History

Poole Field ProspectingPoole Field ProspectingMineralization was discovered at Prairie Creek in 1928 by Poole Field with limited work conducted on the property until 1966.

Cadillac Explorations Ltd ("Cadillac") acquired the property in 1966 and, during 1966 to 1969, explored the mineralized zones now known as Zones 3, 7 and 8 through bulldozer trenching and exploratory cross-cuts.

In 1970, the property was optioned to Penarroya Canada Ltd ("Penarroya"). Underground development of Zone 3 was carried out, as well as bulk sampling and preliminary metallurgical test work. Some surface drilling was carried out on Zones 6, 7 and 9. In late 1970, Cadillac terminated the option agreement with Penarroya. Between 1970 and 1980 extensive underground development of Zone 3 at the 3,050 foot and 2,850 foot levels (today referred to as the 930 and 870 metre levels) took place.

In 1980, an independent feasibility study was completed by Kilborn Engineering (BC) Ltd. Financing negotiations were completed with Procan Exploration Company Ltd., a private company owned by Nelson Bunker Hunt and William Hunt of Texas. In 1980, Cadillac acquired the 1,200 ton per day Churchill Copper concentrator which was dismantled and transported on the winter road to Prairie Creek.

e123145cdce077f9d32fHunt BrothersBy May 1982, the surface facilities were 90%-95% completed, and mine preparation work to produce an initial 500 tons per day had been finalized. A total of CDN$64 million had been expended on the Project. At that time the silver price collapsed and Cadillac was forced into bankruptcy, after the Project, together with all other assets of Procan, were tied up in litigation until 1990.

In 1991, Conwest Exploration Company Limited acquired the property and granted an option to Canadian Zinc Corporation (then known as San Andreas Resources Corporation) (the “Company”) to acquire a 60% interest in the property. Since 1991, Canadian Zinc has completed more than 78,000 metres of surface diamond drilling and underground exploration programs which have greatly expanded the reserves and resources on the property.

In 1992, the discovery of the stratabound-type mineralization in the main zone opened up multiple exploration targets for deposit expansion.

In 1993 and 1994, the Company completed initial environmentalassessment research, further metallurgical studies in addition to diamond drilling. The 1995, drill program explored for the extension of the vein to the north on 200 metre step-out sections. All drill holes successfully intersected the vein structure and demonstrated the continuance and strength of the Click to view our Image GalleryCamp Established in 1960svein which now has a strike trend length of 2.1 kilometres and remains open at depth and along strike.

In 1996, the Company successfully completed the negotiation of The Prairie Creek Development Co-operation Agreement with Nahanni Butte Dene Band.

In 1997, the underground workings were rehabilitated in order to complete detailed chip sampling of the vein at the 930 metre and 870 metre underground levels.

In January 2001, Canadian Zinc completed a Scoping Study designed to outline and guide the re-development of the mine and mill on the Prairie Creek Property. The preliminary study indicated the feasibility of a mining and milling operation on the site and identified a number of different development and production scenarios. The operation would utilize the existing mine and mill infrastructure put in place in 1982, but never operated. Indicated capital costs for the new operation were estimated in 2000 to be CDN$40.5 million, including the construction of an all-weather access road to the site. The 2001 Scoping Study is now considered to be out of date and should not be relied upon.1981 Construction 2Mine Construction in 1981

Between 2003 and 2005, the Company’s principal focus was to advance the Prairie Creek Project towards development, principally through permitting. In 2001, the Company applied for two surface exploration drilling permits, an underground exploration permit, a pilot plant metallurgical permit and a permit for use of part of the road from the property. Following Environmental Assessment the two surface exploration land use permits were issued in 2001. The underground exploration and pilot plant permit applications were referred for Environmental Assessment which lasted throughout all of 2001, 2002 and into June of 2003.

In September 2003, a Land Use Permit and Water Licence for underground exploration and development and for metallurgical testing in a pilot plant were issued to the Company by the Mackenzie Valley Land and Water Board ("MVLWB"). An appeal to the Federal Court seeking judicial review of the decision of the Water Board to issue the Water Licence was filed in October 2003 by the DehCho First Nations and heard by the Court in August 2005. In December 2005, the Court issued its Judgment directing the Water Board to reissue the Licence containing modified language which had been agreed between the Company and the Minister of Indian and Northern Affairs Canada. The Licence was reissued by the Board in February 2006.

The Company made significant progress during 2003. The issuing of the Land Use Permit and Water Licence in September 2003, after a 30 month arduous process, was an important step forward. The improvement in metal prices during 2003, including in particular, zinc, lead and silver, enhanced the attractiveness of the Prairie Creek Project.Building the Mine 1Mill Construction

With the general improvement in metal prices, and the investment market for resource companies, during the second half of 2003, the Company completed a number of financing's to fund the on-going permitting, exploration and development of the Prairie Creek Property. During 2003 a total of $15,619,802, before expenses, was raised, representing a significant improvement in the Company’s liquidity and working capital.

In 2003, the Company submitted a separate application for a Land Use Permit for use of the existing road from the Liard Highway to the mine site and claimed legal exemption from the Environmental Assessment process. The claim for exemption was denied by the Water Board and the Company filed an appeal to the Supreme Court of the Northwest Territories. That Appeal was heard by the Court in December 2004 and in May 2005 the Court issued its Judgment ruling that the proposed development is exempt under the Act from Environmental Assessment.

During 2004, the Company carried out an exploration program at the Prairie Creek Property. A total of 27 holes were drilled comprising 5,963 meters, directed at three different target areas with encouraging results, especially down dip to the north outside the immediate mine development area. At the same time the underground workings were rehabilitated in preparation for the planned decline and underground drilling program, whilst important site maintenance and environmental work was also carried out.

In the spring of 2004, the Company applied to the MVLand and Water Board for an amendment to expand the area of an existing diamond drill Land Use Exploration Permit. The application was referred for Environmental Assessment and this assessment was conducted by the Mackenzie Valley Environmental Impact Review Board throughout 2005, culminating in a decision dated December 23, 2005, in which the Review Board recommended to the Minister of Indian Affairs and Northern Development that the development proceed to the regulatory phase of approvals. On February 3, 2006, the Minister accepted the recommendations of the Review Board and the permit was issued by the Water Board to finalize the terms and conditions of the permit.

During 2005, the Company carried out an extensive program of site rehabilitation and maintenance including design of a new water treatment plant, upgrade of fuel facilities and the construction of a new water polishing pond.

CZN DSC 91231Prairie Creek Mine In 2006, the Company continued with the development of Prairie Creek, including surface and underground exploration and development. A new decline tunnel was driven from the end of the existing workings to provide access to deeper parts of the mine to enable infill and deeper exploration drilling. Underground diamond drilling commenced in late 2006 and was completed in early 2008. Phase 1 of decline development and drilling was completed in June 2007. It was decided to initiate Phase 2 of the decline extension and tunneling resumed in August 2007 followed by drilling in September 2007. The NI 43-101 resource report was finalized in October and demonstrated more than adequate resources to supply the mill for in excess of 14 years. Due to the success of the previous program defining adequate resources to enable a pre-feasibility study, the decline tunnel was halted in November and diamond drilling was terminated in December 2007.

In 2008, the operations permits were submitted to the regulatory authorities to initiate the permitting process for the mine.

Between 2010 and 2011, the Company undertook an exploration program 1.8 kilometres north of the last drillhole in the Main Zone resource and around the existing Measured, Indicated and Inferred resources, to examine the potential for resource expansion and to confirm geologic confidence in the resource model.

In 2011, after the completion of a three and a half year Environmental Assessment process, Canadian Zinc received approval for the proposed operation at Prairie Creek (for more details on the permits and the permitting process, please see the Permits/Permitting section). The MVERB issued its Report of Environmental Assessment and Reasons for Decision for CZN`s Prairie Creek Mine on December 9, 2011. The Review Board concluded that an environmental impact review of the proposed development was not necessary and that the project should proceed to the regulatory phase for approvals. Subsequent to this announcement, the Ministers with jurisdiction confirmed that an environmental impact review was not required for the Prairie Creek Mine.

In 2012 continued efforts were directed to obtaining all the necessary operating permits. In May, the Company received a Class "A" Land Use Permit for the activity of underground decline development for exploration and an extension to the existing Class "B" Water Licence. Also in 2012, a diamond drill exploration drill program continued and drill results were reported in November that included a high grade silver intercept of 2,059 g/t silver over 1.3 metres. The Company also renewed a Memorandum of Understanding with Parks Canada to ensure the continuing cooperative relationship and signed a Transportation Collaboration Agreement with the Government of the Northwest Territories.

The most significant development of 2012, however, was the delivery of a positive Preliminary Feasibility Study ("PFS") in June. The PFS was undertaken by SNC-Lavalin Inc. from its Vancouver office. A review of the Mineral Resource was undertaken and a new Mineral Resource estimate was prepared by AMC Mining Consultants (Canada) Ltd. ("AMC") and a new Mineral Reserve was prepared by Barry Hancock, P. Eng.

As a result of the PFS and Mineral Reserve estimation, a new Technical Report was prepared by AMC for Canadian Zinc and filed on SEDAR on August 9, 2012.

In January 2013, CZN filed all its written responses to the MVLWB questions that were rasied by the various government agencies and other parties concerning the application for the water licence for the Prairie Creek Mine. Public hearings were held in Nahanni Butte and Fort Simpson, NWT, later in January and March. On July 8, 2013 the MVLWB issued a draft Type "A" Water Licence to the Federal government with a recommendation for approval.

In September 2013, Parks Canada issued a Land Use Permit and Type "B" Water Licence for the section of the road that passes through the Nahanni National Park Reserve. On September 18, 2013, the Minister of Aboriginal Affairs and Northern Development, acting on behalf of the Ministers with jurisdiction, approved and signed the Type "A" Water Licence for the Prairie Creek Mine.

In 2014, efforts were focused on advancing the project through the ongoing optimization, planning and engineering for incorporation into feasibility studies considered necessary to secure the financing to complete the development and construction of the project and to place the mine into production.

During 2014, the Company engaged AMC Mining Consultants to undertake an underground optimization study of the mine with a view to reducing the initial cost of mine development, improving the mining methods, minimize mine operating costs and incorporate results of exploration drilling programs not recently included into an updated mineral resource estimate. AMC also undertook a number of underground mine studies, including a geotechnical assessment to determine the optimum mining methods for use in the design of the new mine plan, and underground ventilation and backfill studies were also completed.

AMC completed a geotechnical analysis of the existing underground workings and concluded that longhole stoping methods were a viable and preferable mining method for the project. The longhole stoping is expected to reduce operating costs and increase mine productivity when compared to the cut and fill method proposed in the Pre-Feasibility Study (PFS) from 2012.

A new mineral resource estimate, completed by AMC in March 2015, has demonstrated an increase in overall resource tonnages in the Indicated and the Inferred categories. The new mineral resource updates the previous resource estimate reported in June 2012, which was incorporated into the PFS.

During 2014, the Company engaged Tetra Tech WEI Inc. to provide technical services for basic engineering and procurement services for the development of major equipment packages, facility rehabilitation and repair work and capital items for the Prairie Creek Mine with the goal to refine and augment the design work completed previously and generate definitive feasibility level estimates of the capital cost and schedules, and in turn reduce contingency factors.

Tetra Tech developed tender packages for mine rehabilitation and development; mill completion, power generation and distribution; heat recovery systems; a dense media separation plant; a paste fill plant; a water treatment plant; instrumentation and control systems; camp construction; and winter road construction and maintenance. Plant engineering and design work by Tetra Tech has identified the possibility and desirability of enhancing the grinding and flotation circuits to increase the mill’s capacity and throughput.

The contract tendering and procurement process, managed by Tetra Tech, is nearly complete and has been an important phase of the Prairie Creek Project that refines and augments the design work completed previously and will generate definitive estimates for a large portion of the capital cost required to place the Prairie Creek Mine into operation.

Negotiations with vendors are being finalized and the Company expects to be able to compile the complete capital cost estimate for inclusion into an updated preliminary feasibility study targeted to be completed later in the 2015.

Canadian Zinc has been working with a number of experts in the transportation business to identify optimum transportation routes and methods, along with the associated costs. The transportation plan utilized in the 2012 PFS envisaged the use of the access road from the mine site to the Liard Highway only in the winter months of each year, both for the outbound transportation of concentrates and for the inbound transportation of equipment and supplies, including diesel fuel. This winter road plan would necessitate a large investment in working capital to finance consumables and supplies and also a large build up in concentrate inventory awaiting transportation and sale, and would also involve a major mobilization and logistical exercise.

Accordingly, in pursuit of possible improved economics, consideration is now being given to the construction and use of an all season road which would enable the transportation of both supplies and concentrates in smaller volumes spread throughout the year.

In 2014, the Company engaged Cliveden Trading AG, an international metal trading and advisory company based in Switzerland, to formulate a comprehensive market assessment and marketing strategy for all concentrate production and advise CZN on commercial and marketing matters. Cliveden has identified multiple smelter destinations and is developing marketing strategies as well as advising on expected treatment charges and penalties for the Prairie Creek concentrates.

These studies are ongoing and include lab testing using new and different reagents combined with trade-off evaluations of projected economics to better determine optimum concentrate specifications and payability of the contained metals. The results of these metallurgical studies will be incorporated into the updated preliminary feasibility study.

At the same time as the underground program is proceeding, upgrades and repairs of existing surface facilities continued. This surface program includes completing further site testing and engineering design work for the proposed water storage pond and the waste rock pile, including conducting penetrometer tests on the pond substrate, and additional test pitting in the base area of the proposed waste rock pile facility.

Continued demolition of the old mill powerhouse generators and switchgear to prepare the powerhouse for the proposed new power generating equipment is also being carried out. Further upgrades of workshops and assessment of the sewage treatment plant has been completed.

In March 2016, Canadian Zinc has signed agreements with Korea Zinc and Boliden for the sale of zinc and lead concentrates to be produced at the Prairie Creek Mine. These offtake arrangements with two of the pre-eminent smelting companies in the world, confirming the marketability of Prairie Creek’s zinc and lead concentrates, represent a major step forward in the development of the Prairie Creek Mine and move Canadian Zinc closer to production.

Canadian Zinc has entered into a Memorandum of Understanding (“MOU”) with Korea Zinc Co., Ltd. (“Korea Zinc”) for the sale to Korea Zinc of approximately 20,000 to 30,000 metric tonnes of zinc sulphide concentrates, approximately 15,000 to 20,000 metric tonnes of lead sulphide concentrates and approximately 5,000 tonnes of lead oxide concentrates, per year, for a minimum period of five years from the date of startup of the Prairie Creek Mine, with exact annual quantiles to be mutually agreed.

Canadian Zinc has also entered into a Memorandum of Understanding with Boliden Commercial AB, (“Boliden”) for the sale to Boliden of a minimum of 20,000 dry metric tonnes and up to 40,000 dry metric tonnes of zinc sulphide concentrates, per year, for a minimum of five years from the start of regular deliveries, with exact annual quantities to be mutually agreed.

These sale agreements will represent all of the planned production of zinc concentrate and about half of the planned production of lead concentrate for the first five years of operation at the Prairie Creek Mine. It is expected that shipments will be made from the Port of Vancouver with the exact shipping schedule and lot sizes in each delivery to be mutually agreed within the Project’s shipping season.

The sales agreements will provide that treatment charges will be set annually at the annual benchmark treatment charges and scales, as agreed between major smelters and major miners. Payables, penalties and quotational periods will be negotiated in good faith annually during the fourth quarter of the preceding year, including industry standard penalties for mercury contained in the zinc concentrate based on indicative terms and agreed limits specified in each MOU.

Metallurgical studies are also being carried out to further optimize and update the proposed mill flow-sheet with the objective of improving the quality of the concentrates by enhancing recoveries and reducing deleterious elements. The zinc concentrate to be produced from Prairie Creek is expected to contain relatively high levels of mercury and the potential reduction of this deleterious element will enable the zinc concentrate to be treated in a greater number of zinc smelters.

In 2016, the Company completed a Preliminary Feasibility Study (“2016 PFS”) (Technical Report filed on SEDAR September 30, 2016) highlghts of which are given below:

Highlights of the 2016 Prairie Creek Prefeasibility Study

(All costs are in Canadian dollars unless indicated otherwise, g=gram, tpd=tonnes per day, dmt=dry metric tonnes, LOM=life of mine, CDN=Canadian, US=United States).

Post-tax Net Present Value, using an 8% discount, of $155 million, with a post-tax internal rate of return of 18%, based on base case metal price forecasts of US$1.00 per pound for both zinc and lead and US$19.00 per ounce of silver, for the LOM production at an exchange rate of $1.25CDN:$1.00US.

  • Average EBITDA of $64 million per year and cumulative EBITDA of $1.0 billion over the LOM.
  • 17 year mine life based exclusively on a defined mineral reserve of 7.6 million tonnes, grading 8.9% zinc and 8.3% lead, with 128 g/t silver, including a defined Mineral Reserve in the Main Quartz Vein of 5.2 million tonnes, grading 9.4% zinc, 10.4% lead and 160 g/t silver.
  • Average annual production of 60,000 dmt of zinc concentrate and 55,000 dmt of lead concentrate containing 86 million pounds of zinc, 82 million pounds of lead and 1.7 million ounces of silver.
  • Pre-production capital cost is estimated to be $216 million of which $59 million will be incurred in year 1 and $157 million in year 2, with an additional contingency of $28 million.
  • Average LOM cash operating costs per tonne of ore mined (before transportation costs) are estimated at $165 per tonne.

The 2016 PFS does not take into consideration the Inferred Resources of 7.0 million tonnes of 11.3% zinc, 7.7% lead and 166 g/t silver, which is currently too speculative geologically to have economic considerations applied to them, but could have the potential to more than double the presently considered mine life. The Prairie Creek orebody continues open-ended at increasing depths to the north.

The 2016 PFS does not take into consideration the Inferred Resources of 7.0 million tonnes of 11.3% zinc, 7.7% lead and 166 g/t silver, which is currently too speculative geologically to have economic considerations applied to them, but could have the potential to more than double the presently considered mine life. The Prairie Creek orebody continues open-ended at increasing depths to the north.

Ausenco has the relevant engineering experience and expertise, including northern design and project execution at brownfield sites, to prepare a Project Execution Plan that will define the approach to constructing the Prairie Creek project. This will include the development of a contracting and procurement strategy for further stages of work, which will align with the project execution schedule and will serve to support the capital cost estimate and make provision for the identified execution risks and opportunities. The plan will be developed with the objective of converting it to an Engineering Procurement and Construction Management (“EPCM”) contract at the appropriate time.

Concurrently, the Company has also retained HCF International Advisers (“HCF”) as financial advisers to arrange debt financing for the Project. HCF is currently developing a funding strategy with the goal of arranging debt financing of up to 70% of the capital expenditures required once the DFS is completed.

Over the past eight years Canadian Zinc has successfully completed six environmental assessments and obtained all the significant regulatory permits and social licences required to complete construction and development at the mine site and a winter access road to allow commencement of mining and milling at Prairie Creek. An environmental assessment for the Company’s permit application for use of the access road on an all season basis is currently underway and completion is expected in August 2017.