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Vol. 12, No. 39 Week of September 30, 2007
Providing coverage of Alaska and Northwest Canada's mineral industry

MINING NEWS: Production decision on tap at Wolverine

Yukon Zinc chases early 2009 startup target with numerous development activities; works to complete project financing by October

Rose Ragsdale

Mining News

With project financing under way and initial construction of a 15-mile access road completed, Yukon Zinc Corp. is loping toward a production decision in October that could see the silver-rich Wolverine project in southeastern Yukon Territory become the regionís next significant zinc-silver mine.

Since outlining its development plans in a feasibility study in January, the Vancouver, B.C.Ėbased junior has made dramatic progress toward constructing a 1,400-tonne-per-day underground mine and mill plant to develop the zinc-lead-copper-silver-gold deposit.

Two years ago, publicly held Yukon Zinc completed a $19 million test mining and definition drilling program at Wolverine that showed the project had considerable potential.

Located in the Finlayson Mining District about 121 miles northwest of Watson Lake, Wolverine has proven and probable mining reserves based on measured and indicated resources totaling 5.15 million metric tons, grading 9.66 percent zinc, 0.91 percent copper, 1.26 percent lead, 281.8 g/t silver and 1.36 g/t gold.

Yukon Zinc estimates an 8-year mine life based on current resources. Average annual metal production in the first 3 years of full production is forecast to total about 53,400 metric tons of zinc, 4,860 metric tons of copper, 6,010 metric tons of lead,

4,933,200 ounces of silver and 20,200 ounces of gold contained in the zinc, copper and lead concentrates. (Not all of the metals in concentrate are payable).

Additional exploration envisioned for Wolverine likely will yield more reserves, which would extend the mineís life, according to Yukon Zinc officials.

Access road nearly complete

Yukon Zinc said Sept. 18 that initial construction of an all-weather gravel access road from the Robert Campbell Highway to the project site was nearly complete and upgrading of culverts and other parts of the road would continue during the coming months. Large trucks, meanwhile, are now able to transport equipment and supplies to the project site.

ďThe ability to mobilize equipment and supplies to the site by truck transport is key to keeping to our timeline for mine development,Ē said Raymond Mah, Yukon Zincís chief operating officer.

Previously, the project area was only accessible by an 800-meter gravel airstrip and an ice road in winter.

Yukon Zinc also aims to lengthen the airstrip to 1,200 meters and upgrade its surface to accommodate larger aircraft needed to transport construction and mine personnel.

Buyers chosen for concentrates

Zinc, copper and lead concentrates are to be trucked about 533 miles to concentrate-loading facilities in the port of Stewart, B.C. for trans-shipment to smelters in Asia. The high content of silver and gold in the copper and lead concentrates increases their unit value and reduces the impact of high transportation costs, according to Yukon Zinc.

On Sept. 4, the company announced the selection of Glencore and MRI Trading AG as buyers for all of the initial projected Wolverine concentrates production for five years, ending Dec. 31, 2013.

The arrangement will provide a secure market for Wolverine concentrates and assist the company in completing project financing, Robert McKnight P.Eng., Yukon Zincís vice president of corporate development.

Project sensitive to operating costs

Meanwhile, construction activities under way or nearly complete at the project site include erection of a water treatment facility cover and site preparation for a new 200-worker construction camp. With completion of these earthworks activities, Yukon Zinc said it will be ready for the next phase of construction activities, which includes resumption of underground development and preparation of mill site foundations.

Additional construction activities will await completion of financing of the remaining $110 million of project equity required to complete cash requirements for the project. This equity together with the $140 million in senior debt financing from Barclays Capital, announced Aug. 27, will complete the projectís financing and allow a full production decision to be made, Mah said.

Yukon Zinc has estimated capital costs for the Wolverine project, excluding working capital, at C$175.6 million, before contingency costs of C$24.3 million and C$7.6M in ownerís costs. Sustaining capital is estimated at $26.5 million for the eight-year operating mine life.

Operating costs per metric ton mined was estimated at C$95.58; resulting in life-of-mine cash cost of zinc of about 26 cents per pound, after deducting by-product revenue on the basis of average metal prices over the preceding two years, the company said.

According to an independent consultantís analysis, the Wolverine project is more sensitive to operating costs than capital costs, and the order of its sensitivity to metal prices in descending order is zinc, silver, copper, gold and lead.

Other projects on backburner for now

Yukon Zinc was created in December 2004 along with sister company Pacifica Resources out of Expatriate Resources. Earlier this year, Pacifica was split into two companies, Savant Exploration and Selwyn Resources. (See Feb. 25 article in Mining News.)

Yukon Zinc has several other exploration projects in the Yukon, including the Logan zinc-silver deposit about 67 miles west of Watson Lake in south-central Yukon. With a 60 percent joint venture interest acquired in Logan in May 2003, Yukon Zinc is eyeing its potential for development in conjunction with the nearby Swift property.

The company acquired a 100 percent interest in the Swift property in November 2004. It is located 34 miles southwest of Logan. A large property covering a 12 ?-mile-long belt of zinc-copper-silver showings, Swift has the potential for higher grade ores that could be developed with the Logan deposit, the company said.

Last year, Yukon Zinc conducted airborne gravity surveys at both Logan and Swift, but since has placed exploration of the two properties on a backburner until the Wolverine project is brought into production, according to Yukon Zinc spokesman Shae Dalphond.

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