Exploration advances in Selwyn Basin

HOWARD'S PASS, Yukon Territory - In this wide, alpine valley that snakes across the border into the Northwest Territories at its southeastern tip, one of the world's largest zinc-lead-silver properties may slumber.

First drilled by a joint venture between Placer Dome and Cygnus Mines Ltd. in the 1970s and 1980s, the mineralized zones here are strung along 65 kilometers, or 40 miles.

Junior Selwyn Resources Ltd, formerly Pacifica Resources Ltd., believes the property contains more than the 500 million metric tons of indicated and inferred zinc-lead resource and is busy proving this concept in hopes of attracting a major partner to help mine the behemoth profitably.

The Selwyn Project is the consolidation of claims in the Howard's Pass Joint Venture formed by Placer Dome and Cygnus and the lands Selwyn Resources already held in the Selwyn Basin.

Placer Development Corp. discovered Howard's Pass in 1972, and aggressively advanced it with Cygnus, a subsidiary of U.S. Steel Corp., until 1981. The property covers 7,450 hectares, or 2,185 acres, of mineral claims in the Yukon and 2162 hectares, or 634 acres, of mining lease lands in the Northwest Territories, that comprised the former JV lands.

Selwyn owns another 14,434 hectares, or 4,233 acres, of mineral claims in the Yukon and 3,373 hectares, or 989 acres, of claims in the Northwest Territories.

The Howard's Pass JV drilled 210 holes during the 1970s and 1980s and defined three deposits (XY, Anniv and OP) spread over a 40-kilometer, 26-mile-long belt of favorable strata. The three zones on the Howard's Pass Property contain a historical indicated mineral resource released in 1983 of 115.4 million metric tons grading 5.41 percent zinc and 2.10 percent lead (mostly in the XY Zone), plus an additional inferred resource in excess of 367 million metric tons with a similar grade, which was projected for areas where only widely spaced drilling had been performed.

The estimates predate current resource estimation standards established by National Instrument 43-101. An NI 43-101 compliant estimate, updated in January, puts indicated and inferred resources at Selwyn closer to 386 million metric tons.

In 2000, Howard's Pass briefly went under option to Copper Ridge Exploration, a junior that drilled 8 holes in the Anniv deposit and undertook a scoping study on development that indicated the area's deposits could be economically attractive with large-scale production.

Laying claim to a mega-property

Pacifica, Selwyn Resources' predecessor, purchased the JV property from Placer and Cygnus in 2005 for $10 million, plus a 20 percent net profits royalty on production, a 1 percent net smelter royalty and other financial considerations, including an option for Placer and Cygnus to reinvest their purchase payments in Selwyn stock. Placer's interest in the deal subsequently was transferred to Terrane Metals Corp.

Since 2005 Selwyn Resources has spent over $50.7 million on exploration, development and environmental programs on the Selwyn Project.

In January 2007, Pacifica completed a preliminary assessment for the venture, which indicated excellent potential for a long-life mine with large-scale, low-cost zinc and lead production.

The junior underwent a reorganization of its assets in June 2007, and changed its name to Selwyn Resources Ltd. All of Pacifica's assets outside of the Selwyn Basin were transferred to another junior, Savant Explorations Ltd., in exchange for a significant portion of Savant's common shares.

After the reorganization, Selwyn focused exclusively on working toward completion of a bankable feasibility study for the Selwyn Project.

Mineralization throughout the claims consists of stratiform and stratabound zinc and lead sulphide ore within Silurian shales of the Howard's Pass Formation. All known deposits occur within a specific stratigraphic unit referred to as the "active member."

Explorers, so far, have traced the active member for more than 40 kilometers, or nearly 25 miles, and wherever it was contacted, drilling intersected significant zinc-lead mineralization.

After successful exploration seasons in 2005 and 2006, Selwyn Resources spent $21.5 million in 2007, drilling 37,209 meters and discovering five new mineralized zones. The company also conducted environmental baseline and site engineering studies.

An updated NI 43-101 compliant resource estimate released earlier this year reflects that work, identifying indicated and inferred resources for 14 different zones that occur over a strike length of 26.2 kilometers.

Targeting high-grade areas

The company's 2008 program focused on providing detailed information for completion of a pre-feasibility study, and support for a permitting application in late 2008.

Project geologist David Legault gave visitors an update on the junior's efforts during a visit to the project in late June. He described the Selwyn Project as containing sediment exhalative deposits geologically similar to the mineral-rich subsea "black smokers" that have been discovered at the bottom of the world's oceans.

Legault said 2008 exploration at Selwyn was smaller in scope than the junior's efforts a year earlier and targeted high-grade zones within larger deposits already identified.

Selwyn began the season in early June, working from the Don Camp and adjacent airstrip built in 2007 with one drill turning. Exploration work primarily consisted of at least 2,500 meters of core drilling and ground truthing of numerous geological and geochemical targets identified through compilation of existing data in conjunction with Selwyn's updated detailed, three-dimension geological model.

Diamond drilling focused on high-grade areas along the 24-kilometer corridor of well-mineralized zinc-lead active member between the XY central deposit in the southeast and the Anniv central deposit in the northwest.

The drilling also aimed to further upgrade high-grade, mineral resource estimates for Don, Don East, and HC West deposits in the Don Valley, which are a subset of the mineral resource estimate for the entire Selwyn Project.

Selwyn is considering developing the high-grade zones on the property first and is looking for a partner to take the project to development at an estimated initial capital cost of about $100 million for a 15,000 metric ton per day open pit and 7,000 t/d underground mining project, Legault explained. Several majors have already expressed interest in the project, he added.

The Selwyn Project offers some development advantages, including a lack of deleterious metals like mercury and selenium in the active member and the acid-consuming nature of the ore. The deposits also have high sphaelerite zinc and sulfur content.

Legault said explorers theorize that Selwyn's mineral formation re-concentrated some of the metals in the ore over time. They also noted that all of the ore zones at Selwyn are the same geological age.

"We've had the most success at the center of the fold, and hopefully, we can duplicate our success as we keep drilling and increase the high-grade resources," the geologist told Mining News. "The only other deposit that compares is Franklin and Sterling Hill in New Jersey."

But Selwyn, unlike the 19th Century U.S. mine, is poor in iron.

Describing Selwyn as "a weird Sed Ex deposit," Legault said geologists have not found its feeder zone.

"Doing so would make my day," he added.

Results from the drilling program this summer have begun to trickle in.

On Sept. 9 Selwyn reported positive early results from 2008 drilling in the XY zone and discovery of a new zinc-lead mineralized zone called the XY West zone. It lies 1,100 meters northwest of the previously defined high-grade XY Central underground deposit. Six drill holes have been completed on this high-grade target totaling 1,394.1 meters. In Hole XYC-174, Selwyn intersected 35.84 meters about true thickness grading 9.99 percent zinc and 3.34 percent lead, including 10.36 meters grading 16.08 percent zinc and 5.71 percent lead, the junior said.

Addressing other challenges

In addition to ongoing exploration, Selwyn Resources has obtained a permit for upgrading a winter road to the Cantung mine in Northwest Territories, which is about 80 kilometers, or 50 miles, from the XY Central deposit.

Legault said Selwyn is envisioning trucking ore from a mine to a deepwater port in Stewart, B.C. or Skagway via the Robert Campbell and Alaska highways where it would be loaded onto oceangoing barges and shipped to smelters in Asia.

The junior also has negotiated benefits agreements with the Ross River Dena Council and Liard First Nation. The Selwyn Project shares the traditional territory of these groups and that of the Sahtu First Nation in the Northwest Territories.

One big challenge for the mine project will be finding a cost-effective power source for operations. Engineers are studying the use of small hydro-dams in nearby rivers to generate power for a mine. The proposed Mackenzie Valley gas pipeline, which has a route that would pass near the Selwyn Project, also could provide low-cost natural gas and wind turbines are also being studied as possible power sources, Legault said.

"I think the way it will go is with several power parts," he said.

But the project was able to retain its three senior managers, including President and CEO Harlan Meade, after the sale this summer of Selwyn's sister project, the Wolverine VMS Project, by Yukon Zinc Corp. to a Chinese investment group.

Several deposits at Selwyn lend themselves well to being developed as open pit operations. They include the Don zone, Don East and HC West because of their high grade ore and accessibility to the dirt road that meanders through the property.

"I think we will start with selected pits that are close together. I'm talking serious tonnage here, with higher grades," he said. "That's one message I want to get across."

Legault said the Don zone is 1 kilometer by 600 meters in size, while Don East is 500 meters by 1,200 meters large.

He said a mine could be developed economically at Selwyn and the initial capital investment could be paid back in less than four years if zinc prices averaged C60-75 cents a pound, and that does not include the value of lead concentrates that would be mined with the zinc.

"I think we're just right for a major that doesn't want to do exploration," he added.