January 7, 2002… Breakwater announces that a recent independent review of its operations has resulted in an increase in the mineral reserves and resources at its El Mochito mine in Honduras and its El Toqui mine in Chile.

In preparation for the filing of a prospectus to complete a previously announced rights offering, Breakwater engaged SRK Consultants to prepare an independent technical report as per National Instrument 43-101 (“NI 43-101”). SRK has reported that there are significant additions to the mineral reserves and resources at El Mochito and El Toqui. There were no material changes in mineral reserves and resources at any of Breakwater’s other operations.

El Mochito

The following table summarizes the mineral reserves and resources of the El Mochito mine as of November 30, 2001 as estimated:

El Mochito Mineral Reserves and Resources

Note: Measured and Indicated Resources include Proven and Probable Reserves

In the December 31, 2000 mineral reserve and resource calculations, Breakwater did not include mineral reserves and resources that have typically been mined from outside of the mineral reserve boundaries. Since 1995, 37% of the mill feed has come from outside the mineral reserve boundaries due primarily to mineral extraction adjacent to reserve outlines. These outlines were based on conservative assumptions. In addition, mining in areas of inferred resources was also considered mining from outside the reserves by Breakwater and was based on an overly conservative classification system. Based on SRK’s recommendations this consistent over-extraction has been included as an extraction factor in the conversion of mineral resources to mineral reserves.

From January to November 2001, inclusive, 596,488 tonnes of ore were mined at El Mochito and when taken into account with the new reserve information would account for an increase in proven and probable mineral reserves of 1,106,488 tonnes for the period, or, 1.5 years of mining at the present production rate.

In summary, the large increase in the measured and indicated resources has come primarily from newly discovered mineral reserves and resources through diamond drilling and the application of the extraction factor.

El Toqui

The following table summarizes the mineral reserves and resources of the El Toqui mine as of November 30, 2001 as estimated:

El Toqui Mineral Reserves and Resources

Note: Measured and Indicated Resources include Proven and Probable Reserves

The November 30, 2001 mineral reserves were reclassified by SRK. The greatest change in the mineral reserves and resources was a large increase in the inferred resources due to the addition of the Concordia poperty resources. SRK recommended that Breakwater reclassify the unclassified resources at its Concordia property to an inferred mineral resource. The higher gold grade is associated with the Aserradero deposit and the most recent results from the diamond drilling program.

Breakwater’s present method of converting resources to reserves included a category called “possible reserves” which was not reported in accordance with the CIM 2000 definitions. On SRK’s recommendations, Breakwater has re-classified a portion of these possible reserves as probable reserves. A total of 536,243 tonnes grading 8.0% zinc and 1.7 g/t gold that were originally classified as possible reserves was reclassified as probable reserves based on the CIM 2000 definitions. These reserves occur in extensions to areas that are very well known, for which mining plans exist and that have in the past consistently delivered very close to the planned tonnes and grade.

From January to November 2001, inclusive, 390,956 tonnes of mineral reserves were mined at El Toqui and when this tonnage is taken into account, with the new reserve information, it would account for an increase in proven and probable mineral reserves of 711,356 tonnes for the period, or, 1.7 years of mining at the present production rate.

This news release contained forward-looking statements. When used in this news release the words “anticipate”, “believe”, “intend”, “estimate”, “plans”, “projects”, “expect”, “will”, “budget”, “could”, “may”, and similar expressions are intended to identify forward-looking statements. To the extent that this news release contains forward-looking statements regarding operating results or business prospects please be advised that the actual operating results and business performance of the Company may differ materially from that anticipated, projected or estimated in such forward-looking statements. Should you require further information please contact:

C. K. Benner

President and Chief Executive Officer Manager

416-363-4798 Ext. 269

cbenner@breakwater.ca

Torben Jensen

Corporate Engineering

416-363-4798 Ext.232

tjensen@breakwater.ca