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

Breakwater Resources Ltd.

January 25, 2010 09:21 ET

Breakwater Resources Ltd.'s Production Results for 2009 and 2010 Guidance

TORONTO, ONTARIO--(Marketwire - Jan. 25, 2010) - Breakwater Resources Ltd. (TSX:BWR)(TSX:BWR.WT.A) announces 2009 production results for the fourth quarter and the full year as well as guidance for 2010.

In 2009, the Company's objectives were to maximize cash flow in a challenging economic environment while maintaining safe, environmentally compliant and productive mines. Where necessary and appropriate the Company invested in capital projects to increase the productivity and efficiency of operations and advanced mine exploration and development. Until the completion of a strategic review later this year, management's business plan in 2010 is to develop a strong, stable base from which to grow. Accordingly, management will invest capital prudently while continuing to contain costs.

Production

The Company's projected metals production for 2010 is set forth in the following table:

  Metal in Concentrate(1) (contained)   Mochito
  Toqui

  Myra Falls

  Total
  Zinc (tonnes)   33,000   23,000   32,000   88,000
  Copper (tonnes)        4,600   4,600
  Lead (tonnes)   13,000   600     13,600
  Gold (ounces)     35,000   17,000   52,000
  Silver (ounces)    1,563,000   83,000   651,000   2,297,000
           

(1)Metal contained in concentrate is before smelting deductions which, based on industry-wide practices, are approximately 15% for zinc and 5% for each of copper and lead. The actual smelting deductions negotiated by the Company may vary from the industry standards depending on a number of factors.

Estimates of production are subject to change and actual production may vary materially from such estimates.

There are numerous uncertainties inherent in estimating anticipated production including many factors beyond the control of the Company. While production forecasts are soundly engineered and detailed, the accuracy of any such estimates is a function of the quality of available data, reliability of production history, variability of grade encountered, mechanical, environmental, social or other issues, engineering and geological interpretation and operator judgment. Rates of production may be more or less than anticipated. Results of drilling, metallurgical testing and production, and the evaluation of mine plans subsequent to the date of any estimate may cause actual production to vary materially from such estimates. For these reasons we will provide updated guidance only when production of contained metal varies from previous guidance by a significant margin.

Capital Expenditures

In 2010, the Company plans to spend $49.5 million on capital with the bulk of the funds related to Mochito, Toqui and Myra Falls. Of the $15.9 million capital budget at Mochito, $9.4 million is for mine and mine development, $2.4 million is for mine equipment and $1.2 million is for delineation drilling. It is expected that approximately $9.8 million of Mochito's total will be spent in the first six months of 2010. At Toqui, of the $19.6 million to be spent, $4.8 million is for mill equipment, $8.4 million is for a paste plant; $2.3 million is for mine equipment, infrastructure and development and approximately $1.9 million is for power generation initiatives. It is expected that approximately $16.5 million of Toqui's capital expenditures will occur in the first six months of the year. Of the $10.0 million to be spent at Myra Falls, approximately $1.4 million is for surface projects, $3.9 million is for various development projects with the balance for mobile equipment, electrical upgrades, the mill and underground equipment. At Langlois, the $4.6 million is for a project to advance two ramps, one from surface to the top of zone 4 and one internal to zone 3. The Company has other capital projects that it may bring forward if metal prices and cash flow allow.

Capital Expenditures
 
($ millions)
2010 Projection
Mochito 15.9
Toqui 18.8
Myra Falls 10.0
Langlois 4.6
Other 0.2
Total Capital 49.5

Costs

The operating costs, on a production basis, at each mine are estimated to fall in the ranges set forth below:

  Production Costs
(per tonne milled)
Mochito US$49 – US$54
Toqui US$51 – US$56
Myra Falls C$112 – C$123

Exploration

The Company expects to spend $3.9 million on exploration expenses in 2010 with the objective of increasing the mineral resources (both measured and indicated and inferred) at Mochito in Honduras and at Toqui in Chile as well as meeting the Company's obligations under various joint venture agreements in Québec, Canada. If market conditions, and the Company's financial position allow, additional exploration may be undertaken. The current forecast of exploration expenses is set forth in the following table. 

Exploration Expenses
 ($ millions)
2010 Projection
Mochito 1.6
Toqui 0.6
Québec 1.7
  3.9

Key Assumptions
Sales

The Company's Canadian dollar gross sales revenues are affected by the United States dollar ("US$") denominated metals prices received and the exchange rate between the US$ and C$. With the current volatility in the markets, including the effect of government stimuli and interest rate decisions, it is difficult to forecast metal prices or exchange rates.

Mochito

Certain ground control issues have affected the mine off and on over the last several years necessitating the mining of ore in unaffected areas. While these issues are thought to be largely resolved, a recurrence could adversely affect the 2010 production. The current labour agreement with Mochito employees expires October 1, 2010. Meeting the above-noted production guidance for Mochito assumes a successful conclusion to labour negotiations.

Toqui

The 2010 mine plan at Toqui is focused on mining the zinc bearing deposits together with the gold bearing deposits and assumes a paste plant is installed and operational by mid-2010, as planned. Toqui's current labour agreement expires October 1, 2010. Meeting the above-noted guidance for Toqui assumes a successful conclusion to labour negotiations.

Myra Falls

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

Langlois

While the 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 economic conditions to determine when production should recommence.

SENSITIVITY TO METAL PRICES AND EXCHANGE RATES

The Company's cash flow and net earnings are sensitive to movements in the price of zinc, lead, copper, silver and gold and to the US$/C$ exchange rate. The following table provides the Company's estimates of the sensitivity of C$ cash flow to changes in the various metal prices and C$/US$ exchange rate movements based on the projections for 2010. The table assumes that all other prices and/or the exchange rate are held constant.


Variable

Change
Sensitivity
($millions)
Zinc US10¢ per pound $11.8
Lead US10¢ per pound $2.3
Copper US20¢ per pound $2.0
Silver US$1 per ounce $1.5
Gold US$25 per ounce $1.0
Exchange rate C$/US$ 5¢ $3.8

2009 PRODUCTION RESULTS

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

  Fourth Quarter Year
  2009 2008 2009 2008
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(1) - 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) - 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

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

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

  Fourth Quarter Year
Metal in Concentrate 2009 2008 % 2009 2008 %
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(1) - 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(1) - 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(1) - 43,424 - - 298,863 -
  814,751 705,069 16% 2,667,408 3,198,383 -17%

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

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