Tuesday, 11 June 2013

Selwyn Resources makes ScoZinc more attractive with updated mine plan

Selwyn Resources (CVE:SWN) has unveiled an updated and improved preliminary economics report for its ScoZinc mine in Nova Scotia, which it is focused on restarting after earlier this month completing the sale of its second project in the Yukon. 
Depending on the results of the company’s annual and special meeting now scheduled to be held on June 17, the proceeds of the $50 million Selwyn project sale are earmarked to be spent on restarting production at the ScoZinc zinc-lead project.
And the company has improved the economics of the Atlantic Canada mine ahead of the meeting, with lower operating costs and higher net present value. 
Tuesday, the company released the results of the preliminary economic assessment (PEA), updated from the prior report released at the end of last year. The newest report includes an expansion of the mine plan, and new metallurgical data based on additional engineering undertaken in the first quarter of 2013. 
Selwyn notes that the update was wrapped up at a "modest cost" of $100,000, with the full text of the NI 43-101 compliant report to be filed shortly on SEDAR. 
"The recently completed work by our ScoZinc team has further enhanced the mine plan and demonstrates the attractive economics for the restart of the mine, when metal prices strengthen from current levels as concentrate supply is forecast to tighten," said president and CEO, Dr. Harlan Meade, in the release. 
The chief is referring to the forecast price increases for zinc and lead as supply begins to wane and mines shut down. 
"The improvements provide for a balancing of mine grades over the current 8-year mine life. With the reduction of operating costs, ScoZinc is well positioned on the cost curve for development projects," he said, adding that the next steps at ScoZinc would be to focus on the further expansion of the mine plan with the addition of the Getty deposit, which the company speculates could add more than three years to the mine life.
On an after-tax basis, the new PEA shows a net present value of $51.9 million at a 5 per cent discount rate, compared to the $35.9 million in the previous report late last year. The internal rate of return is now pegged at 46.2 per cent after tax, versus the 35.5 per cent seen previously. 
Zinc C1 cash costs for the first five years of production, after deducting credits for lead, are estimated at $0.55, an improvement from the $0.66 in the 2012 PEA. Unit operating costs decreased almost 5 per cent for the first five years, to $50.35 per tonne. 
Capital estimated for the restart, including contingency and working capital, edged up slightly to $32.8 million from $30.6 million, but the payback period declined over 30 per cent to one and a half years, from 2.24 years. 
The enhanced economics were reported even with no change in the modelled zinc and lead prices used, despite a projected increase in these metal prices going forward. Both reports were based on a zinc price of US$1.00 per pound and a lead price of US$1.10 per pound, as well as a 2,500 tonne per day mill processing plan. 
Selwyn acquired the ScoZinc in early 2011, and since that time, has increased mineral resources at the mine by 55 per cent in the measured category and 65 per cent in the indicated category, as compared with prior estimates used two years ago. 
The latest PEA update builds on the revised mine plan released in November last year, which included the newest resource estimate, as it incorporates a proposed underground mining operation between the Main and Northeast open pits. It also blends the high grade material with the lower grade open pit mineralization in years five and six of the mine, according to Selwyn's statement today. 
Updated equipment capital and operating cost estimates were also included in the newest economics report, along with new metallurgical data. 
The plan is for the zinc-lead mill feed to be processed by standard flotation methods to produce high-grade zinc and lead concentrate, which was previously shipped to Europe and Asia from the mine. Since its acquisition in 2011, the company said it has spent more than $8 million in engineering, drilling and refurbishement at the site. 
The mine is expected to employ around 120 people during full operations in the third quarter of next year, Selwyn said Tuesday.

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