The Yukon Water Board has issued a water licence for the Selwyn Project.

The licence paves the way for an advanced underground exploration program scheduled to begin this spring.

Selwyn Chihong Mining is working toward completing a feasibility study to determine if the lead-zinc ore body is economically viable.

A draft of the study is expected to be ready late this summer, says a press release issued this morning by Selwyn Chihong.

The Liard First Nation of Watson Lake is challenging the validity of the Yukon government's approval of the project, arguing the environmental screening by the Yukon Environmental and Socio-economic Board (YESAB) was substandard. The government, the First Nation told Yukon Supreme Court Justice Ron Veale recently, should have recognized the screening was insufficient and rejected YESAB's recommendation for approval.

After hearing two days of lengthy legal arguments earlier this month, Veale reserved his decision.

Lawyers for Selwyn Chihong told the judge the screening by YESAB was more than adequate.

But if he does find a problem, he doesn't have to shut down the whole project, they argued. It is possible, Veale heard, for the court to allow the work to proceed while addressing any shortcomings it finds with the screening.

"We are not commenting on the litigation, but it is pretty obvious the water board thinks everything is OK,” Selwyn Resources president Harlan Meade said in an interview this morning.

"We are pleased that the water board in a timely manner did its job and when they were finished they issued a licence,” he said.

"You might have expected them to wait until the court decision was made, but you know they had a job to do, and they did their job, and good on them.”

Selwyn Chihong spent $10 million purchasing equipment and moving it into the site on a winter road last month. The deposit is located northeast of Ross River, along the Yukon-N.W.T. border.

Selwyn Resources sold 50 per cent of the Selwyn Project to the private Chinese company last year for $100 million to complete the work required for a bankable feasibility study.

In addition to more underground exploration drilling, the company is planning 800 metres of tunnelling to mine out 200,000 tonnes of what will be mostly waster rock, along with raw ore to serve as a bulk sample.

Meade said there are about 50 working in the field on the Selwyn Project, and he doesn't expect that will change much through the summer. Completing the underground exploration will require about another $25 million, he said.

The company, Meade explained, wants to have its feasibility study completed by late September, with hopes of being ready to make a decision on the project in the second half of 2012.

Meade said before they can make a decision, Selwyn Chihong needs a mining permit and a water licence for the full-blown mining operation. Only after a permit and water licence are issued does a company have the certainty required for a complete cost analysis, he said.

Meade said the company has not yet filed an application with YESAB for a mine, nor has it filed one with the water board.

"We have maintained an aggressive time line throughout,” he said. "It is achievable but it will require everybody working hard, including the regulators, to move it efficiently through the process.”

In the press release this morning, Selwyn Chihong said: "The Selwyn Project represents one of the largest global undeveloped resources of zinc and lead and is unique in its location in the politically-attractive and stable jurisdiction of the Yukon.

"It is therefore a strategic asset with the potential to provide a long-term secure supply of zinc and lead to the Pacific Margin.”