Canadian Zinc closer to opening Prairie Creek

Canadian Zinc (CZN-T) has been flashed a green light from environmental authorities to go ahead with developing its Prairie Creek mine in the Northwest Territories.

The Mackenzie Valley Environmental Impact Review Board said that building the underground  zinc-lead-silver mine would not have a significant impact on the environment. It also made suggestions about water storage, tailings management and concentrate containment.

The company says the approval is a major step in the right direction and that it would look to implement suggestions during the upcoming permitting stage.

“It has been a long and exhaustive process,” John Kearney, the company’s chairman and CEO, said in a press release. He added that receiving a thumbs-up from the review board has been worth the company’s effort.

The Vancouver-based company applied for a water licence and land-use permits in June 2008, kicking off the environmental assessment.

“The project has been around for many years, but it has taken a long time to get all the aspects in-line and to move through the regulatory process,” says Alan Taylor, the company’s vice-president of exploration and chief operating officer. “It’s a very long process, indeed.”

He explains that the arduous process is caused in part by the project’s location.

The project sits in an environmentally sensitive area in the Mackenzie Mountains near the Nahanni National Park Reserve, which was expanded in 2009 to surround the property. It is also 43 km from the South Nahanni River and in an area that the Deh Cho First Nations have claimed as their traditional territory. But no treaty settlement has been made with the federal government.

Canadian Zinc optioned into the zinc-lead-silver property from Conwest Exploration in 1991, and has since been diligently working to push the previously permitted project forward.

The company plans to upgrade the existing infrastructure that its predecessors built on the site in the eighties to put the zinc-lead-silver mine into production. The infrastructure has an estimated worth of $250 million, but has never been used.

Canadian Zinc completed an initial scoping study for the project in 2001, and applied for several licences shortly after, which it received in 2003. 

But in October 2003, the Deh Cho First Nations requested a judicial review of the company’s water licence to drill. That licence was reissued in 2006. In 2006 and 2007 the company says it invested $18.7 million in Prairie Creek, and to date has spent a total of $40 million on the project. 

The company is now working on a feasibility study. Taylor explains the study won’t be completed until Canadian Zinc has
all the parameters that will be issued through the permitting process.

That process will start once its environmental assessment report is approved by John Duncan, the federal minister of Aboriginal Affairs and Northern Development. Even with the positive report from the review board, the minister can request an environmental impact review of the company’s proposal to start up the mine, which could add another year to the timeline. 

Meanwhile, the company has worked closely with Aboriginal communities in the area and has formalized key agreements to benefit the region. “We feel that there’s an opportunity here not just for the company, but for the region to benefit from. This is why we are moving it ahead,” Taylor says.

The agreements offer local employment and contract opportunities at the proposed mine, which will create 220 direct jobs once in production. The company expects one-third of its workforce to consist of aboriginals.

According to a 2007 technical report, the project hosts a measured and indicated resource of 5.8 million tonnes grading 10.71% zinc, 9.90% lead, 161.12 grams silver per tonne and 0.33% copper. It also has 5.5 million tonnes at slightly higher grades in inferred. Based on the measured and indicated resource, the mine could run for 10 years as a 1,000- to 1,300-
tonne-per-day operation.

The main focus for the company now is to get through the permitting process.

“We see that there is a light at the end of the tunnel,” Taylor concludes. “Sometime soon there is a distinct possibility that we will be able to obtain a permit and get this operation under way.”

On Dec. 9, the day of the news, Canadian Zinc closed up 8% to 76¢ on 2 million shares traded.

On Dec. 15, Canadian Zinc announced it was raising $17.5 million from three sources. 

A $5.1-million bought-deal financing of 1.61 million units is being sold at 67¢ per unit, with each unit comprising a share and half a purchase warrant exercisable at 67¢ within two years. 

Another $2.4 million is rolling in in the form of 3.2 million flow-through shares priced at 75¢ each.

Thirdly, a subsidiary of Shenzen-listed Shandong Zhongrun Investment Holding Group is spending $10 million to buy 15 million units at 67¢, with each unit comprising a share and half a purchase warrant exercisable at 90¢ over two years.