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Zincx Resources Corp
Symbol ZNX
Shares Issued 166,169,683
Close 2018-06-20 C$ 0.325
Market Cap C$ 54,005,147
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Zincx releases PEA results for Cardiac Creek

2018-06-20 16:20 ET - News Release

Mr. Peeyush Varshney reports

ZINCX ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR THE CARDIAC CREEK (AKIE PROPERTY) ZINC-LEAD-SILVER DEPOSIT

Zincx Resources Corp. has received positive and robust results from the recently commissioned independent preliminary economic assessment (PEA) for the 100-per-cent-owned zinc-lead-silver Cardiac Creek deposit, located on the Akie property in northeast British Columbia, Canada.

Economic highlights:

  • Estimated pretax NPV (net present value) discounted at 7 per cent of $649-million ($401-million after tax);
  • Estimated pretax 35-per-cent IRR (internal rate of return) (27 per cent after tax);
  • Estimated pretax 2.6-year payback (3.2-year payback after tax);
  • PEA contemplates a 4,000-tonne-per-day underground mine and 3,000-tonne-per-day concentrator with an 18-year mine life;
  • Total mine production of 25.8 million tonnes, of which 19.7 million tonnes are processed;
  • Initial capex (excluding contingency) estimated at $256.7-million, total of $302.3-million, including $45.7-million in contingency;
  • Payable metal production over life of mine is 3,268 million pounds of zinc and 362 million pounds of lead;
  • Average annual production of 178,000 pounds of payable zinc and 20,000 pounds of payable lead at an all-in operating cost of $102.38 per tonne milled;
  • Total payable metal LOM (life of mine) is $3.96-million or $201 per tonne milled;
  • Saleable zinc and lead concentrates with no penalty elements (clean concentrate);
  • There are no net smelter royalties owed (0-per-cent NSR (net smelter royalties);
  • Opportunities for continued refinement through additional studies, including upgrading lead and silver recoveries and reducing operating costs;
  • The Cardiac Creek deposit remains open at depth with potential to increase mine life;
  • Akie and Kechika regional combined offer district-scale potential for new discoveries.

The PEA is considered preliminary in nature and includes mineral resources, including inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. Mineral resources that are not mineral reserves have not yet demonstrated economic viability. Due to the uncertainty that may be attached to mineral resources, it cannot be assumed that all or any part of a mineral resource will be upgraded to mineral reserves. Therefore, there is no certainty that the results concluded in the PEA will be realized.

"The positive results outlined in the PEA demonstrate a robust, stand-alone base metal project with a large and potentially growing resource base, all-season access, good rail and road infrastructure, and amenable to conventional mining and milling practices common to similar projects. We are delighted with the strong results of the PEA and intend to now move to advance the project through feasibility, permitting and towards production. This project has significant exposure to zinc given the almost 10 to 1 zinc to lead ratio in payable metal production over life of mine.

"We have a strong competitive advantage that will appeal to mining and investment partners, including 100-per-cent ownership, 0-per-cent NSR, long-term mineral tenure security, good stable jurisdiction and strong first nation community support. The PEA demonstrates low-risk economics and well-established mining and milling techniques," stated Peeyush Varshney, president and chief executive officer.

Additional optimization studies are anticipated to improve the overall economics. Specific areas of advancement include:

  • Additional metallurgical variability testing to optimize metal recoveries and include silver as a payable;
  • Optimize dense media separation (DMS) circuit by using a coarser grind in future testing;
  • Investigate optimal grinding size to improve lead liberation;
  • Reduce reagent and collector dosages to reduce mill opex (operating costs);
  • Continue discussions with rail companies to further reduce transportation costs to Trail smelter;
  • Exploration potential remains open at depth at the Cardiac Creek deposit, and significant upside remains as higher grades seem to be improving with depth; further drill testing is required to delineate the downdip potential;
  • District-scale exploration potential exists over the 800-square-kilometre highly prospective land package; additional focused exploration is planned.

PEA results

The PEA was completed by JDS Energy & Mining Inc. of Vancouver, B.C. JDS is widely known in the mining space for fit-for-purpose design and fundamentally sound technical engineering studies. All inputs are based on budget quotations, peer comparisons and JDS's recent experience in projects of similar scope.

The PEA envisages a conventional underground mine and concentrator operation with a small environmental footprint measuring approximately 20 hectares in size upon start-up, expanding to approximately 35 hectares at closure. The mine will produce an average production rate of 4,000 tonnes per day (tpd) principally from long-hole stoping. Much of the waste rock and the majority of the volume of mill tailings will be placed back underground as cemented backfill. The rest of filtered tailings will be stacked in a surface filtered tailings facility, located near the mill.

The mine will have an 18-year life with potential to extend the life-of-mine through resource expansion at depth. Key assumptions for the PEA are summarized in the attached tables.

The estimated pretax NPV, discounted at 7 per cent, is $649-million, with a 35-per-cent IRR and a 2.6-year payback. Posttax NPV, discounted at 7 per cent, is $401-million, with a 27-per-cent IRR and a 3.2-year payback.

Total payable LOM metal production is expected to be 3,268 million pounds of zinc and 362 million pounds of lead. Silver is not expected to be a payable due to relatively low head grade and anticipated smelter deductions. Future metallurgical work will continue to optimize the lead and zinc circuits to improve recoveries and potentially add silver as a payable metal.

The preproduction capital cost (capex) is estimated at $256.7-million, for a total of $302.3-million, including $45.7-million contingency. Sustaining capital is estimated at $302.7-million, for a total of $315.6-million, including $12.9-million contingency.

The total estimated capital cost over LOM, including closure costs but net of salvage value, is estimated at $559.4-million; for a total of $617.9-million, including $58.5-million contingency. The majority of mine construction is expected to take approximately 24 months.

The average on-site all-in operating costs (opex) total $102.38 per tonne processed, which includes $38.13 per tonne mined for mining, $33.13 per tonne milled for milling, $2.87 per tonne milled for tailings and DMS rejects, and $16.33 per tonne milled for general and administrative (G&A).

The base-case used metal prices are calculated from the three-year trailing average, coupled with two-year forward projection of the average price, and are: $1.21 (U.S.) per pound for zinc, $1 (U.S.) per pound for lead and $16.95 (U.S.) for silver. A Canadian-dollar/U.S.-dollar exchange rate of 0.77 was used. The NPV discount rate is 7 per cent.

                                     SUMMARY OF KEY ASSUMPTIONS   
Assumption                                                           Base case                       Spot price (1)

Mine life                                                             18 years
Mine production rate                                                 4,000 tpd
Plant throughput (LOM average; after DMS)                            3,000 tpd
Tonnes mined                                                           25.8 mt
Mined head grades                               7.6% Zn; 1.5% Pb; 13.08 g/t Ag
Tonnes milled                                                          19.7 mt
Milled head grades (after DMS upgrade)         10.0% Zn; 1.9% Pb; 17.17 g/t Ag
Total payable metal (LOM)                                        $3.96-billion                      $4,888-million
Total operating expenses (LOM)                                  $2,014-million                      $2,014-million
Net (pretax) operating income (LOM)                             $1,946-million                      $2,874-million
Net pretax cash flow (LOM)                      $1,328-million; $74-million/yr     $2,257-million; $125-million/yr
Net after-tax cash flow (LOM)                     $870-million; $48-million/yr      $1,459-million; $81-million/yr
Pretax NPV7%                                                      $649-million                       $1.16-billion
Pretax IRR                                                                 35%                                 52%
Pretax payback                                                       2.6 years                           1.8 years
After-tax NPV7%                                                   $401-million                        $727-million
After-tax IRR                                                              27%                                 40%
After-tax payback                                                    3.2 years                           2.2 years

(1) Spot prices at close of London Metal Exchange on June 15, 2018: 
$1.42 (U.S.) per pound zinc, $1.08 (U.S.) per pound lead and $16.95 
(U.S.) per ounce silver.

                        SUMMARY OF CAPITAL EXPENDITURES
   
Capital costs                           Initial ($M)     Sustaining ($M)     LOM total ($M)

Mining                                        $58.2              $260.0             $318.2
Site development                                7.5                 0.7                8.2
Mineral processing                             78.8                11.8               90.6
Tailings management                             5.0                 8.3               13.3
On-site infrastructure                         55.1                 6.3               61.4
Off-site infrastructure                         1.0                 0.2                1.2
Project indirects                              28.0                 5.1               33.2
Engineering and project management             17.4                 1.5               18.8
Owner costs                                     5.6                   -                5.6
Closure                                           -                 8.9                8.9
Total                                         256.7               302.7              559.4
Contingency                                    45.7                12.9               58.5
Total                                         302.3               315.6              617.9
$/tonne mined                                 11.71               12.22              23.92

                  SUMMARY OF OPERATING COSTS
   
Average operating costs       Per tonne milled                  LOM

Mining                                  $50.05*      $984.7-million
Processing                              $33.13       $651.7-million
Tailings and DMS rejects                 $2.87        $56.5-million
G&A                                     $16.33       $321.3-million
All-in total opex                      $102.38     $2,014.1-million

* $38.13 per tonne mined.

            SUMMARY OF PAYABLE METAL PRODUCTION
   
Metal                   Per annum (avg M lb/yr)         LOM (M lb)

Zinc                                       178              3,268
Lead                                        20                362

Total payable metal                      $ LOM     $/tonne milled
                                        $3,960               $201

                      SENSITIVITY ANALYSIS
   
                           -$0.10          Base case             +$0.10

Zinc (U.S.$/lb)       $1.11 (U.S.)       $1.21 (U.S.)       $1.31 (U.S.)
Lead (U.S.$/lb)       $0.90 (U.S.)       $1.00 (U.S.)       $1.10 (U.S.)
Pretax
NPV7%                       $389M              $649M              $908M
IRR                            25%                35%                44%
Payback                 3.5 years          2.6 years          2.1 years
Posttax
NPV7%                       $234M              $401M              $567M
IRR                            20%                27%                34%
Payback                 4.1 years          3.2 years          2.7 years

            EXCHANGE RATE SENSITIVITY ANALYSIS
   
                       -0.02        Base case            +0.02

Cdn$: U.S.$            $0.75             0.77             0.79
Pretax
NPV7%                  $718M            $649M            $583M
IRR                       37%              35%              33%
Payback            2.5 years        2.6 years        2.8 years

Infrastructure

The Akie property is accessible year-round by a network of all-weather logging roads leading north from Mackenzie, B.C. It is expected that the company will share in road maintenance expenses with other resource users, including local forestry licensees and mining companies. Mackenzie is connected to the B.C. provincial highway network through Highway 39 that branches off of Highway 97. No road or bridge upgrades are anticipated, and road maintenance costs are factored into the concentrate trucking costs from site to Mackenzie.

Power will be generated on site using liquefied-natural-gas-(LNG)-powered portable generators, each with a 2,500-kilowatt capacity. The connected load is estimated to be fewer than 18 megawatts.

A modular 250-person all-weather camp will be constructed and installed during the preproduction period, and will serve both the construction and lifetime operation phases of the project.

JDS evaluated several concentration transportation options to deliver concentrate from the Akie project to either the Port of Prince Rupert (for shipment overseas to an Asian smelter) or to the Trail smelter, located in southeastern British Columbia and owned by Teck Resources. Two options for each destination were evaluated for transporting zinc concentrate: These included trucking the entire distance from site to the final destination, or trucking from site to Mackenzie, B.C., and then by rail from Mackenzie to the final destination. It is assumed that a rail loadout facility at Mackenzie, B.C., will be available for use.

After a careful assessment of cost, it was determined that the most efficient transportation option for zinc is to truck haul the concentrate from site to Mackenzie and load onto rail cars for delivery to the Trail smelter. Zinc concentrate will be initially shipped bulk in covered ore hauler trailers and then by covered gondola railcars. The lead concentrate will be truck hauled direct from site to the Trail smelter. Lead concentrate will be shipped in sealed bags or totes, inside 20-foot shipping containers, which act as double containment as a safety precaution. The containers are limited to a 20-foot length due to weight restrictions, and because CN Rail does not have the ability to cost-effectively handle and manage the 20-foot containers, rail is not a viable option for the lead concentrate.

Mining and processing

The PEA is based on a conventional underground mine similar to other operations in Canada. The deposit will be accessed through a main underground production haulage way with secondary ingress/egress provided by a secondary portal and a vent raise to surface. Stope spacing is estimated at 20 metres. Mining dilution is estimated at 15 per cent with 95-per-cent recovery predicted.

Given the steep dip of the deposit (minus 75 degrees), the deposit is amenable to longitudinal long-hole open stoping as the main method of underground mining. Underground mining equipment will include twin boom jumbos, long-hole drills, LHD scoop trams, haul trucks and support mobile equipment.

A concentrator with conventional milling and flotation is envisaged to be built on site. The process plant contemplates a 3,000-tonne-per-day throughput and will include a three-stage crushing circuit, a DMS circuit and a grinding circuit using ball mills. Sequential zinc and lead flotation circuits will incorporate cleaning stages. The concentrate dewatering will use thickeners and pressure filters.

Recent metallurgical testwork conducted in 2017 and announced on April 9, 2018, was utilized by the PEA. This work indicates that marketable zinc and lead concentrates could be produced from the deposit with no deleterious substances or penalty elements.

Knight Piesold Ltd., a consultant to JDS, developed the tailings, waste and water management plan for the PEA. KP assessed tailings management technologies and potential storage locations to support the study. KP and JDS concluded that the preferred waste management strategy is to store potentially acid-generating (PAG) waste rock and the bulk of the tailings (approximately 70 per cent) in mined-out underground stopes, based on the geochemical characteristics of the waste materials and the need for structural backfill. The remaining waste materials, including non-potentially acid-generating (NPAG) waste rock, DMS rejects and the balance of tailings not used for backfill (approximately 30 per cent), will be stored on surface in a filtered tailings management facility (TMF), which allows the DMS reject and filtered tailings to be co-mingled into a single facility. A separate water management pond is included for managing process water and stormwater runoff from the surface of the TMF.

Next planned steps

The company will be working closely with its mining consultants and advisers to plot a course forward for the most cost-effective and efficient development of the Cardiac Creek deposit. The company anticipates more detailed engineering assessments leading to a prefeasibility study.

2018 plans:

  • Recently announced diamond drill program on the Akie property, including drill targets on other known mineralized occurrences, including the Sitka showing and the North lead zone;
  • A satellite structural analysis will be completed on the northern portion of the Kechika regional properties providing the company with seamless detailed structural analysis over its entire Akie and Kechika regional claim holdings, representing 140 kilometres of highly prospective and thrust-repeated Gunsteel formation, the known host rock for SEDEX mineral occurrences and deposits in the Kechika trough; complete coverage will aid in target definition for future drill programs;
  • Continue examining cost-effective means to conduct the planned and permitted two-year underground drill program, which has been designed to carry out infill drilling on the Cardiac Creek deposit from close-spaced drill centres from an underground platform, enabling year-round drilling and advancement of the project toward a PFS level;
  • Continue baseline environmental studies to facilitate further permitting and advancement of the project.

Qualified persons

The PEA was led by JDS, an independent consulting firm, and will be incorporated into a National Instrument 43-101 technical report to be filed on SEDAR and the company's website within 45 days of this release.

Various personnel at JDS or its subconsultants are qualified persons and responsible for portions of this news release; and are identified as follows: Michael Makarenko (PEng): mining; Richard Goodwin (PEng): mining; Richard Boehnke (PEng): infrastructure/transportation; Kelly McLeod (PEng): mill processing; and Jim Fogarty (PEng) (Knight Piesold): tailings disposal. A full list of qualified persons contributing to the PEA will be summarized in the NI 43-101 technical report.

The Akie zinc-lead-silver project

The 100-per-cent-owned Akie property is situated within the Kechika trough, the southernmost area of the regionally extensive Paleozoic Selwyn basin and one of the most prolific sedimentary basins in the world for the occurrence of SEDEX zinc-lead-silver and stratiform barite deposits.

Drilling on the Akie property by Zincx Resources (formerly Canada Zinc Metals Corp.) since 2005 has identified a significant body of baritic-zinc-lead SEDEX mineralization known as the Cardiac Creek deposit. The deposit is hosted by siliceous, carbonaceous, fine-grained clastic rocks of the middle to late Devonian Gunsteel formation.

With additional drilling completed in 2017, the company has updated the estimate of mineral resources at Cardiac Creek.

                 ESTIMATE OF MINERAL RESOURCES AT CARDIAC CREEK
 
                         5% zinc cut-off grade                       Contained metal         

Category         Tonnes         Zn         Pb         Ag         Zn         Pb         Ag
               (million)        (%)        (%)      (g/t)      (Blb)      (Blb)      (Moz)

Indicated          22.7       8.32       1.61       14.1      4.162      0.804       10.3
Inferred            7.5       7.04       1.24       12.0      1.169      0.205        2.9

In addition to the Akie project, the company owns 100 per cent of eight of 11 large, contiguous property blocks that comprise the Kechika regional project, including the advanced Mount Alcock prospect. The Kechika regional project also includes the Pie, Yuen and Cirque East properties within which the company maintains a significant 49-per-cent interest with partners Teck Resources Ltd. and Korea Zinc Co. Ltd. These properties collectively extend northwest from the Akie property for approximately 140 kilometres covering the highly prospective Gunsteel formation shale and the main host rock for known SEDEX zinc-lead-silver deposits in the Kechika trough of northeastern British Columbia. These projects are located approximately 260 kilometres north northwest of the town of Mackenzie, B.C., Canada.

Ken MacDonald, PGeo, vice-president of exploration for the company, is the designated qualified person as defined by National Instrument 43-101 and is responsible for the technical information contained in this release.

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