Selwyn Resources Ltd. has agreed to sell its remaining interest in a Yukon zinc and lead project to a state-owned Chinese company.
In 2010 Chihong Canada Mining Ltd. purchased an equal stake in the project from Selwyn for $100 million.
This week it agreed to purchase the other half for $50 million.
In a press release the company cited the need for significant additional capital investments and the potential for significant dilution of shareholders’ equity as reasons for the sale.
In other words, the project needs money that only the Chinese are willing to provide, and this cash infusion would wash out the value of investments in the mine’s Canadian partner.
While Chihong Canada has put down a $5-million deposit towards the purchase price, the transaction is not yet a sure thing. The deal must first be approved by two-thirds of Selwyn’s shareholders, the board of Chihong’s parent company, the Chinese government and the TSX Venture Exchange, among other conditions.
Harlan Meade, Selwyn’s president, could not be reached for comment by press time. (Jacqueline Ronson)