Selwyn Resources and a major Chinese mining company have entered into an agreement to form a joint venture company to pursue the Howard's Pass zinc-lead project.

The agreement between Selwyn and Yunnan Chihong Zinc & Germanium Co. Ltd. – both publicly traded companies – provides Chihong with a 50 per cent interest for an investment of $100 million into the project.

Selwyn will own the other 50 per cent of the joint venture, which will be managed by a board of directors, with half of the board being appointed by each company.

"This is a big validation of the project,” Selwyn president Harlan Meade said in an interview this morning from his Vancouver office.

"We have been in some periods where business looks rather dark,” he said. "But you know good projects weather the storms and go forward and in this case, now that we have our strategic partner, I think this is going to be built as the Yukon's next major zinc-lead mine.”

Howard's Pass and additional deposits discovered in the last couple of years sit inside the Yukon near the Yukon-N.W.T. border, north of the Cantung mine and Hahanni Range Road.

If all goes well, Meade explained, the joint-venture could be commissioning its mill and beginning production in late 2013 at 8,000 tonnes per day with a full-time workforce of approximately 450 employees.

The initial underground mine life is estimated at 12 years, but open pit potential would add many years to that, Meade said.

The announcement notes the $100 million from Chihong will be used for advanced exploration work, engineering, permitting and for initial construction activities.

Meade expects expenditures could reach $50 million next year, with employment numbers peaking at somewhere between 100 and 120 split between two camps.

It's likely next year's schedule will also include upgrading an old 70-kilometre winter road running north from the Cantung mine to Howard's Pass to year-round standards for $5 million or $6 million, he said.

Meade emphasized, however, the deal is still subject to regulatory approvals, with a closing date of May 2010.

Chinese foreign investment regulations are very strict, he said.

Meade was the former president of the Yukon Zinc Corporation, which sold its Wolverine Mine underground zinc mine to the Jinduicheng Molyebdenum Group Ltd., a privately-owned Chinese company.

The Yukon Zinc and Selwyn properties were once held under Expatriate Resources, with Meade as president. Expatriate split in the mid-2000s into Yukon Zinc and Pacifica, and Pacifica split into Selwyn Resources and Savant Explorations.

Meade said Selwyn went shopping for Chinese investors, targetting the base-metal, state-owned mining companies.

They spoke to about half and by the time the other half expressed an interest, it was essentially too late, he said, adding that negotiations between Selwyn and Chihong began in April 2008.

The new owners of Yukon Zinc did express an interest early on, he said.

Meade said while Selwyn took the initiative to seek out investors in China, he credits the Yukon government for helping to secure the deal by assuring Chihong the territory was open for business and its investment was welcomed.

Government staff also helped the Chinese representatives understand the regulatory process, he added.

Without certainty, said Meade, junior companies don't attract these types of investors.

"The Yukon government played a key role here.”

Meade explained the Howard's Pass deposit was initially discovered in 1973 by Placer Dome and Signus Mines, which spent about $20 million on the property up until the project fell dormant in 1981. Another junior took over the deposit for a couple of years early in this decade and Selwyn acquired the properties in 2005, and has since spent about $65 million expanding the original deposit.

In today's dollars, Meade estimates, over $100 million has been spent on the project.

Part of the $100 million Chihong will be putting up is to finish the work necessary to complete a bankable feasibility study to the level required by the stock market and banks.

If a decision is made to advance the project, it will be up to Selwyn and Chihong to raise the financing. The agreement already identifies Chinese banks as a likely source.

Meade said Chinese banks generally provide greater terms, but they're only open to investors if there is Chinese involvement in the project.

Some, he added, have pegged the cost of getting into production at $1 billion, though Selwyn's president believes it's significantly less but he can't say any more because company has not said anything publicly on the matter.

The joint-venture agreement also gives Chihong first right of refusal to buy Selwyn's 50-per cent share of the production, he said.

Meade explained there is also an arrangement that allows Selwyn to enter into a multi-year arrangement for the sale of its product to Chihong to help the junior company raise equity that may be required to secure its portion of financing for development.

The 60-year-old Chinese company is listed on the Shangai Stock Exchange, and has several operational mines and a smelter, with total assets valued at $1 billion, says Monday's announcement.

"We are hoping to be through the permitting work in about two years and hopefully have the bankable feasibility study in a significantly shorter period, maybe 12 to 18 months.”

Selwyn's shares hit a one-year high today of 30 cents on the Toronto Stock Exchanage, and were sitting at 26 cents by press time. In the past year they hit a low of six cents.

"With the announcement, there is a lot of enthusiasm in what we are doing, so I think that is great,” Meade said.