Canadian Zinc Reports Results for Third Quarter
- Positive 2017 Feasibility Study shows increased production
- All season road environmental assessment recommendation
- Exploration drilling in Newfoundland expands high-grade mineralization
Vancouver, British Columbia, November 14, 2017 – 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 nine 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.