Prairie Creek inches toward production

All bets are off, but prospects for the project most likely to succeed in becoming the next producing mine in Northwest Territories got a boost recently when its developer commissioned a new feasibility study.

Canadian Zinc Corp. in February reported engaging SNC-Lavalin Inc. to complete the feasibility study in 2011 for the underground Prairie Creek Project, a longstanding mining venture where it hopes to capitalize on several decades of development work to produce lead and zinc concentrates and a silver-bearing copper concentrate.

The project is located in an environmentally sensitive remote area in the Mackenzie Mountains of southwestern Northwest Territories, within the watershed of the South Nahanni River and in proximity to, but outside, the Nahanni National Park Reserve. The Government of Canada expanded the Nahanni National Park Reserve in June 2009 to completely surround the Prairie Creek Mine, however federal officials have assured Canadian Zinc of its third-party rights to operate and access the Prairie Creek Mine. The mine is also located in an area which is claimed by the DehCho First Nations as their traditional territory. No land claim settlement agreement has been reached between Canada and the DehCho.

Mineralization was discovered in Prairie Creek in 1928, but the property attracted only limited exploration until 1966. The Prairie Creek mineral deposit hosts nearly 6 million metric tons of measured and indicated resources grading 10.71 percent zinc, 9.90 percent lead, 0.326 percent copper and 161.12 grams per metric ton silver, along with 5.54Mt inferred resources grading 13.53 percent zinc, 11.43 percent lead, 0.514 percent copper and 215 g/t silver and additional exploration potential, according to a 2007 independent estimate which is the most recent available.

Unique opportunity

The Prairie Creek Mine project is considered unique because its environmental footprint is virtually complete. The project came within three months of production startup in 1982 before silver prices declined and the original developer, Cadillac Explorations Ltd., was placed into receivership after a spending a total of C$64 million on the project.

Since then, improvements proposed for specific site facilities have been aimed at further mitigating any potential impact the project may have on the environment. For example, filtered mill tailings will be disposed as underground backfill instead of on the surface.

The mine, mill and camp was issued a land use permit in 1980 and subsequently a water license in 1982.

Much of the mine site's current infrastructure, which includes a nearly complete 1,000-metric-tons-per-day mill concentrator, a two-story administration building, workshops, three levels of underground development, accommodations and fuel storage facilities, was held in care and maintenance until 1990.

In 1991, Canadian Zinc (then San Andreas Resources Corp.) negotiated an option to acquire an interest in the Prairie Creek property, and 20 years later, the would-be mine developer may be finally closing in on first production.

Canadian Zinc said existing infrastructure at the mine site is an important aspect of the project and, while requiring some upgrades, it will substantially reduce what would otherwise be the capital cost of putting the deposit into production. Planned new facilities will include a kitchen/accommodation block, concentrate shed, fuel-efficient low-emission power generation units, and an incinerator.

The company holds a water license and a land use permit for underground exploration and development and operation of a pilot plant, and land use permits for surface exploration.

These permits were issued after environmental assessments were carried out by the Mackenzie Valley Environmental Impact Review Board.

Through these assessments, the site and existing facilities have been extensively studied and reviewed, and relevant permits issued.

A number of plans and structures have already been developed and been reviewed and approved by the Mackenzie Valley Land and Water Board.

Those will form a major part of the proposed development, including mine water contingency and spill contingency plans, a certified tank farm and a polishing pond.

The company also holds permits for a winter road to access the mine site from the Liard Highway.

Prairie Creek's current estimated measured and indicated resources are capable of supporting a mine life of more than 14 years at an initial production rate of 600 tons per dsy, which would increase to 1,200 tpd. In addition, future inclusion of the inferred resources is expected to extend the mine's life to at least 20 years.

Canadian Zinc said about 220 permanent workers will be needed at the mine, half of whom would be on-site at any one time. Personnel will generally work a three weeks on, three weeks off schedule (with variations as required). Area nonresident personnel will be flown in on charter flights from regional centers, while local personnel will be flown in from the communities of Nahanni Butte, Fort Liard and Fort Simpson.

The company said it is targeting a 35 percent northern work force, with a minimum 15 percent of its employees being members of First Nations. It also plans to offer training programs to fill mine positions.

2010 activities

Work at the Prairie Creek mine site during the summer of 2010 included continuing care and maintenance, environmental monitoring programs, road construction and repair, and a diamond drill exploration program. Canadian Zinc spent a total of C$4.2 million, compared with C$2.3 million in 2009.

In 2,700 meters of deep drilling, the company also confirmed the presence of the host Whittaker geological formation at the projected horizon, about 4 kilometers, or 2.5 miles, north of the Prairie Creek Mine portal, and the potential vein target that is projected to lie at a down-hole depth of about 1,500 meters.

Further repair work to the existing mine access road was completed, and a new 8-kilometer-, or 5-mile-, long access road to the new drill pad at Casket Creek was constructed.

In August a perimeter land survey was completed on the Gate mineral claims resulting in an adjusted total surface area for the new Gate mining leases of 2,776 hectares, or 6,860 acres. The Gate claims contain similar geology to that of the Prairie Creek mine and grassroots exploration developed new base metal targets, some of which still remain under-explored. The proximity of these claims to the Prairie Creek Mine, and the similarities in geology, justified upgrading the mineral tenure of these claims to long-term mining leases that expire in September 2030.

The Prairie Creek land package, including mining claims, mining leases and surface leases, now totals 8,218 hectares, or 20,299 acres.

Canadian Zinc also undertook the removal, by airlift, of all PCB (polychlorinated biphenyls) contaminated material that has been stored in a dedicated safe facility on site since 1982. This follows a similar program that removed all old cyanide from the site in 2008. The company contracted Hazco Environmental Services to repackage, remove and transport the PCB material off-site to be disposed of, by incineration, at the certified Earth Tech Swan Hills disposal facilities in Northern Alberta.

Canadian Zinc also continued discussions and engagement with the local communities of Nahanni Butte Dene Band and Liidlii Kue First Nation (Fort Simpson) with whom it has entered into a memoranda of understanding to establish mutually beneficial, cooperative and productive relationships. The company has agreed to use its best efforts to employ community members on a first preference basis and to assist the communities to benefit from business opportunities associated with the Prairie Creek Project.

On Jan. 20, Canadian Zinc signed the Nah'a Dehe Dene Prairie Creek Agreement, which provides for an ongoing working relationship between Canadian Zinc Corp. and the Nah'a Dehe Dene Band (Nahanni Butte Dene Band). The agreement provides a framework such that training, employment and business contracts are made available to Nahanni to the mutual benefit of both parties.

Comprehensive technical studies

Over the years, a substantial amount of technical data has been accumulated on the project, dating back to the 1970s and the subsequent completion of the original Prairie Creek Definitive Feasibility Study by a former subsidiary of SNC-Lavalin in 1980. Numerous other technical and economic studies have been carried out since, while exploration of the property continued.

During the past two years, Vancouver-based SNC has assisted Canadian Zinc with various aspects of project planning and design as part of the ongoing environmental assessment process. SNC, which is celebrating 100 years in business in 2011, also has experience in designing and constructing other mine projects in the Far North: Rio Tinto and Harry Winston's Diavik diamond mine and Newmont Gold Corp.'s Hope Bay Davis North gold project (Nunavut).

The general scope of the feasibility study will include detailed engineering and design including mining equipment, on-site and off-site infrastructure, transportation and logistics, a construction schedule and execution plan and capital and operating cost estimates.

Key aspects of the mine's design will be integrated into the new feasibility study with the help of subcontractors, including: DRA Americas - DMS (Dense Media Separation) plant design; Mine Paste Engineering Ltd. - paste plant design; Golder & Associates - site facilities and water treatment design; and SGS Lakefield Research Ltd. - metallurgy and processing.

More permitting ahead

The project is currently in the advanced stages of environmental assessment by the environmental review board. It is expected that public hearings will be held in April or May and that the EA process for the Prairie Creek Mine will be completed in mid-2011.

A further regulatory stage managed by the territory's land and water board (with input from territorial and federal agencies) will follow the EA before permits are issued. These permits will likely include conditions recommended as a result of the EA, the company said.

With the environmental assessment nearing completion, Canadian Zinc said major operational parameters that will factor into the project's implementation are now being determined and now is the time to evaluate the project's capital costs and financial analysis through the completion of the feasibility study, in anticipation of arranging construction and working capital financing.

The company also told federal securities regulators in a March 16 filing that since 2001, it has successfully obtained seven permits for the exploration and development of the Prairie Creek property from the territory's land and water board, including two type "B" water licenses, four land use permits for exploration activities and underground development and a winter road permit. In addition, various aspects of the Prairie Creek project have been the subject of five previous EAs carried out by environmental review board, all of which resulted in recommendations that the relevant project be allowed to proceed.

Although it has experienced long delays in obtaining permits, and expects a continued lengthy process with its permitting activities, Canadian Zinc said it has, to date, successfully carried out extensive programs at Prairie Creek, in accordance with all regulatory requirements and in compliance with all permits and licenses.

"Given the open-ended nature of the Mackenzie Valley permitting process, and the company's experience to date, it is likely that the environmental assessment process will extend for a considerable time," the company added.