- Prairie Creek Feasibility Study Completed
- All Season Road Environmental Assessment Recommended for
Approval
- US$10 Million Project Bridge
Loan Secured
- Over 20,000 Metres of Drilling in Central Newfoundland
- Significant Extensions of Mineralization at Lemarchant
Deposit
CZN-TSX
CZICF-OTCQB
VANCOUVER, March 29, 2018 /CNW/ - Canadian Zinc
Corporation (TSX: CZN; OTCQB: CZICF) ("the Company" or
"Canadian Zinc") reports its financial and operating results
for the year ended December 31,
2017.
Prairie Creek Project
2017 Feasibility Study Results
The Prairie Creek Feasibility Study ("2017 FS") was completed in
September 2017 prepared by AMC Mining
Consultants (Canada) Inc., with
contributions by Ausenco Engineering Canada Inc., Global Mineral
Resource Services Ltd., Allnorth Consultants Limited and F. Wright
Consulting Inc.
The results of the 2017 Feasibility Study 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.
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).
During the first 10 years of production, the expanded mill
throughput results in the following:
- Higher average annual metal production (zinc 95 million pounds
and lead 105 million pounds).
- 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%.
The 2017 FS contemplated commencement of project construction
with a winter road in early 2018 and with mill start-up projected
for August 2020. The mine
construction and start-up schedule are significantly influenced by
the seasonal weather conditions in the Northwest Territories and without a winter
road in 2018 a revised project schedule has now been compiled with
a three-year pre-production and construction period and a
production start-up target date of August
2021.
All Season Road Permitting Process
Mackenzie Valley Environmental Impact Review Board Issues
Environmental Assessment Approval
On September 12, 2017, the
Mackenzie Valley Environmental Impact Review Board ("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 ("EA Report") and submitted the EA Report to the Federal
Minister of Crown-Indigenous Relations and Northern Affairs.
The Review Board recommends that approval of the All Season Road
be granted subject to implementation of the measures described in
the EA Report, which it considers are necessary to prevent
significant adverse impacts on the environment and local
people.
In its EA Report, the Review Board has prescribed mitigation
measures, many of which build on Canadian Zinc's commitments made
during the proceedings, intended to mitigate the adverse impacts on
the environment, improve monitoring and managing the potential
impacts and which will also address any public concern related to
these impacts.
The Review Board has recommended the creation of an Independent
Technical Review Panel, to ensure that the road is designed to a
standard that is highly protective of people and the environment.
Some of the Review Board measures also include requirements that
Canadian Zinc negotiate with traditional knowledge holders from
Nahanni Butte Dene Band and other First Nations about ways to avoid
impacts on heritage resources and to conduct systematic wildlife
monitoring and adaptive management using traditional knowledge.
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.
Environmental Assessment - Indian and Northern Affairs
Canada
On January 18, 2018, the Minister
of Crown Indigenous Relations and Northern Affairs Canada, invoked
a two-month extension to the timeline for the Minister's decision
on the Report of Environmental Assessment for the Prairie Creek All
Season Road, originally due by February 12,
2018, to allow the federal and territorial governments to
complete aboriginal consultations.
In connection with such consultations, on January 19, 2018, Indian and Northern Affairs
Canada ("INAC") provided Canadian Zinc with five Information
Requests, identifying specific issues raised by Indigenous groups
that need further clarity through proponent engagement, so the
Responsible Ministers can be confident that the Crown has
discharged its legal duty to consult by meaningfully and completely
consulting with impacted Indigenous groups.
INAC has requested Canadian Zinc to engage the Nahanni Butte
Dene Band, Liidlii Kue First Nation and the Dehcho First Nations,
as recommended by the Review Board, to gain an understanding of the
Indigenous groups' concerns, discuss and determine how the
Indigenous groups will be included in monitoring and discuss the
Indigenous groups' requests for support to participate in
implementation of the measures recommended by the Review Board and
the commitments made by Canadian Zinc in the environmental
assessment process.
Canadian Zinc is cooperating with the request from INAC and is
engaging with Indigenous groups to discuss the implementation of
various measures recommended by the Review Board, the sharing and
incorporation of Dene traditional knowledge and values into project
design and the inclusion of the Indigenous groups in environmental
and wildlife monitoring of the All Season Road.
The issue of the Information Requests, pursuant to subsection
130 (4.06) of the Mackenzie Valley Resource Management Act,
has the effect of stopping the clock on the five-month time limit
for the Responsible Ministers to make a decision on the Report of
Environmental Assessment. The time limit, extended by an additional
two months, will resume only after the Company has provided an
adequate response to the information requested.
Canadian Zinc had expected that implementation of the measures
which had been recommended by the Review Board would be addressed
and resolved during the permitting phase with the Mackenzie Valley
Land and Water Board ("Water Board") and Parks Canada, as in
previous applications; however, INAC has indicated that the
Responsible Ministers require these issues clarified at this stage
and not deferred to post-environmental assessment processes. As
such, the engagement requested is not an unexpected requirement but
rather one brought forward to the current stage of the process.
All Season Road Permitting Process Going Forward
Once the environmental assessment report is approved by the
Minister, the permitting process enters the regulatory phase,
conducted by the Water Board with input from territorial and
federal agencies, in which road permits are issued by the Water
Board and by Parks Canada. These permits will incorporate the
recommended mitigation measures included in the EA Report.
The proposed All Season Road follows the general alignment of
the already permitted winter road, while reflecting the terrain,
site characteristics, and road specifications suitable and
preferred for an All Season Road. The road from the mine to
kilometer 37.4 is permitted for all season use but needs upgrading
along this section, including realignments and new watercourse
crossings.
Canadian Zinc plans to construct the road over a period of three
years. Prior to construction activities, the Company plans to
conduct field investigations and prepare site plans (including
detailed road design) and award construction contracts. The plan is
to build a winter road in the first winter season to support road
construction activities. The first winter road will also be used
for transporting equipment, materials and diesel fuel to the mine
site for construction and development.
Project Financing Initiatives
HCF International Advisers ("HCF"), a leading independent
corporate finance advisory firm, was fully involved in the
preparation of a new financial model which was incorporated into
the 2017 Feasibility Study and is using the Study to support the
negotiation of debt financing with major financial
institutions.
In December 2017, Canadian Zinc
entered into a financing agreement with Resource Capital Fund VI
L.P. ("RCF VI") pursuant to which RCF VI provided an interim
non-convertible project loan in the amount of US$10 million, which is being used for the
ongoing development of the Prairie Creek Project.
The Company also entered into an investor agreement with RCF VI
which contains various rights granted to RCF VI, including among
other things: a period of exclusivity to work with the Company to
define the terms of RCF VI's future participation in the project
financing of the Prairie Creek Mine, on terms and conditions to be
agreed by the Company and RCF VI; participation rights in favor of
RCF VI to maintain its pro rata shareholding interest in the
Company for as long as it remains a significant shareholder; the
right to nominate one member to the board of directors of the
Company; and certain other project oversight rights.
Central Newfoundland Properties
Canadian Zinc owns an extensive mineral land package in central
Newfoundland covering three large
Volcanogenic Massive Sulphide projects with known mineral deposits
and excellent exploration potential, including the South Tally Pond
Project, the Tulks South Project, and the Long Lake Project.
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.
On December 5, 2017, Glencore
Canada Corporation and Ontario Teachers' Pension Plan announced the
formation of BaseCore Metals LP, a 50:50 joint venture limited
partnership focused on base metals streams and royalties. Under the
agreements for BaseCore Metals, Glencore contributed a portfolio of
selected existing royalties on producing and development stage
properties in North and South
America, including 2% NSR royalties on Canadian Zinc's Tulks
South, South Tally and Long Lake
properties in Newfoundland.
During 2017, the Company completed 15,264 metres of drilling in
59 drillholes over three drilling campaigns at the Lemarchant
deposit. The 2017 drilling intersected significant extensions of
base metal massive sulphide mineralization, both up-dip and
immediately along strike of the currently defined Lemarchant Main
Zone which now extends an additional 80 metres up-dip and over a
250-metre strike length (from sections 100+75N to 103+25N). The
vertical depths of the mineralized drill intercepts range from 120
to 170 metres. Also at the Tulks South Project, the Company
completed 4,981 metres of drilling in 14 drillholes at the
Boomerang-Domino massive sulphide deposit and at three priority
target areas located up to 2.0 km along strike of the
Boomerang-Domino deposit.
Canadian Zinc has engaged Mercator Geological Services Limited
of Dartmouth, Nova Scotia, to
complete an updated National Instrument 43-101 Mineral Resource
Estimate of the Lemarchant deposit. The updated Mineral Resource
Estimate is scheduled to be completed in the second quarter of
2018.
Financial Results
For the year ended December 31,
2017, Canadian Zinc reported a net loss and comprehensive
loss of $11,074,000 compared to a net
loss and comprehensive loss of $5,077,000 for the year ended December 31, 2016.
Included in the loss for year ended December 31, 2017, were exploration and
evaluation expenditures of $8,723,000
compared to $2,428,000 for the
previous year, which are expensed in accordance with the Company's
accounting policies. The loss for year ended December 31, 2017, also includes share-based
compensation charges of $842,000
versus $1,104,000 in the comparable
year. The Company also recorded a gain on currency translation and
a tax deduction recovery in the amount of $148,000 and $267,000 respectively with no comparable amounts
in the year ended December 31,
2016.
At December 31, 2017, the Company
had a positive working capital balance of $11,791,000 including cash and cash equivalents
of $12,979,000 and short-term
investments of $31,000.
Outlook
Canadian Zinc's focus for 2018 is to procure the financing
required to continue the development of the Prairie Creek Project
and advance the Prairie Creek Mine towards production.
In consultation with the Company, HCF conducted preliminary
market soundings of potential lenders and is now in negotiation
with potentially interested parties. It is anticipated that up to
70% of the currently estimated $279
million of capital required to complete the Prairie Creek
Project could be supported by debt financing.
The Investor Agreement with RCF VI contains various rights
granted to RCF VI, including among other things: a period of
exclusivity to work with the Company to define the terms of RCF
VI's future participation in the project financing of the Prairie
Creek Mine, and Canadian Zinc continues in discussions with RCF
regarding RCF's further participation in future project
financings.
In the meantime, the US$10 million
Project Bridge Loan will be used for the ongoing development of the
Prairie Creek Project, focused on further engineering work to
improve project confidence while the Company completes the senior
project financing package and establishes the construction and
development management team.
Specific programs aimed at further de-risking the Prairie Creek
Project are planned for 2018, including detailed engineering and
design of the mine facilities, rehabilitation of equipment and
accommodations, hydrological investigations, initial
site/underground preparation and procurement of long-lead-time
items. The second year of the project schedule, supported by a
winter road in early 2019, will include camp and mill
refurbishment, geotechnical programs leading to further design of
the All Season Road, underground development from existing workings
and construction of key surface infrastructure items. Construction
of the All Season Road is now planned to commence from a winter
road in early 2020 and continue throughout 2020 and into 2021, in
parallel with continuous and ongoing site construction and mine
development, leading to commissioning/plant start-up in early 2021,
with the target of achieving commercial production in August 2021.
Since January 2016, the zinc price
has more than doubled making it one of the better performing metals
over the two-year period. The price of zinc increased over 38% in
2017 and reached a high of US$1.60 in
early 2018, enhanced by continuing inventory drawdowns on the
world's major metal exchanges and the market for refined zinc metal
is in deficit. Large mine closures that happened in 2016, followed
by price induced shutdowns in Australia and in the U.S., tightened the zinc
concentrate market and zinc concentrate spot treatment charges have
fallen to historic lows. Looking ahead for 2018-2019 it is expected
that the zinc market will be in a deficit for at least the first
half of 2018.
Lead prices also rose in 2017, increasing 30% year-over-year,
due to strong demand for lead batteries in automobiles and
three-wheeled e-bikes in China,
and a modest drop in inventory levels. For 2018 it is expected
demand for refined lead metal to increase 5% and demand will exceed
supply.
The current prices of both zinc and lead are strong and
substantially higher that the prices used in the 2017 FS. 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 pursue 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-stage zinc-lead-silver property, located in the
Northwest Territories. Canadian
Zinc also owns an extensive land package in central Newfoundland that it is exploring for
copper-lead-zinc-silver-gold deposits.
This news release should be read in conjunction with CZN's
Management's Discussion and Analysis, Annual Report or Form
20-F, and Annual Consolidated Financial Statements for the
year ended December 31, 2017, which
are available on the Company's website at
www.canadianzinc.com, or under the Company's profile on
SEDAR (www.sedar.com).
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