NorZinc races toward mine development

NorZinc Ltd. appears headed into the home stretch in its decades-long marathon to bring to production the Prairie Creek zinc mine project in southern Northwest Territories.

The junior, formerly Canadian Zinc Corp., Oct. 21 reported completion of an updated preliminary economic assessment of the zinc, lead, and silver mineralization that it hopes to mine and mill at a rate of 2,400 metric tons per day.

NorZinc said the PEA lays the groundwork for a new feasibility study for the project due out in the second quarter of 2022.

The latest PEA, completed in just five weeks, caps an extraordinary year for NorZinc. In August, the longtime mine developer reported cutting above-average silver, zinc, and lead grades in a modest two-hole, 736-meter drill program, echoing results from a more extensive drill program completed in late 2020.

NWT mine regulators in September opted to forego requiring the junior to undergo a new economic assessment of the mine project before commissioning another independent PEA.

Conducted by Australia-based Ausenco Pty Ltd., the latest assessment lays the foundation for updating a 2017 feasibility study that envisioned a mining and mill rate of 1,600 tpd at Prairie Creek.

Long road to development

Even by mining industry standards, the Prairie Creek project has traveled a long road toward development.

Located about 200 kilometers (125 miles) west of Fort Simpson and roughly 500 kilometers (310 miles) west of Yellowknife in the Mackenzie Mountains, Prairie Creek is within traditional Dene First Nation Territory inside Canada's Nahanni National Park Reserve.

The project covers two surface leases and 12 mining leases totaling 7,487 hectares (18,500 acres).

Though discovered in 1928, the property did not see development until the 1980s as the Cadillac Silver Mine by the Hunt Brothers. In 1991, a NorZinc predecessor company acquired the project.

New focus on expansion

Over the years, Prairie Creek's owners have focused on developing the property's zinc and lead values due to extremely high grades of the base metals in the deposit. Recent increases in silver prices, however, prompted NorZinc to re-examine the high silver grade zones on the property.

The junior also has methodically cleared regulatory and logistical hurdles in its quest to bring the mine project into production. These include obtaining operating permits and reliable road access to the project.

NorZinc reported positive drill results in late 2020 and 2021, including multiple high-grade silver and zinc intersections in surface drilling in the property's Main Quartz zone, as well as anomalous gold in samples collected at its Stockwork zone.

The results reignited NorZinc's drive to expand Prairie Creek's reserves and advance the project toward startup.

An updated 2021 mineral resource estimate for the project includes 9.8 million metric tons of measured and indicated resources at 22.7% zinc-equivalent and 6.4 million metric tons of total inferred resources at 24.1% zinc-equivalent.

Based on results of the 2021 PEA completed in October, Prairie Creek will have a 20.3-year mine life based on a mill throughput rate of 2,400 tpd with average annual payable zinc-equivalent production of 261 million pounds.

The project currently hosts 38.1 million oz of silver in measured and indicated resources and 37.6 million oz silver in inferred resource. Current reserves, included in the resource estimates, contain 32.2 million oz silver.

This compares favorably with results of a 2017 feasibility study, which envisioned Prairie Creek with a 15-year mine life based on a throughput rate of 1,600 tpd, producing average annual metal concentrates of 105 million pounds lead, 95 million lbs. zinc, and 2.1 million oz silver for the first 10 years.

Robust projections in PEA

Among highlights of the new PEA (figures in US dollars):

• After-tax net present value of 8% of $299 million, using base case metal prices of $1.20/lb. zinc, $1.05/lb. lead, and $24/oz silver (pre-tax NPV 8% of $505 million).

• After-tax internal rate of return of 17.7% (pre-tax IRR of 21.4%) based on initial capital expenditures of $368 million, including $35 million of contingency, with significant opportunity to improve initial costs: through cost optimization.

• At recent zinc spot price of about $1.50/lb. zinc, after-tax NPV 8% increases to US$479 million and IRR increases to 22.8%.

• Life of mine C1 by-product costs of $0.19/lb zinc and C3 by-product costs of $0.60/lb. zinc (C1 co-product costs of $0.73/lb. zinc-equivalent and C3 co-product costs of $0.92/lb. zinc-equivalent), placing Prairie Creek among the third of zinc mines with the lowest costs once in operation.

• Average annual payable zinc-equivalent production of 261 million lbs., including 2.6 million oz of average annual silver production, over a 20-year life of mine, with a payback of 4.8 years.

"Overall, this PEA demonstrates compelling economics which provides management with greater conviction in early-stage financing discussions already taking place," said NorZinc President and CEO Rohan Hazelton.

"The completion of the PEA is yet another significant milestone for NorZinc as it showcases the true potential of the Prairie Creek deposit," he said, describing the expanded throughput rate of 2,400 tpd over a long mine life of over 20 years as "robust."

"While the PEA considers historical data with a re-interpreted mineral resource, it (also) outlines a solid base-case for management as we continue on the planned path towards financing and development of the Prairie Creek Project. The modified permits for the expanded throughput rates are well underway with approvals expected in late Q1 2022," Hazelton added.

In addition, NorZinc has identified multiple opportunities for further operational and economic optimization, which the company will continue to investigate as it moves towards completing an updated feasibility study for the project, with a keen focus on input costs for initial and sustaining capital and operations, along with ore sorting strategies aimed at optimizing processing, he said.

"The fundamentals for zinc, our primary product, are strong and enhanced by the recent addition of zinc to Canada's Critical Mineral List, which highlights the minerals critical to the building of a clean and digitized economy. Silver is also expected to continue to play a significant role in the development and financing of the project as the market demand for silver streams is high," Hazelton added.

Zinc sales pact extended

In September, NorZinc also reported signing an amended agreement with Boliden Commercial AB to sell zinc concentrates produced at the Prairie Creek Mine.

One of the world's top smelting companies committed to strong environmental and sustainability practices, Boliden has a proven track record of treating complex raw materials at its smelters in Norway and Finland, which are, in part, supported by external mines, according to Hazelton.

"We believe this continued support of the Prairie Creek Mine confirms the marketability of our planned zinc concentrate production and demonstrates another milestone for the company in the path towards production," he added.