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

Breakwater Resources Ltd.

November 05, 2009 17:52 ET

Breakwater Resources Ltd.'s Third Quarter 2009 Financial and Operating Results

TORONTO, ONTARIO--(Marketwire - Nov. 5, 2009) - Breakwater Resources Ltd. (TSX:BWR)(TSX:BWR.WT.A) reports the financial and operating results for the three and nine month periods ended September 30, 2009. The reporting currency is Canadian dollars ("C$" or "$") and all amounts disclosed are in Canadian dollars unless otherwise indicated.

The Company is a mining, exploration and development company which produces zinc, copper, lead and gold concentrates. For the nine months ended September 30, 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 temporary suspension of Langlois affects all aspects of the Company's financial results which makes comparisons between years difficult.

HIGHLIGHTS

The strategic focus by Management on cost containment, extraction of higher value mineralized material and prudent capital expenditures have resulted in a significant improvement in the balance sheet. The Company has protected future earnings by purchasing zinc put options leaving shareholders the benefit of higher zinc prices and the Company's financial position is significantly stronger than it was nine to twelve months ago.

The Company had earnings of $6.5 million or $0.01 per share in the third quarter of 2009 compared with a net loss of $36.1 million or $0.08 per share in the third quarter of 2008. Included in the $6.5 million net earnings was $1.6 million of price protection losses related to the purchase of put options to protect the minimum price on certain zinc sales while retaining further price increase exposure. The temporary suspension of operations at Langlois in the fourth quarter of 2008 significantly impacted quarter-over-quarter results. The change in the results quarter-over-quarter were primarily due to:

- $29.4 million (US$31.2 million) or 29% lower gross sales revenue due to a 38% decrease in concentrate sold

- $18.5 million or 54% lower treatment and marketing costs primarily due to lower concentrate sales, more favourable smelter terms and lower freight rates

- $21.1 million or 38% lower direct operating costs primarily due to lower concentrate sales and cost improvements at all operations

- $18.0 million lower income and mining tax provisions primarily due to $19.0 million of future tax assets written off in 2008 which did not recur in 2009

- $11.0 million write-down of a 20% interest in the mineral properties and fixed assets at Caribou in 2008 which did not recur in 2009

Concentrate produced in the third quarter of 2009 decreased by 34,926 tonnes to 54,588 tonnes primarily due to a 30,501 tonne decrease related to Langlois being placed on care and maintenance and lower planned production at Myra Falls and Toqui partially offset by higher production at Mochito.

OUTLOOK

Mochito

Production at Mochito has been running ahead of budget as it relates to throughput and zinc contained in concentrate, on target for costs and behind target for silver and lead due to changes in the mining cycle resulting in the exploitation of lower grade areas. Accordingly, management now expects that silver contained in concentrate will be approximately 1.8 million ounces and that lead contained in concentrate will be approximately 13,000 tonnes.

Toqui

At Toqui, management has been exploring augmenting its 2.0 megawatts of installed hydro electric capacity with both additional hydro electric and wind power. Subsequent to the quarter end, an agreement was reached with a contractor to install an additional 1.65 megawatts of wind power. At a capital cost of US$5.5 million, the project has a payback of approximately four and a half years and has been fully financed locally by term debt. As part of the project to install the wind turbines, application will be made to register this project under the Clean Development Mechanism which will enable Toqui to sell certified emission reductions, better known as carbon credits, in the market. Wind power will lower the Company's electrical costs going forward and help meet increased electrical requirements once the thickened tailings backfill plant is up and running. A used thickened tailings backfill plant has been dismantled and transported to Chile. This plant will enable Toqui to deposit thickened tails and allow pillar recovery in the future.

The wind power plant cost was not included in the capital expenditure projections previously provided.

Myra Falls

Production from the South Flank area commenced ahead of plan and this area will continue as a significant source of mill feed for the balance of 2009 and 2010. Operating costs per tonne milled were expected to meet projections, while metals in concentrates were expected to be approximately 31,500 tonnes for zinc, 3,500 tonnes for copper and 557,000 ounces of silver compared with previous guidance.

On November 4, 2009 a fire occurred in the production hoist. The fire was contained and there were no injuries. However, an electrical switch gear was destroyed in the fire rendering the production hoist currently unusable. The Company is currently assessing the impact of the damage and its effect on near term production and costs.

The collective bargaining agreement at Myra Falls expired on September 30, 2009. On November 4, 2009 at 6:30pm (PST), the Company was served with 72 hour strike notice and the union is in a legal strike position effective November 7, 2009 at 6:30pm (PST).

Langlois

The rally in zinc prices from their lows earlier this year has prompted the Company to actively review the economics of a reopening plan for Langlois which contemplates six months of preproduction development work. The recent strength in the Canadian dollar has somewhat offset the rise in zinc prices.


STATEMENT OF OPERATIONS REVIEW -- THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 United States dollars ("US$").



Third Quarter First Nine Months
Concentrate Sold (tonnes) 2009 2008 2009 2008
-----------------------------------------------------------------
Zinc
Mochito 18,661 18,251 46,407 41,389
Toqui 10,048 10,185 37,055 56,870
Myra Falls 11,645 19,574 39,588 47,164
Langlois(1) - 22,310 3,618 52,652
-----------------------------------------------------------------
40,354 70,320 126,668 198,075
-----------------------------------------------------------------
Copper
Myra Falls 5,140 4,737 14,375 14,064
Langlois(1) - 3,462 321 7,666
-----------------------------------------------------------------
5,140 8,199 14,696 21,730
-----------------------------------------------------------------
Lead
Mochito 6,101 4,720 16,510 14,059
Toqui 697 3,323 1,120 4,741
-----------------------------------------------------------------
6,798 8,043 17,630 18,800
-----------------------------------------------------------------
Gold
Toqui 2,298 1,416 5,309 3,702
Myra Falls - - 9 -
-----------------------------------------------------------------
2,298 1,416 5,318 3,702
-----------------------------------------------------------------
All Metals 54,590 87,978 164,312 242,307
-----------------------------------------------------------------
(1) On November 2, 2008, Langlois operations were temporarily
suspended.



Third Quarter 2009
-------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 40,354 17,613 1,678 29,549
Copper 5,140 1,203 5,115 6,153
Lead 6,798 4,034 2,037 8,216
Gold(2) 2,298 10,981 957 10,511
Silver n.a. 847,480 14.57 12,352
Price protection loss n.a. (1,476)
Other(3) n.a. 122
------ --------
54,590
------
------
Gross sales revenue in US$ 65,427
Exchange rate 1.0947
--------
Gross sales revenue in C$ 71,622
--------
--------



Third Quarter 2008
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 70,320 31,302 1,830 57,290
Copper 8,199 1,633 7,299 11,919
Lead 8,043 4,487 1,886 8,461
Gold(2) 1,416 9,082 871 7,907
Silver n.a. 721,541 15.45 11,151
Price protection loss n.a. -
Other(3) n.a. (114)
-------- --------
87,978
--------
--------
Gross sales revenue in US$ 96,614
Exchange rate 1.0454
--------
Gross sales revenue in C$ 101,004
--------
--------

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


Concentrate sold decreased 38% in the third quarter of 2009 compared with the third quarter of 2008. The 33,388 tonne decrease in 2009 was primarily due to the impact of the temporary care and maintenance at Langlois (25,772 tonnes sold in the third quarter of 2008) and 1,881 and 7,526 fewer tonnes of concentrate sold at Toqui and Myra Falls respectively partially offset by 8% more tonnes at Mochito. In payable metal terms, zinc, copper and lead decreased by 44%, 26% and 10% respectively while gold and silver sales increased by 21% and 17% respectively.

Realized prices denominated in US$ increased for lead and gold by 8% and 10% respectively in the third quarter of 2009 while zinc, copper and silver decreased by 8%, 30% and 6% 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 third quarter of 2009, the Company purchased zinc put options at a cost of $0.9 million to guarantee a minimum price on a portion of its zinc production for 2010. During the third quarter of 2009, the Company recorded a $1.6 million loss in gross sales revenue related to the marking-to-market of the puts outstanding at September 30, 2009 and the expiry of put option contracts in the third quarter. The put options outstanding at September 30, 2009 had a fair market value of $0.5 million and their value is recorded in other receivables. At September 30, 2009, the Company's zinc put option position consisted of:



-----------------------------------------------------------------
Period Tonnes Strike price per tonne (weighted average)
-----------------------------------------------------------------
Q4 2009 7,200 US$1,362
-----------------------------------------------------------------
Q1 2010 4,200 US$1,543
-----------------------------------------------------------------
Q2 2010 4,200 US$1,543
-----------------------------------------------------------------


Gross sales revenue decreased by US$31.2 million or 32% in the third quarter of 2009 primarily due to the 38% decline in sales volumes noted above. A weaker C$ resulted in an increase in the average C$/US$ exchange rate of 5%. In C$ terms, gross sales revenue decreased $29.4 million or 29% compared with the third quarter of 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 September 30, 2009, the following schedule provides details regarding inventories shipped but not recognized for revenue purposes and the related provisional payments.



Net Weighted-
smelter Inventory Earnings Provisional average
Concentrate return value before taxes payments months to
(DMT) ($000's) ($000's) ($000's) ($000's) settlement
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Zinc 8,091 5,217 3,584 1,633 793 1.9
Copper 1,926 4,073 3,315 758 - 1.0
Gold 1,452 3,796 2,465 1,331 1,113 1.4
----------------------------------------------------------------------------
11,469 13,086 9,364 3,722 1,906
----------------------------------------------------------------------------


As at September, 2008, the Company estimated that inventories shipped but not recognized for revenue purposes had earnings before tax of $2.9 million consisting of $33.0 million of net smelter return less $30.1 million of inventory value on 40,041 tonnes of concentrate.

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



Third Quarter First Nine Months
Average Metal Prices & Exchange Rate 2009 2008 2009 2008
----------------------------------------------------------------------------
Zinc (US$/tonne) 1,761 1,770 1,469 2,105
Copper (US$/tonne) 5,859 7,680 4,650 7,973
Lead (US$/tonne) 1,928 1,912 1,528 2,373
Gold (US$/ounce) 960 869 931 898
Silver (US$/ounce) 14.70 15.03 13.68 16.63
C$/US$ exchange rate 1.0976 1.0417 1.1694 1.0188
----------------------------------------------------------------------------


Treatment and Marketing Costs

Treatment and marketing costs decreased 54% to $15.5 million in the third quarter of 2009 from $33.9 million in the third quarter of 2008 primarily due to the 38% decrease in concentrate sold, lower freight rates and more favourable smelter terms. Treatment and marketing costs for the third quarter of 2009 were 22% of gross revenue compared with 34% in 2008. See details of treatment and marketing under each mine's Expenses in the Production Results section of this news release.

Direct Operating Costs

Direct operating costs were 38% lower in the third quarter of 2009 at $34.0 million compared with $55.0 million in the third quarter of 2008. The decreased costs were primarily due to lower concentrate sales and the temporary suspension of Langlois. 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 $5.9 million or 43% in the third quarter of 2009 compared with the corresponding period in 2008. The decrease was primarily due to the temporary suspension of Langlois, lower concentrate sales and lower asset base at Myra Falls due to the $25.3 million write-down at December 31, 2008. Also see details of depreciation and depletion costs under each mine's Expenses in the Production Results section of this news release.

Reclamation and Closure Costs

Reclamation and closure costs decreased by $1.1 million to $0.9 million in the third quarter of 2009 compared with $2.0 million in the corresponding period in 2008 primarily due to a $1.1 million expense at Bouchard-Hebert which did not recur in 2009.

General and Administrative

General and administrative expenses decreased by $1.3 million or 34% in the third quarter of 2009 compared with 2008 primarily due to lower bonus accruals, salary and benefits, corporate development, legal and audit fees.

Investment and Other Income

Investment and other income was $2.6 million in the third quarter of 2009 compared with $8.5 million in 2008. The $5.9 million swing was primarily due to a realized gain on sale of investment of $4.1 million and a $2.1 million unrealized gain on the mark-to-market of investments both in the third quarter of 2008.

Foreign Exchange and Other

The $2.9 million change in foreign exchange and other was primarily due to the weaker C$ at September 30, 2009 compared with September 30, 2008.

Exploration

Exploration expenses decreased by $4.6 million in the third quarter of 2009 compared with 2008. Significantly lower expenses at corporate, Mochito and Langlois accounted for the decrease.

Other Non-Producing Property Costs

Other non-producing property costs increased by $1.0 million for the third quarter of 2009 compared with the equivalent period in 2008 primarily due to $1.2 million of care and maintenance costs at Langlois.

Income and Mining Tax Provision

In the third quarter of 2009, income and mining tax provision decreased by $18.0 million compared with the respective 2008 period primarily due a $19.0 million write-off of tax assets at Myra Falls and Langlois in 2008 and reduced tax provisions at Mochito partially offset by an increased tax provision at Toqui.

LIQUIDITY AND FINANCIAL POSITION REVIEW

Working Capital

Working capital at the September 30, 2009 was $63.3 million compared with $29.2 million at December 31, 2008, an increase of $34.1 million.

Current Assets

Total current assets decreased $3.4 million to $97.9 million at September 30, 2009 compared with December 31, 2008. The main components of the current asset change were:

- Restricted cash increased by $5.8 million due to a loan to finance a wind power plant at Toqui for which collateral arrangements had not yet been finalized at September 30, 2009 and the related cash was therefore restricted

- Concentrate inventory increased by $3.4 million due to increased concentrate inventories at Toqui partially offset by the elimination of concentrate inventories at Langlois

- Materials and supplies inventory decreased by $4.7 million primarily due to lower supplies inventories at Mochito and Toqui and disposals of certain inventories at Langlois

Current Liabilities

Current liabilities decreased by $37.5 million to $34.6 million at September 30, 2009 compared with December 31, 2008. The main components of the current liabilities change were:

- Accounts payable and accrued liabilities decreased by $26.5 million primarily due to a decrease of $11.0 million of provisional payments refundable to customers, $7.4 million decrease at Langlois related to the temporary suspension of operations and $3.8 million and $2.2 million lower payables at Mochito and Myra Falls respectively

- Provisional payments for concentrate inventory shipped and not priced, which represent payments received for concentrate shipments that were not recognized as revenue, decreased by $8.6 million. Refer to the table in Gross Sales Revenue section of this news release 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 September 30, 2009, the Company had restricted reclamation investments of $31.5 million compared with $35.0 million at December 31, 2008. Reclamation deposits of $10.9 million and $20.6 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 four restricted promissory notes at September 30, 2009 totalling $105.7 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(1) 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 $6.8 million at September 30, 2009 consisted of deferred indemnity agreement fees and prepaid interest income related to the Myra Falls royalty transactions(1) in 2004, 2005, 2008 and 2009 which will be recognized as income over the terms of the four agreements.

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

Royalty Obligations

The royalty obligations of $101.9 million at September 30, 2009 relate to the royalty amounts received from the 2004, 2005, 2008 and 2009 Myra Falls royalty transactions(1). See restricted promissory notes above.

Long-term Debt

Long-term debt increased by $7.1 million to $9.0 million primarily due to a $5.9 million (US$5.5 million) loan entered into 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 September 30, 2009, total reclamation, closure cost accruals and other environmental obligations were $30.5 million compared with $28.5 million at December 31, 2008.

Of the $30.5 million, $5.2 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 $0.6 million in reclamation and closure costs in the third quarter of 2009 compared with $1.3 million in the third quarter of 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$6.6 million).

Reclamation and Closure Cost Accruals and Other Environmental Obligations at September 30, 2009



($ millions) Current Long-term Total
-----------------------------------------------------
-----------------------------------------------------
Myra Falls 0.7 19.2 19.9
Mochito(1) 0.0 1.3 1.3
Toqui 0.0 2.9 2.9
Langlois 0.0 1.1 1.1
Bouchard-Hebert 2.5 0.1 2.6
Nanisivik 1.4 0.4 1.8
Bougrine 0.6 0.3 0.9
-----------------------------------------------------
Total 5.2 25.3 30.5
-----------------------------------------------------
(1) Reclamation and closure cost accruals for Mochito relate to accrued
severances.


Future Income Tax Liabilities

Future income tax liabilities increased $2.4 million to $5.6 million at September 30, 2009. The increase was primarily due to a $2.2 million increase in Quebec mining duties at Langlois in 2009 partially offset by a $0.3 million decrease at Toqui related to timing differences.

Shareholders' Equity

Shareholders' equity at September 30, 2009 was $311.3 million compared with $309.7 million at December 31, 2008. The increase of $1.6 million was primarily due to the Company closing a public offering for gross proceeds of $23.0 million in April 2009 (the "Offering") partially offset by a net loss of $4.6 million and an other comprehensive loss of $16.0 million.



Other Total
Shareholders' Contri- compre- share-
Equity Capital buted Retained hensive holders'
($000's) stock Warrants surplus earnings income 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) 8,538 - - -
Exercise of Warrants 5 (1) - - - 4
Employee share option
plan - proceeds of
options exercised 29 - - - - 29
Employee share
purchase plan 243 - - - - 243
Stock-based
compensation - - 432 - 432
Other comprehensive
loss - - - - (15,959) (15,959)
Loss - - - (4,551) - (4,551)
----------------------------------------------------------------------------
As at September 30,
2009 229,549 4,518 13,874 76,017 (12,702) 311,256
----------------------------------------------------------------------------


In the first nine months of 2009, the Company issued the following Common Shares: 230,000,000 Common Shares and 115,000,000 warrants pursuant to the Offering; 100,000 Common Shares to a third party; 1,821,765 Common Shares pursuant to the Company's employee share purchase plan and 150,000 Common Shares pursuant to the Company's share option plan. The 33,481,849 warrants outstanding at December 31, 2008 expired on January 28, 2009.

Capital Expenditures

The Company invested $18.1 million in mineral properties and fixed assets in the first nine months of 2009. At mining operations, $9.4 million, $6.9 million, $1.1 million and $0.1 million were invested 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 $0.5 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 2009. 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. 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.



Third Quarter First Nine Months
All Mines 2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 436,287 596,713 1,247,614 1,786,013
Zinc (%) 6.0 7.4 5.7 6.7

Concentrate Production (tonnes)
Zinc
Mochito 17,584 14,191 48,213 41,559
Toqui 10,498 16,243 30,866 49,523
Myra Falls 15,669 17,539 40,289 51,890
Langlois(1) - 26,561 - 60,693
----------------------------------------------------------------------------
43,751 74,534 119,368 203,665
----------------------------------------------------------------------------
Copper
Myra Falls 3,079 4,495 10,602 17,530
Langlois(1) - 3,940 - 9,186
----------------------------------------------------------------------------
3,079 8,435 10,602 26,716
----------------------------------------------------------------------------
Lead
Mochito 4,912 4,912 14,880 13,922
Toqui 413 1,362 1,582 4,202
----------------------------------------------------------------------------
5,325 6,274 16,462 18,124
----------------------------------------------------------------------------
Gold
Toqui 2,433 271 6,469 1,346
Myra Falls - - 2 -
----------------------------------------------------------------------------
2,433 271 6,471 1,346
----------------------------------------------------------------------------
Total 54,588 89,514 152,903 249,851
----------------------------------------------------------------------------
----------------------------------------------------------------------------
C$ operating costs, production basis
($000's) 28,092 46,103 89,157 152,535
C$ operating cost per tonne milled
(production basis) 64 77 71 85
(1) On November 2, 2008, Langlois operations were temporarily suspended.


Concentrate produced in the third quarter of 2009 decreased by 39% to 54,588 tonnes primarily due to 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.

Aggregate operating costs and operating costs per tonne milled decreased in the third quarter of 2009 compared with 2008 due to the temporary suspension of Langlois and reduced operating costs at Toqui and Myra Falls partially offset by the impact of a weaker C$. Also see details under each mine's production in the respective production results section of this news release.

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



Third Quarter First Nine Months
Metal in Concentrate 2009 2008 % 2009 2008 %
---------------------------------------- --------------------
Zinc (tonnes)
Mochito 9,284 7,594 22% 25,686 21,992 17%
Toqui 5,077 8,064 -37% 14,820 24,474 -39%
Myra Falls 8,475 9,615 -12% 21,788 28,103 -22%
Langlois(1) - 14,366 n.a. - 32,574 n.a.
----------------- --------------------
22,836 39,639 -42% 62,294 107,143 -42%
----------------- --------------------
Copper (tonnes)
Myra Falls 789 1,057 -25% 2,457 4,129 -40%
Langlois(1) - 742 n.a. - 1,713 n.a.
----------------- --------------------
789 1,799 -56% 2,457 5,842 -58%
----------------- --------------------
Lead (tonnes)
Mochito 3,146 3,315 -5% 9,673 9,240 5%
Toqui 223 763 -71% 853 2,126 -60%
----------------- --------------------
3,369 4,078 -17% 10,526 11,366 -7%
----------------- --------------------
Gold (ounces)
Toqui 10,191 3,718 174% 30,977 13,327 132%
Myra Falls 4,019 2,996 34% 9,652 11,124 -13%
Langlois(1) - 494 n.a. - 1,227 n.a.
----------------- --------------------
14,210 7,208 97% 40,629 25,678 58%
----------------- --------------------
Silver (ounces)
Mochito 462,024 479,617 -4% 1,314,046 1,462,986 -10%
Toqui 51,325 84,048 -39% 181,912 248,558 -27%
Myra Falls 156,443 159,760 -2% 355,699 526,331 -32%
Langlois(1) - 88,905 n.a. - 255,439 n.a.
----------------- --------------------
669,792 812,330 -18% 1,851,657 2,493,314 -26%
----------------- --------------------
(1) On November 2, 2008, Langlois operations were temporarily suspended.


Aggregate production of zinc in concentrate in the third quarter of 2009 was 42% lower at 22,836 tonnes. The decrease in zinc production was primarily due to Langlois being placed on care and maintenance as well as planned lower production from Toqui and Myra Falls partially offset by higher production from Mochito. Production of copper in concentrate decreased 56% in the third quarter of 2009 due to fewer tonnes milled at Myra Falls and no production from Langlois. Production of lead in concentrate decreased 17% in the third quarter of 2009 due to lower lead grades at Mochito despite more tonnes milled and lower planned lead production at Toqui. Gold in concentrate increased 97% in the third quarter of 2009 due to higher production from Myra Falls and the planned increase in milling of gold material at Toqui. Silver in concentrate decreased 18% primarily due to lower silver grades at Mochito and Toqui and no production from Langlois.



Mochito

(i) Mochito Financial Results

Third Quarter First Nine Months
($000's) 2009 2008 2009 2008
---------------------------------------------------------------------------
Gross sales revenue 35,918 27,009 71,608 78,185
Treatment and marketing costs (7,279) (8,546) (20,717) (22,045)
----------------------------------------
Net revenue 28,639 18,463 50,891 56,140
Direct operating costs (14,319) (10,503) (31,841) (27,154)
Depreciation and depletion (5,355) (2,504) (11,954) (6,283)
Reclamation and closure costs (314) (391) (1,010) (925)
----------------------------------------
Contribution from mining activities 8,651 5,065 6,086 21,778
Exploration (112) (821) (319) (1,788)
----------------------------------------
8,539 4,244 5,767 19,990
Income and mining tax provision (811) (1,206) (1,006) (5,198)
----------------------------------------
Net earnings 7,728 3,038 4,761 14,792
----------------------------------------
----------------------------------------

Capital expenditures 3,116 5,820 9,424 19,776
----------------------------------------
----------------------------------------


Revenue:

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



Third Quarter 2009
-------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 18,661 8,336 1,726 14,389
Lead 6,101 3,689 2,046 7,547
Silver n.a. 737,068 14.70 10,835
Other(2) n.a. 117
-------- -------
24,762
--------
--------
Gross sales revenue in US$ 32,888
Exchange rate 1.0921
-------
Gross sales revenue in C$ 35,918
-------
-------



Third Quarter 2008
-------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 18,251 8,044 1,782 14,332
Lead 4,720 2,910 1,891 5,503
Silver n.a. 410,851 14.70 6,040
Other(2) n.a. -
-------- -------
22,971
--------
--------
Gross sales revenue in US$ 25,875
Exchange rate 1.0438
-------
Gross sales revenue in C$ 27,009
-------
-------

(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 the third quarter of 2009 was 8% higher due to the timing of shipments. The increase and mix of concentrates sold resulted in a 27% rise in gross sales revenues in US$ terms. A weakening of the C$ resulted in gross sales revenue in C$ terms increasing by 33% in the third quarter of 2009.

Expenses:

Aggregate treatment and marketing costs quarter-over-quarter decreased 15% primarily due to more favourable smelter terms and lower freight rates partially offset by a weaker C$ and the increase in concentrate sold.

Direct operating costs increased $3.8 million or 36% in the third quarter of 2009 due to the 8% increase in concentrate sold and higher hydro rates, labour costs and ground control costs. Direct operating cost per tonne of concentrate sold were $578 in the third quarter of 2009 compared with $457 in 2008 primarily due to the factors noted above.

Depreciation and depletion for the third quarter of 2009 increased $2.9 million or 114% when compared with 2008 largely due to the higher quantity of concentrate sold, depreciation of capital spares and lower reserves used for depletion purposes.

Exploration expenses in the third quarter of 2009 were $0.7 million lower compared with the respective period in 2008. Please refer to the drilling section below for additional details.

Income and mining tax provision for the third quarter of 2009 decreased by $0.4 million compared with the respective period in 2008 principally due to changes in foreign exchange adjustments which are not tax effected.

Capital Expenditures:

At Mochito, $9.4 million was invested in the first nine months of 2009 primarily as follows: $3.6 million for mine development; $1.7 million for spare parts for mining equipment, $1.1 million for road construction and $1.3 million for tailings facilities.

(ii) Mochito Production

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



Third Quarter First Nine Months
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 193,479 160,427 539,012 484,762
Zinc (%) 5.4 5.3 5.4 5.1
Lead (%) 2.0 2.5 2.2 2.3
Silver (g/t) 88 105 89 106
Concentrate Production
Zinc (tonnes) 17,584 14,191 48,213 41,559
Recovery (%) 88.6 89.3 88.0 89.0
Grade (%) 52.8 53.5 53.3 52.9
Lead (tonnes) 4,912 4,912 14,880 13,922
Recovery (%) 81.2 82.7 82.7 82.2
Grade (%) 64.1 67.5 65.0 66.4
Metal in Concentrates
Zinc (tonnes) 9,284 7,594 25,686 21,992
Lead (tonnes) 3,146 3,315 9,673 9,240
Silver (ounces) 462,024 479,617 1,314,046 1,462,986

US$ operating costs, production basis
($000's) 10,252 8,949 28,252 26,472
US$ operating cost per tonne milled
(production basis) 53 56 52 55


Production of zinc in concentrate was 22% higher in the third quarter of 2009 compared with the same period in 2008 due to more tonnes milled at a slightly higher zinc head grade. Production of lead in concentrate in the third quarter of 2009 was 5% lower than the same period in 2008 due to lower lead grades despite higher mill throughput.

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 the third quarter of 2009 continued to extend the Imperial, Santo Nino, Barbasco and Port Royal chimneys. All four chimneys remain open in at least one direction and the Company will continue drilling in these areas during the next three months.

A total of 5,258 metres was drilled from underground during the third quarter of 2009. Definition and valuation drilling accounted for 4,043 metres while exploration and extensional drilling accounted for 1,215 metres.

Exploration indicates that the Imperial zone is of considerable interest and is open above, below and to the north. The current known size of the zone confirms that the Barbasco-Imperial trend has great potential along strike and that further exploration along the trend is warranted.

Access drifting continues towards the Imperial zone on both the 1850 and 2050 levels. The upper level will be extended to the north of the Imperial zone in the search for the next deposit along this mineral trend. The underground exploration program is complemented by surface drilling 500 metres to the north of the known deposit. The surface drill program has commenced and the first drillhole is in progress. It is expected to intersect the manto at a depth of 1,150 metres.

The Port Royal chimney has been drill tested up to 200 metres above the 1850 level. A new drill station on this level will test the chimney higher in the stratigraphy where it intersects the Mochito shale (200 metres higher still).

During the third quarter of 2009, five holes were drilled in search of the San Juan chimney above the Mochito shales, however, the holes were not able to pass through the Mochito shales as planned, so the program was cancelled. An alteration pipe was traced within the Mochito shales which indicates a larger deposit may exist where the alteration pipe intersects the upper Atima limestone. This area will be drill tested from surface.

Exploration commenced during the quarter on the Raiz de Salvador chimney. The objective is to explore the area above and below the Mochito shales directly beneath the Salvador chimney. Several other known chimneys have large deposits where the chimney intersects the Mochito shales (upper and lower contact). In the past, this chimney was mined above the 1225 level and was never explored below this level. The first hole drilled from underground to the lower contact of the shales intersected the shales farther down than expected. The shales were partly to heavily altered and showed a one metre thick band of strong dissemination of sphalerite and lesser galena. The results indicate that mineralizing fluids passed through this area and further exploration of this zone is warranted.

(iv) Mochito Outlook

Production at Mochito has been running ahead of budget as it relates to throughput and zinc contained in concentrate, on target for costs and behind target for silver and lead due to changes in the mining cycle resulting in the exploitation of lower grade areas. Accordingly, management now expects that silver contained in concentrate will be approximately 1.8 million ounces and that lead contained in concentrate will be approximately 13,000 tonnes.

Toqui

(i) Toqui Financial Results



Third Quarter First Nine Months
($000's) 2009 2008 2009 2008
----------------------------------------------------------------------------
Gross sales revenue 17,369 18,190 50,067 77,292
Treatment and marketing costs (4,194) (7,683) (15,977) (30,922)
----------------------------------------
Net revenue 13,175 10,507 34,090 46,370
Direct operating costs (6,343) (8,594) (15,360) (26,278)
Depreciation and depletion (2,228) (2,281) (5,317) (6,255)
Reclamation and closure (costs)
recovery (55) (36) (175) 958
----------------------------------------
Contribution (loss) from mining
activities 4,549 (404) 13,238 14,795
Exploration (95) (129) (459) (816)
----------------------------------------
4,454 (533) 12,779 13,979
Income and mining tax provision (1,302) (271) (1,721) (2,678)
----------------------------------------
Net earnings (loss) 3,152 (804) 11,058 11,301
----------------------------------------
----------------------------------------

Capital expenditures 2,842 3,681 6,902 17,755
----------------------------------------
----------------------------------------


Revenue:

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



Third Quarter 2009
-------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 10,048 3,946 1,533 6,049
Lead 697 345 1,938 669
Gold 2,298 9,036 962 8,690
Silver n.a. 31,119 14.51 452
Other(2) n.a. 5
--------- -------
13,043
---------
---------
Gross sales revenue in US$ 15,865
Exchange rate 1.0948
-------
Gross sales revenue in C$ 17,369
-------
-------



Third Quarter 2008
-------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
-------------------------------------------------------------------
Zinc 10,185 4,041 1,801 7,278
Lead 3,323 1,577 1,876 2,958
Gold 1,416 6,338 863 5,472
Silver n.a. 103,022 16.27 1,676
Other(2) n.a. (108)
--------- -------
14,924
---------
---------
Gross sales revenue in US$ 17,276
Exchange rate 1.0529
-------
Gross sales revenue in C$ 18,190
-------
-------

(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.


Total concentrate sold in the third quarter of 2009 was 13% less than in the third quarter of 2008 primarily due to lower planned production levels and the timing of shipments. Lower concentrate sales and a lower zinc price resulted in an 8% decrease in gross sales revenue in US$ terms. A 4% increase in the exchange rate resulted in 5% lower gross sales revenue in C$ terms.

Expenses:

Treatment and marketing costs were 45% lower on an aggregate basis in the third quarter of 2009 compared with the third quarter of 2008 primarily due to 13% fewer tonnes of concentrate sold, more favourable smelter terms and lower freight rates partially offset by a weaker C$. As a percentage of gross revenue, treatment and marketing costs decreased to 24% from 42% in the same period in 2008 primarily due to the factors noted above.

Direct operating costs in the third quarter of 2009 were 26% lower than in the same period 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 third quarter of 2009 increased by $1.0 million primarily due to higher earnings before tax in the 2009 period compared with respective period in 2008.

Capital Expenditures:

Toqui capital expenditures of $6.9 million in the first nine months of 2009 consisted primarily of: $1.9 million for development of Mina Profunda; $1.9 million for other development; $2.3 million for thickened tailings plant equipment and tailings facilities and $0.3 million for equipment.

(ii) Toqui Production

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



Third Quarter First Nine Months
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 128,679 128,673 365,829 388,486
Zinc (%) 4.7 7.1 4.8 7.1
Lead (%) 0.3 1.0 0.4 0.9
Gold (g/t) 3.3 1.4 3.5 1.5
Silver (g/t) 16 29 22 27
Concentrate Production
Zinc (tonnes) 10,498 16,243 30,866 49,523
Recovery (%) 85.8 88.8 86.1 89.0
Grade (%) 48.4 49.7 48.0 49.4
Lead (tonnes) 413 1,362 1,582 4,202
Recovery (%) 62.5 60.4 59.9 59.9
Grade (%) 54.0 56.0 53.9 50.6
Gold (tonnes) 2,433 271 6,469 1,346
Recovery (%) 60.6 51.0 60.4 54.8
Grade (g/t) 96.9 221.1 108.1 159.5
Metal in Concentrates
Zinc (tonnes) 5,077 8,064 14,820 24,474
Lead (tonnes) 223 763 853 2,126
Gold (ounces) 10,191 3,718 30,977 13,327
Silver (ounces) 51,325 84,048 181,912 248,558

US$ operating costs, production basis
($000's) 5,734 6,170 15,989 18,903
US$ operating cost per tonne milled
(production basis) 45 48 44 49


Production of zinc in concentrate was 37% lower in the third quarter of 2009 compared with the same period in 2008 due to lower zinc grades and recoveries. Production of lead in concentrate was 71% lower due to lower planned lead grades. Production of gold in concentrate was 174% higher in the third quarter of 2009 due to higher planned gold grades.

As the price of zinc exceeded expected prices, 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 third quarter of 2009 resulted in higher cash flows and lower costs per tonne than planned.

(iii) Toqui Drilling

During the third quarter of 2009, a total of 3,580 metres of underground definition drilling was carried out from several in-mine locations. A total of 600 metres was drilled in order to define the limits of Mina Profunda II, a horizon of calcareous sandstone with economic gold values, situated approximately 40 metres beneath the Aserradero North area. Another 400 metres was drilled in the main Aserradero South mine, which has extended the southern limits of the deposit as well as identifying the presence of copper mineralization on the south side of the Fortuna fault, one of the principal limiting faults of the Aserradero mine. An additional 2,040 metres was drilled from several locations into the calcareous sandstone horizon beneath the Dona Rosa mine, identifying sub-economic zinc and gold mineralization. The final 566 metres was drilled to the west of the Estatuas mine, with good indications of zinc mineralization.

(iv) Toqui Outlook

At Toqui, management has been exploring augmenting its 2.0 megawatts of installed hydro electric capacity with both additional hydro electric and wind power. Subsequent to the quarter end, an agreement was reached with a contractor to install an additional 1.65 megawatts of wind power. At a capital cost of US$5.5 million, the project has a payback of approximately four and a half years and has been fully financed locally by term debt. As part of the project to install the wind turbines, application will be made to register this project under the Clean Development Mechanism which will enable Toqui to sell certified emission reductions, better known as carbon credits, in the market. Wind power will lower the Company's electrical costs going forward and help meet increased electrical requirements once the thickened tailings backfill plant is up and running. A used thickened tailings backfill plant has been dismantled and transported to Chile. This plant will enable Toqui to deposit thickened tails and allow pillar recovery in the future.

The wind power plant cost was not included in the capital expenditure projections previously provided.



Myra Falls

(i) Myra Falls Financial Results

Third Quarter First Nine Months
($000's) 2009 2008 2009 2008
----------------------------------------------------------------------------
Gross sales revenue 19,918 28,354 54,844 75,490
Treatment and marketing costs (3,987) (9,351) (13,798) (22,494)
---------------------------------------
Net revenue 15,931 19,003 41,046 52,996
Direct operating costs (13,291) (19,252) (38,378) (56,314)
Depreciation and depletion (343) (1,675) (1,165) (4,469)
Reclamation and closure costs (394) (427) (2,698) (1,287)
---------------------------------------
Contribution (loss) from mining
activities 1,903 (2,351) (1,195) (9,074)
Exploration - (49) - (1,027)
---------------------------------------
1,903 (2,400) (1,195) (10,101)
Income and mining tax provision - (5,297) - (8,164)
---------------------------------------
Net earnings (loss) 1,903 (7,697) (1,195) (18,265)
---------------------------------------
---------------------------------------

Capital expenditures 389 283 1,104 3,250
---------------------------------------
---------------------------------------


Revenue:

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



Third Quarter 2009
--------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
--------------------------------------------------------------------
Zinc 11,645 5,332 1,709 9,111
Copper 5,140 1,203 5,117 6,153
Gold n.a. 1,945 936 1,821
Silver n.a. 79,293 13.43 1,065
Other(2) n.a. n.a.
--------- --------
16,785
---------
---------
Gross sales revenue in US$ 18,150
Exchange rate 1.0974
--------
Gross sales revenue in C$ 19,918
--------
--------


Third Quarter 2008
--------------------------------------------------------------------
Gross
Concentrate Realized sales
sold Payable price(1) revenue
(tonnes) metal(1) (US$) ($000's)
--------------------------------------------------------------------
Zinc 19,574 9,023 1,741 15,710
Copper 4,737 1,047 7,096 7,430
Gold n.a. 2,381 887 2,113
Silver n.a. 101,839 17.21 1,753
Other(2) n.a. n.a.
--------- --------
24,311
---------
---------
Gross sales revenue in US$ 27,006
Exchange rate 1.0499
--------
Gross sales revenue in C$ 28,354
--------
--------
(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 the third quarter of 2009 was 31% lower than in the third quarter of 2008. Lower concentrate sales and lower realized zinc and copper prices resulted in revenues for the quarter decreasing by 33% in US$ terms. A 5% higher exchange rate resulted in gross sales revenue decreasing 30% in C$ terms to $19.9 million.

In the third quarter of 2009, treatment and marketing costs were 57% lower on an aggregate basis primarily due to 31% lower concentrate sales, lower freight rates and more favourable smelter terms partially offset by the higher exchange rate. As a percentage of gross revenue, in the third quarter of 2009, treatment and marketing costs decreased 20% from 33% in the same period in 2008 primarily due to the factors noted above.

Aggregate direct operating costs decreased 31% primarily due to 31% lower concentrate sales and cost reductions achieved in 2008 and 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 taxes decreased $5.3 million in the third quarter of 2009 primarily due to a $5.3 million write-down of a future tax asset in the third quarter of 2008 which did not recur in 2009.

Capital Expenditures:

Myra Falls' capital expenditures in the first nine months of 2009 of $1.1 million consisted primarily of $0.3 million for a new tailings disposal area; $0.4 million for equipment; and, $0.2 million in ramp development.

(ii) Myra Falls Production

Myra Falls' production is set out in the following table.



Third Quarter First Nine Month
2009 2008 2009 2008
----------------------------------------------------------------------------
Tonnes Milled 114,129 131,043 342,773 465,932
Zinc (%) 8.4 8.4 7.2 6.9
Copper (%) 1.1 1.1 1.0 1.2
Gold (g/t) 1.6 1.2 1.3 1.2
Silver (g/t) 54 51 43 45
Concentrate Production
Zinc (tonnes) 15,669 17,539 40,289 51,890
Zinc recovery (%) 88.6 87.7 88.2 87.0
Zinc grade (%) 54.1 54.8 54.1 54.2
Gold recovery (%) 23.8 24.9 22.0 25.2
Gold grade (g/t) 2.8 2.3 2.5 2.8
Copper (tonnes) 3,079 4,495 10,602 17,530
Copper recovery (%) 57.9 71.8 68.7 74.4
Copper grade (%) 25.6 23.5 23.2 23.5
Gold recovery (%) 37.9 32.2 34.7 35.2
Gold grade (g/t) 21.8 11.8 14.9 11.5
Gold (tonnes) 0.03 - 1.94 -
Recovery (%) 8.8 - 8.1 -
Grade (g/t) 441,912 - 21,442 -
Metal in Concentrates
Zinc (tonnes) 8,475 9,615 21,788 28,103
Copper (tonnes) 789 1,057 2,457 4,129
Gold (ounces) 4,019 2,996 9,652 11,124
Silver (ounces) 156,443 159,760 355,699 526,331

C$ operating costs, production basis
($000's) 11,028 15,318 38,231 61,548
C$ operating cost per tonne milled
(production basis) 97 117 112 132


Production of zinc in concentrate was 12% lower in the third quarter of 2009 compared with the same period in 2008 due to fewer tonnes milled despite higher recoveries. Production of copper in concentrate was 25% lower in the third quarter of 2009 due to fewer tonnes milled and lower recoveries.

Compared with previously disclosed guidance, mill throughput and zinc, copper and silver grades were lower than expectations. Lower head grades were primarily due to ore dilution compounded by decreased mining recovery to plan, both associated with remnant mining. Mill recoveries were also negatively affected by the lower head grade. Copper recoveries were affected by a period of high lead grades resulting in a lead to copper ratio of 1:1. The mine plan is being adjusted to increase blending to reduce this problem in the future.

(iii) Myra Falls Drilling

During the third quarter of 2009, exploration drilling was entirely focused on the west side of the Battle lens towards three targets; the West Gap area, the West Gopher Down-Drop, and a new zone called the RE-108 lens. A total of 2,845 metres was drilled during the quarter.

The West Gopher Down-Drop drill program has been deferred, pending core logging and interpretation.

During the third quarter of 2009, delineation of a new polymetallic zone - RE-108 - was undertaken. The lens has now been substantiated to the point where the development is being accelerated in order to bring some of this material into the mine plan in the fourth quarter of 2009. The zone is currently open to the west.

The South Flank area is presently in production as well as undergoing increased development. The South Flank Main lens and South Flank East lens accesses are now under development and any additional drilling in this area has been deferred to the fourth quarter of 2009.

A drill has been moved up to 20 level in the HW mine to drill two orientation holes into the Price-South Flank stratigraphy.

(iv) Myra Falls Outlook

Production from the South Flank area commenced ahead of plan and this area will continue as a significant source of mill feed for the balance of 2009 and 2010. Operating costs per tonne milled were expected to meet projections, while metals in concentrates were expected to be approximately 31,500 tonnes for zinc, 3,500 tonnes for copper and 557,000 ounces of silver compared with previous guidance.

On November 4, 2009 a fire occurred in the production hoist. The fire was contained and there were no injuries. However, an electrical switch gear was destroyed in the fire rendering the production hoist currently unusable. The Company is currently assessing the impact of the damage and its effect on near term production and costs.

The collective bargaining agreement at Myra Falls expired on September 30, 2009. On November 4, 2009 at 6:30pm (PST), the Company was served with 72 hour strike notice and the union is in a legal strike position effective November 7, 2009 at 6:30pm (PST).

Langlois Outlook

The rally in zinc prices from their lows earlier this year has prompted the Company to actively review the economics of a reopening plan for Langlois which contemplates six months of preproduction development work. The recent strength in the Canadian dollar has somewhat offset the rise in zinc prices.


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
September 30, 2009
------------------------------ Myra
($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs per
financial statements 14,319 6,343 13,291 13 33,966
Adjustment to production basis (3,427) 235 (2,252) n.a. (5,444)
Less: stock-based compensation (1) (14) (11) (13) (39)
Less: royalty adjustment n.a. (391) n.a. n.a. (391)
---------------------------------------------
Operating costs on production
basis (C$) 10,891 6,173 11,028 - 28,092
---------------------------------------------
---------------------------------------------

Average exchange rate 1.0623 1.0766 1.0882 n.a. 1.0755
Operating costs on production
basis (US$) 10,252 5,734 10,134 n.a. 26,120
---------------------------------------------
---------------------------------------------

Tonnes milled 193,479 128,679 114,129 n.a. 436,287
---------------------------------------------
---------------------------------------------

Operating cost per tonne
milled - US$ 53 45 89 n.a. 60
Operating cost per tonne
milled - C$ 56 48 97 n.a. 64

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



Three Months ended
September 30, 2008 Myra
($000's) Mochito Toqui Falls Langlois Total
----------------------------------------------------------------------------
Direct operating costs
per financial
statements 10,503 8,594 19,252 16,671 55,020
Adjustment to
production basis (1,175) (1,583) (3,850) (1,661) (8,269)
Less: stock-based
compensation (10) (20) (44) (14) (88)
Less: royalties n.a. (560) n.a. n.a. (560)
---------------------------------------------
Operating costs on a
production basis (C$) 9,318 6,431 15,358 14,996 46,103
---------------------------------------------
---------------------------------------------

Average exchange rate 1.0412 1.0423 1.0552 1.0424 1.0464
Operating costs on
production basis (US$) 8,949 6,170 14,555 14,386 44,060
---------------------------------------------
---------------------------------------------

Tonnes milled 160,427 128,673 131,043 176,570 596,713
---------------------------------------------
---------------------------------------------

Operating cost per
tonne milled - US$ 56 48 111 81 74
Operating cost per
tonne milled - C$ 58 50 117 85 77



Nine Months ended
September 30, 2009 Myra
($000's) Mochito Toqui Falls Langlois(1) Total
----------------------------------------------------------------------------
Direct operating costs
per financial
statements 31,841 15,360 38,378 1,175 86,754
Adjustment to
production basis 738 3,886 (84) (1,133) 3,407
Less: stock-based
compensation (9) (42) (63) (42) (156)
Less: royalty
adjustment n.a. (848) n.a. n.a. (848)
-----------------------------------------------
Operating costs on
production basis (C$) 32,570 18,356 38,231 - 89,157
-----------------------------------------------
-----------------------------------------------

Average exchange rate 1.1528 1.1480 1.1694 n.a. 1.1589
Operating costs on
production basis (US$) 28,252 15,989 32,693 n.a. 76,934
-----------------------------------------------
-----------------------------------------------

Tonnes milled 539,012 365,829 342,773 n.a. 1,247,614
-----------------------------------------------
-----------------------------------------------

Operating cost per
tonne milled - US$ 52 44 95 n.a. 62
Operating cost per
tonne milled - C$ 60 50 112 n.a. 71

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



Nine Months ended
September 30, 2008 Myra
($000's) Mochito Toqui Falls Langlois Total
----------------------------------------------------------------------------
Direct operating costs per
financial statements 27,154 26,278 56,314 43,837 153,583
Adjustment to production
basis (140) (5,664) 5,483 968 647
Less: stock-based
compensation (45) (119) (249) (46) (459)
Less: royalty adjustment n.a. (1,236) n.a. n.a. (1,236)
----------------------------------------------
Operating costs on production
basis (C$) 26,969 19,259 61,548 44,759 152,535
----------------------------------------------
----------------------------------------------

Average exchange rate 1.0188 1.0188 1.0188 1.0188 1.0188
Operating costs on production
basis (US$) 26,472 18,903 60,412 43,933 149,720
----------------------------------------------
----------------------------------------------

Tonnes milled 484,762 388,486 465,932 446,833 1,786,013
----------------------------------------------
----------------------------------------------

Operating cost per tonne
milled - US$ 55 49 130 98 84
Operating cost per tonne
milled - C$ 56 50 132 100 85


SUMMARY OF QUARTERLY RESULTS

2007 2008 2008 2008
Q4 Q1 Q2 Q3
----------------------------------------------------------------------------
Gross sales revenue ($ millions) 135.5 81.9 115.1 101.0
Net earning (loss) ($ millions) (38.4) (6.9) 8.1 (36.1)
Basic earnings (loss) per share $ (0.09) $ (0.02) $0.02 $ (0.08)
Weighted-average number of
Common Shares outstanding
(millions) 421.6 425.8 446.4 446.5
Diluted earnings (loss) per share $ (0.09) $ (0.02) $0.02 $ (0.08)
C$/US$ realized exchange rate 0.9857 1.0047 1.0100 1.0457
Average realized zinc price (US$/t) 2,608 2,409 2,205 1,830
Average realized zinc price (C$/t) 2,571 2,420 2,227 1,914
Concentrate tonnes sold(1) 102,415 59,210 95,188 87,978
Concentrate tonnes produced(1) 72,470 73,481 86,856 89,514
----------------------------------------------------------------------------


2008 2009 2009 2009
Q4 Q1 Q2 Q3
----------------------------------------------------------------------------
Gross sales revenue ($ millions) 100.1 64.1 40.9 71.6
Net earning (loss) ($ millions) (53.5) (6.5) (4.5) 6.5
Basic earnings (loss) per share $ (0.12) $ (0.01) $ (0.01) $0.01
Weighted-average number of
Common Shares outstanding
(millions) 446.8 447.7 678.4 678.9
Diluted earnings (loss) per share $ (0.12) $ (0.01) $ (0.01) $0.01
C$/US$ realized exchange rate 1.2050 1.2499 1.1599 1.0947
Average realized zinc price (US$/t) 1,331 1,156 1,413 1,678
Average realized zinc price (C$/t) 1,604 1,445 1,639 1,837
Concentrate tonnes sold(1) 104,229 66,051 43,670 54,590
Concentrate tonnes produced(1) 65,986 49,803 48,512 54,588
----------------------------------------------------------------------------

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


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$ over the past eight quarters impacts the realized C$ gross sales revenue.

RELATED PARTY TRANSACTIONS

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.

CRITICAL ACCOUNTING ESTIMATES

Asset Impairment

The carrying values of producing mineral properties, including properties placed on a care and maintenance basis and related deferred expenditures, are reviewed when events or changes in circumstances arise that may result in impairments in the carrying value of those assets. Estimated future net cash flows, on an undiscounted basis, are calculated for each property using: estimated recoverable reserves; estimated future metal price realization (considering historical and current prices, price trends and related factors); and, estimated operating, capital and other cash flows.

For 2008 testing purposes, the Company used the price assumptions contained in the Sensitivity to Metal Prices and Exchange Rates section in the news release dated February 26, 2009 and estimated future price realizations and exchange rates for 2010 to the end of each mine's life. Estimates of future cash flows are subject to risks and uncertainties. It is possible that changes may be required to these assumptions in the future which may affect the assessment of recoverability of the carrying value of mineral properties. See Sensitivity to Metal Prices and Exchange Rates section in the year-end news release dated February 26, 2009 at www.sedar.com.

Provisional Payments for Concentrate Shipped and Not Priced

Provisional payments for concentrate inventory shipped and not priced are based on price estimates prevailing close to the date the concentrate is shipped and final pricing can occur several months later, therefore, if there is a dramatic decline in metal pricing during this period, the Company could be required to remit funds back to its customers.

Employee Future Benefits

The Company measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at December 31 of each year. Actuarial reports valuing this hourly plan are prepared every three years using the projected accumulated benefit method, with December 31, 2007 being the most recent valuation. Employee future benefits relate only to employees at Myra Falls and include amounts related to unionized hourly employee defined benefit pension plan and post-retirement supplements and medical benefits to certain non-union employees. The determination of employee future benefit expenses, obligations and funding requirements require the use of estimates which can produce significant measurement uncertainty into the actuarial valuation process. Such estimates include: mine closure assumptions, expected average remaining service lifetime, termination of employment, retirement timing, mortality, marital status, discount rates, rate of return on plan assets and health care and dental cost inflation assumptions.

INTERNATIONAL FINANCIAL REPORTING STANDARDS

In February 2008, the Canadian Institute of Chartered Accountants announced that GAAP for publicly accountable enterprises will be replaced by International Financial Reporting Standards ("IFRS") for interim and annual financial statements for fiscal years beginning on or after January 1, 2011. The standard also requires that comparative figures for 2010 be based on IFRS. The Company is currently in the planning stages and cannot at this time determine the final impact of the transition to IFRS. As at September 30, 2009, the Company has completed a "Phase 1 - Preliminary Study" which analyses the Company's existing financial reporting and provides a preliminary assessment of the potential key impact areas of the IFRS conversion. The Company has formed a steering committee to oversee the implementation of the conversion to IFRS and plans to hold training sessions for staff and directors in the final quarter of 2009. The Company has commenced "Phase 2 -- Planning and Implementation" which is to develop a detailed project plan, evaluate the potential key impact areas and the options available under IFRS.

RISKS, UNCERTAINTIES AND OTHER INFORMATION

Readers are encouraged to read and consider the risk factors, and additional information regarding the Company, included in its most recent Amended and Restated Annual Information Form filed with the Canadian securities regulators, a copy of which is posted on the SEDAR website at www.sedar.com.

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. For a more complete description of certain elements please refer to note 16 to the 2008 audited consolidated financial statements.



Common Shares or Securities Convertible into Common Shares November 5, 2009
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Issued and outstanding 683,191,280
Share options outstanding (weighted-average exercise price
$1.10) 6,844,408
Warrants issued at $0.12, expire on April 9, 2014 -- traded
on TSX 111,053,000
----------------------------------------------------------------------------
Future fully diluted 801,088,688
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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 benefits 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 associated with operations in foreign countries; 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 unanticipated 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 and the Company's other primary metals and minerals 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.

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 Amended and Restated 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)
----------------------------------------------------------------------------
September December
30, 2009 31, 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets

Current
Cash and cash equivalents 18,313 20,328
Restricted cash 6,590 761
Short-term investments 180 142
Accounts receivable -- concentrate 1,820 614
Other receivables 10,196 12,451
Concentrate inventory 25,223 21,816
Materials and supplies inventory 32,545 37,278
Prepaid expenses and other current assets 3,044 5,748
Income and mining tax receivable 32 1,550
Future income tax assets - 621
----------------------------------------------------------------------------
Total current assets 97,943 101,309

Restricted reclamation investments 31,541 35,026
Mineral properties and fixed assets 260,628 277,990
Restricted promissory notes 105,724 80,886
----------------------------------------------------------------------------
495,836 495,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity
Current
Accounts payable and accrued liabilities 24,373 50,837
Provisional payments for concentrate inventory shipped
and not priced 1,906 10,512
Short-term debt including current portion of long-term
debt 2,049 4,854
Income and mining taxes payable 1,152 264
Current portion of reclamation, closure cost accruals and
other environmental obligations 5,147 5,622
----------------------------------------------------------------------------
Total current liabilities 34,627 72,089

Deferred income 6,822 5,924
Long-term lease obligations 76 125
Royalty obligations 101,852 78,449
Long-term debt 8,964 1,851
Reclamation, closure cost accruals and other
environmental obligations 25,318 22,906
Employee future benefits 1,292 994
Future income tax liabilities 5,629 3,211
----------------------------------------------------------------------------
Total liabilities 184,580 185,549
Shareholders' equity 311,256 309,662
----------------------------------------------------------------------------
495,836 495,211
----------------------------------------------------------------------------
----------------------------------------------------------------------------



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 Nine Months Ended

For the periods ended September 30 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Gross sales revenue 71,622 101,004 176,694 298,009
Treatment and marketing costs 15,460 33,949 51,676 96,132
----------------------------------------------------------------------------
Net revenue 56,162 67,055 125,018 201,877
----------------------------------------------------------------------------

Direct operating costs 33,966 55,020 86,754 153,583
Depreciation and depletion 7,972 13,904 18,573 30,951
Reclamation and closure costs 887 2,036 4,492 2,669
----------------------------------------------------------------------------
42,825 70,960 109,819 187,203
----------------------------------------------------------------------------
Contribution (loss) from mining
activities 13,337 (3,905) 15,199 14,674
----------------------------------------------------------------------------

General and administrative 2,443 3,706 8,120 11,433
Interest and financing 776 1,031 2,334 2,978
Investment and other income (2,614) (8,497) (7,292) (13,536)
Foreign exchange and other expense
(income) 2,217 (642) 4,723 (1,488)
Exploration 300 4,923 1,139 13,830
Other non-producing property costs 1,449 437 5,212 1,244
Write-down of mineral properties and
fixed assets - 10,970 - 10,970
----------------------------------------------------------------------------
4,571 11,928 14,236 25,431
----------------------------------------------------------------------------
Earnings (loss) before income and
mining tax provision 8,766 (15,833) 963 (10,757)
Income and mining tax provision 2,285 20,239 5,514 24,097
----------------------------------------------------------------------------
Net earnings (loss) 6,481 (36,072) (4,551) (34,854)
Retained earnings, beginning of
period 69,536 170,126 80,568 168,908
----------------------------------------------------------------------------
Retained earnings, end of period 76,017 134,054 76,017 134,054
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic earnings (loss) per Common
Share $0.01 ($0.08) ($0.01) ($0.08)
Diluted earnings (loss) per Common
Share $0.01 ($0.08) ($0.01) ($0.08)
Basic weighted-average number of
Common
Shares outstanding (000's) 678,926 446,508 601,701 439,556
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Accumulated Other Comprehensive (Loss) Income
(Expressed in thousands of Canadian dollars)
(Unaudited)

----------------------------------------------------------------------------
September 30, December
2009 31, 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Accumulated other comprehensive income (loss),
beginning of period 3,257 (3,817)
Other comprehensive (loss) income (15,959) 7,074
----------------------------------------------------------------------------

Accumulated other comprehensive (loss) income, end
of period (12,702) 3,257
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Other Comprehensive (Loss) Income
(Expressed in thousands of Canadian dollars)
(Unaudited)

Three Months Ended Nine Months Ended
For the periods ended September 30 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net earnings (loss) 6,481 (36,072) (4,551) (34,854)
----------------------------------------------------------------------------

Other comprehensive (loss) income,
net of income taxes:
Unrealized (losses) gains on
translating financial statements
of self sustaining foreign
operations (9,521) 3,974 (15,797) 6,167
Unrealized loss on short-term
available-for sale securities,
net of income tax provision for
the 3 months of $Nil (2008 - $3)
and 9 months of $1 (2008 - $4) (1) (18) (6) (23)
Unrealized gain (loss) on restricted
investments net of income tax
provision for the 3 months of $9
(2008 - $23) and 9 months of
$10 (2008 - $23) 49 126 (55) 126
Unrealized loss on long-term
available-for-sale securities,
net of income tax provision for
the 3 months of $Nil (2008 - $27)
and 9 months of $Nil (2008 - $Nil) - (172) - -
Reclassification of gain (loss) on
sale of available-for-sale securities
to income 2 (6,479) (101) (13,222)
----------------------------------------------------------------------------

Other comprehensive loss, net of
income taxes (9,471) (2,569) (15,959) (6,952)
----------------------------------------------------------------------------

Comprehensive loss (2,990) (38,641) (20,510) (41,806)
----------------------------------------------------------------------------
----------------------------------------------------------------------------



BREAKWATER RESOURCES LTD.
Consolidated Statements of Cash Flow
(Expressed in thousands of Canadian dollars)
(Unaudited)
Three Months Nine Months
Ended Ended
For the periods ended September 30 2009 2008 2009 2008
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Operating Activities
Net earnings (loss) 6,481 (36,072) (4,551) (34,854)
Items not affecting cash:
Depreciation and depletion 7,972 13,904 18,573 30,951
Loss (gain) on sale of investments 3 (2,059) (118) (9,035)
Unrealized (gain) loss on
investments (156) (4,127) 77 1,722
Write-down of mineral properties
and fixed assets - 10,970 - 10,970
Other non-cash items (202) 443 (416) 2,815
Stock-based compensation 83 190 433 901
Unrealized deferred income (912) (153) (1,847) (458)
Future income taxes 1,132 18,377 3,453 15,685
Reclamation, closure cost accruals
and other environmental obligations 887 2,036 4,492 2,669
Employee future benefits 858 675 2,577 1,384
Payment of reclamation, closure cost
accruals and other
environmental obligations (563) (1,336) (1,874) (2,883)
Payment of employee future benefits (754) (772) (2,279) (2,481)
Changes in non-cash working capital
items (9,676) (17,219) (31,123) (23,596)
----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities 5,153 (15,143) (12,603) (6,210)
----------------------------------------------------------------------------

Investing Activities
(Increase) decrease in restricted
cash (5,829) 68 (5,829) 118
Short-term investments - 3,569 - 7,017
Long-term investments - - - 13,350
Funds advanced on promissory note - - (23,428) -
Restricted reclamation investments (224) (476) 3,302 (476)
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 (6,196) (16,503) (18,057) (65,150)
Proceeds from sale of mineral
properties and fixed assets - 164 1,906 192
----------------------------------------------------------------------------
Net cash used in investing
activities (12,249) (13,178) (42,106) (44,960)
----------------------------------------------------------------------------

Financing Activities
Proceeds from sale of royalty
interest - - 23,428 -
Issue of common shares and warrants
for cash, net of issue costs 89 97 21,659 284
Deferred income relating to
royalties - - 2,745 -
Decrease in long-term lease
obligations (60) (72) (49) (109)
Increase (decrease) in short-term
debt 564 60 (557) 891
Increase in long-term debt 5,468 35 5,468 3,057
----------------------------------------------------------------------------
Net cash provided by financing
activities 6,061 120 52,694 4,123
----------------------------------------------------------------------------
Net decrease in cash during the
period (1,035) (28,201) (2,015) (47,047)
Cash and cash equivalents, beginning
of period 19,348 44,088 20,328 62,934
----------------------------------------------------------------------------
Cash and cash equivalents, end of
period 18,313 15,887 18,313 15,887
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental Information
Cash interest paid 43 5 549 66
Cash income and mining taxes paid 114 4,328 964 14,635
Cash interest received 185 624 765 984
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Segment Information
For the Three Months Ended September 30, 2009 (Unaudited)
---------------------------------------------------------------------------
($000's) Myra
Operating Segment Mochito Toqui Falls Langlois Total
---------------------------------------------------------------------------

Gross sales revenue 35,918 17,369 19,918 - 73,205
Treatment and marketing costs 7,279 4,194 3,987 - 15,460
---------------------------------------------------------------------------
Net revenue 28,639 13,175 15,931 - 57,745
---------------------------------------------------------------------------
Direct operating costs 14,319 6,343 13,291 13 33,966
Depreciation and depletion 5,355 2,228 343 23 7,949
Reclamation and closure costs 314 55 394 21 784
---------------------------------------------------------------------------
19,988 8,626 14,028 57 42,699
---------------------------------------------------------------------------
Contribution (loss) from
mining activities 8,651 4,549 1,903 (57) 15,046
---------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange and other - - - - -
Exploration 112 95 - 93 300
Other non-producing property
costs - - - 1,183 1,183
---------------------------------------------------------------------------
112 95 - 1,276 1,483
---------------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision 8,539 4,454 1,903 (1,333) 13,563
Income and mining tax
provision 811 1,302 - 172 2,285
---------------------------------------------------------------------------
Net earnings (loss) 7,728 3,152 1,903 (1,505) 11,278
---------------------------------------------------------------------------

Capital expenditures
(recovery) 3,116 2,842 389 - 6,347
Mineral properties and fixed
assets 48,774 59,193 22,278 121,172 251,417
Identifiable assets 71,731 84,775 179,773 125,344 461,623
---------------------------------------------------------------------------
---------------------------------------------------------------------------


--------------------------------------------------------------------
($000's) Non-operating Corporate
Operating Segment mines and Other Consolidated
--------------------------------------------------------------------

Gross sales revenue - (1,583) 71,622
Treatment and marketing costs - - 15,460
--------------------------------------------------------------------
Net revenue - (1,583) 56,162
--------------------------------------------------------------------
Direct operating costs - - 33,966
Depreciation and depletion - 23 7,972
Reclamation and closure costs 103 - 887
--------------------------------------------------------------------
103 23 42,825
--------------------------------------------------------------------
Contribution (loss) from
mining activities (103) (1,606) 13,337
--------------------------------------------------------------------
General and administrative - 2,443 2,443
Interest and financing - 776 776
Investment and other income - (2,614) (2,614)
Foreign exchange and other - 2,217 2,217
Exploration - - 300
Other non-producing property
costs 226 40 1,449
--------------------------------------------------------------------
226 2,862 4,571
--------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision (329) (4,468) 8,766
Income and mining tax
provision - - 2,285
--------------------------------------------------------------------
Net earnings (loss) (329) (4,468) 6,481
--------------------------------------------------------------------

Capital expenditures
(recovery) - (151) 6,196
Mineral properties and fixed
assets 994 8,217 260,628
Identifiable assets 1,155 33,058 495,836
--------------------------------------------------------------------
--------------------------------------------------------------------

Information about major customers - Summary of net revenue from
major customers for the three months ended September 30, 2009.

Revenue Source

($000's) Mochito Toqui Myra Falls Total
--------------------------------------------------------
Customer 1 10,385 1,002 8,883 20,270
Customer 2 11,025 - 8,155 19,180



For the Three Months Ended September 30, 2008 (Unaudited)
--------------------------------------------------------------------------
($000's) Myra
Operating Segment Mochito Toqui Falls Langlois Total
--------------------------------------------------------------------------

Gross sales revenue 27,009 18,190 28,354 27,451 101,004
Treatment and marketing costs 8,546 7,683 9,351 8,369 33,949
--------------------------------------------------------------------------
Net revenue 18,463 10,507 19,003 19,082 67,055
--------------------------------------------------------------------------
Direct operating costs 10,503 8,594 19,252 16,671 55,020
Depreciation and depletion 2,504 2,281 1,675 7,404 13,864
Reclamation and closure costs 391 36 427 20 874
--------------------------------------------------------------------------
13,398 10,911 21,354 24,095 69,758
--------------------------------------------------------------------------
Contribution (loss) from
mining activities 5,065 (404) (2,351) (5,013) (2,703)
--------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange and other
income - - - - -
Exploration 821 129 49 895 1,894
Other non-producing property
costs - - - - -
Write-down of mineral
properties - - - - -
--------------------------------------------------------------------------
821 129 49 895 1,894
--------------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision
(recovery) 4,244 (533) (2,400) (5,908) (4,597)
Income and mining tax
provision (recovery) 1,206 271 5,297 13,719 20,493
--------------------------------------------------------------------------
Net earnings (loss) 3,038 (804) (7,697) (19,627) (25,090)
--------------------------------------------------------------------------

Capital expenditures 5,820 3,681 283 6,461 16,245
Mineral properties and fixed
assets 51,609 57,914 58,538 132,105 300,166
Identifiable assets 79,091 76,522 191,960 158,522 506,095
--------------------------------------------------------------------------
--------------------------------------------------------------------------


--------------------------------------------------------------------
($000's) Non-operating Corporate
Operating Segment mines and Other Consolidated
--------------------------------------------------------------------

Gross sales revenue - - 101,004
Treatment and marketing costs - - 33,949
--------------------------------------------------------------------
Net revenue - - 67,055
--------------------------------------------------------------------
Direct operating costs - - 55,020
Depreciation and depletion - 40 13,904
Reclamation and closure costs 1,162 - 2,036
--------------------------------------------------------------------
1,162 40 70,960
--------------------------------------------------------------------
Contribution (loss) from
mining activities (1,162) (40) (3,905)
--------------------------------------------------------------------
General and administrative - 3,706 3,706
Interest and financing - 1,031 1,031
Investment and other income - (8,497) (8,497)
Foreign exchange and other
income - (642) (642)
Exploration 32 2,997 4,923
Other non-producing property
costs 398 39 437
Write-down of mineral
properties - 10,970 10,970
--------------------------------------------------------------------
430 9,604 11,928
--------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision
(recovery) (1,592) (9,644) (15,833)
Income and mining tax
provision (recovery) - (254) 20,239
--------------------------------------------------------------------
Net earnings (loss) (1,592) (9,390) (36,072)
--------------------------------------------------------------------

Capital expenditures - 258 16,503
Mineral properties and fixed
assets 5,292 9,786 315,244
Identifiable assets 6,207 32,826 545,128
--------------------------------------------------------------------
--------------------------------------------------------------------

Information about major customers - Summary of net revenue from
major customers for the three months ended September 30, 2008.

Revenue Source

($000's) Mochito Toqui Myra Falls Langlois Total
-------------------------------------------------------------------
Customer 1 6,648 - - 6,393 13,041
Customer 2 - 2,652 10,155 - 12,807
Customer 3 9,435 312 - - 9,747



For the Nine Months Ended September 30, 2009 (Unaudited)
---------------------------------------------------------------------------
($000's) Myra
Operating Segment Mochito Toqui Falls Langlois Total
---------------------------------------------------------------------------

Gross sales revenue 71,608 50,067 54,844 2,992 179,511
Treatment and marketing costs 20,717 15,977 13,798 1,184 51,676
---------------------------------------------------------------------------
Net revenue 50,891 34,090 41,046 1,808 127,835
---------------------------------------------------------------------------
Direct operating costs 31,841 15,360 38,378 1,175 86,754
Depreciation and depletion 11,954 5,317 1,165 68 18,504
Reclamation and closure costs 1,010 175 2,698 64 3,947
---------------------------------------------------------------------------
44,805 20,852 42,241 1,307 109,205
---------------------------------------------------------------------------
Contribution (loss) from
mining activities 6,086 13,238 (1,195) 501 18,630
---------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange and other - - - - -
Exploration 319 459 - 361 1,139
Other non-producing property
costs - - - 4,464 4,464
---------------------------------------------------------------------------
319 459 - 4,825 5,603
---------------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision 5,767 12,779 (1,195) (4,324) 13,027
Income and mining tax
provision 1,006 1,721 - 2,176 4,903
---------------------------------------------------------------------------
Net earnings (loss) 4,761 11,058 (1,195) (6,500) 8,124
---------------------------------------------------------------------------

Capital expenditures 9,424 6,902 1,104 91 17,521
---------------------------------------------------------------------------
---------------------------------------------------------------------------


--------------------------------------------------------------------
($000's) Non-operating Corporate
Operating Segment mines and Other Consolidated
--------------------------------------------------------------------

Gross sales revenue - (2,817) 176,694
Treatment and marketing costs - - 51,676
--------------------------------------------------------------------
Net revenue - (2,817) 125,018
--------------------------------------------------------------------
Direct operating costs - - 86,754
Depreciation and depletion - 69 18,573
Reclamation and closure costs 545 - 4,492
--------------------------------------------------------------------
545 69 109,819
--------------------------------------------------------------------
Contribution (loss) from
mining activities (545) (2,886) 15,199
--------------------------------------------------------------------
General and administrative - 8,120 8,120
Interest and financing - 2,334 2,334
Investment and other income - (7,292) (7,292)
Foreign exchange and other - 4,723 4,723
Exploration - - 1,139
Other non-producing property
costs 682 66 5,212
--------------------------------------------------------------------
682 7,951 14,236
--------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision (1,227) (10,837) 963
Income and mining tax
provision - 611 5,514
--------------------------------------------------------------------
Net earnings (loss) (1,227) (11,448) (4,551)
--------------------------------------------------------------------

Capital expenditures - 536 18,057
--------------------------------------------------------------------
--------------------------------------------------------------------


Information about major customers - Summary of net revenue from
major customers for the nine months ended September 30, 2009.

Revenue Source
($000's) Mochito Toqui Myra Falls Langlois Total
--------------------------------------------------------------------------
Customer 1 12,962 - 15,735 - 28,697
Customer 2 10,385 4,422 10,818 - 25,625
Customer 3 7,741 6,009 6,893 455 21,098



For the Nine Months Ended September 30, 2008 (Unaudited)
--------------------------------------------------------------------------
($000's) Myra
Operating Segment Mochito Toqui Falls Langlois Total
--------------------------------------------------------------------------

Gross sales revenue 78,185 77,292 75,490 67,042 298,009
Treatment and marketing costs 22,045 30,922 22,494 20,671 96,132
--------------------------------------------------------------------------
Net revenue 56,140 46,370 52,996 46,371 201,877
--------------------------------------------------------------------------
Direct operating costs 27,154 26,278 56,314 43,837 153,583
Depreciation and depletion 6,283 6,255 4,469 13,818 30,825
Reclamation and closure costs
(income) 925 (958) 1,287 60 1,314
--------------------------------------------------------------------------
34,362 31,575 62,070 57,715 185,722
--------------------------------------------------------------------------
Contribution (loss) from
mining activities 21,778 14,795 (9,074) (11,344) 16,155
--------------------------------------------------------------------------
General and administrative - - - - -
Interest and financing - - - - -
Investment and other income - - - - -
Foreign exchange and other
income - - - - -
Exploration 1,788 816 1,027 3,598 7,229
Other non-producing property
costs - - - - -
Write-down of mineral
properties - - - - -
--------------------------------------------------------------------------
1,788 816 1,027 3,598 7,229
--------------------------------------------------------------------------
Earnings (loss) before income
and mining tax provision
(recovery) 19,990 13,979 (10,101) (14,942) 8,926
Income and mining tax
provision (recovery) 5,198 2,678 8,164 9,003 25,043
--------------------------------------------------------------------------
Net earnings (loss) 14,792 11,301 (18,265) (23,945) (16,117)
--------------------------------------------------------------------------

Capital expenditures 19,776 17,755 3,250 23,286 64,067
--------------------------------------------------------------------------
--------------------------------------------------------------------------


----------------------------------------------------------------------
($000's) Non-operating Corporate
Operating Segment mines and Other Consolidated
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Gross sales revenue - - 298,009
Treatment and marketing costs - - 96,132
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Net revenue - - 201,877
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Direct operating costs - - 153,583
Depreciation and depletion - 126 30,951
Reclamation and closure costs
(income) 1,355 - 2,669
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1,355 126 187,203
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Contribution (loss) from
mining activities (1,355) (126) 14,674
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General and administrative - 11,433 11,433
Interest and financing - 2,978 2,978
Investment and other income - (13,536) (13,536)
Foreign exchange and other
income - (1,488) (1,488)
Exploration 422 6,179 13,830
Other non-producing property
costs 1,069 175 1,244
Write-down of mineral
properties - 10,970 10,970
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1,491 16,711 25,431
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Earnings (loss) before income
and mining tax provision
(recovery) (2,846) (16,837) (10,757)
Income and mining tax
provision (recovery) - (946) 24,097
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Net earnings (loss) (2,846) (15,891) (34,854)
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Capital expenditures - 1,083 65,150
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Information about major customers - Summary of net revenue from
major customers for the nine months ended September 30, 2008.


Revenue Source
($000's) Mochito Toqui Myra Falls Langlois Total
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Customer 1 5,951 13,495 19,482 - 38,928
Customer 2 - 4,600 31,678 - 36,278
Customer 3 6,648 - - 13,986 20,634

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