Prairie Creek Mine gets environmental OK

The Mackenzie Valley Environmental Impact Review Board has approved a proposal by Canadian Zinc Corp. for protecting the environment during operation of the Prairie Creek Mine in the Northwest Territories.

The move, which comes after more than three years of review, is seen as perhaps a major milestone in the permitting process for the underground lead-zinc mine project and a signal that the investment climate for mining may be changing for the better in the northern territory.

The Mackenzie Valley Environmental Impact Review Board issued its Report of Environmental Assessment and Reasons for Decision for the project Dec. 8, submitting it to Canada's Minister of Aboriginal Affairs and Northern Development John Duncan to begin the next regulatory phase for permitting the mining operation.

The Prairie Creek Mine property has substantial quantities of zinc, lead and silver that would-be developers have pursued for more than 30 years. Canadian Zinc has worked to develop the Prairie Creek resource for more than a decade.

The property, which is situated within the South Nahanni River watershed of the Mackenzie Mountains and surrounded by the Nahanni National Park Reserve, has estimated measured and indicated resources totaling 5,840,329 metric tons grading 10.71 percent zinc, 9.90 percent lead, 0.326 percent copper, and 161 grams per metric ton silver and a large inferred resource of 5,541,576 metric tons grading 13.53 percent zinc, 11.43 percent lead, 0.514 percent copper and 215 g/t silver.

The polymetallic deposit's measured and indicated resources are capable of supporting a mine life of more than 14 years at a planned initial production rate of 600 metric tons per day, which will increase to 1,200 tpd; future inclusion of inferred resources would extend the mine's life to at least 20 years.

The Review Board is the primary authority responsible for all environmental assessment and review throughout the natural resources-rich Mackenzie Valley of Northwest Territories. Canadian Zinc's application for operating permits was deemed complete in mid-2008. Since then the Review Board has conducted an extensive environmental assessment of the project and concluded in its latest decision that the proposed development is unlikely to have any significant adverse impacts on the environment or be a cause for significant public concern.

The next step in this process is for federal and territorial regulators to either accept the Review Board's decision or refer the matter for

environmental impact assessment. Responsible regulators include

the Government of the Northwest Territories Minister of Environment and

Natural Resources and several federal ministers, including Duncan.

The ministers have 10 business days to decide to accept the report, send

the project for an EIS Review or extend their deliberations (if required). They were expected to issue a decision by Dec. 22.

If the Review Board's opinion is endorsed, officials say the project application would proceed to the regulatory phase of permitting, which is administered by the Mackenzie Valley Land and Water Board.

Improved development

In a summary of its decision, the Review Board outlined major aspects of Canadian Zinc's proposal, which not only involves constructing an underground mine capable of producing up to 1,200 tpd of ore, but also upgrading or replacing existing mine site facilities and building new water treatment, paste backfill plant, dense media separation plants and other facilities at the mine site. In addition, the company intends to construct a waste rock pile in the Harrison Creek valley; re-design an existing water storage pond and possibly build a second water storage pond; re-clear the existing winter road from the mine site to the Liard Highway and re-align portions of the winter road route

The Review Board said the company proposed design modifications to the mine site and winter access road throughout the environmental assessment process, changes designed to improve the project and minimize potentially adverse impacts on the environment.

The new operation would utilize existing infrastructure and facilities that were built and never used in the 1980s and will be upgraded and enhanced to meet current-day environmental standards. The improvements proposed for specific site facilities will further mitigate the potential impact the project might have on the environment. Specifically, Canadian Zinc proposes to place waste rock and tailings underground in a cemented backfill mix, use the existing large pond for temporary water storage, and place development waste rock in an engineered facility removed from the Prairie Creek floodplain.

All mining will be performed from underground and no hazardous chemicals will be used in the milling process. All flotation tailings will be backfilled into the voids in the underground mine in a mix with the waste rock aggregate and cement. The flotation tailings are expected to be non-acid generating with low sulphide content and excess buffering capacity. Waste rock from underground development along with excess waste rock aggregate from the DMS plant will be placed in an engineered Waste Rock Pile in the adjacent Harrison Creek valley.

Concentrates will be bagged, stored under cover and trucked off-site on flat-deck trailers over the winter road. Canadian Zinc also has applied for Type "A" Land Use Permits for two new transfer facilities, one to be located about mid-point along the winter road and the other at the junction of the winter road with the Liard Highway near the community of Nahanni Butte. The trucks will then travel southbound on Highway 7 for about 130 kilometers (81 miles) to the British Columbia border and onwards to the railway at Fort Nelson, where they will be loaded onto railcars and shipped to smelters in Canada and/or to a port for transport overseas.

When in production, the Prairie Creek Mine is expected to add significantly to Canada's production of lead and zinc concentrates, averaging up to 100 million pounds of zinc, 90 million pounds of lead and 2 million ounces of silver per year in full-scale production.

Strong commitments

"Key design modifications include the developer's commitment to increase water storage capacity at the mine site, an improved mine-effluent outfall design, an enhanced water treatment plant and re-alignments to the winter road. The final list of commitments is included in Appendix B of the Review Board's Report of Environmental Assessment. These commitments are fundamental to the Review Board's decision on the significance of adverse impacts," the Review Board noted.

The board also offered three suggestions aimed at improving the monitoring and management of potential impacts from the development:

Suggestion 1 - The Review Board believes that either option proposed by Canadian Zinc Corp. to increase water storage on site will improve water quality in Prairie Creek. The Review Board notes that construction of a second pond may address a broader range of risks and result in better water management on site and improved water quality in Prairie Creek. The Review Board suggests that the Mackenzie Valley Land and Water Board consider this during the licensing phase.

Suggestion 2 - The Review Board suggests that Canadian Zinc Corp. prepare a tailings management plan for both the permanent storage of tailings underground and the temporary storage of tailings on surface at the mine site. The Review Board suggests that this plan should be part of the water license.

Suggestion 3 - The Review Board recognizes that there are better ways to contain concentrate during transport along the winter road than the bag method proposed by the developer. The Review Board suggests that the developer use secondary containment of concentrate during transport along the winter road to reduce the risk of contaminant dispersal. The Mackenzie Valley Land and Water Board and Parks Canada can best address this issue during the regulatory phase.

Significant dissent

The administrative tribunal said it strives to make consensus decisions, but it failed to reach a unanimous decision in this case. Two of the board's nine members opposed the decision, and offered dissenting comments in the Review Board's report.

Danny Bayha of Aboriginal Affairs and Northern Development and Rachel Crapeau of Parks Canada cited "gaps in the evidence which should have been provided by the developer to fully describe the project, explain its effects, and set out clear mitigation strategies to avoid development impacts."

Bayha and Crapeau said they believe the Review Board should have established a mandatory framework to ensure that the developer's numerous commitments to protect water quality will be undertaken. "In the absence of such certainty, we find ourselves unable to agree that significant impacts from this development will be avoided and are unlikely," they added.

In letters to Minister Duncan, the Dehcho First Nations and the Nahanni Butte Dene Band also expressed opposition to the Review Board's decision.

"DFN communities support the economic development potential of the project and the impact benefits agreements signed by the Liidlii Kue First Nation and Nahanni Butte Dene Band, however, we believe that the project should only proceed with standards in place to ensure that the environmental integrity of the Nahanni National Park Preserve is maintained and the downstream communities of Nahanni Butte, Fort Simpson and Wrigley are not impacted by water contamination," wrote Dehcho Grand Chief Sam Gargan in a Dec. 13 letter .

However, the First Nations support a "Reference Condition Approach" suggested by Parks Canada and Aboriginal Affairs and Northern Development, which requires a higher standard for water effluent treatment, Gargan told the minister.

Chief Fred Tesou of the Nahanni Butte Dene Band said the Review Board failed on two procedural counts by not imposing measures to mitigate acknowledged impacts and protect the First Nation's rights. He asked Duncan to send the report back to the Review Board with instructions to rewrite it and impose "clear and specific mitigative measures" on the development that eliminate potential for significant adverse environmental impacts.

"If this approach is taken, NDDB does not believe that the project should be referred to an environmental impact assessment … NDDB wants it clearly understood that it supports the mine going forward, with the added certainty of appropriate environmental protection … ," Tesou added.

Industry praise

Canadian Zinc and the Nwt & Nunavut Chamber of Mines applauded the Review Board's decision "This favorable report is a significant step forward for the Prairie Creek Mine," Canadian Zinc Chairman and CEO John Kearney said in making the announcement. "It has been a long and exhaustive process, the Review Board carried out a detailed environmental assessment and receiving a positive decision from the Review Board is confirmation that all of our efforts have been worthwhile. We are very satisfied with this Report and Decision and gratified to have received the approval of the Review Board," Kearney added.

Canadian Zinc Chief Operating Officer Alan Taylor said the company is comfortable with the Review Board's suggestions. "The support from the Nahanni Butte Dene Band and from the Liidlii Kue First Nation, together with the co-operation and support of the Government of the Northwest Territories, were important factors in the Review Board's decision and reflect the significant economic contribution that the Prairie Creek Mine will bring to that region of the Northwest Territories," Taylor added.

Canadian Zinc Dec. 13 also announced a public offering of 6 million units and

at a price of C67 cents per unit for gross proceeds of C$4.02 million and a concurrent private placement of flow-through shares of the company to raise gross proceeds of up to C$2.025 million at a price of C75 cents per FT share. The company said it will use net proceeds from the offering for the advancement of the Prairie Creek Project and for general corporate and working capital purposes.

Calling the Review Board decision "encouraging," Chamber of Mines President Pamela Strand said "this would be an important milestone for the Northwest Territories and will help send a signal of confidence to companies considering investment in the Territories."

The Chamber of Mines encourages all parties to continue to demonstrate leadership in making appropriate changes in the regulatory processes to reinstate the NWT as an attractive investment destination."

Strand said the mining industry group continues to actively encourage the Government of Canada in its work to improve the northern regulatory environment, and the boards in their work to improve the efficiency and predictability of their processes.

"Chamber members are also encouraged with the recent announcement that a mining strategy will form part of the new NWT Government's priorities," she added.

In a separate announcement, Strand observed that the investment environment in Northwest Territories is not as strong as it should be. "Given that the NWT diamond mining industry is now reaching its plateau, the lack of grassroots exploration investment is worrisome," she said.

Estimates of mining exploration expenditures in the territory continue to decrease, while comparable spending in neighboring Nunavut and Yukon Territory has continued to climb in recent months. A recent revised estimate of NWT spending by Natural Resources Canada fell to C$81 million from C$83 million originally projected in March. Estimates in Nunavut and the Yukon, by comparison, jumped 23 percent to C396 million from C$323 million and 21 percent to C$309 million from C$256 million, respectively, in the March forecast. The lower exploration activity in the NWT is mainly attributed to regulatory complexity associated with aboriginal land claims and high levels of proposed protected areas.