JOHANNESBURG (miningweekly.com) – Negotiations are under way and proposals are being evaluated for potential debt financing for the Prairie Creek zinc/lead/silver project that TSX-listed Canadian Zinc is advancing in the Northwest Territories.
The company, which this week named former KGHM International executive Don MacDonald its new president and CEO, is seeking to raise up to C$195.3-million in debt funding for the project, equating to 70% of the estimated C$279-million in capital expenditure that is required to complete the mine.
“The long-term price outlook for lead and zinc remains very positive,” Canadian Zinc said on Thursday, adding that it believed the project’s robust economics would assist its efforts to raise the senior financing necessary to complete the construction and put Prairie Creek into production.
A 2017 feasibility study estimated that the project has a pretax net present value, at an 8% discount rate, of C$344.5-million and an internal rate of return of 23.8%. Payback has been estimated at 4.4 years.
Canadian Zinc earlier this week entered into an equity financing agreement with a subsidiary of Resource Capital Fund VI (RCF VI), which has agreed to purchase 100-million shares at C$0.20 each to raise C$20-million. The RCF VI subsidiary was also issued with 50-million short-dated warrants, which if exercised would generate an additional C$12.5-million.
The proceeds of the funding would be used to repay a $10-million bridge loan and would provide additional funding for the engineering work aimed at improving project confidence in Prairie Creek.
“The C$20-million equity financing by RCF is a strong vote of confidence in the company's potential and the viability of the Prairie Creek project. RCF is the company's largest shareholder and the investment at a subscription price of $0.20 a share represents a 61% premium over the ten-day volume-weighted average price of the company's shares as of May 14,” Canadian Zinc said.
The proceeds of the unit offering would turn the company debt free and boost its cash balance.
In the first ten years of its 15-year mine life, the Prairie Creek mine will produce an average of 95-million pounds a year of zinc, 105-million pounds a year of lead and 2.1-million ounces a year of silver.
Canadian Zinc has signed memoranda of understanding with Korea Zinc and Boliden for the sale of most of the planned zinc concentrate production and almost half of the planned lead concentrate production for the first five years of operation.
The company has all the necessary permits for the development, operation and subsequent closure of the Prairie Creek mine in hand. In September last year the Mackenzie Valley Environmental Impact Review Board recommended for approval a planned all season road, subject to the implementation of certain measures to prevent adverse impacts on the environment and local people.
Canadian Zinc reported on Thursday that it continued to engage with Indigenous groups to seek agreement on the incorporation of Dene traditional knowledge and to include Indigenous groups in environmental and wildlife monitoring in the design, construction and operation of the all season road.
Once it has approval from the Indian and Northern Affairs Canada Ministries, the road’s permitting process would move to the regulatory phase, during which land permit approval would be sought from the Water Board and Parks Canada.