Canada Zinc gets $18 million from Tongling

Vancouver – An $18-million investment has doubled Tongling Nonferrous Metals‘ stake in Canada Zinc Metals (CZX-V), giving the Chinese metals giant a 36% stake in the junior and its Akie zinc-lead-silver project in northeast British Columbia.

Tonglong already held more than 17% of Canada Zinc, having invested $4.9 million in the company in early 2009. That investment netted Tongling 11.5 million shares plus 5.75 million warrants, which the Chinese firm exercised in May for $3.45 million.

Now Tongling is spending $18 million to purchase another 31.4 million shares and 15.7 million warrants. The shares are valued at 57.4¢ a piece; the warrants are exercisable at 67.5¢ during the first year and at 77.5¢ during the second year.

Canada Zinc says it will use the funds to advance its Akie property, which sits 260 km north-northwest of the town of Mackenzie. The Akie property is within the southernmost segment of the Selwyn Basin, in a geologic area called the Kechika Trough. The Selwyn Basin is known to host sedimentary-exhalative (Sedex) zinc-lead-silver deposits.

In the mid-1990s Inmet Mining explored Akie. It then sat idle until Canada Zinc came along in 2005. Drilling on the property to date has identified a baritic zinc-lead Sedex deposit at Cardiac Creek that hosts 23.6 million inferred tonnes grading 7.6% zinc, 1.5% lead, and 12 grams silver per tonne, using a cut-off grade of 5% zinc.

Canada Zinc is now several weeks into its 2010 drilling program at the project, which will see two diamond drilling rigs cut 5,000 metres in ten holes. The program has two goals: to test the promising Gunsteel Formation stratigraphy that extends to the northwest along strike from Cardiac Creek for mineralization and to further explore the North lead anomaly. The North lead anomaly is 2.2 km northwest of the Cardiac Creek deposit and has produced massive sulphides carrying sphalerite and galena in previous drilling, with a best intercept of 0.8 metres grading 11.6% zinc and 9.05% lead.

The Selwyn Basin become known for its potential to host large, stratiform sulphide deposits in the 1950s to 1970s, when three sizeable deposits were discovered in the area. Soon after came the most significant discovery – in 1977 a joint venture between Cyprus Anvil and Hudson’s Bay Oil and Gas discovered Cirque. At Cirque two deposits, known as Cirque Main and Cirque South, host an historic resource of 52 million tonnes grading 7.8% zinc, 2.2% lead, and 48 grams silver.

In addition to the Akie property, Canada Zinc controls a large, contiguous group of claims extending northwest from Akie along 125 km of the Kechika Trough. The Kechika Trough regional project is home to several other historic projects, such as the Mt. Alcock project that yielded an 8.8-metre intercept grading 9.3% combined lead-zinc.

Canada Zinc’s share price gained a penny on news of the Tongling investment to close at 49¢. The company has a 52-week trading range of 27¢ to 70¢ and has 103 million shares outstanding.