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News Release
Selwyn Resources Announces C$100 Million Joint Venture Transaction
With Yunnan Chihong Zinc & Germanium Co.
Ltd.
Vancouver,
BC, December 14,
2009 – Selwyn Resources Ltd.
(SWN.TSX-V) (“Selwyn”
or the “Company”)
announces that it has executed a binding Framework Agreement (the “Agreement”) with Yunnan Chihong Zinc & Germanium Co. Ltd. (“Chihong”).
The parties have agreed to form a Joint Venture Operating Company to
finance the advancement of the Selwyn Project to bankable feasibility,
and if warranted, to production.
Highlights of the transaction include:
- Selwyn will transfer
its mineral and other assets associated with the Selwyn Project to a
new Canadian Joint Venture (JV) company.
- A new company
(Operating Co.) will be established, owned 50% by each of Selwyn and
Chihong, to act as the operator to
carryout the programs of the JV. The Board of Operating Co. will
have equal representation from each of Selwyn and Chihong.
- Chihong will deposit C$100 million in cash irrevocably to a bank
account set up by the Operating Co., which funds will be used to
fund programs of the JV. Chihong will earn
a 50% interest in the JV by expending these funds on programs.
Dr. Harlan
Meade, President and CEO of Selwyn, remarks: “the formation of the Joint Venture is a major step towards
advancing the Selwyn Project to production. We are very pleased to have Chihong, an experienced and accomplished fully
integrated zinc-lead mining and smelting company, as our strategic
partner that shares our vision of the Selwyn Project becoming the next
major zinc-lead mine in the world. Chihong
becoming a strategic partner for the Selwyn Project opens up the Asian
markets for project financing, which is seen as strategically very
important in the evolving financial markets for financing resource
development.”
Chihong is an
integrated lead and zinc producer with over 60 years of history in
exploration, mining, beneficiation, smelting and downstream processing. The
company has several operating mines in China. Its Qujing
smelter is equipped with internationally advanced technologies in terms
of environmental protection, energy conservation and waste emission. The
smelter recovers lead, zinc, precious and rare metals. Chihong is listed on the Shanghai Stock Exchange and
has its head office in Qujing, Yunnan Province.
Its major shareholder is China Yunnan Metallurgical Group Co., Ltd., a
diversified resources company majority owned by the Yunnan Provincial
Government. Chihong has C$1 billion total
assets and a market capitalisation of approximately C$4 billion.
Mr. Ying Dong,
Chairman of Chihong, commented, “The Selwyn Project provides much potential to
become a major zinc-lead mine. The successful development of the project
can bring significant growth to both Chihong
and Selwyn. The signing of the Framework Agreement is an important first
step for the cooperation between the two companies. With joint efforts,
the two parties will strive for the best outcome for the Selwyn Project.”
Upon completion
of the transaction and the expending of the C$100 million on exploration
and development, Chihong and Selwyn will each
own a 50% interest in the JV. The combination of Selwyn and Chihong brings together a strong team capable of
carrying out all activities for the exploration, development and
operation of the Selwyn Project as a mine. Chihong’s
C$100 million investment will be used to advance the Selwyn Project
through, advanced exploration, engineering, permitting and for initial
construction activities, including the preparation of a 43-101 compliant
feasibility study. Upon completion of the expenditure of the C$100
million investment, the joint venture participants will fund continuing
expenditures pro rata to their interest in the Joint Venture.
The Agreement,
which has been approved by the Boards of both Selwyn and Chihong, provides for Chihong,
together with Selwyn, to use all commercially reasonable measures to
bring the Selwyn Project into commercial production as soon as possible
after the Closing, subject to the completion of the bankable feasibility
study and a decision by the JV management committee to proceed with
construction of a mine. The Agreement also provides for Chihong’s technical assistance for the preparation of
the NI 43-101 compliant bankable feasibility study, mine development and
associated infrastructure planning, mining operations and related
matters. Selwyn and Chihong have agreed to
procure the maximum amount of debt financing commercially available from
Chinese banks for placing the Selwyn Project into commercial production.
Under the
transaction, Selwyn will be reimbursed for its direct costs incurred on
the Selwyn Project from July 1, 2009 to the Closing of the Transaction. This
amount is estimated to be approximately C$4.2 million. Following
completion of the transaction, Selwyn will have a strong working capital
of approximately C$8.0 million, and will be well positioned (no money
will be required by Selwyn for the Selwyn Project until after Chihong’s C$100 million has been spent on JV
programs) to raise additional funds to enable it to continue its
participation in the Selwyn Project and to grow Selwyn into a significant
base-precious metal producer.
Closing of the
Transaction is targeted for May 2010 and is subject to completion of non-techinical due diligence and formal documentation,
including a Joint Venture Agreement, the formation and organization of JV
company and receipt by each of Selwyn and Chihong
of all necessary regulatory approvals and other customary conditions.
Selwyn and Chihong look forward to working with governments and
communities of the Yukon in advancing the Selwyn Project and realizing
significant economic and social benefits from mine and infrastructure
development in a responsible and constructive manner.
In current
dollars, Selwyn and its predecessors have spent more than $100 million on
the exploration and development of the Selwyn Project. Drilling has
defined 15 mineralized zones over 38 kilometres of the known mineralized
trend. NI 43-101 compliant mineral resources include Indicated resources
of 154.35 million tonnes grading 5.35% zinc and 1.86% lead containing
18.19 billion pounds of zinc and 6.32 billion pounds of lead; and
Inferred resources of 234.15 million tonnes grading 4.57% zinc and 1.42%
lead containing 23.57 billion pounds of zinc and 7.32 billion pounds of lead.
Included in the global mineral resources is high-grade mineralization
with an Indicated resource of 16.06 million tonnes grading 10.25% zinc
and 4.23% lead, and an Inferred resource of 26.70 million tonnes grading
8.71% zinc and 2.75% lead. These high-grade mineral resources are the
initial focus of the JV as it proceeds towards the preparation of a
bankable feasibility study and carries out permitting activities for the
Selwyn Project. The current mineral resource estimate was prepared by
Non-Independent Qualified Person John J. O’Donnell, P.Geo., the onsite
Qualified Person for Selwyn (see February 26, 2009 News Release). Mr.
Jason Dunning, P.Geo., also a Non-Independent Qualified Person, has
reviewed the current mineral resource and has approved the technical
information in this news release.
Upon completion
of this transaction, the JV intends to undertake initial underground
development and advanced exploration on the NI 43-101 compliant mineral
resources of the XY Central deposit. This work will be designed to
upgrade Inferred resources to both the Measured and Indicated categories
from both surface and underground diamond drilling platforms. The
underground development will also provide an exceptional exploration
platform for the JV to explore the core of the Synclinal Structure that
hosts the high-grade mineralization because these areas of high mineral
potential are too difficult to test from surface. In addition, it is
anticipated that surface diamond drilling will resume on the Don deposit
to allow for upgrading to NI 43-101 compliant Inferred resources to both
the Measured and Indicated categories.
The Selwyn
Project represents one of the largest undeveloped resources of zinc and
lead in the world and is uniquely located in the politically attractive
and stable jurisdiction of the Yukon. It is therefore both a unique
opportunity and a strategic asset that could provide a long term secure
supply of zinc and lead to the markets of the Pacific Margin.
This news
release contains forward-looking statements concerning the proposed
transaction with Chihong, the future financing
and development of the Selwyn Project and the objectives of exploration
activities to be carried out at the Selwyn Project and Selwyn’s future
prospects in maintaining its 50% interest in the Selwyn Project. These
statements are based on assumptions and judgments of management regarding
future events or results that may prove to be inaccurate as a result of
failure to complete the proposed transaction with Chihong,
whether due to an inability to reach agreement on the terms of the formal
documentation or the failure to obtain necessary regulatory or other
required approvals, the failure of exploration activities to upgrade
Inferred resources to Measured and Indicated categories, the failure of
Selwyn to raise funds to enable it to meet its pro rata share of
expenditures for the Selwyn Project and other risk factors, both
financial and technical, that are beyond Selwyn’s control. There can be
no assurance that such forward-looking statements will prove to be
accurate as actual results and future events could differ materially from
those anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements contained in this news
release.
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For more information contact:
Dr. Harlan Meade, President and CEO
Jasmin TamDoo,
Manager of Investor Communications
Telephone: (604) 801-7240
Toll-free: 1-888-989-9188
Facsimile: (604) 689-8355
info@selwynresources.com
www.selwynresources.com
Neither the TSX Venture Exchange nor
its Regulation Services Provider (as that term is defined in the policies
of the TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
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