Economics

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 was premised on resources as included in the March 2006 mineral resource inventory and exclude the new resources defined by the large 2006 drilling program. Integration of the April 2007 mineral inventory would allow better optimization of the resource base and longer pit life and therefore better capital utilization. Inclusion of higher grade underground resources could provide additional increased output and increased early revenues, and will be an important aspect of future economic modeling. Lastly, as the resource base increases, expansion of the production rate is likely to provide greater economies of scale; but such expansions are likely to be tied to infrastructure improvements such as railway and new power developments that could occur after initial mine development.

The January 2007 Preliminary Assessment Report based on a 20,000 tpd mining rate is available on www.sedar.com. The base case utilized 87 million tonnes of indicated and inferred resources in four pits. Application of DMS provided an upgrade from run-of-mine 6.78% combined zinc+lead to 10.73% combined zinc+lead feeding into the grinding circuit. Applying a 90% recovery in the DMS plant and 83% zinc and 75% lead recovery, annual production in the early years is forecast to be approximately 278,000 tonnes of zinc in zinc concentrate and 93,000 tonnes of lead in lead concentrates, making it about the fifth largest zinc mine in the World.

The application of the DMS plant reduces the size of the mill, saving significant capital and provides for a higher grade mill feed and better capital utilization. The elimination of waste prior to milling similarly provides considerable operating cost savings and results in improved project economics.

Selwyn Project Operating Parameters

Preliminary economics using US$1.10 per pound of zinc and US$0.50 per pound lead, results in an attractive pre-tax IRR of 32.2% and a pre-tax Net Present Value of $836 million. Initial capex and sustaining capital were assumed at CAD$685M and CAD$196M respectively for mine, mill and road access to the Robert Campbell Highway. The preliminary modeling of the project economics is very encouraging and provides parameters for considering other development alternatives.

Selwyn Project Economics

* Assumes a US $0.50/lb lead price and no other product credits. Mining reserve assumption includes Inferred Resources with no assurance that they will be confirmed with in-fill drilling.