Drills to turn at Prairie Creek

Vancouver — Having spent nearly 10 years promoting the Prairie Creek base metal project, Canadian Zinc (CZN-T) will again have the drills turning on the prospective property in the Northwest Territories.

The company’s first step will be to extend the high-grade zone of the deposit, which hosts a geological resource of 11.8 million tonnes grading 12.5% zinc, 10.1% lead, 0.4% copper and 161 grams silver per tonne. The measured and indicated resource is pegged at 3.6 million tonnes grading 11.8% zinc, 9.7% lead, 0.3% copper and 142 grams silver.

The junior is slated to start the program next month and has received a series of permits aimed at redeveloping the existing mine and mill.

Additional permits have moved into the environmental review process. They seek to allow:

• the drilling of 50-60 holes to add to the existing 250-hole database;
• the operation of a 1-tonne-per-hour pilot plant within the existing mill building; and
• the development of an underground decline.

Canadian Zinc aims to have all the necessary permits in hand and begin operations in early 2003.

The company (formerly known as San Andreas Resources) is under new management. In May 2000, mining engineer Malcolm Swallow was appointed president and chief executive officer, replacing Alan Taylor, who is now manager of exploration. John MacPherson was appointed chairman and Robert Gayton came on board as vice-president of finance. Hugh Morris, David Shaw and Wayne Lenton were added to the board of directors.

The junior subsequently raised $1.5 million through two private placements. Yorkton Securities took down 1.8 million flow-through shares at 42 each to raise $756,000. Clubb Capital of London subscribed to 1.5 million units at 50 each for an additional $750,000.

Last summer, Canadian Zinc initiated a scoping study to determine possible production levels, capital requirements and operating costs, while addressing transportation, metallurgical and environmental considerations.

The study was performed in-house, using independent consultants and contractors. It calls for a 1,500-tonne-per-day operation capable of producing 95 million lbs. zinc annually over 18 years.

Prairie Creek, known formerly as the Cadillac property, was financed in the early 1980s to within months of startup, largely by Procan Exploration, a private company owned by the Hunt bothers of Texas. Owner Cadillac Exploration suspended construction activities in May 1982, when it ran out of money due to a collapse of the silver price. Cadillac was forced into bankruptcy after incurring about $64 million in expenditures on the property.

Existing facilities at the site include:

• a lined tailings pond;
• camp accommodation for 200 personnel;
• maintenance, office and warehouse shops;
• four 1.1-megawatt diesel-powered generators and two smaller standby generators; and
• fuel storage tanks.

All of Procan’s assets, including the Prairie Creek project, were tied up in litigation until 1990. San Andreas optioned the property in 1991 from Nanisivik Mines. San Andreas was renamed Canadian Zinc in 1999. It now owns 100% of the project, subject to a 2% net smelter return royalty held by Titan Pacific Resources and capped at $8.2 million.

Under a 1996 development co-operation agreement, the Nahanni Butte Dene band will receive a 5% after-tax net profits interest. The band will also have the one-time right to buy either a 10% or 15% stake in the project (within three months of receiving permitting approval) in return for a cash payment of either $6 million or $9 million.

The Prairie Creek property is 300 km north of Fort Nelson, B.C. (the nearest railhead) and 450 km west of Yellowknife.