Breakwater Resources Ltd.
TSX : BWR

Breakwater Resources Ltd.

March 26, 2009 17:22 ET

Breakwater Enters Into New Red Mile Royalty Agreement

TORONTO, ONTARIO--(Marketwire - March 26, 2009) - Breakwater Resources Ltd. (TSX:BWR) has entered into a royalty agreement with Red Mile Resources No. 6 Limited Partnership whereby Breakwater sold a basic royalty on a portion of the payable zinc production, over the life of the Myra Falls mine. Breakwater received $26.2 million, which included royalty income of $23.4 million and fees and interest of $2.8 million.

Under the terms of the royalty agreement, the Company is required to make basic royalty payments at fixed amounts per pound of payable zinc produced, which escalates from $0.004 per pound to $0.107 per pound over the first twelve years of the royalty agreement. In addition, the Company granted Red Mile a net profit interest of 1.5%, 1.75% or 2.0% in years 2015 through 2019 if the price of zinc in a given calendar year averages US$4,250, US$4,500 or US$4,750 per tonne respectively.

Of the funds received, $23.4 million was placed with a financial institution, for which the Company took back a promissory note. Interest earned from the promissory note will be used to fund the expected basic royalty payments during the initial years of the royalty agreement. Over the remaining years of the royalty agreement, interest and principal from the promissory note will be used to fund the basic royalty payments. The balance of the funds received of $2.8 million will be used for general corporate purposes.

Under certain circumstances the Company has the right, by way of a call option, to acquire the partnership units of Red Mile for the lower of market value or for the outstanding amount of the promissory note.

Breakwater is a mining, exploration and development company which produces and sells zinc, copper, lead and gold concentrates to customers around the world. The Company's concentrate production is derived from three mines in Chile, Honduras and Canada. Breakwater's Langlois mine in Quebec, Canada is currently on temporary care and maintenance.

Contact Information

  • Breakwater Resources Ltd.
    Ann Wilkinson
    Vice-President, Investor Relations
    (416) 363-4798 Ext. 277