Xstrata set to begin development of Bracemac-McLeod mine in Matagami camp

Donner Metals Ltd. (TSX: V.DON, Stock Forum) and partner Xstrata Ltd. (OTO: XSRAF, Stock Forum) are set to develop a new zinc-copper mine in Matagami, Que.

The announcement sent Donner shares up 30% to 23.5 cents on Friday.

Production from the Bracemac-McLeod deposit will be used to replace the depleting output from Xstrata’s nearby Perseverance mine, which is currently a key source of feed for the refurbished Matagami Lake mill.

Assuming production begins in late 2012 or early 2013, the new mine will be owned 65% by Xstrata and 35% by Donner. Over the last eight months, Xstrata was been doing definition drilling on an indicated resource of 3.62 million tonnes, grading 11.52% zinc, 1.60% copper, 31.55 grams per tonne silver, and 0.49 grams per tonne gold.

Xstrata will drive an access ramp towards the deposit, which is located beneath a former open pit mine.

Donner has already spent virtually all of the $25 million that was necessary to earn a 50% stake in the project. But Xstrata can earn back an additional 15% by contributing $20 million towards a feasibility study.

Once development is complete, Donner will become a mining company for the first time.