Its share price is hovering around C$0.10 after trading close to C$2.50 a year ago, it has temporarily closed two of its four mines, and zinc prices continue to be weak. Analysts say Breakwater Resources Ltd.’s (OTC:BWLRF) future in is doubt after wrapping up a disappointing third quarter with just C$16-million in cash.
TD Newcrest analyst Greg Barnes said it is in “survival mode” and with the average price for zinc even lower so far this quarter, the company’s prospects are looking bleak.
Canaccord Adams analyst Orest Wowkodaw said in a research note:
In light of the recent plunge in zinc prices, Breakwater’s near-term liquidity remains the most pressing concern given the company’s relatively weak balance sheet and no current available lines of credit.
He added that management has been unable to put forth an action plan. He forecasts that the company could run out of cash as soon as the first quarter of 2009.
However, some believe Breakwater’s cost-cutting efforts will make a difference. Octagon Capital analyst Hendrik Visagie said:
We are certain that Breakwater, unlike many other mining companies in production, will survive the current insanity in the metals market, and will be well-positioned to benefit from any rebound, with its assets intact.
He maintained a “buy” recommendation, and a C$1.00 price target given his firm’s positive long-term outlook for zinc prices.
Mr. Wowkodaw also noted that the price of zinc is unsustainable at current levels since roughly 50% of the industry is losing cash. However, until he sees a material recovery in the metal’s price or a funding infusion, his outlook for Breakwater will remain unchanged.