CZN-TSX
CZICF-OTCQB
- Investor Agreement with Resource Capital Fund VI
L.P.
- US$10 million Project Bridge
Loan with RCF VI
- Exclusivity to RCF VI on future project development
financing
- Project bank debt financing discussions underway
VANCOUVER, Dec. 22, 2017 /CNW/ - Canadian Zinc
Corporation (TSX: CZN; OTCQB: CZICF) is pleased to announce
that it has entered into a financing agreement ("Project Bridge
Loan") and an investor agreement ("Investor Agreement") with
Resource Capital Fund VI L.P. ("RCF VI") pursuant to
which RCF VI has agreed to provide an interim non-convertible
project loan to Canadian Zinc of US$10
million which will be used for the ongoing development of
the Prairie Creek Zinc-Lead-Silver Project in the Northwest Territories, Canada.
Use of proceeds of the financing will focus on further
engineering work to improve project confidence while the Company
completes the senior project financing package for the Prairie
Creek Mine and establishes the construction and development
management team.
The Project Bridge Loan will bear interest at the rate of 8%,
payable quarterly, and will mature on January 31, 2019. The loan is secured by a charge
on the Prairie Creek property and contains customary affirmative
and negative covenants and events of default.
The Investor Agreement with RCF VI contains various rights
granted to RCF VI, including among other things: a period of
exclusivity to work with the Company to define the terms of RCF
VI's future participation in the project financing of the Prairie
Creek Mine, on terms and conditions to be agreed by the Company and
RCF VI; participation rights in favor of RCF VI to maintain its pro
rata shareholding interest in the Company for as long as it remains
a significant shareholder; the right to nominate one member to the
board of directors of the Company; and certain other project
oversight rights.
RCF VI and Canadian Zinc remain in discussions regarding the
further participation of RCF VI in future project financings,
including any project development facility, which participation may
be subject to receipt of shareholder approval if required by any
regulatory authority and approval of the Toronto Stock Exchange,
and certain other conditions.
John Kearney, Canadian Zinc's
Chairman and CEO, commented, "This financing commitment from
RCF is a strong vote of confidence in the Prairie Creek project by
the Company's largest shareholder RCF VI, a fund managed by RCF, a
highly respected mining finance group. The Investor Agreement with
RCF VI provides the way forward to put in place the senior project
financing to maintain the momentum directed at completing
construction of the Project and bringing the Prairie Creek Mine
into production by mid-2020".
Ross Bhappu, Head of Private
Equity Funds at RCF said, "RCF VI's financial support has
actively helped multiple global mining projects move into
production over the past 5 years and RCF is excited to be working
with Canadian Zinc as a financial and technical partner to support
the construction of Prairie Creek, a future zinc, lead and silver
source which we believe will be important to supply".
Resource Capital Funds ("RCF") is a group of commonly managed
private equity funds, established in 1998 with a mining sector
specific investment mandate spanning all hard-mineral commodities
and geographic regions. Since inception, RCF has supported 166
mining companies, with projects located in 51 countries and across
29 commodities. The sixth fund, Resource Capital Fund VI L.P. ("RCF
VI") with committed capital of $2.04
billion, is now being invested.
Further information about RCF can be found on its website
(www.resourcecapitalfunds.com). RCF aims to partner with
companies to build strong, successful and sustainable businesses
and in doing so strives to earn superior returns for all
shareholders. RCF VI currently holds 19.7% of Canadian Zinc's
shares.
Project Financing
CZN has retained HCF International Advisers Limited
("HCF"), a leading corporate finance firm based in London, UK and focused on the global natural
resources and infrastructure sectors, as its adviser in securing
bank debt or other project debt financing for the construction of
the Prairie Creek Mine and HCF is currently engaged in advanced
discussions with several finance providers. It is anticipated that
up to 70% of the estimated capital required to complete the Project
could be supported by debt financing.
Sandstorm Gold Ltd. ("Sandstorm"), which provides
financing to mining companies through stream and royalty
agreements, currently holds a 1.2% net smelter returns royalty
("NSR") on the Prairie Creek Mine which it purchased in 2013 for
US$10 million. In addition, as part
of the Royalty Agreement, Sandstorm has a right of first refusal to
purchase any metal stream based on production from the Prairie
Creek property that Canadian Zinc may decide to sell to finance
part of the capital cost to develop the Prairie Creek Mine.
In connection with the Project Bridge Loan and the Royalty
Agreement, Sandstorm and RCF have agreed to enter into an
Inter-Creditor Agreement reflecting certain agreed intercreditor
principles.
Feasibility Study Highlights
On September 28, 2017 Canadian
Zinc announced the preliminary results of its 2017 Feasibility
Study ("2017 FS") which indicate notable improvements compared to
the Preliminary Feasibility Study completed in 2016 ("2016 PFS")
and confirm that the Prairie Creek Mine can support a significant
increase in the mining rate and mill throughput that will enable
production of higher quantities of zinc, lead and silver, and at
lower operating cost as compared to the mine plan presented in the
2016 PFS. The Capital cost was estimated at $279 million, including contingency. The
development and construction period is estimated at 2.5 years and,
subject to completion of financing, the start-up of mine production
is projected for mid-2020.
The 2017 FS Mine Plan covers a 15-year LOM from mill start-up
with a focus on optimizing the LOM grade profile. During the first
10 years of production, the expanded mill throughput results in the
following as compared to the 2016 PFS:
- Higher average annual metal production (zinc 95M lbs. and lead 105M lbs.).
- Average annual total contained lead in both zinc and lead
concentrates is 105 million pounds per year, an increase of 23
million pounds, while the average annual production of silver is
also increased 25% to 2.1 million ounces per year.
- Average annual total contained zinc in both zinc and lead
concentrates increased by approximately 7% from 82 million pounds
to 88 million pounds per year.
The 2017 FS indicates many financial improvements from the 2016
PFS:
- Cumulative net revenue over the life of the mine increased by
$325 million to $3 billion and cumulative undiscounted cash flow,
pre-tax, up $190 million to
$900 million, an increase of over
30%, at base case metal prices of zinc=US$1.10/lb., lead=US$1.00/lb., and silver=US$19.00/oz.
- The pre-tax NPV, discounted at 8%, increased 21% to
$344 million, with an IRR of 23.8%,
while the NPV post-tax and royalties, discounted at 8%, increased
22% to $188 million, with an IRR of
18.4%.
- Capital cost increased by $35
million (14%) to $279 million,
including contingency, primarily because of the expansion in mine
and mill throughput and accelerated mine development.
- The post-tax payback period was reduced by five months to 4.6
years from mill start-up.
A Technical Report Study prepared in accordance with National
Instrument 43-101 Standards for Disclosure for Mineral Projects
("NI 43-101") reporting the results of the 2017 Feasibility was
filed on SEDAR on October 31,
2017.
Forward-Looking Information
This News Release contains certain forward-looking
information, including, among other things, the expected completion
of acquisitions and the advancement of mineral properties. This
forward looking information includes, or may be based upon,
estimates, forecasts, and statements as to management's
expectations with respect to, among other things, the completion of
transactions, the issue of permits, the size and quality of mineral
resources and reserves, future trends for the company, progress in
development of mineral properties, future production and sales
volumes, capital costs, mine production costs, demand and market
outlook for metals, future metal prices and treatment and refining
charges, the outcome of legal proceedings, the timing of
exploration, development and mining activities, acquisition of
shares in other companies and the financial results of the company.
There can be no assurances that such statements will prove to be
accurate and actual results and future events could differ
materially from those anticipated in such statements.
Cautionary Note to United States Investors
The United States Securities and Exchange Commission ("SEC")
permits U.S. mining companies, in their filings with the SEC, to
disclose only those mineral deposits that a company can
economically and legally extract or produce. We use certain terms
in this press release, such as "measured," "indicated," and
"inferred" "resources," which the SEC guidelines prohibit U.S.
registered companies from including in their filings with the
SEC.
This News Release includes resource and reserve information
that has been prepared in accordance with the requirements of the
securities laws in effect in Canada, which differ from the requirements of
United States securities laws. The
terms "mineral reserve", "proven mineral reserve" and "probable
mineral reserve" are Canadian mining terms as defined in accordance
with Canadian National Instrument 43-101 – Standards of Disclosure
for Mineral Projects ("NI 43-101") and the Canadian Institute of
Mining, Metallurgy and Petroleum (the "CIM") - CIM Definition
Standards on Mineral Resources and Mineral Reserves, adopted by the
CIM Council, as amended. These definitions differ from the
definitions in SEC Industry Guide 7 under the United States
Securities Act of 1933, as amended (the "Securities Act"). Under
SEC Industry Guide 7 standards, a "final" or "bankable" feasibility
study is required to report reserves, the three-year historical
average price is used in any reserve or cash flow analysis to
designate reserves and the primary environmental analysis or report
must be filed with the appropriate governmental authority.
Statements about the Company's planned/proposed Prairie Creek
Mine operations, which includes future mine grades and recoveries;
the Company's plans for further exploration at the Prairie Creek
Mine and other exploration properties; future cost estimates
pertaining to further development of the Prairie Creek Mine and
items such as long-term environmental reclamation obligations;
financings and the expected use of proceeds thereof; the completion
of financings and other transactions; the outlook for future prices
of zinc, lead and silver; the impact to the Company of future
accounting standards and discussion of risks and uncertainties
around the Company's business are not guarantees of future
performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, the Company's
actual results could differ materially and adversely from those
expressed in any forward-looking statements as a result of various
factors. You should not place undue reliance on these
forward-looking statements.
The Company cautions that the list of factors set forth above
is not exhaustive. Some of the risks, uncertainties and other
factors which negatively affect the reliability of forward-looking
information are discussed in the Company's public filings with the
Canadian securities regulatory authorities, including its most
recent Annual Report, quarterly reports, material change reports
and press releases, and with the United States Securities and
Exchange Commission (the "SEC"). In particular, your attention is
directed to the risks detailed therein concerning some of the
important risk factors that may affect its business, results of
operations and financial conditions. You should carefully consider
those risks, in addition to the other information in the Company's
filings and the various public disclosures before making any
business or investment decisions involving the Company and its
securities.
The Company undertakes no obligation to revise or update any
forward-looking statement, or any other information contained or
referenced in this News Release to reflect future events and
circumstances for any reason, except as required by law. In
addition, any forecasts or guidance provided by the Company are
based on the beliefs, estimates and opinions of the Company's
management as at the date of this News Release and, accordingly,
they involve a number of risks and uncertainties. Consequently,
there can be no assurances that such statements will prove to be
accurate and actual results and future events could differ
materially from those anticipated in such statements. Except as
required by law, the Company undertakes no obligation to update
such projections if management's beliefs, estimates or opinions, or
other factors should change.
SOURCE Canadian Zinc Corporation