Take two for zinc-lead-silver project once backed by Hunt brothers
Financing jumps to the fore as Canadian Zinc passes environmental scrutiny of regulators on the Prairie Creek project in Canada's north.
Author: Kip Keen
Posted: Thursday , 19 Sep 2013
HALIFAX, NS (MINEWEB) -
For Canadian Zinc (TSX: CZN) it all comes down to financing now environmental regulators have cleared critical permits it needs to build and operate the Prairie Creek zinc-lead-silver project in the Northwest Territories. Really, quite monumental this as the property concessions form an island in the middle of Nahanni National Park. That fact alone has made the permitting process, completed this week for the second time round, a high profile affair in Canada's north, requiring extra effort to get it through the regulatory process.
Money, getting the C$193 million in estimated capital costs, becomes Canadian Zinc's main task, one made easier without those regulatory issues hanging over its head. How the financing comes – indeed, if it does – is an undecided matter, at least publicly. A company spokesperson acknowledged Thursday the play has moved from permitting to financing, but was reticent to be overly specific beyond that.
One option came on the table back in May, through a $10 million financing with Sandstorm. Canadian Zinc sold an NSR to Sandstorm and struck an agreement that could see Sandstorm purchase a silver stream from Prairie Creek for, at a minimum, $90 million, according to Canadian Zinc. Nothing about the deal is set in stone, however. Otherwise Canadian Zinc would presumably turn to debt and equity markets – a path that could be made easier with a promise for funds from Sandstorm. Yet that means giving up silver and this must be part of the discussion. Could Canadian Zinc otherwise finance the mine with acceptable dilution and reasonable debt levels and meantime hold onto its silver production?
If it does get financing, then Prairie Creek would have a shot at fulfilling the dreams of the high-flying Hunt brothers - Herbert and Bunker Hunt - best known for trying to corner the silver market in the early 1980s. Back then they financed Prairie Creek, helping it get close to production, but fell short as the price of silver crashed. The project, owned by a company called Cadillac Explorations, went bust. Significant infrastructure and underground development was left behind, however, which Canadian Zinc aims to rehabilitate, modernize and expand. The plan is to run a 1,000 tonne per day plant, producing about 76 million pounds zinc, 90 million pounds lead and 2.2 million ounces silver a year.