Selwyn advances on two fronts

Rather than fuss with fickle equity and debt markets, Selwyn Resources (SWN-V) wants to raise some of the cash it needs from its own assets.

While the company’s main focus is developing its Selwyn zinc project in the Yukon — being advanced through a joint venture with China-based Chihong Mining — it is looking to get a past-producing mine in Nova Scotia into production first, and use the capital generated to fund the Selwyn project.

Selwyn acquired the ScoZinc mine, which lies 50 km northeast of Halifax, from Acadian Mining early in 2011 for $10 million, and has since spent $6 million on proving the project up. The mine had been in operation from 2007 into early 2009, before the economic crisis caused zinc and lead prices to collapse.

One of the key factors that drew Selwyn to the asset was that zinc-lead mineralization was mined in an open pit, which it says confirms the potential for mining other deposits adjacent to the Main open-pit area using the same lower-cost mining method.
The key focus at the site now is the Gays River deposit, where Selwyn released an updated mineral resource that outlines measured resources of 2.075 million tonnes grading 3.14% zinc and 1.68% lead; indicated resources of 5.77 million tonnes grading 3.30% zinc and 1.69% lead; and inferred resources of 3.7 million tonnes grading 2.35% zinc and 1.51% lead.

Those new numbers represent a 55% increase in measured resources, a 65% increase in indicated resources and a 13% decrease in inferred resources.

With more zinc-lead mineralization now outlined, Selwyn says it has more flexibility in updating a mine plan at the site.
The initial plan was released in August 2011 as part of a preliminary economic assessment. The study considered a 2,500-tonne-per-day mill, with operating costs of $51.77 per tonne milled for the first three years.

Mine and mill restart capex are expected to be $30 million, and the investment is expected to generate a net present value (NPV) of $54.1 million using an 8% discount rate. The pre-tax internal rate of return (IRR) is estimated to be 63.9%.

Mineralization at the Gays River deposit consists of disseminated to locally semi-massive sphalerite and galena, occurring within a dolomitized carbonate reef of the Lower Carboniferous-age Gays River formation. The Gays River deposit is one of a series of related zinc-lead mineralized reefs, including the Getty deposit 1,500 metres west of the Main deposit and mill facilities.

No work has been undertaken on the Getty deposit, and it was not part of the resource update.

The new resource calculation was based on information from 93,787 metres of drilling done by previous operators between 1951 and 2011.

After Selwyn did its own infill and definition drilling late last year, it re-evaluated the historic database and found that a large number of zinc-lead mineralized drill holes had not been used in the historic resource estimates.

The company updated the resource model using all mineralized drill holes with a zinc equivalent cut-off of 0.50%, so that it could accurately outline the system that formed the deposit.