Selwyn Resources
project. The assets would then be transferred to a new joint venture company, creating the basis for securing future loans from the Chinese banks. “We believe that access to the debt and equity market in China, which is developing very rapidly, is going to be very important going forward,” says Meade. “And we are way ahead of most other junior mining companies in Canada in doing this.” It turns out that this was a wise move. Debt financing from North American and European sources has become almost impossible to acquire in the current tough economic climate. Meade also explains that Western markets usually demand a 55:45 percent debt-to-equity ratio, most of production to be hedged for seven to eight years, and the production of much time-consuming documentation and consultation. By contrast, Chinese banks are likely to accept a 70:30 percent debt-to-equity ratio, little or no hedging of production at all, and much simpler documentation. Selwyn eventually received three offers from Asian firms and in December 2009 chose Yunnan Chihong Zinc and Germanium Co., Ltd., a Chinese mining company with considerable mining experience. Chinese regulatory approvals were received in July and the JV transaction was completed in August with the creation of Selwyn Chihong. A bankable feasibility study is due for completion by early 2011. Meanwhile, drilling will continue, to upgrade resources to reserves. Looking forward, the company is hoping to begin construction of the mine in early 2012, with a completion date some 18 months later, and it will then transition to full production by the first quarter of 2014. “My prediction is that we will have a wonderful zinc market by that time. There are virtually no other good projects in the development pipeline, and many of our large mines will have been depleted by the time this one starts up.” There are a number of challenges ahead, though, and Selwyn is predictably going for unconventional and ambitious solutions. The mine
is located a considerable distance from rail and ocean transport. “Truck transport is expensive, and nobody knows what diesel will cost 10 years from now, so transport costs are becoming more of an issue.” The company has reviewed all the options and has chosen to pioneer the construction of a concentrate pipeline to carry the zinc/lead slurry from the mine to the nearest major highway, where it will then be dried and transferred to trucks for transport to the port of Skagway in Alaska, and off to the markets in Asia. The seven-inch pipeline will be buried to a depth of 1.5 meters where it won’t freeze, and its operating costs are likely to be a fraction of those of road transport, helping to ensure the mine is viable in bad times as well as good. The location also makes access to power a challenge. Rather than install and rely on diesel generators, which are expensive to run and damaging to the environment, the company is proposing to construct a hydroelectric power plant as its base source of power. This plan includes the construction of a dam upstream to balance flow throughout the year, and the use of diesel generators to provide peak power only. “We believe every problem has a solution,” Meade concludes. “But you have to observe how things are changing and get in front of that change. If you do, you will find you’re not where the crowd is. And that’s tricky. We’ve stood back and looked at the rapidly evolving global community and figured out where we want to be. We believe there will be very significant changes in the amount of equity capital available for resource development coming out of China and its proxy, Hong Kong.” What Selwyn Resources has achieved is gaining early access to these important markets. Selwyn clearly recognizes that its management team requires flexibility and the support of its major investors if it is to develop this into the world’s largest zinc mine and transform itself into a midtier mining company.
t ownership, and we began drilling. Within two years we demonstrated like that in the world”
DECEMBER 10 www.bus-ex.com
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