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Selwyn Resources (SWN.V) - a highly leverage exposure to record zinc prices

Full Report by Objective Capital , Jul 05, 2007 download full report
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Key Points:

  • Selwyn is focussed on the development of the deposit at Howard’s Pass, a large zinc prospect in the Yukon Territory of Canada. A drill programme is under way to intercept the high-grade underground resource at depth in Don and Don East zones in northwest part of the Don Valley. High-grade mineralisation occurs both above and below the Don Valley floor at several sites and the zones above, at XY and ANNIV Central, will be accessible with horizontal drifting.

  • In May 2007 the company was restructured into a single project company. The company now retains only the Selwyn project which embraces the development of the Howard’s Pass deposit. The company’s other assets were transfered to a new exploration company, Savant Explorations Ltd., with existing share holders retaining a stake in the new venture.

  • In March 2006, a NI 43-101 compliant mineral resource estimate was completed on the Howard’s Pass deposit. This further increases the confidence in the potential to develop the Howard Pass deposit into an economic mine.

  • The asset restructuring sits well with Selwyn’s corporate strategy as it helps its plans for development partnerships with other mining groups. The objective behind the segregation of prospects is to derive a better value for all the company’s projects by marketing them individually. Thus, the promising Howard’s Pass deposit would be an attractive target for a larger mining group with zinc interests; by contrast, projects involving other base metals or gold lend themselves to marketing to other counterparties.

  • Strong zinc fundamentals strengthen Selwyn’s investment case and underpin its valuations. Aided by the rising demand in all industrial nations as well as their suppliers in Asia, zinc prices have been on the rise since 2003. China alone consumes 25 percent of the world’s zinc output with the annual demand growth rate at 7 percent - 8 percent. Zinc’s main end-use sector is the metal galvanizing industry, which accounts for almost half the world’s consumption. Low zinc inventory levels at the London Metal Exchange (LME) and continued demand growth are expected to keep zinc prices high.

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