CZN-TSX
CZICF-OTCQB
- Higher Mining Rate, 25% Increase in Mill Throughput,
Higher Metal Production
- Lower Operating Costs, Lower Treatment Charges,
Moderate Increase in Capital Cost
- Integrated LNG supplied by Northwest Territories Power
Corporation with All Season Road
- $3 Billion in Net
Revenue and $1.3 Billion in EBITDA
over Initial 15 Year Mine Life
- Pre-tax NPV(8%) $344
million, IRR 24%, Post-tax NPV $188
Million, IRR 18%
VANCOUVER, Sept, 28, 2017
/CNW/ - Canadian Zinc Corporation (TSX: CZN; OTCQB: CZICF)
is pleased to report positive preliminary results for the
Feasibility Study recently completed on its Prairie Creek
Zinc-Lead-Silver Project in the Northwest
Territories, Canada.
The preliminary results of the Feasibility Study ("2017 FS")
indicate notable improvements compared to the Preliminary
Feasibility Study completed in 2016 ("2016 PFS") and confirm that
the Prairie Creek Mine can support a significant increase in the
mining rate and mill throughput that will enable production of
higher quantities of zinc, lead and silver, and at lower operating
cost as compared to the mine plan presented in the 2016 PFS.
The 2017 FS was completed by AMC Mining Consultants
(Canada) Inc ("AMC") and Ausenco
Engineering Canada Inc. ("Ausenco"), with input from Allnorth
Consultants Limited, F. Wright Consulting Inc., G. Mosher of Global
Mineral Resource Services Ltd. and HCF International Advisers
Limited ("HCF").
Feasibility Study Highlights
Optimization work completed as part of the 2017 FS has led to
improvements in many aspects of the Prairie Creek Mine with only a
modest increase in the capital cost. Among these are:
- Increased mining rate (+18.5% to 1,600 tonnes per day).
- Increased mill throughput after DMS processing (+25% to 1,200
tonnes per day).
- Lower operating cost (-2.6% to $223 per tonne mined, including transport).
- Increased Mineral Reserve tonnage (+6.2% to 8.1 million
tonnes).
The 2017 FS Mine Plan covers a 15 year LOM from mill start-up
with a particular focus on optimizing the LOM grade profile. During
the first 10 years of production, the expanded mill throughput
results in the following as compared to the 2016 PFS:
- Higher average annual metal production (zinc 95M lbs. and lead
105M lbs.).
- Average annual production of lead concentrates up by 16,000
tonnes to 71,600 tonnes per year, an increase of about 30%, while
the grade of lead in the lead concentrates is also improved.
- Average annual total contained lead in both zinc and lead
concentrates is 105 million pounds per year, an increase of 23
million pounds, while the average annual production of silver is
also increased 25% to 2.1 million ounces per year.
- Average annual total contained zinc in both zinc and lead
concentrates increased by approximately 7% from 82 million pounds
to 88 million pounds per year.
The 2017 FS indicates many financial improvements from the 2016
PFS:
- Cumulative net revenue over the life of the mine increased by
$325 million to $3 billion and cumulative undiscounted cash flow,
pre-tax, up $190 million to
$900 million, an increase of over
30%, at base case metal prices of zinc=US$1.10/lb., lead=US$1.00/lb., and silver=US$19.00/oz.
- The pre-tax NPV, discounted at 8%, increased 21% to
$344 million, with an IRR of 23.8%,
while the NPV post-tax and royalties, discounted at 8%, increased
22% to $188 million, with an IRR of
18.4%.
- Capital cost increased by $35
million (14%) to $279 million,
including contingency, primarily because of the expansion in mine
and mill throughput and accelerated mine development.
- The post-tax payback period was reduced by five months to 4.6
years from mill start-up.
Management Commentary
"We are very pleased with the results of the 2017 Feasibility
Study which is a major milestone for the development of the Prairie
Creek Mine and confirms strong project economics and significant
potential value for our shareholders", stated John F. Kearney, Chairman and CEO of Canadian
Zinc.
"The positive results, showing many improvements from the
2016 PFS, demonstrate the potential of this world-class asset and
confirm that the development of the Prairie Creek Mine will provide
material benefits to local communities and to the economy of the
Northwest Territories for many
years," stated Mr. Kearney.
"As part of the 2017 Feasibility Study, a number of
optimization programs recommended in earlier Preliminary
Feasibility Studies were completed which had a beneficial impact on
the Prairie Creek Project, and demonstrated that the capacity of
the mine can be increased from 1,350 to 1,600 tonnes per day and
the mill from 900 to 1,200 tonnes per day, producing more metal at
a faster rate than projected in the 2016 PFS," stated
Alan Taylor, COO of Canadian
Zinc.
"While the increased throughput shortens the previously
projected initial mine life by almost two years, this study is
based on mining the currently defined Proven and Probable Reserves
only, and we are confident that conversion of the additional
Inferred Resource will substantially increase the initial 15 year
mine life," stated Mr. Taylor.
"The optimization work and focus on technical improvements
resulted in higher metal production than originally forecast and
contributed to further de-risking the project. The optimized
mine plan, combined with an increase in mill throughput, a simple
and effective flow sheet, and new reagent scheme will significantly
increase metal production and lower operating costs," added
Mr. Taylor.
"Canadian Zinc has to date invested almost $85 million in the exploration, development,
environmental assessment and permitting of the Prairie Creek Mine
and has significantly improved and de-risked the project. With the
recent recommendation from the Mackenzie Valley Environmental
Impact Review Board for approval of the all season road, and with
this robust feasibility study in hand, Canadian Zinc will now
concentrate efforts on financing for the development and
construction of the Prairie Creek Mine," stated Mr.
Kearney.
"We are currently engaged in advanced discussions with
several finance providers and ongoing engineering and early
project work activities are already under way to facilitate a rapid
start to construction. The development and construction period is
estimated at 2.5 years and, subject to completion of financing, the
start-up of mine production is projected for mid-2020," added
Mr. Kearney.
Highlights of the
2017 FS
|
|
|
Mine and Mill
Parameters
|
C o n c e n t r a
t e s
|
Type
|
10 yr W.
Avg. Tonnes
|
Average
Grade
|
Payability
|
Total ore mined
(million tonnes)
|
8.07
|
Zinc
concentrate
|
64,800
|
Zinc: 59%
|
Zinc: 85%
|
Mining rate
(tonnes/day)
|
1,600
|
Silver: 136
g/t3
|
Silver:
70%
|
Milling rate
(tonnes/day) post-DMS
|
1,200
|
Lead
concentrate
|
71,600
|
Lead: 62%
|
Lead: 95%
|
LOM
(years)
|
15
|
Silver: 800
g/t
|
Silver:
95%
|
Mine and Mill
Statistics
|
Metal
|
10 yr Ore Grade
(Weighted Average)
|
Ore Grade
LOM
(Weighted
Avg.)
|
Mill
Recoveries
LOM (Weighted
Average)
|
10 yr Average
Annual Contained
Metal
|
Zinc
|
8.50%
|
8.70%
|
83%
|
95M
lbs4
|
Lead
|
9.30%
|
8.10%
|
88%
|
105M
lbs4
|
Silver
|
139 g/t
|
124 g/t
|
87%
|
2.1M
oz4
|
Project
Assumptions Base Case
|
Zinc price
|
US$1.10/lb
|
Treatment
Charges
|
Exchange
Rate
|
$1.25CDN:$1.00US
|
Lead price
|
US$1.00/lb
|
US$172/tonne Zn
Con
|
Discount
Rate
|
8%
|
Silver
price
|
US$19.00/oz
|
US$130/tonne Pb
Con
|
|
|
Operating and
Capital Costs
|
Operating
Costs2
|
LOM $/t ore
mined
|
Capital
Costs
|
$M
|
Mining
|
58
|
Pre-production
capital
|
253
|
Processing
|
47
|
Contingency
|
26
|
Site
Services
|
19
|
Total Pre-production
Capital
|
279
|
G&A
|
30
|
Sustaining
Capital
|
117
|
Total On-site
Costs
|
154
|
Working
Capital
|
36
|
Transportation1
|
69
|
|
Total Operating
Costs2
|
223
|
1 Includes
truck, rail, handling and ocean shipping
|
3 Subject
to a deduction of 3 oz. per tonne of concentrate
|
2 Does not
include treatment, refining charges,
royalty
|
4 Total
metal contained in both lead and zinc concentrates
|
Economic Results
(LOM)
|
Pre-tax
|
Post-tax
|
Cash Flow
Undiscounted ($M)
|
899
|
562
|
NPV @ 8%
($M)
|
344
|
188
|
NPV @ 5%
($M)
|
497
|
291
|
IRR (%)
|
23.8
|
18.4
|
Payback period (years
from first revenue)
|
4.4
|
4.6
|
Average annual EBITDA
($M)
|
81
|
|
|
|
|
|
|
|
|
|
Financial Analysis Summary
CZN has retained HCF as its adviser in securing debt financing
for the construction of the Prairie Creek Mine. HCF has developed a
comprehensive cash flow financial model that is used in the 2017 FS
to generate economic and financial data for the proposed mining
project.
The 2017 FS indicates a base case Pre-Tax Net Present Value
("NPV") of $344 million using an 8%
discount rate, with an Internal Rate of Return ("IRR") of 23.8% and
a post-tax NPV of $188 million with a
post-tax IRR of 18.4%. The Base Case metal price assumptions used
in the model are: Zn US$1.10/lb., Pb
US$1.00/lb., Ag US$19.00/oz., with a foreign exchange rate of
CA$1.25=US$1.00.
The pre-tax and post-tax net present values, at 5% and 8%
discount rates, and internal rates of return, are illustrated in
the table below, at a Canadian/US dollar exchange rate of
CA$1.25=US$1.00, except where noted.
The table also demonstrates the sensitivities of the Prairie Creek
Project to zinc, lead and silver prices and to the Canadian/US
dollar exchange rate.
Economic
Sensitivities of the Prairie Creek Project
|
Metal
Prices
|
Pre-Tax
|
Post-Tax
1
|
Zinc/Lead
US$/lb
|
Silver
US$/oz
|
Undiscounted
$M
|
NPV
(5%)
$M
|
NPV
(8%)
$M
|
IRR
%
|
Undiscounted
$M
|
NPV
(5%)
$M
|
NPV
(8%)
$M
|
IRR
%
|
0.80
|
17.00
|
139
|
10
|
(39)
|
5.5
|
75
|
(29)
|
(68)
|
3.3
|
0.90
|
18.00
|
452
|
211
|
120
|
14.4
|
282
|
109
|
43
|
10.6
|
1.10/1.00
|
19.00
|
899
|
497
|
344
|
23.8
|
562
|
291
|
188
|
18.4
|
1.20/1.00
|
19.00
|
1,033
|
582
|
410
|
26.2
|
644
|
344
|
230
|
20.4
|
1.10
|
20.00
|
1,077
|
614
|
437
|
27.3
|
671
|
364
|
247
|
21.3
|
1.20
|
21.00
|
1,390
|
815
|
596
|
32.7
|
863
|
489
|
346
|
25.7
|
1.30
|
22.00
|
1,703
|
1,017
|
755
|
37.7
|
1,053
|
612
|
444
|
29.8
|
1.10/1.00
2
|
19.00
2
|
1,208
|
696
|
501
|
29.5
|
752
|
416
|
287
|
23.1
|
1.20/1.00
2
|
19.00
2
|
1,355
|
789
|
574
|
31.9
|
842
|
473
|
332
|
25.0
|
1.
|
Post-tax results
include all taxes, royalties, aboriginal participation costs and
the Sandstorm 1.2% NSR.
|
2.
|
Foreign exchange
assumed to be CA$1.375:US$1.00 on these lines.
|
Using the base case metal prices and exchange rate of
CA$1.35=US$1.00 would increase the
pre-tax NPV 8% to $500 million and
the IRR to 29.5%. Using a zinc price of US$1.20 per lb., with all other base case inputs
and a foreign exchange rate of CA$1.25=US$1.00 would increase the pre-tax NPV 8% to
$410 million and the IRR to 26.2%.
Using a zinc price of US$1.20 per
lb., with all other base case inputs and a foreign exchange rate of
CA$1.375=US$1.00 would increase the
pre-tax NPV 8% to $574 million and
the IRR to 31.9%.
During the first 10 full years of concentrate production the
2017 FS forecasts average annual production of approximately 65,000
tonnes of zinc concentrate and 72,000 tonnes of lead concentrate,
containing an average of approximately 95 million pounds of zinc,
105 million pounds of lead and 2.1 million ounces of silver.
The 2017 FS indicates average annual earnings before interest,
taxes, depreciation and amortization ("EBITDA") during the first 10
full years of $111 million per year
and cumulative EBITDA of $1,294
million over the projected LOM of 15 years, using base case
metal price forecasts.
The Economic Model used in the 2017 FS has been prepared
assuming average blended indicative treatment charges of
US$172 per tonne for zinc sulphide
concentrates and US$130 per tonne for
lead concentrates, both substantially higher than the current spot
treatment charges, with industry standard penalties, including
mercury penalties of US$1.75 for each
100 ppm above 100 ppm per tonne of concentrate.
Key Variances
Between 2017 FS and 2016 PFS
|
|
2017 FS
Base
|
2016
PFS
|
Variance
|
Economic
Valuations
|
|
|
|
Pre-Tax NPV (CAD
$M)
|
344.5
|
284.3
|
60.2
|
Pre-Tax IRR
(%)
|
23.8
|
22.5
|
1.3
|
Pre-Tax Payback
Period (years)
|
4.4
|
4.0
|
0.4
|
Post-Tax NPV (CAD
$M)
|
188.3
|
154.8
|
33.5
|
Post-Tax IRR
(%)
|
18.4
|
17.9
|
0.5
|
Post-Tax Payback
Period (years)
|
4.6
|
5.0
|
(0.4)
|
|
|
|
|
Key Assumptions
Base Case
|
|
|
|
Discount rate
(%)
|
8.0
|
8.0
|
-
|
Lead
(US$/lb)
|
1.00
|
1.00
|
-
|
Silver
(US$/oz)
|
19.00
|
19.00
|
-
|
Zinc
(US$/lb)
|
1.10
|
1.00
|
0.10
|
Lead treatment charge
- $/tonne
|
130.00
|
195.00
|
(65.00)
|
Zinc treatment charge
- $/tonne
|
172.00
|
212.00
|
(40.00)
|
Exchange rate
(US$/CAD$)
|
1.25
|
1.25
|
-
|
|
|
|
|
Life of Mine
Inputs and Outputs (CAD $M)
|
|
|
|
Capital
expenditures
|
278.9
|
243.6
|
35.3
|
Sustaining capital
costs
|
117.0
|
70.4
|
46.6
|
Gross
revenue
|
3,977.9
|
3,733.3
|
244.6
|
Smelter
costs
|
886.9
|
968.2
|
(81.3)
|
Net
revenue
|
3,091.0
|
2,765.1
|
325.9
|
Operating costs
including transportation
|
1,796.6
|
1,740.7
|
55.9
|
Pre-tax cash
flow
|
898.5
|
710.4
|
188.1
|
Taxes and
royalties
|
336.1
|
279.4
|
56.7
|
Net project cash flow
after-tax and royalties
|
562.4
|
431.0
|
131.4
|
Working
capital
|
36.1
|
32.8
|
3.3
|
|
|
|
|
Life of Mine
Production Statistics
|
|
|
|
Ore Mined -
kt
|
8,071.5
|
7,603.6
|
467.9
|
Lead con -
dmkt
|
924.2
|
865.9
|
58.3
|
Zinc con -
dmkt
|
975.4
|
957.9
|
17.5
|
|
|
|
|
Life of Mine
Metrics (CAD $/tonne ore/ average)
|
|
|
|
Gross
revenue
|
492.83
|
490.99
|
1.84
|
|
Mining
costs
|
58.23
|
78.58
|
(20.35)
|
|
Milling and
processing
|
46.76
|
40.75
|
6.01
|
|
General and
administrative
|
30.32
|
22.58
|
7.74
|
|
Site
services
|
18.55
|
21.96
|
(3.41)
|
Total operating
costs
|
153.86
|
163.87
|
(10.01)
|
Transportation
costs
|
68.73
|
65.05
|
3.68
|
Smelter
costs
|
109.88
|
127.34
|
(17.46)
|
Operating
profit
|
160.36
|
134.73
|
25.63
|
Taxes and
royalties
|
41.64
|
36.75
|
4.89
|
Income before
depreciation and amortization
|
118.72
|
97.98
|
20.74
|
Pre-production Capital Costs, including provision for a new all
season road, are estimated at $253
million, with a contingency of $26
million for a total of $279
million, and with post-tax payback of 4.6 years from
commencement of concentrate production.
The $35 million increase in
Pre-production capital costs compared to the 2016 PFS is largely
attributable to a longer construction period, earlier mine
dewatering, earlier and larger ramp and mine development, new paste
stockpile building, additional mill equipment, extended mill
building for lead oxide circuit, with EPCM and other timing
differences.
The $46 million increase in
sustaining capital costs is largely attributable to increased mine
development, purchase of contractor handover mining equipment,
maintenance of all season road and timing differences.
Operational
Differences Between 2017 FS and 2016 PFS
|
Discipline
|
Detail
|
2017
FS
|
2016
PFS
|
MINING
|
Mineral Reserve
(t)
|
8,071,463
|
7,603,590
|
Underground
development (m)
|
52,012
|
49,362
|
Mine
dewatering
|
Dewatering starts
prior to
mining
|
Dewatering as
mining
progresses
|
Access to sulphide
ore
|
Higher sulphide in
early feed
|
Higher oxide in early
feed
|
Annual Rate
(t/yr)
|
584,000
|
470,000
|
LOM
(years)
|
14.5
|
16.0
|
PROCESSING
|
Milling rate
(post-DMS) tpd
|
1,200
|
960
|
Nominal Rate DMS
Plant (t/h)
|
67
|
58
|
Process
grinding
|
80% passing 156
µm
|
80% passing 80
µm
|
Pb
flotation
|
Grind/regrind
mill
|
Grind mill
|
Total LOM Concentrate
Production (dmt)
|
1,899,544
|
1,823,787
|
SUPPORT
SERVICES
|
Energy
supply
|
LNG/diesel
|
Diesel
|
Power Running Load
(MW)
|
6.5
|
5.3
|
Power
Scheme
|
Turnkey
|
Build/operate
|
Power cost
($/kWh)
|
0.25
|
0.21
|
Construction Schedule
(years)
|
2.5
|
3.0
|
TRANSPORT
|
Transport
Logistics
|
20t containers site
to port
|
Bulk truck, transfer
to rail
|
Load-out
facilities
|
Containers and small
facility
|
Bagging and large
warehouse
|
Permitting
|
EA approved from
MVRB
|
EA in
process
|
Road Construction
schedule (years)
|
2.5
|
3.0
|
Dual LNG/Diesel Power Generation
Development of the all season road, along with local LNG
production facilities, has enabled the use of LNG as an alternative
energy source. This in turn has reduced the reliance on diesel fuel
thereby reducing environmental impacts.
CZN has a memorandum of understanding with the Northwest
Territories Power Corporation to examine the supply of electrical
power for the development and operation of the Prairie Creek
Mine.
The 2017 Feasibility Study incorporates a non-binding indicative
proposal from Northwest Territories Power Corporation to supply
turnkey type power generation utilizing four new 2.77 MW dual fuel
LNG/diesel powered generator units that will provide power and heat
for the site.
The power generator units will be located within the existing
Mill powerhouse. Maximum electrical running load for the site is
estimated at 6.5 MW. These generators will be outfitted with heat
recovery systems to maximize energy efficiency. The waste heat from
the generators will be used to heat the surface facilities. Further
heat for underground and accommodations will be generated by LNG
based furnaces.
Mineral Reserve Estimate
The 2017 FS has a new Mineral Reserve estimate of 8.1 million
tonnes of Proven and Probable Reserves at a combined grade of
16.75% Pb and Zn plus 124 g/t Ag, which represents a 6% increase in
Reserve tonnage compared to the 2016 PFS.
The increase is due to marginally lower Zinc equivalent cutoff
grades, reflecting the final 2016 PFS operating cost estimate, a
small increase in projected Zn prices and further optimization of
the stoping design. The 2017 Mineral Reserves have slightly lower
average metal grades than those estimated in the 2016 PFS, but
increased overall metal content. The estimation of Mineral Reserves
by AMC is shown below.
August 2017
Mineral Reserves, Prairie Creek Mine
|
Mineral
Zone
|
Classification
|
Tonnes
(t)
|
Silver
(g/t)
|
Lead
(%)
|
Zinc
(%)
|
ZnEq
(%)
|
Main Quartz
Vein
(MQV)
|
Proven
|
1,524,171
|
161.43
|
8.90
|
10.22
|
26.84
|
Probable
|
4,190,187
|
144.76
|
9.96
|
8.20
|
25.70
|
Total
|
5,714,358
|
149.21
|
9.67
|
8.74
|
26.00
|
Stockwork
(STK)
|
Proven
|
188,173
|
108.19
|
4.84
|
11.56
|
21.22
|
Probable
|
1,188,366
|
63.81
|
3.54
|
6.86
|
13.46
|
Total
|
1,376,539
|
69.88
|
3.72
|
7.50
|
14.52
|
Stratabound
(SMS)
|
Proven
|
-
|
-
|
-
|
-
|
-
|
Probable
|
980,566
|
54.90
|
5.06
|
9.64
|
17.97
|
Total
|
980,566
|
54.90
|
5.06
|
9.64
|
17.97
|
TOTAL
|
Proven
|
1,712,344
|
155.58
|
8.45
|
10.36
|
26.22
|
Probable
|
6,359,119
|
115.78
|
8.00
|
8.17
|
22.22
|
Total
|
8,071,463
|
124.22
|
8.10
|
8.64
|
23.07
|
The Mineral Reserves
are as of August 02, 2017, and based on a design cut-off grade of
11% ZnEq for longhole open stoping ("LHOS"), 11% ZnEq for
mechanized drift-and-fill ("DAF"), an incremental stoping cut-off
grade of 10% ZnEq, and 6% ZnEq cut-off grade for development ore.
Cut-off grades are based on a zinc metal price of $1.00/lb,
recovery of 75% and payable of 85%; a lead metal price of $1.00/lb,
recovery of 88% and payable of 95%; and a silver metal price of
$18/oz, recovery of 92% and payable of 81%. Exchange rate used is
C$1.25= US$1.00. Average planned dilution, unplanned dilution and
mining recovery factors of 13%, 11% and 95%, respectively, for
LHOS; and 18%, 6% and 98%, respectively, for DAF are
assumed.
|
The August 2017 Prairie Creek
Mineral Reserve estimate was prepared by H.
A. Smith, P. Eng., Qualified Person ("QP"), as defined by
National Instrument 43-101 ("NI 43-101") of AMC Mining Consultants
(Canada) Ltd.
These Mineral Reserves are based upon a Measured and Indicated
Resource of 8.7 million tonnes grading 9.5% Zn; 8.9% Pb and 136 g/t
Ag, and represent an initial mine life of 15 years.
Prairie Creek also hosts an additional Inferred Mineral Resource
of 7.0 million tonnes grading 11.3% Zn, 7.7% Pb, and 166 g/t Ag,
which has the potential, through further exploration and
development, to be upgraded to Measured or Indicated Mineral
Resources and increase the initial 15 year mine life.
Capital Cost Estimates
The general breakdown of the Pre-Production Capital Cost
estimate for the Prairie Creek Project is indicated in the
following table:
Capital Cost
Estimate – Prairie Creek Mine
|
Description (Costs
in $M)
|
Project
Year
|
Total
Cost
|
1
|
2
|
3
|
Mine
development
|
2.6
|
13.6
|
21.5
|
37.7
|
Site
preparation
|
4.3
|
12.5
|
2.6
|
19.4
|
Mill process
plant
|
9.0
|
18.9
|
3.2
|
31.1
|
Paste tailings plant
and process
|
2.9
|
16.6
|
3.4
|
22.9
|
Indirects including
EPCM
|
10.9
|
7.8
|
5.1
|
23.8
|
Other site
infrastructure
|
6.7
|
7.7
|
1.5
|
15.9
|
All season
road
|
13.0
|
41.6
|
13.9
|
68.5
|
Owner's
costs
|
6.8
|
15.3
|
11.5
|
33.6
|
Total (excluding
contingency)
|
56.2
|
134.0
|
62.7
|
252.9
|
Contingency
|
5.5
|
12.3
|
8.2
|
26.0
|
Total
Pre-Production Capital
|
61.7
|
146.3
|
70.9
|
278.9
|
Pre-Production Capital Cost refers to capital costs incurred
until the first processing of mined ore, and has been estimated at
a total of $252.9 million, excluding
contingency, and $278.9 million
including a contingency of $26.0
million.
Based on the proposals received, several capital items will be
supplied on a lease-to-purchase basis, including the accommodation
camp, paste plant, flotation cells and thickeners. The lease costs
of such items incurred during the pre-production period are
included in Pre-production Capital costs, and lease costs incurred
after production start-up are included in Sustaining Capital
costs.
Contingency for the process plant and site infrastructure
portion was estimated using a Monte Carlo simulation model with an
overall contingency of 13.2% based on 80% confidence level. Mine
development costs are largely based on contractor quotes for the
detailed scope of work, but with an overall 13.0% contingency
allowance. The all season road estimation used an overall
contingency of 8.0% and owner's costs were assigned a contingency
factor of 10.0%. The overall project contingency is 10.3%.
Sustaining capital over the life of the mine has been estimated
at $117 million and relates largely
to ongoing mine development as the mine is expanded to deeper
levels, ongoing maintenance of the all season road and includes
leasing costs of capital items in the amount of $11 million.
Working capital required to fund the first six months of mill
production has been estimated at $36
million and includes the full operating cost of mining and
processing operations.
Operating Cost Estimates
The breakdown of the Operating Cost Estimate for the Prairie
Creek Mine, on a Canadian dollar per tonne mined basis, is shown in
the following table.
Operating Cost
Estimate – Prairie Creek Mine
|
Total Operating
Cost
|
($/t
mined)
|
Mining
|
58.23
|
Milling/Processing
|
46.76
|
General and
Administrative
|
30.32
|
Site
Services
|
18.55
|
Sub-total
|
153.86
|
Transportation1
|
68.73
|
Total
|
222.59
|
|
1. Includes
truck/rail/handling/shipping
|
Mining operating costs for the first two years of operation are
largely based on contractor quotes. Operating cost estimates for
mining beyond the contractor period have been developed from first
principles and using direct supplier quotes.
The mining contractor quotes for the first two years of
operation, based on a detailed scope of work and schedule, provide
a high level of confidence in the estimated mining costs. The
indicative proposal from the Northwest Territories Power
Corporation to supply turnkey type power generation provides
further support in the key area of power costs.
Qualified Persons and Technical Report
This news release has been reviewed and approved by Alan Taylor, P.Geo., COO & VP Exploration,
who participated in the preparation of the Feasibility Study and is
a Non-Independent QP under National Instrument 43-101 ("NI 43-101")
for Canadian Zinc.
The following Qualified Persons, who also participated in the
preparation of the 2017 Feasibility Study have reviewed and
approved the content of this news release as it pertains to their
areas of expertise and project responsibility.
|
H. A. Smith,
P.Eng.
|
AMC Mining
Consultants (Canada) Ltd.
|
|
L. P. Staples,
P.Eng
|
Ausenco Engineering
Canada Inc.
|
|
Scott Elfen,
P.Eng.
|
Ausenco Engineering
Canada Inc.
|
|
G. Z. Mosher,
P.Geo
|
Global Mineral
Resource Services Ltd.
|
|
F. Wright,
P.Eng.
|
F. Wright Consulting
Inc.
|
|
Don Williams,
P.Eng.
|
Allnorth Consultants
Limited
|
A Technical Report in support of the 2017 Feasibility Study
prepared in accordance with National Instrument 43-101 Standards
for Disclosure for Mineral Projects ("NI 43-101") will be filed
on SEDAR within 45 days of this news release.
Cautionary Statements
The summary results of the 2017 Feasibility Study reported in
this news release are preliminary. For the full details and further
information with respect to the key assumptions, parameters, and
risks associated with the results of the feasibility study the
mineral reserve and resource estimates included therein, and other
technical information, please refer to the complete Technical
Report to be made available on SEDAR.
The EBITDA projections summarized in this news release are
not measures recognized under Canadian generally accepted
accounting principles ("GAAP") and do not have any standardized
meanings prescribed by GAAP.
Mineral resources that are not mineral reserves do not have
demonstrated economic viability. Inferred mineral resources are
considered too speculative geologically to have economic
considerations applied to them that would enable them to be
categorized as mineral reserves. There is no certainty that mineral
resources will be converted into mineral reserves.
|
Conference
Call/Webcast
|
|
Canadian Zinc will
host a conference call/webcast for analysts and investors on
Monday, October 2, 2017, beginning at 11:00 AM Eastern Time, to
discuss the results of the 2017 Feasibility Study for the Prairie
Creek Mine.
|
|
Shareholders and
other interested parties can access the conference call by dialing
the following numbers to access the call and providing entering the
conference ID 84282162:
|
|
Local: Toronto +1 416
764 8688
|
Local: Vancouver +1
778 383 7413
|
Toll Free: +1 888 390
0546
|
|
Interested parties
can view the presentation at the webcast URL:
|
http://event.on24.com/r.htm?e=1518152&s=1&k=958E52F9C6CABBDC13500646E8B2C0D5
|
Forward-Looking Information
This press release contains certain forward-looking
information, including, among other things, the expected completion
of acquisitions and the advancement of mineral properties. This
forward looking information includes, or may be based upon,
estimates, forecasts, and statements as to management's
expectations with respect to, among other things, the completion of
transactions, the issue of permits, the size and quality of mineral
resources and reserves, future trends for the company, progress in
development of mineral properties, future production and sales
volumes, capital costs, mine production costs, demand and market
outlook for metals, future metal prices and treatment and refining
charges, the outcome of legal proceedings, the timing of
exploration, development and mining activities, acquisition of
shares in other companies and the financial results of the company.
There can be no assurances that such statements will prove to be
accurate and actual results and future events could differ
materially from those anticipated in such statements.
Cautionary Note to United States Investors
The United States Securities and Exchange Commission ("SEC")
permits U.S. mining companies, in their filings with the SEC, to
disclose only those mineral deposits that a company can
economically and legally extract or produce. We use certain terms
in this press release, such as "measured," "indicated," and
"inferred" "resources," which the SEC guidelines prohibit U.S.
registered companies from including in their filings with the
SEC.
This Press Release includes resource and reserve information
that has been prepared in accordance with the requirements of the
securities laws in effect in Canada, which differ from the requirements of
United States securities laws. The
terms "mineral reserve", "proven mineral reserve" and "probable
mineral reserve" are Canadian mining terms as defined in accordance
with Canadian National Instrument 43-101 – Standards of Disclosure
for Mineral Projects ("NI 43-101") and the Canadian Institute of
Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition
Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended. These definitions differ from the
definitions in SEC Industry Guide 7 under the United States
Securities Act of 1933, as amended (the "Securities Act"). Under
SEC Industry Guide 7 standards, a "final" or "bankable" feasibility
study is required to report reserves, the three-year historical
average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report
must be filed with the appropriate governmental authority.
Statements about the Company's planned/proposed Prairie Creek
Mine operations, which includes future mine grades and recoveries;
the Company's plans for further exploration at the Prairie Creek
Mine and other exploration properties; future cost estimates
pertaining to further development of the Prairie Creek Mine and
items such as long-term environmental reclamation obligations;
financings and the expected use of proceeds thereof; the completion
of financings and other transactions; the outlook for future prices
of zinc, lead and silver; the impact to the Company of future
accounting standards and discussion of risks and uncertainties
around the Company's business are not guarantees of future
performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, the Company's
actual results could differ materially and adversely from those
expressed in any forward-looking statements as a result of various
factors. You should not place undue reliance on these
forward-looking statements.
The Company cautions that the list of factors set forth above
is not exhaustive. Some of the risks, uncertainties and other
factors which negatively affect the reliability of forward-looking
information are discussed in the Company's public filings with the
Canadian securities regulatory authorities, including its most
recent Annual Report, quarterly reports, material change reports
and press releases, and with the United States Securities and
Exchange Commission (the "SEC"). In particular, your attention is
directed to the risks detailed therein concerning some of the
important risk factors that may affect its business, results of
operations and financial conditions. You should carefully consider
those risks, in addition to the other information in the Company's
filings and the various public disclosures before making any
business or investment decisions involving the Company and its
securities.
The Company undertakes no obligation to revise or update any
forward-looking statement, or any other information contained or
referenced in this Press Release to reflect future events and
circumstances for any reason, except as required by law. In
addition, any forecasts or guidance provided by the Company are
based on the beliefs, estimates and opinions of the Company's
management as at the date of this Press Release and, accordingly,
they involve a number of risks and uncertainties. Consequently,
there can be no assurances that such statements will prove to be
accurate and actual results and future events could differ
materially from those anticipated in such statements. Except as
required by law, the Company undertakes no obligation to update
such projections if management's beliefs, estimates or opinions, or
other factors should change.
SOURCE Canadian Zinc Corporation