Griffin Mining to take over Yukon Zinc

Vancouver – A Barbados-based company is taking over Yukon Zinc (YZC-V) to get its hands on the silver-rich polymetallic Wolverine project in the Yukon.

Griffin Mining, a mining and investment company that trades on Alternative Investment Market of the London Stock Exchange, will issue one Griffin share for every nine shares of Yukon Zinc. The deal values Yukon Zinc shares at 20.6 based on Griffin’s closing price on April 18 and on a 0.4984 exchange rate, a 46.9% premium over Yukon Zinc’s April 18 closing price. Considering 20-day, volume-weighted average share prices, the deal is a 43% premium for Yukon Zinc.

After the transaction closes, Yukon Zinc shareholders will hold 16% of Griffin. Griffin will hold Wolverine and Yukon Zinc’s large exploration land package in the Finlayson and Rancheria districts of the Yukon.

Griffin already holds a 60% interest in the Caijiaying zinc-gold-silver-lead mine in Hebei province, China. When Wolverine achieves full production, expected in 2009, Griffin will produce 150 million lbs. zinc in concentrates and 4.5 million oz. payable silver annually, as well as significant copper, gold, and lead.

“Yukon Zinc will add a high grade, profitable mine to Griffin’s portfolio and add extensive acreage in one of the most exciting base metals regions in the world,” said Mladen Ninkov, chairman of Griffin, in a statement. “We couldn’t be more pleased.”

Yukon Zinc’s board of directors supports the deal unanimously and the company’s senior officers and directors have agreed to vote in favour. To pass, 66.7% of Yukon Zinc shareholders have to vote for the takeover.

The Wolverine project is in south-eastern Yukon, 240 km northwest of Watson Lake and 440 km northeast of Whitehorse. The Robert Campbell highway runs past the project 26 km distant; in September Yukon Zinc completed a road connection to the highway that will serve as the conduit for trucks taking concentrate the 860 km to loading facilities in the port of Stewart, British Columbia.

Mineralization at Wolverine in hosted in a classic volcanogenic massive sulphide (VMS) deposit hosted in felsic volcanic and argillaceous sedimentary rocks. The sulphides occur in two tabular lenses that together hold 5.2 million tonnes of proven and probable reserves grading 9.71% zinc, 284.2 grams silver per tonne, 0.93% copper, 1.37 grams gold per tonne, and 1.26% lead.

The development plan for Wolverine foresees an underground mine producing 1,700 tonnes of ore per day. A dense media separation plant will reduce the tonnage to 1,400 tonnes of mill feed by removing less dense waste rock. Conventional grinding and flotation will result in three concentrates: zinc, copper, and lead. All three will have silver and gold credits but the copper and lead concentrates will be particularly enriched.

Wolverine is expected to produce 117.8 million lbs. zinc, 10.3 million lbs. copper, 12.9 million lbs. lead, 4.9 million oz. silver, and 20,200 oz. gold annually. Capital costs are estimated at $207.5 million. The project’s pre-tax net present value, using a 8% discount rate and two-year backward average metal prices, is $184.2 million and its internal rate of return is 26.3%.

The reserves currently provide for a 10-year mine life that could be extended by three to four years by infill drilling the remaining inferred resources.

Yukon Zinc was halted for the takeover announcement and did not resume trading before the day’s end. The company has a 52-week trading range of 8.5 to 32 and has 396.3 million shares issued.

Griffin, through its two Chinese joint ventures, has a controlling interest in mining and exploration licenses covering 67 sq. km in Hebei province. Within this area, Griffin built and commissioned the Caijiaying mine and processing facility and has steadily increased mill throughput. In 2006 the mill processed 301,101 tonnes of ore to produce 20,138 tonnes of zinc in concentrate. Throughput is currently close to 500,000 tonnes per year and Griffin aims to increase that to 750,000 tonnes by the end of 2008.

The mine produced its first commercial product in July 2005. Though it only hold 60% of the project Griffin is entitled to 100% of the net cash flows from Caijiaying for the mine’s first three years.

Continued exploration in the Caijiaying area has revealed highly prospective indicators for further base and precious metal mineralization. Griffin has made progress in defining a second resource at the Zone II area some 1.5 km south of the mine.

Griffin is awash in cash. For the six months ending June 30th 2007 the company reported an after-tax profit of US$18 million. In August Griffin completed a 68.1-million share placement at 1.10 for gross proceeds of 75 million (US$152 million). The company currently holds in excess of US$200 million cash.