Chinese Yukon mine investment finalized

Selwyn Resources Ltd. says it has ambitious plans to open a lead-zinc mine on the Yukon-Northwest Territories border now that it has finalized a $100-million deal with a Chinese mining firm.

The Vancouver-based exploration company has partnered with Yunnan Chihong Zinc Germanium Co. Ltd., which will invest $100 million toward a mine feasibility study at Selwyn's Howard's Pass lead-zinc deposit.

The companies have formed a joint venturecalled Selwyn Chihong Mining Ltd. and aim to get all the permits they need for a mine within two years and to be ready for production two years after that.

"I will stress that these are aggressive timelines," Selwyn CEO Harlan Meade told investors at a teleconference Thursday. "Nonetheless, we believe they are achievable.

"The overall target of commissioning of the mill is set for the first quarter of 2014."

The investment gives Yunnan Chihong a 50 per cent ownership stake in the joint venture with Selwyn Resources.

Largest deposit in world

The Howard's Pass property is located about 220 kilometres northwest of Watson Lake, Yukon. More than 90 per cent of the property is in Yukon, with only the southeast end extending into the Northwest Territories.

At about 38 kilometres in length, the deposit at Howard's Pass is considered to be the largest known lead-zinc deposit in the world, according to the company.

The joint venture between Selwyn and Yunnan Chihong was agreed upon in June, but it needed final approvals from the Chinese government.

Selwyn Resources receives $11 million as reimbursement for the development work it has already done over the past two years while the remaining $89 million will be spent on what it calls a "bankable feasibility study," which will determine whether theproject makes economic sense.

Meade said $50 million has been budgeted for more exploration work next year.

'A lot of coin'

While the Chinese investment is substantial, it does not always guarantee that a mine is viable, said Mike Burke, head of the Yukon Geological Survey in Whitehorse.

"When they've spent the $100 million doing that feasibility-style work more engineering, more environmental work, more exploration then they'll have a much better idea of whether the deposit is economic," Burke said.

"It will certainly have a longer-term impact. $100 million is a lot of coin."

Pipeline, rail options

The feasibility study will also determine cost options for transportation and power.

One major hurdle the venture will face is how best to transport the lead-zinc concentrate from the remote Howard's Pass site to tidewater in Skagway, Alaska, Meade said.

"I think it's unlikely that we would have an all-truck route," he said. "Our preference is the concentrate pipeline, but there are recent developments on rail in the Yukon. White Pass has been considering reactivating the former rail line, and that could make a difference."

In terms of power, Meade said although the proposed mine would likely use diesel generators initially, the company will look at the possibility of using hydroelectricity.

"There is significant hydroelectric potential in the area, and we would hope that with time, we could substitute diesel with hydroelectric," he said.

The partnership between Selwyn and Yunnan Chihong is the second large investment in the Yukon's mining industry by a Chinese mining company.

Yukon Zinc Corp.'s Wolverine mine near Ross River, Yukon, is owned by Jinduicheng Molybdenum Group Co. Ltd. and Northwest Nonferrous International Investment Company Ltd. That mine is expected to begin production later this year.

If a mine proves to be feasible in Howard's Pass, Meade said he expects Chinese backers to finance what could be a $1-billion project.