Canadian Zinc puts Prairie Creek on fast track (September 17, 2003)

Vancouver — Authorities have given Canadian Zinc (CZN-T) the approval to proceed with underground development and construction of a metallurgical pilot plant at the Prairie Creek base metal project in the Northwest Territories.

The Environmental Review Board, the federal Ministry of Indian and Northern Affairs, and the Mackenzie Valley Land and Water Board issued a land-use permit and a type B water licence, both of which extend for five years.

The decline will provide access to vein mineralization below the current 4 km of mine workings and allow drilling of the higher-grade core area.

The 1-tonne-per-hour pilot plant will be established in the existing mill building and produce concentrates of copper, lead and zinc, all of which contain silverr. Although limited in volume, the plant will allow the junior to dispose of tailings underground.

Canadian Zinc has also applied for a permit to reopen the existing winter road to the mine. No changes are planned to the existing winter road, which was permitted in 1980. Current access to the site is limited to fixed-wing aircraft.

Prairie Creek, formerly known as the Cadillac property, was financed in the early 1980s to within months of startup, largely by Procan Exploration, a private company owned by the Hunt bothers of Texas. However, owner Cadillac Exploration suspended construction activities in May 1982 after it ran out of money following a collapse of the silver price. Silver had hit a short-lived high of US$50 per oz. in late 1979 and early 1980, when the project was given the green light. Cadillac went bankrupt after incurring about $64 million in expenditures on the property.

Existing facilities at the site include:

• a lined tailings pond;
• camp accommodation for 200 personnel;
• maintenance, office and warehouse shops;
• four 1.1-MW diesel-powered generators and two smaller standby generators; and
• fuel storage tanks.

The Prairie Creek project, indeed all the assets of Procan, were tied up in litigation until 1990. San Andreas optioned the property in 1991 from Nanisivik Mines. San Andreas was renamed Canadian Zinc in 1999, and it now owns 100% of the project, subject to a 2% net smelter return royalty held by Titan Pacific Resources and capped at $8.2 million.

Under a 1996 agreement, the Nahanni Butte Dene band will receive a 5% after-tax net profits interest. The band will also have the one-time right to buy either a 10% or a 15% stake in the project within three months of receiving permitting approval, in return for a cash payment of either $6 million or $9 million

A 2001 scoping study calculated the break-even cash cost of production at US34.5 per lb. of salable zinc (net of byproduct credits but before financing and taxation). The study, performed in-house using independent consultants and contractors, calls for a 1,500-tonne-per-day operation capable of producing 95 million lbs. zinc annually over 18 years.

This year, the company refined the study in an attempt to boost silver production. Results indicate that the cash cost of producing silver, after all byproduct credits, is US$1.70 per oz. By mining material from the higher-grade core of the decline area, the operation could produce about 7 million oz. silver per year for the first three years at an average silver cash cost of US$1.48 per oz Typical silver grades in this section are around 320 grams silver per tonne.

Overall, the project hosts a mineral resource of 11.9 million tonnes grading 12.5% zinc, 10.1% lead, 161 grams silver per tonne, and 0.4% copper. The measured and indicated resource is pegged at 3.6 million tonnes grading 11.8% zinc, 9.7% lead, 0.3% copper and 142 grams silver.

“We’re confident the pilot plant and the decline will confirm that Prairie Creek can be redeveloped at low costs and in time to take advantage of the anticipated improvement in silver and zinc prices,” says Canadian Zinc Chairman John Kearney.

The Prairie Creek property is 300 km north of Fort Nelson, B.C., the nearest railhead, and 450 km west of Yellowknife, in the Nahanni region.