Selwyn Resources receives vote of confidence from Paradigm Capital

Selwyn Resources (CVE:SWN) is in a position of strength, having recently acquired the Scotia zinc and lead mine-mill complex in February, and continually advancing its Selywn project in the Yukon, Canada.

The company has investors and analysts convinced, with equity research firm Paradigm Capital raising the zinc and lead explorer's 12-month price target to seventy cents, up from its current share price of thirty cents.

The Scotia mine, the company's newest asset located in Nova Scotia, was last operated and drilled out between 2007 and 2009 by Acadian Mining, but the mine was eventually shut down due to the collapse in zinc prices. Reported production rates were approximately 25ktpa of zinc and 10ktpa of lead, at a cash cost of $0.55 per pound of zinc.

Selwyn, through its purchase of ScoZinc, acquired 100% of the Scotia complex, as well as an extensive mineral claims package, and plans on refurbishing the mill and restarting production at the site by the first quarter of 2012.

"We see Selwyn’s acquisition of the Scotia mine mill asset as relatively inexpensive with a total price tag of C$35M, including the refurbishment," Paradigm noted in its research report. 

As part of the mine refurbishment plan, Selwyn will complete additional drilling  to fully update and confirm the resources at the property, which now stand at 10 million tonnes grading between 3.0-3.5% zinc and 1.5-2.0% lead.

According to Paradigm's calculations, Scotia has the ability to generate approximately $20M in annual cash flow, much needed money for Selwyn to fund the development of its core Yukon asset.

The Selwyn Yukon project is recognized as one of the largest undeveloped zinc and lead deposits in the world, consisting of more than 65 kilometres. Last August, the company signed a 50/50 split joint venture deal with Yunnan Chihong Zinc and Germanium Co in order to secure funding.

Having spent over $60 million to advance the project to the pre-feasibility stage, Selwyn has logged the discovery of 13 new mineralized zones that define the Selwyn deposit as continuous for at least 38 km in the Howard’s Pass District. The company has released a basket of high grade confirmatory drill results in the past several weeks, which will serve to outline the base resource for the bankable feasibility study, expected by the middle of this year. First production is aimed for 2014.

Initially, the company is targeting 16 million tonnes of high grade indicated zinc lead resources from its underground XY Central deposit, plus an additional 26 million tonnes of inferred resources.

"Selwyn is in a good position to meet its aggressive project development timeline...the investment and JV partnership from/with Chihong will allow for future progress to be made at the necessary pace.

"This will be important for Selwyn in order to meet its production schedule, which could possibly coincide with a decreased global zinc supply due to medium-term worldwide mine shutdowns," Paradigm concluded.

Indeed, the expected shortfall in supply in the next few years would result in a spike in zinc prices, placing Selwyn in a prime position for the future and giving it "the potential to back up its claim that it truly is a giant in the making". Paradigm re-iterated the company's buy target.