Sale could create producing zinc mine

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A proposal to sell Yukon Zinc Corp. to an international mining company with a producing zinc mine in China was unveiled Monday.

Yukon Zinc president Harlan Meade said from Vancouver this morning the proposed sale to Griffin Mining Ltd. is good for Yukon Zinc and its shareholders. He said he fully expects Griffin to move the advanced Wolverine project into production.

“There is always a bit of trepidation when your baby grows up and somebody takes it away,” said Meade, who’s been at the helm of Yukon Zinc from the beginning.

“But you know, this is a good company and it potentially gives us a bright future.

“I guess I’ll be the nanny now.”

The Yukon Zinc president described the purchase proposal as a friendly arrangement negotiated by the two companies, with initial discussions going back to last October.

It’s expected Meade and his management team will stay on to help advance the project. Yukon Zinc’s board of directors will likely fold as Griffin’s board of directors takes over as the decision-making body.

But he suggested Griffin has not offered to buy the company to have the Wolverine property sit idle.

Under the proposal, shareholders of Yukon Zinc will receive one-ninth of an ordinary share of Griffin for every Yukon Zinc share. The court-approved plan of arrangement must be approved by two-thirds of the shareholders who register a vote.

There are about 455 million shares in Yukon Zinc, though the total number of shareholders today is unclear. There were about 3,600 shareholders when the company held its annual meeting last spring.

It’s expected the deal will close by July 31, says the media statement released Monday announcing the proposed purchase.

Trading of Yukon Zinc was halted on the TSX Venture Exchange yesterday, and the announcement was made once the markets closed.

Trading was normal this morning, with share prices up.

While Yukon Zinc was trading this morning at around 17 cents per share, the value of each Yukon share was calculated at about 20.6 cents, based upon Griffin’s closing price on London, England’s Alternative Investment Market last Friday.

With last fall’s uncertain market conditions and a sharp decline in Yukon Zinc’s share price, the company cancelled attempts to raise capital financing, as too many shares would have to have been sold to raise the necessary financing.

Griffin has cash assets in excess of $200 million US, with ongoing revenue from production at its Caijiaying mine in China’s Hebei Province, says the press release.

Meade said it will require about $207 million to get the mine into production, and will take about 18 months.

It’s likely there’ll be some work this year, but he expects the bulk of construction will take place next year, with production beginning in late 2010 or early 2011.

Yukon Zinc has spent about $55 million on the Wolverine deposit in the last four or five years, and has secured all the major permits for the project, such as its major mining licence and its type A water licence.

“I think our main capitalization will be next year, so you know it is going to be a big chunk of the $207 million next year,” Meade said.

The purchase proposal contains a clause stipulating if Yukon Zinc accepts a better offer from another company, it would have to pay Griffin $2.5 million, though Griffin also has the right to match any other offers, should any be made.