Water flows at Prairie Creek

After years of environmental challenges and legal wrangling, the Mackenzie Valley Land and Water Board has issued a water licence allowing Canadian Zinc (CZN-T) to carry out metallurgical test-work and underground exploration and development at its Prairie Creek zinc-lead-silver deposit in the Northwest Territories.

The move comes after a federal court ruled earlier this year that the licence should be re-issued, following legal challenges to a previous licence by several local native groups, including ones that had initially supported mine development.

Lawyers representing the native groups argued that the Water Board “had exceeded its jurisdiction” in issuing the license without including certain conditions on water treatment as recommended by other agencies, among other matters.

In its judgement, the federal court accepted a submission made by the company, based on a pre-trial settlement agreement that included an amendment to the conditions of the license. The court also awarded costs to Canadian Zinc.

Canadian Zinc plans some 400 to 500 metres worth of decline development accompanied by around 10,000 metres of underground infill drilling. The work is aimed at better defining the known resources in the Main Zone and outlining additional resources.

The project is home to a nearly complete mine, 1,000-tonne-per-day mill and surrounding infrastructure. A historical resource (pre-National Instrument 43-101) resource totals 11.8 million tonnes averaging 12.5% zinc, 10.1% lead, 0.4% copper and 161 gram silver per tonne.

The project nearly made it to production in the 1980s, but was stymied by falling silver prices.

A scoping study in 2001 suggested that the operation could be revived for around $40 million. Annual output was pegged at 43,000 tonnes zinc plus byproduct lead and copper concentrates containing significant silver.

Despite the court victory, the project still faces opposition from various environmental groups, particularly the Canadian Parks and Wilderness Society (CPAWS), which is seeking to expand the Nahanni National Park Reserve to protect the entire South Nahanni watershed.

The Prairie Creek mine is situated 16 km north of the present park boundary, and a mountain range serves as natural barrier between the park and the proposed mine. Parks Canada has not proposed to expand the park to include the entire watershed.

The company plans to fund the work program via a recently completed private placement of 13.3 million units at 72 apiece with Northern Securities. Each unit includes a share plus half a warrant. Each full warrant is good for another share at $1 each for two years.

Northern Securities received a cash commission equal to 7% of the gross proceeds plus options to buy another 1.3 million units at 72 each for two years. Approval for the options will be put to a shareholder vote at the company’s next annual general meeting in June.