December 31, 2007
The 2007 ore production at Balmat was 335,808 tonnes at 6.96% zinc. Operating costs per ore tonne are expected to continue to decrease as production tonnage increases during 2008. Operating costs per ore tonne trended down in 2007 from $85.55 per tonne in the first quarter of the year to $50.24 in the fourth
quarter of 2007, and averaged $63.46 for all of 2007. Despite continued improvement, the mine did not reach the targets set out in the feasibility study for its first year of operation. The lower production combined with higher capitalized development expenses resulted in a higher than expected carrying value for the operation by the end of 2007. The higher carrying value together with a lower forecasted zinc price, triggered an impairment test, which indicated that the probability weighted cash flows would not recover the value of the long-lived assets. A non-cash charge was taken to reduce the value of the assets to their estimated fair value. We are currently in the process of optimizing this operation.
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