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Strategies & Market Trends : Commodities - The Coming Bull Market -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (975)	11/28/2001 10:31:42 AM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Breakwater posts Q3 loss, sees 2002 zinc recovery biz.yahoo.com Tuesday November 20, 3:25 pm Eastern Time By Lesley Wroughton TORONTO, Nov 20 (Reuters) - Fighting a liquidity crunch as its income is drained by several months of record low zinc prices, Canadian miner Breakwater Resources Ltd. (Toronto:BWR.TO - news) reported a third-quarter loss on Tuesday that includes a C$69.8 million ($43 million) writedown on assets. The company said a new credit structure agreed with bankers on Nov. 15, which includes access to $6.5 million in additional debt funding, would ensure it was part of a recovery in the zinc market in 2002. But analysts said the company's survival depends on a planned C$15 million rights issue. Dundee Bancorp, which owns 30 percent of Breakwater, has guaranteed the additional debt and will subscribe to C$5 million of the offering. ``It's a matter of raising the money to survive until the zinc price gets back,'' a Toronto-based mining analyst said. An increase in the zinc price to 40 cents a pound from the current 36 cents would be enough to give Breakwater a new lease on life, analysts said. Harsh market conditions and more than a year of ailing zinc prices, which remain near 15-year lows, forced several major miners worldwide to close operations or curtail production in Europe and North America. Breakwater was among them, closing its Nanisivik zinc mine in the Canadian Arctic in September, earlier than planned, after 25 years of continuous production. The company said it had also brought its cash operating costs in the quarter to their lowest possible levels at its five remaining operations in Canada, Tunisia and Chile. The hard times also prompted the resignation of chairman and chief executive Gordon Bub on Nov. 15. He remains a director of the company. Breakwater announced on Tuesday a net loss of C$91.8 million, or 99 Canadian cents a share, compared with a profit of C$6.4 million, or 8 Canadian cents a share, in the corresponding period a year ago. The loss included the writedown of mineral properties and fixed assets of C$69.8 million. The company said contributions from mining activities fell C$27.7 million quarter over quarter due to lower metal prices, to a loss of C$14.3 million from a profit of C$13.3 million. Revenues slipped 37 percent to C$61.5 million in the third quarter, from C$97.4 million. A 35 percent decline in the average price of zinc to 34 cents a pound, from 52 cents a pound in the 2000 quarter, led to the sharp drop in revenues, it said. Breakwater said the net loss was also due to a C$3.3 million downward revaluation of inventories and receivables, and costs associated with the premature closure of Nanisivik. ``The unprecedented low price of zinc has had a serious impact on all zinc producers. In Breakwater's case the impact of the price decrease has resulted in reduced liquidity,'' the company said in a statement. The company said that as of Sept. 30 this year, $29 million had been drawn from its $45 million credit line, which decreased to $16.3 million at Oct. 31 as Nanisivik metal shipments were delivered and paid. The mine produced 21,171 tonnes of zinc concentrate in the third quarter, compared with 25,014 in 2000. ``What is very clear is that without the financial arrangements it was quite possible that the company would not have survived,'' another analyst told Reuters. ``The company has paid a high price.'' Breakwater said metal production in the quarter was 9 percent lower than year-ago levels, and 6 percent lower than its 2001 target of 480 million pounds. The decrease was due to the shortfall in production at Nanisivik, it said. The company produced 51,000 tonnes of zinc in concentrate in the quarter, down from 56,000 tonnes in the 2000 period. The firm said cash costs for the full year are expected to be better than management's previous forecast of 39 cents a pound, but did not elaborate further. Cash cost of its zinc mines in the quarter was 37 cents, compared with 41 cents in 2000.