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CANADIAN MINE PERSPECTIVES: Wolfdens good deeds attract takeover bid

Someone once said that no good deed goes unpunished. I dont know what that anonymous savant had in mind, but the t...



Someone once said that no good deed goes unpunished. I dont know what that anonymous savant had in mind, but the thought fits WOLFDEN RESOURCES of Thunder Bay, Ont., as ZINIFEX, the Australian zinc and lead producer, makes a takeover bid for the Canadian company.

Wolfden counts among its good deeds three development projects in Nunavut.
The company has production plans for the High Lake project, located 45 km south of Coronation Gulf and the Izok project, located 80 km west of the former Lupin gold mine and mill site. The $333-million High Lake project includes both underground and open pit mining plus a 4,000-t/d concentrator. Wolfden has bought the Nanisivik concentrator and plans to move it to High Lake. Construction could begin in 2008, and mining in 2010. The deposit has an inferred resource of 17.3 million t grading 3.35% Zn, 2.25% Cu, 0.31% Pb, 0.95 g/t Au and 69.7 g/t Ag.

At Izok, Wolfden estimates indicated resources to be 14.5 million t grading 12.94% Zn, 2.52% Cu, 1.28% Pb and 71.0 g/t Ag. An open pit and 4,000-t/d mill will be built. The cost of development at Izok would be about $539 million.

Wolfden is also working on the Ulu gold deposit, 155 km north of the Lupin site. Ulu has an indicated resource of 720,000 t grading 11.7 g/t Au. Exploration has moved underground, and the cost to put the deposit into production with ore treated at the Lupin mill is estimated to be $61 million.

Moreover, Wolfden is assessing the possibility of reopening the Lupin gold mine and looking at the prospects of two other copper-zinc deposits in the region, Gondor and Hood.

Such success turns out to be a takeover magnet. Zinifex has made a non-binding offer of $3.90 cash per Wolfden share, a deal worth $358 million. The proposal includes several conditions of acceptance and will need regulatory approval. Wolfden has granted Zinifex an exclusivity period in which to complete its due diligence, and provision for its management to remain employed.

Zinifex claims to be one of the worlds largest integrated zinc and lead producers. It owns two mines in Australiathe underground Rosebery mine on the west coast of Tasmania and the Century open pit on the Gulf of Carpentaria in Queensland. The company operates four smelters: two in Australia and one each in the United States and the Netherlands. According to its 2006 annual report, Zinifexs combined mine production is 599,232 t of zinc and 107,640 t of lead in concentrates. (For comparison, the mines of TECK COMINCO produced 627,000 t of zinc and 129,000 t of lead in 2006.)

The combination of the Wolfden and Zinifex looks to be a winner for the larger company. Wolfdens assets are exactly what Zinifex needs to grow its business. Too bad another Canadian company may soon become foreign-owned.


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