UPDATE 2-Sabina to sell some Nunavut properties to Xstrata

Thu Jun 2, 2011 4:29pm EDT

* Says to sell fully owned Hackett River property

* To sell certain claims on Wishbone Greenstone belt

* Xstrata to pay C$50 mln; Deal to close in 6 months

* Sabina shares close almost 3 pct higher on TSX (Adds details on deal; executive comment)

TORONTO, June 2 (Reuters) - Sabina Gold & Silver (SBB.TO), a Canadian exploration company, said on Thursday it would sell its Hackett River property and part of its Wishbone exploration property in Canada's northern Nunavut territory to a unit of diversified miner Xstrata XTA.L.

Vancouver-based Sabina said the deal will allow it to focus solely on developing its precious metal assets and help boost its valuation.

As part of the deal, Xstrata Zinc will pay C$50 million ($51.1 million) in cash and Sabina will reserve a silver production royalty equal to 22.5 percent of the first 190 million ounces of payable silver from the properties and 12.5 percent of all payable silver from the properties thereafter.

"This transaction solidifies Sabina's precious metals focus and poises the company for a potential market re-rating as a gold company," said Sabina's Chief Executive Tony Walsh in a statement.

The precious metals explorer said Xstrata -- one of the world's largest diversified miners -- will spend about C$50 million on exploration and complete a feasibility study on the properties within four years.

"The prospective Hackett River and Wishbone exploration properties are early stage opportunities that could provide additional mined zinc production to complement our Canadian operations," said Santiago Zaldumbide, head of Xstrata Zinc, in a separate statement.

Xstrata acquired the bulk of its Canadian assets through its 2006 acquisition of Canada's Falconbridge valued at about C$24.1 billion.

Sabina said the transaction could take up to six months to complete. BMO Capital Markets acted as Sabina's financial advisor on the deal.

Shares of Sabina closed up almost 3 percent at C$6.93 on Thursday on the Toronto Stock Exchange. ($1=0.978 Canadian dollars) (Reporting by Euan Rocha in Toronto and Amruta Sabnis in Bangalore; editing by Janet Guttsman)