BWR : TSE : $2.05 Canaccord's Greg Barnes (416) 869-3092
Recommendation: BUY
Target price: $4.50
52-week price range: $4.60-1.99
Shares O/S: basic 82.4M
Book value per share $2.59
Working capital: $25.8M
Long-term debt: $36.1M
Market capitalization: $175M
Enterprise value: $168.9M
Sector: Metals & Minerals
Web site address: www.breakwater.ca
Breakwater released exploration results from its Chilean projects
yesterday morning which continue to show that the area around the El
Toqui mine holds significant potential - including a new zone that
contains significant gold values.
In the past, Breakwater's management has indicated that it believes
that the El Toqui mMine is the top operation in the company's
portfolio with respect to the potential to significantly increase ore
reserves. Reserves at the mine at the end of 1999 stood at 2 million
tonnes grading 8% zinc and 0.4 g/t gold. Based on the 2000 mine plan,
the operation has a mine life of close to five years.
Since the beginning of July 25 holes totaling 6,400 metres have been
drilled in the Estatuas, Dona Rosa, and Aserradero sectors surrounding
the current operations. Most of the holes reported respectable zinc
grades and intersections. The results released yesterday indicate
that the company appears to be having the most success in the Estatuas
area, located 3.5 kilometres west of the El Toqui mill. To date,
inferred resources totaling 4.4 million tonnes grading 7% zinc have
been outlined at Estatuas. Yesterday's results reported an average
true thickness of 4.1 metres and a weighted average grade of 5.65%
zinc.
In other drilling, a new horizon was intercepted in the Dona Rosa
south sector below the principal sulphide bearing zone. The new zone
reported high gold grades (up to 21 g/t gold) along with reasonable
zinc grades. Further drilling will be conducted to test the extent of
the new zone. El Toqui produces a gold concentrate along with a zinc
concentrate. In 1999, the operation produced 2,992 tonnes of gold
concentrate containing 4,938 ounces of gold.
Breakwater also released some very early stage results from its Puerto
Sanchez project located 250 kilometres to the south of the El Toqui
mine. Soil sampling in the area confirmed the earlier stream sediment
sampling, which indicated the presence of a large base metal anomaly.
The company is planning a drilling program on the target starting in
November.
With Breakwater experiencing a full quarter with the Langlois and
Bouchard-Hebert operations in its control, we are expecting better
results than reported in Q2/00 (EPS $0.05 and CFPS $0.12). We
estimate EPS in the range of $0.10-0.12 and CFPS in the $0.15-0.20
range. Breakwater is expected to release its Q3 results this coming
Monday, October 16. We are maintaining our BUY recommendation on
Breakwater and our $4.50 target price (5 times 2001 CFPS). |
