Selwyn Resources Ltd.

Selwyn Resources Ltd.

August 18, 2010 13:53 ET

Selwyn Closes CDN$100 Million Joint Venture Transaction With Chihong Zinc & Germanium

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 18, 2010) - Selwyn Resources Ltd. (TSX VENTURE:SWN) ("Selwyn" or the "Company") announces that it has closed the CDN$100 million joint venture transaction ("the Transaction") with Chihong Canada Mining Ltd. ("Chihong"), an indirect wholly owned subsidiary of Chihong Zinc & Germanium Co. Ltd., a Chinese company. The details of this Transaction were previously announced on December 14, 2009 and March 2, 2010.

Pursuant to the Transaction:

  1. Selwyn and Chihong incorporated Selwyn Chihong Mining Ltd. ("JVCO"), owned 50/50% by Selwyn and Chihong, to be the operator of the Joint Venture.
  1. CDN$100 million was deposited by Chihong into a JVCO bank account in Canada. These funds will be used to pay for pre-development programs of the Joint Venture. Chihong will earn a 1% interest in the Joint Venture for each CDN$2 million of the funds spent.
  1. Selwyn has transferred all Selwyn Project claims, equipment, permits and licenses to JVCO to be held by it as trustee for Selwyn and Chihong in accordance with their interests in the Joint Venture.
  1. CDN$5,078,509 is to be reimbursed to Selwyn as the first tranche of the reimbursement of Selwyn Project expenditures incurred by Selwyn since July 1, 2009. A second reimbursement tranche, expected to be approximately CDN$6 million, will be made following a routine audit of eligible expenditures.
  1. The Joint Venture management committee has approved in principle a pre-development program budget totalling CDN$89 million for 2010 and 2011. These expenditures will be directed to advancement of permitting, completion of the Wardrop Engineering Feasibility Study, and related engineering and resource definition drilling from both surface and underground.
  1. The Transaction agreement 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. The Agreement also provides for Chihong's technical assistance to the Selwyn Project for the preparation of a feasibility study sufficient to meet the needs of Chinese banks. These banks will be approached to provide a senior project debt facility for the entire project, with a view to maximizing the portion of debt financing.

Chihong Zinc & Germanium Co. Ltd. is controlled by China Yunnan Metallurgical Group ("CYMCO"), a Chinese State Owned Enterprise based in Kunming, China. Chihong owns and operates several zinc-lead mines in Yunnan province and a fully integrated zinc and lead metallurgical facility in Qujing, Yunnan. This facility produces refined zinc, lead and germanium, sulphuric acid and other products. Chihong Zinc & Germanium Co. Ltd is listed on the Shanghai Stock Exchange.

Dr. Harlan Meade, President and CEO of Selwyn, remarked: "The closing of this Transaction, providing major funding and securing a strong joint venture partner, is a major milestone in the advancement of the Selwyn Project towards production. Selwyn is very pleased to have Chihong as our new strategic partner. Chihong is an experienced and accomplished fully integrated zinc-lead mining and smelting company — one that shares our vision of the Selwyn Project becoming a major new zinc–lead mining operation."

Mr. Jin Chen, General Manager of Chihong states, "Chihong looks forward to working together with Selwyn in building the Selwyn Project into a world class lead and zinc mine."

JVCO management consists of Dr. Harlan Meade, CEO; Dr. Yun Lei, Executive VP; and Mr. David Li as CFO. Along with Dr. Meade, other Selwyn senior management being seconded to JVCO are Bob McKnight, VP Business Development, Jason Dunning, VP Exploration and Justin Himmelright, VP Environment and Community Affairs. The Directors and Management of JVCO look forward to working closely with governments, communities and First Nations in advancing the Selwyn Project, and realizing significant economic and social benefits from mine and infrastructure development in a responsible and constructive manner.

Included in the Closing documents are 2010 and 2011 pre-development programs totaling approximately CDN$89M. The 2010 program that commenced in June aggregates CDN$33M. The planned 2010 expenditures consist of approximately CDN$18M in definition drilling (28,000 metres) to upgrade mineral resources in the XY Central, XY West and Don zones for inclusion in the Bankable Feasibility study being prepared by Wardrop Engineering Ltd. (see January 5, 2010 news release) and support costs. Surface drilling is planned to continue into early 2011. Approximately, CDN$8.6M for environmental and permitting, CDN$1.7M in engineering, CDN$1.5M in property payments, CDN$1.1M in general and administrative and a contingency of CDN$2.1M comprise the remaining planned 2010 expenditures.

JVCO intends to undertake initial underground development and advanced exploration on the NI 43-101 compliant mineral resources of the deeper parts of the XY Central deposit in early 2011. This work will further support the upgrading of Inferred resources to both Measured and Indicated categories. The underground development will also provide an exceptional platform for the exploration of the core of the synclinal structure that hosts the high-grade mineralization. These areas of high mineral potential are more easily tested from an underground drill platform. In addition, it is anticipated that surface diamond drilling will resume on the Don deposit to allow for upgrading of Inferred resources to both Measured and Indicated categories in the NI 43-101 compliant mineral resources. The 2010 program also includes extensive environmental and engineering work to support permitting activity. Field activity commenced in May, with two diamond drills currently undertaking definition drilling. With closing of the Transaction diamond drilling will ramp up to 6 surface diamond drills.

Selwyn and its predecessors have spent more than CDN$100M, in current dollars, 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 154.35M 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 234.15M 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 16.06M tonnes grading 10.25% zinc and 4.23% lead, and an Inferred resource of 26.70M tonnes grading 8.71% zinc and 2.75% lead. These high grade mineral resources are the initial focus of mine development and feasibility study. The updated 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 updated mineral resource and approved the technical information in this news release.

The Selwyn Project represents one of the largest undeveloped resources of zinc and lead in the world and its unique location in the politically-attractive and stable jurisdiction of the Yukon. It is therefore both an exceptional development opportunity and a strategic asset that could provide a long term secure supply of zinc and lead to the Pacific Margin.

Selwyn was represented on the Transaction by Lang Michener LLP from Vancouver, British Columbia. Lang Michener's lead lawyer on the file was G. Barry Finlayson (partner) who was assisted on the closing of the Transaction by Lance Bredeson (associate).

This news release contains forward-looking statements concerning the Transaction with Chihong, and the future financing and development of 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 exploration, failure to upgrade Inferred resources and other risk factors related to mining activities 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.

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).

Contact Information