per share
amounts)
(Unaudited)

Three Months Ended Twelve Months Ended
December 31 December 31

2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Gross sales revenue 49,744 100,101 226,438 398,110
Treatment and marketing costs 12,980 39,664 64,656 135,796
----------------------------------------------------------------------------
Net revenue 36,764 60,437 161,782 262,314
----------------------------------------------------------------------------

Direct operating costs 17,333 76,125 103,736 229,323
Depreciation and depletion 4,684 16,726 23,257 47,677
Reclamation and closure costs 933 810 5,776 3,864
----------------------------------------------------------------------------
22,950 93,661 132,769 280,864
----------------------------------------------------------------------------
Contribution (loss) from mining
activities 13,814 (33,224) 29,013 (18,550)
----------------------------------------------------------------------------

General and administrative 5,799 990 13,919 12,423
Interest and financing 836 (272) 3,170 2,706
Investment and other income (2,463) (10,669) (9,755) (24,205)
Foreign exchange expense (income) 1,003 (3,703) 5,726 (5,191)
Exploration 650 3,382 1,789 17,212
Write-down of mineral properties and
fixed assets - 35,508 - 46,478
Other non-producing property costs 1,530 590 6,742 1,834
----------------------------------------------------------------------------
7,355 25,826 21,591 51,257
----------------------------------------------------------------------------
Earnings (loss) before income and
mining tax provision 6,459 (59,050) 7,422 (69,807)
Income and mining tax provision
(recovery) 1,099 (5,564) 6,613 18,533
----------------------------------------------------------------------------
Net earnings (loss) 5,360 (53,486) 809 (88,340)
Retained earnings, beginning of year 76,017 134,054 80,568 168,908
----------------------------------------------------------------------------
Retained earnings, end of year 81,377 80,568 81,377 80,568
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic earnings (loss) per Common Share $ 0.01 ($0.12) ($0.00) ($0.20)
Diluted earnings (loss) per Common
Share $ 0.01 ($0.12) ($0.00) ($0.20)
Basic weighted-average number of
Common Shares outstanding (000's) 683,632 446,843 622,183 441,378
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Accumulated Other Comprehensive
(Loss) Income
(Expressed in thousands of Canadian dollars)
(Unaudited)
----------------------------------------------------------------------------
Year ended December 31 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive income (loss), beginning of
year 3,257 (3,817)
Other comprehensive (loss) income (19,086) 7,074
----------------------------------------------------------------------------

Accumulated other comprehensive (loss) income, end of year (15,829) 3,257
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Other Comprehensive (Loss) Income
(Expressed in thousands of Canadian dollars)
(Unaudited)
Three Months Twelve Months
Ended Ended
December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net earnings (loss) 5,360 (53,486) 809 (88,340)
----------------------------------------------------------------------------

Other comprehensive (loss) income, net
of income taxes:
Unrealized (losses) gains on
translating financial statements of
self sustaining foreign operations (3,004) 13,622 (18,801) 19,789
Unrealized loss on short-term
available-for-sale securities,
net of income tax provision of $Nil
(2008 - $5) 6 (3) - (26)
Unrealized (loss) gain on restricted
investments, net of income tax
provision of $32 (2008 - $94) (130) 407 (185) 533
Reclassification of gains on sale of
available-for-sale securities to
income 1 - (100) (13,222)
----------------------------------------------------------------------------
Other comprehensive (loss) income, net
of income taxes (3,127) 14,026 (19,086) 7,074
----------------------------------------------------------------------------

Comprehensive earnings (loss) 2,233 (39,460) (18,277) (81,266)
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Cash Flow
(Expressed in thousands of Canadian dollars)
Three Months Twelve Months
Ended Ended
(Unaudited) December 31 December 31
2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Activities
Net earnings (loss) 5,360 (53,486) 809 (88,340)
Items not affecting cash:
Depreciation and depletion 4,684 16,726 23,257 47,677
Gain on sale of investment - 14 (118) (9,021)
Write-down of mineral properties and
fixed assets - 35,508 - 46,478
Gain on sale of Lapa royalties - (6,350) - (6,350)
Unrealized loss (gain) on investments 182 (385) 259 1,337
Other non-cash items 2,106 (91) 2,885 2,271
Stock-based compensation 494 190 927 1,091
Unrealized deferred income (936) (153) (2,783) (611)
Future Income taxes (946) (2,231) 2,507 13,454
Reclamation, closure cost accruals
and other environmental obligations 933 810 5,776 3,864
Employee future benefits 881 249 3,458 1,633
Payment of reclamation, closure cost
accruals and other environmental
obligations (1,062) (2,537) (2,936) (5,420)
Payment for employee future benefits (814) (975) (3,093) (3,456)
Changes in non-cash working capital
items 12,213 13,529 (19,261) (10,452)
----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 23,095 818 11,687 (5,845)
----------------------------------------------------------------------------
Investing Activities
Increase in restricted cash 5,815 (250) (14) (132)
Restricted reclamation investments (226) (423) 3,076 (899)
Short-term investments - (14) - 7,003
Long-term investments - - - 13,350
Funds advanced on promissory note (62,641) (15,970) (86,069) (15,970)
Issue of common shares to purchase
Myra Falls Limited Partnership - - - (34)
Acquisition of Metco Resources Inc.,
net of cash acquired - - - 23
Mineral properties and fixed assets (12,112) (11,689) (30,169) (76,839)
Proceeds from sale of mineral
properties and fixed assets - 7,018 1,906 7,210
----------------------------------------------------------------------------
Net cash used in investing activities (69,164) (21,328) (111,270) (66,288)
----------------------------------------------------------------------------
Financing Activities
Proceeds from sale of royalty interest 62,641 15,970 86,069 15,970
Proceeds from sale of Lapa royalty - 6,350 - 6,350
Issue of common shares and warrants
for cash 682 97 22,341 381
Deferred income relating to royalties 6,811 869 9,556 869
Increase (decrease) in long-term lease
obligations 546 (33) 497 (142)
(Decrease) increase in short-term debt (329) 3,096 (886) 3,987
(Decrease) increase in long-term debt (329) (3,057) 5,139 -
----------------------------------------------------------------------------
Net cash provided by financing
activities 70,022 23,292 122,716 27,415
----------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents held in
U.S. dollars (loss) gain (1,186) 1,659 (2,381) 2,112
----------------------------------------------------------------------------
Net increase (decrease) in cash during
the period 22,767 4,441 20,752 (42,606)
----------------------------------------------------------------------------
Cash and cash equivalents, beginning
of period 18,313 15,887 20,328 62,934
----------------------------------------------------------------------------
Cash and cash equivalents, end of
period 41,080 20,328 41,080 20,328
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental Information
Cash interest paid 130 148 679 214
Cash income and mining taxes paid 87 859 1,051 15,494
Cash interest received 412 412 1,054 1,396
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Segment Information

Segment Information
For the Three Months Ended December 31, 2009 (Unaudited)
---------------------------------------------------------------------------
($000's)
Operating Segment Mochito Toqui Myra Falls Langlois Total
---------------------------------------------------------------------------

Gross sales revenue 17,666 10,111 23,534 - 51,311
Treatment and
marketing costs 4,700 1,727 6,553 - 12,980
---------------------------------------------------------------------------
Net revenue 12,966 8,384 16,981 - 38,331
---------------------------------------------------------------------------
Direct operating
Costs 4,851 3,855 8,612 15 17,333
Depreciation and
Depletion 2,195 1,014 233 1,219 4,661
Reclamation and
closure costs 300 192 305 21 818
---------------------------------------------------------------------------
7,346 5,061 9,150 1,255 22,812
---------------------------------------------------------------------------
Contribution (loss)
from mining activities 5,620 3,323 7,831 (1,255) 15,519
---------------------------------------------------------------------------
General and
administrative - - - - -
Interest and financing - - - - -
Investment and other
income - - - - -
Foreign exchange expense - - - - -
Exploration 900 182 - (492) 590
Other non-producing
property costs - - - 1,432 1,432
---------------------------------------------------------------------------
900 182 - 940 2,022
---------------------------------------------------------------------------
Earnings (loss) before
income and mining tax
provision (recovery) 4,720 3,141 7,831 (2,195) 13,497
Income and mining tax
provision (recovery) 1,683 913 162 (1,659) 1,099

---------------------------------------------------------------------------
Net earnings (loss) 3,037 2,228 7,669 (536) 12,398
---------------------------------------------------------------------------
Capital expenditures 3,553 7,269 541 - 11,363

Mineral properties
and fixed assets 46,394 63,429 22,474 119,952 252,249
Identifiable assets 78,331 89,629 254,363 123,865 546,188
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Segment Information
For the Three Months Ended December 31, 2009 (Unaudited)
---------------------------------------------------------------------------
($000's)
Operating Segment Non-operating mines Corporate and Other Consolidated
---------------------------------------------------------------------------
Gross sales revenue - (1,567) 49,744
Treatment and marketing costs - - 12,980
---------------------------------------------------------------------------
Net revenue - (1,567) 36,764
---------------------------------------------------------------------------
Direct operating costs - - 17,333
Depreciation and depletion - 23 4,684
Reclamation and closure costs 115 - 933
---------------------------------------------------------------------------
115 23 22,950
---------------------------------------------------------------------------
Contribution (loss) from
mining activities (115) (1,590) 13,814
---------------------------------------------------------------------------
General and administrative - 5,799 5,799
Interest and financing - 836 836
Investment and other income - (2,463) (2,463)
Foreign exchange expense - 1,003 1,003
Exploration - 60 650
Other non-producing property costs 109 (11) 1,530
---------------------------------------------------------------------------
109 5,224 7,355
---------------------------------------------------------------------------
Earnings (loss) before income and
mining tax provision (recovery) (224) (6,814) 6,459
Income and mining tax
provision (recovery) - - 1,099
---------------------------------------------------------------------------
Net earnings (loss) (224) (6,814) 5,360
---------------------------------------------------------------------------
Capital Expenditures - 749 12,112
Mineral properties and
fixed assets 977 8,927 262,153
Identifiable assets 1,190 47,873 595,251
---------------------------------------------------------------------------



Segment Information
For the Three Months Ended December 31, 2008 (Unaudited)
---------------------------------------------------------------------------
($000's)
Operating
Segment Mochito Toqui Myra Falls Langlois Total
---------------------------------------------------------------------------
Gross sales
revenue 20,411 18,763 33,915 27,012 100,101
Treatment and
marketing costs 6,933 9,265 10,392 13,074 39,664
---------------------------------------------------------------------------
Net revenue 13,478 9,498 23,523 13,938 60,437
---------------------------------------------------------------------------
Direct operating
costs 15,309 10,985 31,934 17,897 76,125
Depreciation and
depletion 3,750 3,117 2,562 7,257 16,686
Reclamation and
closure costs 389 125 178 20 712
---------------------------------------------------------------------------
19,448 14,227 34,674 25,174 93,523
---------------------------------------------------------------------------
Contribution
(loss) from
mining activities (5,970) (4,729) (11,151) (11,236) (33,086)
---------------------------------------------------------------------------
General and
administrative - - - - -
Interest and financing - - - - -
Investment and
other income - - - - -
Foreign exchange
(income) - - - - -
Exploration 821 128 7 306 1,262
Write-down of
mineral properties
and fixed assets 8,327 - 25,300 - 33,627
Other non-producing
property costs - - - - -
---------------------------------------------------------------------------
9,148 128 25,307 306 34,889
---------------------------------------------------------------------------
Earnings (loss)
before income
and mining tax
provision
(recovery) (15,118) (4,857) (36,458) (11,542) (67,975)
Income and mining
tax recovery (1,928) (626) (291) (2,701) (5,546)
---------------------------------------------------------------------------
Net (loss)
earnings (13,190) (4,231) (36,167) (8,841) (62,429)
---------------------------------------------------------------------------
Capital
expenditures
(recovery) 8,315 3,135 420 1,706 13,576
Mineral
properties
and fixed
assets 55,714 67,874 22,307 129,377 275,272
Identifiable
assets 81,862 84,659 159,056 134,220 459,797
---------------------------------------------------------------------------



Segment Information
For the Three Months Ended December 31, 2008 (Unaudited)
---------------------------------------------------------------------------
($000's)
Operating
Segment Non-operating mines Corporate and Other Consolidated
---------------------------------------------------------------------------
Gross sales revenue - - 100,101
Treatment and marketing costs - - 39,664
---------------------------------------------------------------------------
Net revenue - - 60,437
---------------------------------------------------------------------------
Direct operating costs - - 76,125
Depreciation and depletion - 40 16,726
Reclamation and closure costs 98 - 810
---------------------------------------------------------------------------
98 40 93,661
---------------------------------------------------------------------------
Contribution (loss) from
mining activities (98) (40) (33,224)
---------------------------------------------------------------------------
General and Administrative - 990 990
Interest and financing - (272) (272)
Investment and other income - (10,669) (10,669)
Foreign exchange income - (3,703) (3,703)
Exploration 21 2,099 3,382
Write-down of mineral
properties and fixed assets 1,282 599 35,508
Other non-producing
property costs 599 (9) 590
---------------------------------------------------------------------------
1,902 (10,965) 25,826
---------------------------------------------------------------------------
Earnings (loss) before
income and mining tax
provision (recovery) (2,000) 10,925 (59,050)
Income and mining tax recovery - (18) (5,564)
---------------------------------------------------------------------------
Net (loss) earnings (2,000) 10,943 (53,486)
---------------------------------------------------------------------------

Capital expenditures
(recovery) - (1,887) 11,689
Mineral properties and
fixed assets 1,100 1,618 277,990
Identifiable assets 1,785 33,629 495,211
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Segment Information
For the Year Ended December 31, 2009 (Unaudited)
---------------------------------------------------------------------------
($000's) Myra
Operating Segment Mochito Toqui Falls Langlois Total
---------------------------------------------------------------------------
Gross sales revenue 89,273 60,179 78,377 2,992 230,821
Treatment and marketing
costs 25,417 17,704 20,351 1,184 64,656
---------------------------------------------------------------------------
Net revenue 63,856 42,475 58,026 1,808 166,165
---------------------------------------------------------------------------
Direct operating costs 36,691 18,864 46,990 1,191 103,736
Depreciation and
depletion 14,150 6,331 1,398 1,287 23,166
Reclamation and closure
costs 1,307 718 3,004 86 5,115
---------------------------------------------------------------------------
52,148 25,913 51,392 2,564 132,017
---------------------------------------------------------------------------
Contribution (loss) from
mining activities 11,708 16,562 6,634 (756) 34,148
---------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange expense - - - - -
Exploration 1,219 642 - (131) 1,730
Other non-producing
property costs - - - 5,896 5,896
---------------------------------------------------------------------------
1,219 642 - 5,765 7,626
---------------------------------------------------------------------------
Earnings (loss) before
income and mining tax
provision (recovery) 10,489 15,920 6,634 (6,521) 26,522
Income and mining tax
provision (recovery) 2,689 2,633 162 1,893 7,377

---------------------------------------------------------------------------
Net earnings (loss) 7,800 13,287 6,472 (8,414) 19,145
---------------------------------------------------------------------------
Capital expenditures 12,977 14,171 1,645 91 28,884
---------------------------------------------------------------------------



Segment Information
For the Year Ended December 31, 2009 (Unaudited)
-------------------------------------------------------------------------
($000's)
Operating Non-operating Corporate and
Segment mines Other Consolidated
-------------------------------------------------------------------------
Gross sales revenue - (4,383) 226,438
Treatment and marketing costs - - 64,656
-------------------------------------------------------------------------
Net revenue - (4,383) 161,782
-------------------------------------------------------------------------
Direct operating costs - - 103,736
Depreciation and depletion - 91 23,257
Reclamation and closure costs 661 - 5,776
-------------------------------------------------------------------------
661 91 132,769
-------------------------------------------------------------------------
Contribution (loss) from
mining activities (661) (4,474) 29,013
-------------------------------------------------------------------------
General and administrative - 13,919 13,919
Interest and financing - 3,170 3,170
Investment and other income - (9,755) (9,755)
Foreign exchange expense - 5,726 5,726
Exploration - 59 1,789
Other non-producing property costs 794 52 6,742
-------------------------------------------------------------------------
794 13,171 21,591
-------------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision
(recovery) (1,455) (17,645) 7,422
Income and mining tax
provision (recovery) - (764) 6,613
-------------------------------------------------------------------------
Net earnings (loss) (1,455) (16,881) 809
-------------------------------------------------------------------------
Capital expenditures - 1,285 30,169
-------------------------------------------------------------------------



Segment Information
For the Year Ended December 31, 2008 (Unaudited)
----------------------------------------------------------------------------
($000's)
Operating Myra
Segment Mochito Toqui Falls Langlois Total
----------------------------------------------------------------------------
Gross sales revenue 98,596 96,056 109,404 94,054 398,110
Treatment and
marketing costs 28,978 40,187 32,886 33,745 135,796
----------------------------------------------------------------------------
Net revenue 69,618 55,869 76,518 60,309 262,314
----------------------------------------------------------------------------
Direct operating
costs 42,463 36,879 88,247 61,734 229,323
Depreciation and
depletion 10,033 9,372 7,031 21,075 47,511
Reclamation and
closure costs
(recovery) 1,314 (449) 1,466 80 2,411
----------------------------------------------------------------------------
53,810 45,802 96,744 82,889 279,245
----------------------------------------------------------------------------
Contribution (loss)
from mining activities 15,808 10,067 (20,226) (22,580) (16,931)
----------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange (income) - - - - -
Exploration 2,609 943 1,033 3,905 8,490
Write-down of mineral
properties and fixed
assets 8,327 - 25,300 - 33,627
Other non-producing
property costs - - - - -
----------------------------------------------------------------------------
10,936 943 26,333 3,905 42,117
----------------------------------------------------------------------------
Earnings (loss) before
income and mining
tax provision (recovery) 4,872 9,124 (46,559) (26,485) (59,048)

Income and mining
tax provision
(recovery) 3,270 2,051 7,873 6,302 19,496

----------------------------------------------------------------------------
Net earnings (loss) 1,602 7,073 (54,432) (32,787) (78,544)
----------------------------------------------------------------------------
Capital expenditures
(recovery) 28,091 20,890 3,670 24,992 77,643
----------------------------------------------------------------------------



Segment Information
For the Year Ended December 31, 2008 (Unaudited)
-------------------------------------------------------------------------
($000's)
Operating Non-operating Corporate and
Segment mines Other Consolidated
-------------------------------------------------------------------------

Gross sales revenue - - 398,110
Treatment and marketing costs - - 135,796

-------------------------------------------------------------------------
Net revenue - - 262,314
-------------------------------------------------------------------------
Direct operating costs - - 229,323

Depreciation and depletion - 166 47,677

Reclamation and closure
costs (recovery) 1,453 - 3,864
-------------------------------------------------------------------------
1,453 166 280,864
-------------------------------------------------------------------------
Contribution (loss) from
mining activities (1,453) (166) (18,550)

-------------------------------------------------------------------------
General and administrative - 12,423 12,423

Interest and financing - 2,706 2,706

Investment and other income - (24,205) (24,205)

Foreign exchange income - (5,191) (5,191)

Exploration 444 8,278 17,212
Write-down of mineral
properties and fixed assets 1,282 11,569 46,478

Other non-producing
property costs 1,668 166 1,834
-------------------------------------------------------------------------
3,394 5,746 51,257
-------------------------------------------------------------------------
Earnings (loss) before
income and mining tax
provision (recovery) (4,847) (5,912) (69,807)

Income and mining tax
provision (recovery) - (963) 18,533

-------------------------------------------------------------------------
Net earnings (loss) (4,847) (4,949) (88,340)
-------------------------------------------------------------------------
Capital expenditures (recovery) - (804) 76,839
-------------------------------------------------------------------------


Contact Information

  • Breakwater Resources Ltd.
    Dave Langille
    Vice President, Finance and Chief Financial Officer
    (416) 363-4798 Ext. 236
    or
    Breakwater Resources Ltd.
    Ann Wilkinson
    Vice President, Investor Relations
    (416) 363-4798 Ext. 277