Development

In early 2007, Selwyn developed a preliminary development plan with an assumed mining rate of 20,000 tonnes per day with ores sourced from the XY Central, Brodel and Anniv Central and Anniv East pits. The model (see NI 43-101 technical report filed March 2, 2007 on www.sedar.com) was premised on resources as included in the March 2006 mineral resource inventory and exclude the new resources defined by the large 2006 and 2007 drilling program. Integration of the current mineral inventory would allow better optimization of the resource base and longer pit life and therefore better capital utilization.

With the discovery of significant high grade mineral resources at Selwyn Project, the approach to development has changed to initial development of the high grade mineralization by underground mining methods. Development of near surface mineralization as open pit operations could provide a second expansion phase of development.

Recent evaluation has focused on internal scoping work and pre-feasibility level studies for the development of the Selwyn Project as a high grade underground mine followed by later expansion with addition of open pit operations. Initial scoping work on a 5000 tonne per day production rate scenario indicated that the project would benefit from a higher production rate. This work is being optimized with an increase in the production rate to 8000 tonnes per day and further evaluation of multiple concentrate transport and power supply alternatives. Annual output of zinc and lead are tentatively projected at approximately 255,000 tonnes of zinc and 65,000 tonnes of lead.

These optimization studies are targeted at reducing operating costs to the mid-range of producer costs and increasing mine cash flow to speed up re-payment of initial project capital. The mining of high grade and increased production rate is expected to be more capital efficient than the original modeling of larger tonnage, lower grade open pit operations.