Operational Plan

Proposed Prairie Creek Mine Operation:

ConceptMineSite Aug2012

Site Infrastructure

The Mine Site presently contains a near complete mill, three levels of underground workings, a fuel tank farm, office facilities, accommodation facilities and workshops. Existing buildings and structures will be upgraded and modernized. New facilities will include fuel-efficient low-emission power generation units, a kitchen/accommodation block, concentrate shed and an incinerator.

Mining

jumbo-resizeSingle Boom Jumbo on the 880 Level

The mine will be an underground operation, based primarily on mining the Main Quartz Vein, with a steady state production rate of 1,350 tonnes per day over a 17-year mine life. During full production, approximately 485,000 tonnes of ore per year will be mined. A detailed mine plan has been developed that provides for early access to key areas underground to maximize the metal mined while minimizing mine development.

Mining will be primarily by long-hole open stoping (“LHOS”), with mechanized drift-and-fill (“DAF”) employed for the extraction of the SMS ore, and with the disposal of tailings material underground as paste backfill to be carried out for both mining methods. The objective and operating plan is to use and dispose of 100% of the flotation tailings as backfill.

The mill feed grades from the mine over the first 10 years of operations are projected to be higher than the average LOM feed grades. This is because the major part of ore targeted for mining during the first 10 years is from higher grade areas of the MQV. It is anticipated that exploration definition drilling will be completed in tandem with mining operations and, based on previous exploration experience showing a high conversion rate of Inferred to Indicated Mineral Resources, there is a significant probability that a similar rate of mining in the MQV could be maintained beyond the first 10 years, which would have the potential to further enhance the economics of the operation.

Mine PlanProposed Underground Development to Extract Measured and Indicated Resources

Mill

IMG 5290Mill View From Catchment Pond Dyke

The mill, which was almost completely constructed but never operated in the early 1980's, will have a 1,500 tpd crushing capacity, with an installed jaw crusher, short head cone crusher, double-decked screen and a 2,000t ore bin.

The Prairie Creek plant is planned to process the run-of-mine (“ROM”) ore produced from the underground mine. The daily operating throughput will be approximately 1,200 to 1,350 tpd to a Dense Media Separation (DMS) facility, which is at the front end of the mill. The DMS product will be fed to the grinding and flotation circuit at a feed rate is 955 tpd. The designed grinding and flotation circuit availability is 92%. The proposed process flowsheet for the Prairie Creek Project will include:

  • Two stages of crushing to reduce the ROM ore to 100% passing 16 mm.
  • DMS on the coarse fraction of the crushed ore to reject gangue minerals.
  • One stage of grinding on the pre-concentrated ore to 80% passing 80 µm.
  • Lead sulphide flotation producing a lead sulphide concentrate.
  • Zinc sulphide flotation producing a zinc sulphide concentrate.
  • Lead oxide flotation producing a lead oxide concentrate.
  • Concentrate dewatering and load-out systems.
  • Tailings dewatering and paste backfill preparation systems.

Metallurgical tests from the MQV and SMS indicated the two types of mineralization can be commingled during processing without significantly affecting their metallurgical performances. The metallurgical performance of mineralization from the STK is expected to be similar to the vein mineralization. More and better information concerning the characteristics of the ore obtained from studies conducted over the past two years has enabled the design of an enhanced mine plan, which will supply optimal feed to the process plant and provide better predictability of quantity and quality of concentrate products.

 

Concentrate Production

The Prairie Creek Project will produce three types of concentrates: zinc sulphide, lead sulphide and lead oxide. CZN plans to combine the two lead concentrates into one concentrate at the mill site. The concentrates will then be transported in enclosed haul trucks via the mine access road and Liard Highway to Fort Nelson, and from there by train to the Port of Vancouver.

As announced on March 3, 2016, Canadian Zinc has signed MOUs with Korea Zinc and Boliden for the sale of zinc and lead concentrates. These offtake arrangements, with two of the pre-eminent smelting companies in the world, confirm the marketability of Prairie Creek’s zinc and lead concentrates.

The 2016 PFS indicates average annual production of 60,000 tonnes of zinc concentrate and 55,000 tonnes of lead concentrate, containing approximately 86 million pounds of zinc, 82 million pounds of lead and 1.7 million ounces of silver. The sale agreements referenced above will account for 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.

The sales agreements will also 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 based on indicative terms and agreed limits specified in each MOU.

Treatment and refining charges, including deductibles, payable and penalties, vary with smelter location, and individual smelter terms and conditions. The Economic Model used in the 2016 PFS has been prepared assuming average blended indicative treatment charges of US$212 per tonne for zinc sulphide concentrates and US$195 per tonne for lead concentrates, with industry standard penalties, including mercury penalties of US$1.75 for each 100 ppm above 100 ppm Hg per tonne of concentrate.

The Prairie Creek zinc concentrates will contain, to varying degrees, relatively high levels of mercury, reflecting the high grade nature of the orebody. The mercury grade is not consistent throughout the orebody and can vary significantly in different areas of the mine. Canadian Zinc has developed a comprehensive mercury grade prediction model, which has been integrated into the mine plan, in order to better predict and manage the grade of mercury reporting in individual shipments of zinc concentrate.

With the new detailed mine plan model and process schedule, more accurate predictions can be made of the quality and quantity of concentrate that will be produced from year to year during the life of the mine. In summary, it is expected that approximately 20% of the zinc concentrate will grade less than 0.1% Hg; 33% less than 0.15% Hg; 50% less than 0.2% Hg; 92% less than 0.25% Hg; and 100% less than 0.3% Hg, with an average life of mine expected mercury grade of 0.175% Hg. The economic model in the 2016 PFS includes mercury penalties ranging from $700,000 to $4 million per year, with an average of approximately $2 million per year.

 LocationRegional Northwest Territories Map Showing Prairie Creek Mine Location and Mineral Concentrate Haulage Route To Fort Nelson Railhead

Access Road Construction and Transportation Plan

Concentrates will be trucked out and supplies delivered over a proposed new all-season road to connect the mine site to the Liard Highway. Transportation over the all-season road will be staged over the year utilizing an ice bridge in winter and a barge in summer to cross the Liard River.

The transportation plan utilized in the 2012 PFS envisaged the use of the access road 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.

In April 2014, the Company submitted an application to the Mackenzie Valley Land and Water Board and to Parks Canada for Land Use Permits to permit the possible future upgrade of the current winter access road to all-season use. The application is now undergoing environmental assessment before the Mackenzie Valley Review Board.

The all season road will reduce energy costs and also enable the consideration of more environmentally friendly alternative energy sources. Local gas fields in the area may be producing LNG in the near future, which may provide an opportunity to reduce reliance on diesel fuel. An all season road would also have environmental and safety benefits, in that spreading out the trucking schedule over the full year would avoid high or congested traffic in winter months, therefore lower the risk of any accidents or spills.

Canadian Zinc currently holds all the significant regulatory permits for the construction and use of the access road in winter but does not yet hold the permits for the all season road. The Company anticipates that the environmental assessment process for the proposed all season road permit application will take most of the year 2016.

Upon reaching the Liard Highway, concentrates will be trucked to the railhead at Fort Nelson and transported by rail to the port of Vancouver for shipment to smelters overseas. Inbound freight will be trucked as backhaul over the same route. A staging area will be established at the junction of the mine access road and the Liard Highway. A loading area will be constructed at the railhead in Fort Nelson.

Transportation costs included in the 2016 PFS have been estimated at $65 per tonne of ore mined, which includes approximately $33/t for road/truck transportation, $24/t for rail and trans-loading and $8/t for ocean freight.

Incorporation of an all season road for future operations would have significant financial implications, both in additional capital cost but also in potential savings and lower finance costs. Because of the environmental and economic benefits indicated from the operation of a year round road, early in 2014 the Company applied to the regulatory authority for a Land Use Permit for an all season road into the Prairie Creek mine. The all season road application is presently in Environmental Assessment and Company is submitting it’s required Developer’s Assessment Report shortly.  In tandem with this the Company is currently finalizing the design and cost estimates of a potential all season road for inclusion into the capital cost schedule of the Prairie Creek Project, along with incorporating the consequent reduction in operating costs.

Power Generation

Five new 1.5 MW diesel powered generator units will provide power and heat for the site. These self-contained, pre-commissioned power generator units, supplied on a lease-to-own basis, will be located adjacent to the mill. Maximum power load for the site is estimated at 5.2 MW. These generators will be outfitted with heat recovery systems to maximize energy efficiency. The waste heat from the generators will be used to heat the surface facilities and mine air.

Power Plant UpgradePresentation Slide Showing the Power Plant Upgrade

Water Quality and Management

The Water Storage Pond is an existing large pond, originally intended in 1980 for tailings disposal, will be reconfigured, relined, expanded and recertified to form a two-celled Water Storage Pond. Mine drainage, treated sewage water and waste rock pile runoff will report to the first cell. Used water from the Mill will report to the second cell. The first cell will feed water to the Mill for mineral processing. Excess water from both cells will be sent to a water treatment plant. The treated water will discharge to the existing Catchment Pond before final discharge to the environment via an exfiltration system.

ProposedWSPSept2012WebProposed Water Storage Pond Showing Cells

Waste Management

Tailings from the mill will be placed permanently underground as paste backfill, produced in a new paste backfill plant, and augmented by DMS reject material in the event of any volume shortfall. The majority of DMS reject and mine development material will be placed in a newly created Waste Rock Pile facility located behind the mill off the Prairie Creek floodplain.

CPD Fig 2-14Proposed Waste Rock Pile Location

Employment

Approximately 150 people are expected to be employed during initial project construction. A new accommodation block will be constructed at site to accommodate the workforce.

During operations the mine will employ a total of approximately 316 people, including truckers, with half of the employees being on-site at any one time, and with an additional 28 off-site in the Fort Liard and Fort Nelson areas. Personnel will work shifts of three weeks in/three weeks out, with transport by charter flights to the existing on-site 1,000m gravel airstrip. Canadian Zinc’s hiring policy and commitments under its signed Impact and Benefits Agreements are to give preference to qualified local community residents, followed by northern residents. Training programs will be organized to further promote and maximize local aboriginal employment.

Mine Closure

At the end of the Mine’s life, the Mine Site will be reclaimed. The underground development will be fully backfilled so as to help limit the movement of groundwater. The objective is to create a seal to minimize the movement of groundwater in the mine workings and limit the release of any contaminants. The waste rock pile will be covered with a clay-rich soil to limit infiltration and seepage. Mine Site buildings and infrastructure, if deemed not to have any future use, will be dismantled and the Mine Site will be returned to its natural setting.