Canadian Zinc pulls trigger to secure debt financing for NT base metals mine

VANCOUVER (miningweekly.com) – Project developer Canadian Zinc has appointed HCF International Advisers to advise the company in securing debt financing for the construction of its flagship Prairie Creek zinc/lead/silver mine, in Canada’s Northwest Territories.

The UK-based independent corporate finance advisory boutique is focused on the global natural resources and infrastructure sectors, providing strategic and financial advice to companies and financial institutions across the complete life cycle of a project, including the structuring of debt finance.

To this end, HCF has prepared a three-staged approach to source and negotiate debt financing for the Prairie Creek mine, Canadian Zinc said on Tuesday.

The estimated capital expenditure was reported in the Prairie Creek 2016 preliminary feasibility study (PFS) totalling C$250-million and it is expected that debt financing could range up to 70% of this figure.

"The Prairie Creek project is on the cusp of development with a definitive feasibility study (DFS) under way to support the project debt financing. We believe the appointment of an experienced, financial adviser like HCF is timely and will help guide the debt financing process to a successful conclusion,” chairperson John F Kearney stated.

Canadian Zinc expects the DFS to be complete by mid-2017, dovetailing into the improving metal prices market.

The company advised that the DFS will provide a path towards construction by addressing all the contingencies in the required detail and help to manage or reduce the various risk factors in the project. The DFS will also follow up on several recommendations in the Prairie Creek 2016 PFS for further optimisation and potentially enhanced economics.

The Prairie Creek mine hosts proven and probable reserves of 7.6-million tonnes averaging 8.93% zinc, 8.33% lead and 127.58 g/t silver within measured and indicated resources of 8.7-million tonnes grading 9.5% zinc, 8.9% lead and 136 g/t silver. The deposit also contains an inferred resource of 7.05-million tonnes grading 11.3% zinc, 7.7% lead and 166 g/t silver and further exploration potential, according to the company.

Over the 17-year mine life, Prairie Creek is expected to produce an annual average 60 000 t/y of zinc concentrate and 55 000 t/y of lead concentrate containing 86-million pounds of zinc, 82-million pounds of lead and 1.7-million ounces of silver.

The financial metrics indicated a pre-tax undiscounted cumulative cash flow of C$710-million at metal prices of $1/lb of zinc, $1/lb of lead and $19/oz of silver. The financial model yields a pre-tax net present value (NPV) of C$284-million, at an 8% discount rate, with an internal rate of return (IRR) of 23%, and a post-tax NPV of C$155-million, with a post-tax IRR of 18%.