Doug Ashbury
Northern News Services

NNSL (Aug 16/99) - Zinc inventories have declined to levels which could mean a bolt in the base metal's price, said Breakwater Resources in its recent six-month financial report.

The Nanisivik lead-silver mine, near Arctic Bay on Baffin Island, is one of Breakwater's four mine properties.

Total zinc inventories held by the London Metal Exchange, producers, consumers and merchants at the end of June equalled about six weeks of consumption, a level which "when breached in the past has led to significant and often explosive increases in price for zinc," the company said.

Since June, inventories have continued to decline from around 300,000 tonnes to about 284,000 tonnes by Aug. 10. Current inventories are at mid-1992 levels.

In August, zinc averaged 49.7 cents US per pound, up from 48.6 cents US per pound in July.

Despite dropping metal prices earlier this year, Breakwater Resources booked a $9-million half-year profit.

The gain compares with a $3-million loss in the first half of 1998.

"The increase in revenue, earnings and cash flow during the first half of 1999 occurred despite a decline in realized metal prices," Breakwater said.

Zinc production increased by 41 per cent, lead production increased by 91 per cent, the company said.

Mine-site cash costs decreased by 16 per cent to 38 cents US per pound of payable zinc compared to 45 cents US per pound in 1998.

The balance sheet positives were partially offset by an increase in net interest expenses.

For the six months, Nanisivik had operating earnings of $7.1 million compared to $4.2 million in the first half of 1998.

Nanisivik's improved earnings were due to lower costs and increased zinc production.

"The increase in zinc production was due to higher grades and increased mill throughput as operations had a record productivity performance for the fist half of 1999."

To protect against risk of declining metal prices and changes in the dollar exchange rate, Breakwater has entered into various hedging transactions.

Nanisivik's six month numbers include:

• Ore milled was 401,242 tonnes compared to 392,057 tonnes.

• Zinc: 7.6 per cent compared to 7.0 per cent.

• Silver: 27 grams per tonne compared to 28 grams per tonne.

• Zinc concentrate: 29,423 tonnes compared to 26,469 tonnes.

• Silver: 261,168 ounces compared to 254,918 ounces.

• Operating costs (US) per tonne milled: $24.67 compared to $28.08.

• Mineable cash costs (US) in payable zinc per pound: $0.38 compared to $0.41.