JOHANNESBURG (miningweekly.com) – Canada’s Selwyn Resources said the 8 000 t/day mine plan it was using for a feasibility study at its namesake project in the Yukon would not work at prevailing metals prices, leading it to start a new study on a scaled-back 3 500 t/day operation that would focus on mining high-grade sections.
The company jointly owns the Selwyn project, which it calls the largest undeveloped zinc-lead deposit globally, with China’s Chihong Canada Mining.
The Asian firm bought 50% of the project in August 2010 for C$100-million.
Selwyn in March said it hired London-based Cutfield Freeman & Co. as a financing advisor for its namesake project, but hinted on Monday it could also be looking for a buyer for the entire company.
Cutfield Freeman & Co. would study “all financing alternatives including debt, equity and other financial instruments, as well as concentrate off-take finance, partnership arrangements, corporate restructuring and sale alternatives for Selwyn and its mineral projects”, the junior said.
“Among others things, Cutfield Freeman intends to enter into discussions with industrial groups that may have an interest in purchasing Selwyn.”
A 2007 preliminary economic assessment had envisaged a 20 000 t/day open pit operation at Selwyn.
The company said a number of factors had changed since then, including exchange rates, metal prices and capital and operating costs, and that the open-pit plan was no longer viable.
In 2010, the joint venture partners hired Tetra Tech Wardrop to study the feasibility of a scaled-down 8 000 t/day underground operation.
Using the work done to date, the partners had concluded such a plan would not be viable either.
All was not lost, however, Selwyn said: a review considering the use of selective mining methods in a much smaller underground operation might work.
“This recent analysis suggests that the new development plan has a good probability of providing a satisfactory economic return,” the company commented, adding a caveat that this was speculation until it completed a formal economic evaluation of the new plan.
The joint venture firm would present an implementation plan and budget for this by the end of June, said Selwyn.
The Vancouver-based firm also owns the ScoZinc project in Nova Scotia, for which it raised a $10-million secured loan with Toronto's Waterton Global Value earlier in April.
Selwyn's share price has slumped 58% over the past 12 months, including a 16.6% drop on Monday morning, when the stock was changing hands for $0.10 apiece. It ended the day 25% lower at C$0.09 a share.
The company has suffered as a result of funding problems, as well as from a general investor wariness of resources stocks, and juniors in particular, given Europe's dire financial situation, and a sharp slowdown in Chinese economic growth.
Notwithstanding the precarious situation the global economy finds itself in, coupled with a current zinc surplus, the metal used to galvanize steel is set to swing into deficit in coming years as five of the largest mines run out of ore.
Hong Kong-domiciled China Mining owns 11.3% of Selwyn, while Korea Zinc holds a 12.9% stake.
Canada's HudBay Minerals has a 2.3% ownership in the junior.