- Positive 2017 Feasibility Study shows increased
production
- All season road environmental assessment
recommendation
- Exploration drilling in Newfoundland expands high-grade
mineralization
CZN-TSX
CZICF-OTCQB
VANCOUVER, Nov. 14, 2017 /CNW/ - Canadian Zinc
Corporation (TSX: CZN; OTCQB: CZICF) ("the Company" or
"Canadian Zinc") reports its interim financial results and
update on development activities for the three and nine month
periods ended September 30, 2017.
This news release should be read in conjunction with the
Company's unaudited interim consolidated financial statements for
the three and six month periods ended September 30, 2017 and the related management's
discussion and analysis (MD&A) which are available on the
Company's website at www.canadianzinc.com, under the
"Financials" section, or on SEDAR (www.sedar.com).
Summary Highlights Third Quarter 2017
Canadian Zinc completed a Feasibility Study ("2017 FS"), which
supersedes the 2016 Pre-Feasibility Study ("2016 PFS"). A new
Technical Report entitled "Prairie Creek Property Feasibility Study
NI 43-101 Technical Report" effective September 28, 2017 was filed on SEDAR.
The results of the 2017 Feasibility Study indicate notable
improvements compared to the Preliminary Feasibility Study
completed in 2016 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 Mackenzie Valley Environmental Impact Review Board issued
its report on environmental assessment September 12, 2017 and recommended approval of
the Prairie Creek All Season Road, subject to implementation of
various measures.
In central Newfoundland,
Canadian Zinc continued the 2017 drill program targeting up-dip
mineralization at the Lemarchant deposit as well as other nearby
targets reporting positive results. A 5,000 metre drill program was
initiated subsequent to the end of the quarter, staged from the
Company's Pat's Pond camp location, in the Boomerang-Domino deposit
area.
The 2017 drill programs at Lemarchant intersected significant
extensions of base metal massive sulphide mineralization, both
up-dip and to the immediate south of the currently defined
Lemarchant deposit. The exploration results from the 2017 drilling
programs will be compiled into an updated resource estimate on the
Lemarchant deposit, which is expected to be completed after the end
of the present drilling program, in the first quarter of 2018.
Prairie Creek Project
The Feasibility Study ("2017 FS") was completed in September and
supersedes the 2016 Pre-Feasibility Study ("2016 PFS"). A new
Technical Report entitled "Prairie Creek Property Feasibility Study
NI 43-101 Technical Report was filed on SEDAR on October 31, 2017.
Feasibility Study Completed
The 2017 Feasibility Study concludes that the Prairie Creek Mine
is shown to be a viable project, based on the mineral reserves,
mine plan, production and economic parameters determined within the
2017 FS.
AMC recommends that Canadian Zinc advance the Project to the
next stage, which will include; detailed design and planning of the
required services, construction of the all season road,
refurbishment of the mill, ordering the long-lead equipment for
power generation, portal refurbishment, access widening, and
development of ramp declines in preparation for ore production and
processing.
Mill start-up is projected for August
2020, with a pre-production period during which detailed
engineering, mill and camp refurbishment, underground development
from existing workings, and construction of key surface
infrastructure items, including a paste plant and all season road,
will take place.
Feasibility Study Highlights
Optimization work completed as part of the 2017 FS has led to
improvements compared with the plan contained in the 2016 PFS 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 Life of Mine ("LOM")
production 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 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.
Financial Analysis Summary
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.
|
The 2017 FS indicates average annual 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.
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.
Using the base case metal prices and exchange rate of
CA$1.375=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%.
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.
Pre-production Capital Costs, including provision for
construction of 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.
Project Execution
Target start-up for commencement of commercial
production/milling operations at Prairie Creek mine is scheduled
for August 1, 2020 with commissioning
of the mill taking place over three months prior to this date.
The 2017 FS contemplates the first year of the project schedule
comprising detailed engineering and initial site/portal
preparation, including the completion of permitting and design of
the all season road with the second year including procurement of
long-lead-time items and further preparation of the site, followed
by continuous site construction and mine development to
production.
Mobilization will initially be by winter road and/or airlift,
concurrent with construction of the all season road.
All Season Road Approved by Mackenzie Valley Review
Board
On September 12, 2017, the
Mackenzie Valley Environmental Impact Review Board ("MVRB" or the
"Review Board") recommended approval of the proposed all season
road for the Prairie Creek Mine. The Review Board issued its
Report of Environmental Assessment and Reasons for Decision
for Canadian Zinc's Prairie Creek all season road project for the
Prairie Creek Mine (the "EA Report") and submitted the Report to
the Federal Minister of Crown-Indigenous Relations and Northern
Affairs.
The Review Board recommends the approval of the Prairie Creek
all season road be made subject to implementation of the measures
described in the Report, which it considers are necessary to
prevent significant adverse impacts on the environment and local
people.
In its Report, the Review Board has prescribed measures, many of
which build on Canadian Zinc's commitments made during the EA
Report, intended to mitigate the significant adverse impacts on the
environment, improve monitoring and managing the potential impacts
and which will also address any public concern related to these
impacts. With these and other measures to reduce or avoid
identified impacts, the Review Board concluded that the Project
will be improved, and meaningful actions will mitigate the
significant impacts that would otherwise occur.
Road Permitting Process Going Forward
The EA Report was forwarded to the Federal Minister of
Crown-Indigenous Relations and Northern Affairs, on September 12, 2017 with a recommendation that the
development be approved, subject to the measures described in the
Report.
The Mackenzie Valley Resource Management Act provides
that after considering the report of an environmental assessment,
the federal Minister and the responsible ministers to whom the
report was distributed may agree to adopt the recommendation or
refer it back to the Review Board for further consideration or,
after consulting the Review Board, adopt the recommendation with
modifications, or reject it and order an environmental impact
review of the proposal. Under the Act, the Minister is
required to distribute a decision within five months of receipt of
the report.
The regulatory phase, conducted by the Mackenzie Valley Land and
Water Board with input from territorial and federal agencies, is
the next permitting stage in which the road permit is issued by the
Water Board and by Parks Canada. This permit is expected to include
the recommended measures included in the EA Report.
The 2017 FS contemplates that initial development of the mine
and construction of site infrastructure over the two-year project
schedule will be serviced by a winter road with the all season road
utilized for the outbound transportation of concentrates in late
2020.
Newfoundland Properties
Canadian Zinc owns an extensive mineral land package in central
Newfoundland that includes three
large VMS projects, each with defined mineral deposits, which are
being explored by Canadian Zinc.
The Company's exploration strategy in Newfoundland is to continue to build on its
existing polymetallic resource base with the aim of developing
either a stand-alone mine, similar to the past-producing mines at
Buchans and Duck Pond, or a number
of smaller deposits that could be developed simultaneously and
processed in a central milling facility.
Central Newfoundland Exploration Work
During the 2017 summer program 9,082 metres of diamond drilling
were completed in 38 drillholes. A total of 12,152 metres of
drilling in 48 drillholes and 3 drillhole extensions has now been
completed in 2017.
The 2017 drill programs at Lemarchant intersected significant
extensions of base metal massive sulphide mineralization, both
up-dip and to the immediate south of the currently defined
Lemarchant deposit.
The Lemarchant Main Zone massive sulphide mineralization has
been shown to extend an additional 80 metres up-dip and over a
200-metre strike length (from sections 100+75N to 103+25N). The
vertical depths of the mineralized drill intercepts range from 120
to 170 metres.
For full results refer to Canadian Zinc News Release
April 18, 2017, August 14, 2017, September
25, 2017 and November 10,
2017, with drill hole location maps and key sections
provided on the Canadian Zinc website (www.canadianzinc.com).
Mercator Geological Services Limited, of Dartmouth, Nova Scotia, has been engaged to
complete a geological structural study of the Lemarchant deposit.
The structural study will examine specific drill core and bedrock
features that will be applied to the geological model with the
objective of identifying potential offset areas of known
mineralization and potential new adjacent areas of mineralization.
The structural model will also assist in the preparation of an
updated NI 43-101 Geological Resource Estimate of the Lemarchant
deposit that will be completed after the end of this drilling
program.
Drilling at the Boomerang-Domino massive sulphide deposit on the
Tulks South property was initiated in early October. Up to 5,000
metres of drilling is being planned for the area, specifically
targeting the Zinc Zone located immediately along strike of the
Boomerang Deposit; drilling an untested area up-dip of the
Boomerang deposit; and further testing of the high-grade Hurricane
prospect.
Financial Results
For the three and nine month periods ended September 30, 2017, Canadian Zinc reported a net
loss and comprehensive loss of $2,456,000 and $8,256,000 respectively compared to a net loss
and comprehensive loss of $1,708,000
and $3,351,000 for the same periods
ended September 30, 2016.
Included in the loss for the three and nine month periods ended
September 30, 2017, were exploration
and evaluation expenditures of $2,023,000 and $6,229,000 respectively compared to $838,000 and $1,642,000 respectively for the comparable
periods and share-based compensation charges of $104,000 and $761,000 respectively versus $488,000 and $646,000 respectively in the comparable
periods.
For the three and nine month periods ended September 30, 2017, Canadian Zinc expensed
$1,156,000 and $4,960,000 respectively on its exploration and
evaluation programs at Prairie Creek compared to $758,000 and $1,451,000 for the three and nine month periods
ended September 30, 2016. The Company
was involved in the environmental assessment of permits for the all
season road in all periods and was engaged in mine planning and
feasibility studies in the current periods but not the comparable
periods.
For the three and nine month periods ended September 30, 2017, Canadian Zinc also expensed
$867,000 and $1,269,000 respectively on its exploration and
evaluation properties in central Newfoundland compared to $80,000 and $191,000 for the comparative periods.
At September 30, 2017, Canadian
Zinc had a positive working capital balance of $2,028,000 including cash and cash equivalents of
$2,697,000 and short term investments
of $25,000.
Outlook
Canadian Zinc's focus for the remainder of 2017 and into 2018 is
to procure the financing required to begin development of the
Prairie Creek Project and advance the Mine towards production.
It is anticipated that a decision by the Minister on the
environmental assessment of the all season road should be issued in
February 2018, following which the
proposal should be referred to the Water Board for the issue of the
Land Use Permit.
The current prices of both zinc and lead are strong and
substantially higher that the prices used in the 2017 FS. The
Prairie Creek Project is particularly sensitive to zinc, lead and
silver prices and to the Canadian/US dollar exchange rate. For
example, using a zinc price of US$1.20 per lb. instead of the price of
US$1.10 per lb. used in the 2017 FS,
with all other base case inputs unchanged, 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%.
The long-term price outlook for lead and zinc remains very
positive. Supported by the robust economics indicated by the 2017
FS, Canadian Zinc will continue to evaluate all alternatives for
raising the senior financing necessary to complete the development
and construction and put the Prairie Creek Mine into
production.
About Canadian Zinc
Canadian Zinc is a TSX-listed exploration and development
company trading under the symbol "CZN". The Company's key project
is the 100%-owned Prairie Creek Project, a fully permitted,
advanced-staged zinc-lead-silver property, located in the
Northwest Territories.
Qualified Person: Alan
Taylor, P.Geo., Vice President of Exploration, Chief
Operating Officer and Director of the Company, who is a
Non-Independent Qualified Person as defined in National Instrument
43-101 – Standards of Disclosure for Mineral Projects
("NI 43-101"), has prepared, supervised the preparation of
or reviewed, the parts of this News Release that are of a
scientific or technical nature.
Cautionary Statement – Forward-Looking Information
This press release contains certain forward-looking
information, including, among other things, 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, 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. 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.
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.
SOURCE Canadian Zinc Corporation