Mr. John Kearney reports

CANADIAN ZINC CORPORATION -- FINANCIAL RESULTS FOR SECOND QUARTER OF 2016 -- GRANT OF STOCK OPTIONS AND RESTRICTED SHARE UNITS

Canadian Zinc Corp. has released its interim financial results and development activities for the three- and six-month periods ended June 30, 2016.

This news release should be read in conjunction with the company's unaudited financial statements for the second quarter ended June 30, 2016, and the related management's discussion and analysis (MD&A), which are available on the company's website under the financials section or on SEDAR.

Financial results for second quarter of 2016

For the three- and six-month periods ended June 30, 2016, the company reported a net loss and comprehensive loss of $866,000 and $1,643,000, respectively, compared with a net loss and comprehensive loss of $2,613,000 and $6,435,000 for the same periods ended June 30, 2015.

For the three- and six-month periods ended June 30, 2016, the company expensed $385,000 and $693,000, respectively, on its exploration and evaluation programs at Prairie Creek, compared with $2,039,000 and $5,727,000, respectively, for the three- and six-month periods ended June 30, 2015. For the six-month period ended June 30, 2016, the company also expensed $111,000 on its exploration and evaluation properties in central Newfoundland compared with $148,000 for the comparative period in 2015.

Underwritten public offering of $10.2-million completed

On July 7, 2016, the company closed an underwritten public offering of common shares and flow-through shares through a syndicate of underwriters co-led by Paradigm Capital Inc. and Canaccord Genuity Corp. and including Dundee Securities Ltd.

The company issued 34,135,000 common shares at 25 cents per share for gross proceeds of $8,533,750, and 6,665,000 flow-through shares at 25 cents per share for gross proceeds of $1,666,250. In total, the gross proceeds of the offering amount to $10.2-million.

Outlook

Canadian Zinc's focus for 2016 will be to continue to advance the Prairie Creek mine toward production. The updated 2016 prefeasibility study (2016 PFS) indicates a robust project at consensus forecasts for the long-term prices of lead and zinc, and there is good potential for additional project optimization, enhanced economics and further extending of the mine life. The 2016 PFS, with the base case economic model, indicates a pretax NPV (net present value), using an 8-per-cent discount, of $509-million, with an IRR (internal rate of return) of 32 per cent, and after-tax NPV, using an 8-per-cent discount, of $302-million, with an IRR of 26 per cent with an initial mine life of 17 years and payback period of three years.

The strong fundamental results derived from the economic model, combined with improving commodity prices and a strong outlook for zinc prices, helped the company to raise $10.2-million in new financing in July, 2016.

Several commercial banks have expressed indicative interest in providing senior, secured project financing for the project. From discussions and investigations to date, while there is considerable interest on the part of financial and commodity institutions, particularly in the context of the positive outlook of the price of zinc, it has been indicated that the opportunity for raising bank debt financing for Prairie Creek would be enhanced with the production of a definitive or bankable feasibility study, which would address all of the contingences in the required detail and help to manage or reduce the various risk factors. The company is considering the benefits of continuing to work toward completion of a definitive feasibility study which could be required to support bank debt or other senior financing.

The 2016 PFS identified a number of project opportunities that, if implemented, could yield economic, operational and environmental benefits. The Prairie Creek mineral resource would support a substantial increase in mining/milling rates and a high-level assessment is envisaged of substantially increasing the mill capacity with various scenarios of mining and milling, including possible mill expansion that could lead to improved economics with more metal being mined and milled per year.

A recommendation from the 2016 PFS is the creation of a composite bulk sample, collected from recent underground drilling, on which to carry out locked cycle tests for better definition of the milling process, recoveries and reagent consumption, together with a high-level assessment of substantially increasing the mill capacity with various scenarios of mining and milling, including possible mill expansion. In addition, Tetra Tech has recommended further metallurgical variability tests be carried out from different mineralization zones for better understanding of metallurgical performances.

Some of these recommended mill capacity studies and metallurgical testing studies have been initiated, along with the continuing environmental assessment and permitting of the proposed all-season road. The company expects both initiatives will be carried out over the balance of the year.

The metallurgical testing program on the company's Newfoundland properties is continuing and will be followed-up by the development of a process simulation and cost assessment model, which will be used to help focus on the key factors that are critical to realizing the economic potential of the base metal deposits in central Newfoundland. This program, which is financially supported by the Research & Development Corporation of Newfoundland and Labrador (RDC), will continue throughout 2016 and is scheduled to be completed by November, 2016. The company is also planning a two-stage exploration program on selected targets, with the first stage of geophysical surveys to be conducted in the fall and the second-stage drill program planned for the winter of 2017.

Zinc has led the revival in base metal prices in the first half of 2016. The zinc price increased around 16 per cent in the second quarter of 2016, its best performance since 2010, taking its improvement in the year to date to 38.6 per cent. Recent spot prices for zinc have been over $1.02 (U.S.) per pound. The long-term outlook for lead and zinc remains very positive, and supported by the results of the 2016 PFS, Canadian Zinc will continue to evaluate all alternatives and possibilities for raising the senior financing necessary to complete the development and construction and put the Prairie Creek mine into production.

Prairie Creek permitting update

The company has 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 (MVRB).

Technical sessions took place in Yellowknife from June 13, 2016, to June 16, 2016. The purpose of the technical sessions was for all parties and regulators to discuss issues face to face in order to gain a better understanding of the all-season road project and its potential environmental impacts. The technical sessions generated a list of commitments and undertakings, to which Canadian Zinc is now responding. It is expected that once this is complete, a second round of information requests will be submitted to the company in late August.

In July, 2016, the company completed a fieldwork program gathering additional baseline data on vegetation, wildlife and stream crossings. Additional technical sessions on cultural impacts were also held in the local communities of Nahanni Butte and Fort Simpson on July 4 and July 5, 2016. The purpose of these sessions was to gather information from land and resource users in the two Dehcho communities about the potential impacts and to discuss possible mitigations of the proposed all-season road. The company anticipates the environmental assessment process for the all-season road application will be completed by the end of the year.

Newfoundland properties

Canadian Zinc owns an extensive land package in central Newfoundland that includes three VMS (volcanogenic massive sulphide) projects, each with defined deposits, which are being explored by Canadian Zinc.

In 2015, the company entered into a collaboration agreement with Buchans Minerals Corp., a wholly owned subsidiary of Minco PLC, whereby the two companies share research data on their respective central Newfoundland zinc-lead-copper-silver-gold deposits. The collaboration agreement is focused on seven VMS deposits located in central Newfoundland. Four of the deposits are held the company (Lemarchant, Boomerang-Domino, Tulks East and Long Lake).

The intent and objective of the research are to determine the technical and economic viability of developing the companies' deposits into producing operations by using a central milling facility. The concept is based on the potential that collectively, the satellite deposits can be economically mined, preconcentrated, trucked, and then milled simultaneously or sequentially through a central mill.

The initial flotation test results indicate the deposits are amenable to a common flotation flowsheet with the sequential copper-lead-zinc flotation flowsheet providing the best overall performance for all four deposits tested. Preliminary bench-scale rougher flotation tests at varying primary grind sizes were conducted in order to select the primary grind size to use for subsequent rougher flotation testing. Results of the rougher flotation program show good to very good copper, lead and zinc recoveries to the respective rougher flotation concentrates, but with some tests reporting elevated levels of arsenic and antimony, which may necessitate further cleaning or reduction testwork. The bench-scale batch cleaner flotation test program on the copper, lead and zinc concentrates is under way and expected to be completed by late August. The program is scheduled to be completed by November, 2016.

As part of the recently completed financing, the company has allocated $1.67-million in flow-through financing for exploration of its properties in central Newfoundland. Three priority areas of the South Tally Pond property (Lemarchant Deposit, Beaver Lake and Lake Douglas -- Lake of the Woods areas) and two targets on the Tulks South properties (a possible extension of the Boomerang deposit and the Tulks West target) will be evaluated in a two-staged exploration program. The first stage, to be completed over the summer and fall, will include the review and modelling of geophysical data, limited line cutting and grid establishment, to be followed by ground magnetic and EM (electromagnetic) surveys. Based on successful results, a winter drill program will be completed to further explore selected priority targets.

Grant of stock options and restricted share units

On Aug. 11, 2016, pursuant to the company's stock option plan, the company granted stock options to purchase a total of 5.15 million shares, exercisable at a price of 35 cents per share, to directors, officers, employees and other service providers, and subject to all necessary regulatory approvals. The stock options will vest over a period of two years and have a term of five years. The company also awarded a total of 1.9 million restricted share units pursuant to the company's restricted share unit plan to three senior officers, subject to a one-year vesting period, a payout date of 30 months and an expiry date of five years, and subject to all necessary regulatory approvals.

We seek Safe Harbor.