Yukon Zinc AR 05 - Yukon Zinc Corporation

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undergoing internal and external review to finalize capital and operating costs. Considerable additional metallurgical testwork was completed in 2005 to finalize process design and determine recoveries and product quality. This testwork completes a long history of metallurgical testwork that commenced in early 1996. Early test work identified abnormally high selenium content in the test concentrates. In the late 1990's high selenium contents were considered a possible impediment to their saleability; particularly for the zinc concentrate. The recent dramatic increase in selenium price from US$4.00 per pound to more than US$50 per pound, combined with the serious shortfall in zinc concentrates, has resulted in much increased interest in the concentrates. Recenty, all smelters contacted have expressed interest in the Wolverine concentrates and it is apparent that Wolverine concentrates can be readily sold. Discussions are now focused on removal of selenium penalty on concentrates and possible price participation in sale of recovered selenium. The copper and lead concentrates from Wolverine are very rich in silver and gold increasing their value and marketability. Furthermore, the byproduct credit for silver and gold significantly reduces the cash cost of producing zinc. In late 2004, Yukon Zinc began the evaluation of application of dense media separation (DMS) technology in an effort to manage mining dilution to maximize mill efficiency and output. The testwork conducted at SGS Lakefield Research indcates that the application of this simple gravity technology would provide a very effective pre-concentration step. The DMS process provides for efficient rejection of less dense waste materials from the dense ore. Testwork indicates recovery of approximately 98% of base metals and 95% of precious metals in the dense “sink” portion together with “fines” products. Successful application of DMS technology at Wolverine should reduce mill process costs on a unit of production basis. However, the main benefit will be in mining where it provides a means of removing waste material from ores prior to processing. The effective removal of waste allows mining to maximize recovery of the high-grade ores; particularly, where excessive dilution with waste rock occurs due to multiple bands of massive sulphide mineralization, hangingwall failure, contamination of ore with footwall material and in the mining of thin massive sulphide lenses. Application of DMS at Wolverine will allow the mining of thinner zones of ore and simple upgrading before milling, therefore increasing mining reserves and increasing mine life. These thinner ores are commonly more precious metals rich, which adds significant additional precious metals recovery. Planned Development Schedule Scoping Study Exploration Eis Test Mining Underground Drilling Feasibility Financing Detailed Engineering Production Decision Procurement Site Preparation Construction Startup Operations 2004 2005 2006 2007 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan PAGE 10 YUKON ZINC 2005 ANNUAL REPORT APPLICATION OF DMS TECHNOLOGY
The Environmental Assessment Report was filed on October 28, 2005, and is now being reviewed by the regulators and general public. PERMITTING, ENVIRONMENTAL & COMMUNITY AFFAIRS Yukon Zinc resumed permitting of Wolverine development in summer 2004. The Company submitted its B Water License Application in July 2004 and received the license in early 2005. The B Water License and the amended Mining Land Use Permit are the permits associated with the test mining program. for issuance of the Mining License in June of 2006. The Type A Water License required for operation of a mine and mill is expected in October 2006. In the fall of 2004, the Company made application for an A Water License and submitted a Project Description Report in support of a Quartz Mining License application for development of Wolverine. The Yukon Government has appointed a Project Coordinator to coordinate the review of submissions and ensure the smooth working process for review of permitting documents. The Environmental Assessment Report was submitted in October 2005 and has progressed through initial regulatory screening and public consultation. The permitting is on track In July 2005, the Company completed a socioeconomic participation agreement with the Ross River Dena Council. The agreement addresses the concerns of local aboriginal people whose traditional territory the Wolverine deposit is located in and provides for their participation in the economic and social benefits of the development and operation of Wolverine as a mine. Their support is greatly appreciated and the Company looks forward to working with them to maximize benefits to their members and our shareholders. YUKON ZINC 2005 ANNUAL REPORT PAGE 11
Page 2 and 3: President’s Message 2005 was a ye
Page 4 and 5: Yukon Zinc's vision is to provide e
Page 6 and 7: Wolverine Project Development The F
Page 8 and 9: RED LINE AND GOAL NET NORTH The Red
Page 10 and 11: ICE The wholly owned Ice deposit is
Page 14 and 15: development in ore to minimize deve
Page 16 and 17: LOGAN DEPOSIT In April 2003, Yukon
Page 18 and 19: CORPORATE INFORMATION Capital Struc
Page 20: A ZINC-SILVER MINE IN THE MAKING Yu

Yukon Zinc AR 05 - Yukon Zinc Corporation

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