NZC-TSX
NORZF-OTCQB
VANCOUVER, May 13, 2019 /CNW/ - NorZinc Ltd.
(TSX: NZC; OTCQB: NORZF) ("NorZinc" or "the Company") reports its
interim financial results and development activities for the first
quarter ended March 31, 2019. ("Q1
2019"). (All amounts are in Canadian dollars unless otherwise
stated. M = million).
Q1 2019 Results & Recent Highlights
- Financial and Corporate
-
- Hired Prairie Creek Project Manager (Apr)
- Engaged Cliveden Trading AG to provide concentrate marketing
support (Apr)
- New Board member and Chair Proposed (May)
- Cash at March 31, 2019 -
$6.5 million (Mar)
- Loss for Q1 2019 - $2.6 million
(Mar)
- Prairie Creek - Permitting and Indigenous Groups
-
- Traditional Lands Use Agreement for ASR signed (Jan)
- Post-EA information package filed for All Season Road (ASR)
(Feb)
- ASR advances to Permit drafting stage (Mar)
- ASR Initial comments received (Apr)
Summary
The Company's activities are primarily focussed on the
completion of permitting and ultimate development of the Prairie
Creek zinc-lead-silver mine in the Canada's Northwest
Territories. The Prairie Creek mine has previously received
operating permits in 2013 based upon a winter road access to the
mine, but recent development planning has been based on all season
access to the mine. The Company is in the latter stages of
the permitting process for the All Season Road ("ASR") with the
current timeline indicating permit receipt in late Q3 2019 based on
the schedule provided by the regulators.
The development of the mine, subject to the above permit receipt
and full financing, is planned to commence in Q1 2020 with
construction of phase 1 of the ASR and with limited site activities
during 2020, followed by the main construction and development
activities during 2021 and 2022, culminating in completion of the
ASR and site development, and commencement of operations in the
latter part of 2022. The Company has been considering multiple
development financing opportunities and currently anticipates
financing the 2020 activities from non-bank sources with the main
development funding from the latter part of 2020 expected to be
sourced largely from the debt markets as equity markets for junior
base metal companies are currently at recent historic lows.
Since January 1, 2019 the Company
has made significant advances towards the successful development of
the Prairie Creek mine.
- In January the company signed a Traditional Land Use Agreement
with Nah?a Dehé Dene Band ("NDDB")
and is currently progressing toward the signing of a Road Benefit
Agreement with Łíídlįį Kų́ę́ First Nation ("LKFN") and an
Environmental Management Agreement with NDDB and LKFN.
- In February the company submitted its final Post-EA Information
Package to the regulators and received the initial comments from
the official reviewer organizations in April. Various extensions
have been requested and granted but all are within the timeline
previously provided by the regulators.
- In April, after an extensive search, the Company announced the
hiring of its Project Manager for the development of the Prairie
Creek mine and anticipates hiring additional key development
personnel throughout 2019.
- In May the Company announced changes to its board of directors
to prepare the Company for its next phase of development. The
Company anticipates further changes in 2019.
- Since January, the Company has undertaken a number of
initiatives to advance the financing of the development of the
Prairie Creek Mine and contemplates making various announcements
during 2019 as these processes develop.
All Season Road - Regulatory Approval
The Environmental Assessment ("EA") of the ASR was completed in
2018. With the Company's submission of the requested Post-EA
Information Package in February 2019,
subsequently deemed complete in March
2019, the ASR permit has now entered the final permitting
stage jointly with the Mackenzie Valley Land and Water Board
("Water Board") and Parks Canada (jointly "MVLWB & Parks").
Comments from registered reviewers on the Post-EA Information
Package were received April 25, 2019,
to which the Company is responding to by May
15, 2019. A permit is expected, based on the draft schedule
provided by the regulators, to be received in late Q3 2019. The
permit is expected to incorporate the recommended mitigation
measures included in the EA Report and will require additional
reclamation security deposits yet to be determined and not included
in the 2017 FS.
The construction schedule of the ASR requires an initial Phase 1
winter road be established in order to gain initial access to the
project site and, at the same time, provide required geotechnical
data to finalize the ASR route design. Due to local terrain
challenges, small sections of the Phase 1 road would be constructed
using non-typical methods of winter roads. The ASR will follow the
general alignment of the previously permitted winter road, while
reflecting the terrain, site characteristics, and road
specifications suitable and preferred for an all season road.
Indigenous Agreements
NDDB of Nahanni Butte is the
nearest community to the Prairie Creek Mine, located approximately
90 kilometres southeast of the mine site. The mine site and route
of the ASR are within NDDB's Traditional Territory. LKFN of
Fort Simpson are the largest
community within the Dehcho Region. Fort
Simpson is located about 185 kilometres east of the mine
site. In 2011, the Company signed an Impact Benefit Agreement with
the NDDB (the "Nahanni IBA"), and subsequently signed a similar
agreement with the LKFN (the "LKFN IBA") for the development of the
Prairie Creek Mine, which contemplated access to the mine via a
winter road only. In both agreements, NDDB and LKFN agreed to
support the Company in obtaining all necessary permits and other
regulatory approvals required for the Prairie Creek Mine Project.
Recognizing the ASR may have additional potential impacts and
effects on both groups as compared to a winter-only road, the
Company initiated additional consultation discussions and
negotiations with both groups involving supplemental agreements. As
a result of the negotiations, in January
2019, the Company signed a Traditional Land Use Agreement
("TLUA") with the NDDB for the construction and operation of the
ASR.
The Company is also finalizing negotiations for a Road Benefit
Agreement ("RBA") with the LKFN. As part of the EA Report
engagement, the NDDB and LKFN entered into an agreement with the
Company which provides for the negotiation of an Environmental
Management Agreement ("EMA"). The EMA is intended to be a formal
mechanism, tested in other projects, to, in addition to regulatory
instruments, provide for Indigenous participation in environmental
management, and to ensure that the mitigative measures and
environmental protection commitments in the EA Report are
appropriately implemented. It will also involve Dene participation
in the environmental management of the ASR, a cornerstone of which
is a Dene-led independent monitoring program. The EMA agreement
will also provide for Dene communities' review, participation and
oversight of environmental monitoring of the ASR during permitting,
design, construction, operation and closure phases, and the
implementation of the mitigation measures contained in the EA
Report.
The Dene communities and the Company intend the EMA to provide
for a consultative and cooperative approach to environmental
management of the ASR that will establish the appropriate
responsibilities of the NDDB, LKFN and the Company in the
development, project design, ongoing review and monitoring, as well
as modification of follow-up programs to mitigate potential effects
on the environment and to provide transparency and oversight to
local communities.
These aforementioned agreements, both completed and near
completion, provide assurance the Prairie Creek Mine has strong
local Aboriginal support as the ASR moves through the final stage
of permitting.
Timing
NorZinc plans to construct the ASR over parts of three calendar
years, initially in Phase 1 (2020) as a winter road and in Phase 2
(2021-2022) installing bridges, culverts and surfacing the road.
Prior to each phase of construction activity, the Company plans to
complete further field investigations and site plans and award
construction contracts. During Phase 1 the Company plans to
undertake geotechnical work on the ASR route to determine final ASR
design and Phase 2 bidding parameters. Dependent on the permitting
and financing timeline, construction of the ASR is planned to
commence from a winter road in early 2020 and continue into 2022,
in parallel with continuous and ongoing site construction and
project development.
Financing Initiatives
The Company continues to assess various options for financing
the development of Prairie Creek, these include alternative project
financing, discussions with strategic investors, governmental
supported funding, leases and other financing mechanisms. The
Company has since mid-2018 broadened its assessment of financing
opportunities, including working with the Indigenous communities
and various levels of government to source financing that could
support the ASR construction which entirely traverses Dene
traditional territory.
The Company has been working with HCF International Advisers as
financial advisers since late 2016 to facilitate the raising of
project debt financing of up to 70% of the capital expenditures
required for the Prairie Creek Mine. The market for project
lending is currently reasonably strong, however, as described
below, equity markets for junior base metal companies are currently
at recent historic lows.
Marketing
The Company has retained Cliveden Trading AG to advise on
current and future market conditions for zinc and lead
concentrates. NorZinc has signed non-binding Memorandum of
Understanding ("MOU") with each of Korea Zinc Company ("Korea
Zinc") and Boliden Commercial AB ("Boliden") for the sale of the
Company's planned zinc concentrate production (and with Korea Zinc
for planned lead concentrate production) confirming the
marketability of both concentrates. The planned zinc concentrate
production will contain, to varying degrees, relatively high levels
of mercury. Since signing the MOUs almost three years ago, more
concentrates with elevated levels of mercury are being produced and
processed, laws around the world for mercury production continue to
change, and technology regarding the safe removal of mercury has
improved. The Boliden MOU was to expire on December 31, 2018 and has been extended to
June 30, 2019. The Company is
continuing discussions with Boliden on the further extension and
possible addition of lead concentrate to the Boliden MOU.
Newfoundland Properties
The Company holds four, high-grade zinc-lead-copper-gold-silver
volcanogenic massive sulphide ("VMS") deposits consisting of
Lemarchant, Boomerang-Domino, Long
Lake and Tulks East. Three of these have resource estimates
and Tulks East has a historical resource. Plans for 2019
include:
- Reduce land holdings and maintain the core land position that
includes:
-
- 3 base metal deposits having National Instrument (NI) 43-101
compliant resource estimates; and
- the Tulks East historic base metal resource.
- Advance specific economic and structural studies on the
Lemarchant deposit.
- Consider optioning out key land holdings with high gold
exploration potential.
Since acquiring the Newfoundland assets, the Company has completed
47,000 metres of drilling on its properties and increased indicated
resources by almost 40%. The Company's exploration strategy in
Newfoundland is to continue to
build on its existing polymetallic resource base with the aim of
developing either a stand-alone mine, similar to the past-producing
mines at Buchans and Duck Pond, or
a number of smaller deposits that could be developed simultaneously
and processed in a central milling facility.
Financial Results for the First Quarter of 2019
For the three months ended March 31,
2019, the Company reported a net loss and comprehensive loss
of $2,601,000 compared to a net loss
and comprehensive loss of $1,831,000
for the three months ended March 31,
2018.
Liquidity
At March 31, 2019, the Company had
a positive working capital balance of $6,001,000 which included cash and cash
equivalents of $6,459,000 and
short-term investments of $38,000. At December
31, 2018, the Company had cash and cash equivalents of
$9,253,000, short-term investments of
$32,000 and a positive working
capital balance of $8,327,000.
Outlook and Factors Affecting Performance
NorZinc's focus for 2019 is to continue the development of the
Prairie Creek Project and advance the Prairie Creek Mine towards
production.
The business of mining for minerals involves a high degree of
risk. NorZinc is an exploration and development company and is
subject to risks and challenges similar to companies in a
comparable stage and industry. These risks include, but are not
limited to, the challenges of securing adequate capital,
exploration, development and operational risks inherent in the
mining industry; changes in government policies and regulations;
the ability to obtain the necessary permitting; as well as global
economic and metal price volatility; all of which are
uncertain.
In particular, the Company does not generate revenue. As a
result, the Company continues to be dependent on third party
financing to continue exploration and development activities on the
Company's properties, maintain capacity and satisfy contractual
obligations. Accordingly, the Company's future performance will be
most affected by its access to financing, whether debt, equity or
other means. Access to such financing, in turn, is affected by
general economic conditions, the price of metals, exploration and
development risks and the other factors described in the section
entitled "Risk Factors" in this MD&A and the Company's most
recent AIF.
At March 31, 2019, the Company had
cash and cash equivalents and short-term investments totaling
$6.5 million and a working capital
balance of $6.0 million. The
long-term price outlook for zinc and lead remains positive.
Supported by the robust economics indicated by the 2017 FS, NorZinc
will continue to pursue all alternatives for raising the senior
financing necessary to complete the development and construction of
the Prairie Creek Mine.
At the Prairie Creek Mine Site, further de-risking programs are
planned in 2019 and include detailed engineering and design of the
mine facilities, assessment of, and proposals for, rehabilitation
of certain site facilities in anticipation of construction,
including site cranes, accommodation, the mill roof and some
electrical facilities. The Company will be considering
refurbishment of some of those items in the 2019 summer season,
prior to main construction activities planned for 2020.
On the permitting and environmental side, the Company received a
positive recommendation of the EA Report by the Responsible
Ministers in October 2018 and has now
moved from the EA process to the permitting phase for the issue of
the land use permits for the ASR by the MVLWB & Parks. The
regulatory phase is expected, based on the schedule provided by the
regulators, to be completed in the third quarter of 2019.
The Company concluded an important TLUA agreement with NDDB and
is negotiating the RBA agreement with LKFN, all the while
continuing engagement with both Indigenous groups on the
implementation of various mitigation measures recommended by the
Review Board in the EA Report of the ASR to seek agreement on the
incorporation of Dene traditional knowledge and the inclusion of
both Indigenous groups in environmental monitoring.
The Company is assessing various options for financing the
development of Prairie Creek, these include alternative project
financing, discussions with strategic investors, governmental
supported funding, leases and other financing mechanisms. These
opportunities and the risks are described in more detail elsewhere
in this MD&A.
About NorZinc
NorZinc is a TSX-listed mine development company trading under
the symbol "NZC". The Company is developing its key project, the
100%-owned high grade zinc-lead-silver Prairie Creek Mine, located
in the Northwest Territories. The
Company also owns projects in Newfoundland that host several
zinc-lead-copper-gold-silver deposits.
This news release should be read in conjunction with the
Company's unaudited condensed interim consolidated financial
statements for the three months ended March
31, 2019 and the related management's discussion and
analysis, which are available on the Company's website at
www.norzinc.com, under the "Financials" section, or under the
Company's profile on SEDAR at www.sedar.com.
Cautionary Statement – Forward-Looking Information
This press 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, 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. Mineral resources that are not mineral reserves do
not have demonstrated economic viability. Inferred mineral
resources are considered too speculative geologically to have
economic considerations applied to them that would enable them to
be categorized as mineral reserves. There is no certainty that
mineral resources will be converted into mineral reserves.
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.
SOURCE NorZinc Ltd.