Business & Finance
Business and Finance
Business and Finance
Mon, December 29, 2008
Wed, December 24, 2008 Breakwater Resources Ltd.: Breakwater Enters Into Royalty Agreement
TORONTO, ONTARIO--(Marketwire - Dec. 24, 2008) - Breakwater Resources Ltd. (TSX:BWR) has entered into a royalty agreement with Red Mile Resources No. 5 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 cash of $18.2 million, which included royalty income of $16.0 million and fees and interest of $2.2 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 $0.003 per pound to $0.075 per pound over the first twelve years of the royalty agreement. In addition, the Company granted Red Mile a net profit interest of 1.0%, 1.25% or 1.5% in years 2014 through 2018 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 cash received, $16.0 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 $2.2 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.
