Selwyn contains a substantial underground resource
The company’s drilling programme continued to probe high-grade
mineralisation at depth across the XY, Don East, Don and HC West deposits.
As a result, Selwyn’s revised resource statement now includes an inferred and
indicated resource totaling 39.2 million tonnes, averaging 9.43 percent zinc
and 3.39 percent lead. Previously, Selwyn projected a high-grade resource of
9.2 million tonnes, averaging 9.98 percent zinc and 4.20 percent lead, all in
the XY deposit area.
Open pittable resources continue to expand
Continued drilling expanded the total resource beyond the high-grade
zones. The project now hosts an indicated and inferred resource totalling
385.9 million tonnes, averaging 4.86 percent zinc and 1.60 percent lead.
This represents a thirty-percent increase in the amount of contained zinc
and a 25‑percent increase in the amount of contained lead.
The potential mine plan is coming into better focus
Selwyn now has sufficient high-grade ore to support a significant underground
component to the proposed mine. The company now envisages a 25,000-
tonne-per-day processing capability, with the mill fed concurrently from one or
more open pits and an underground operation. Based on the current resource,
Selwyn could sustain underground mining at rates varying from 5,000 to
8,000 tonnes per day, with the remainder sourced from the open pits.
Capital cost estimates move lower, operating costs increase
With the addition of a significant high-grade underground component to the
hypothetical mine plan, we now expect the scale of the combined mine will
be smaller than we previously hypothesised, without significant impact on
revenues. As a result, we expect capital costs will be approximately C$950m,
less than our earlier estimate of C$1,050m. Operating costs however will
increase significantly due to the underground component, to C$42.50 per
tonne in the first year, from our earlier projection of C$25 per tonne. We
model production to commence at the start of 2013.
Exploration and development activities continue at a modest pace
Selwyn continues background work to develop Selwyn, including
environmental studies, engineering and metallurgical tasks and preliminary
inquiries regarding potential partnerships. The pace is slower than we
previously envisaged because of the decision to delay the search for a strategic
partner in favour of the 2007 drill programme. We are therefore delaying our
expected start of production by nine months from our most recent valuation.
