Scozinc Announces Robust Results of Its Scotia MINE Pre-Feasibility Study: Pre-Tax NPV of C$156M and IRR of 52%
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SCOZINC ANNOUNCES ROBUST RESULTS OF ITS SCOTIA MINE
PRE-FEASIBILITY STUDY: PRE-TAX NPV OF C$156M AND IRR OF 52%
Halifax, Nova Scotia, July 7, 2020 – ScoZinc Mining Ltd. (TSX-V: SZM) (“ScoZinc” or the “Company”) is pleased
to announce the results of its Pre-Feasibility Study (the “PFS”), including its first NI 43-101 Mineral Reserve Estimate
(“2020 Mineral Reserve ”) for its wholly-owned and fully-permitted Scotia Mine (“ Scotia Mine” or the “ Project”),
located in Nova Scotia, Canada. The PFS was prepared in collaboration with the independent engineering firms of
Ausenco Engineering Canada Inc., MineTech International Limited, SRK Consulting (U.S.), Inc., and Terrane
Geoscience Inc.
Highlights of the PFS are tabled below, with additional details of the NI 43-101 Technical Report (“ 2020 PFS”) to be
filed on www.sedar.com under ScoZinc’s profile within the next 45 days.
Table 1: Pre-Feasibility Study Highlights
Pre-Tax Net Present Value (Discount Rate 8%) $156M
Pre-Tax Internal Rate of Return 52%
After-Tax Net Present Value (Discount Rate 8%) $115M
After-Tax Internal Rate of Return 49%
EBITDA (Annual Average) $17.1M
Payback Period (Years) 2.4
Pre-Production CAPEX (incl $2.7M contingency & $1.2M finance) $30.8M
Metal Production Zinc (5 Year Annual Average) 35M lbs
Metal Production Lead (5 Year Annual Average) 15M lbs
Zinc Concentrate Grade (LOM Average) 57%
Lead Concentrate Grade (LOM Average) 71%
Processing Throughput Rate (Tonnes Per Day) 2,700
Life of Mine ("LOM") (Years) 14.25
Years Ore Reserves Mined (LOM Total) 13.66Mt
Zinc Ore Grade (LOM Average) 2.03% Zn
Lead Ore Grade (LOM Average) 1.10% Pb
Net Revenue After Royalty & Treatment Charges $822M
Operating Cash Flow Before Taxes $335M
Financing Costs $4.6M
C1 Costs Over LOM 1 US$0.59/lb
Total Operating Cost (Per tonne Milled LOM) $53.72/t
All-In-Sustaining-Cost (ZnEq)1, 2 US$0.60/lb
Zinc Price (LOM Average) US$1.19/lb
Lead Price (LOM Average) US$0.89/lb
Foreign Exchange Rate (CAD:USD) 0.71
All dollar amounts are expressed in Canadian Dollars unless otherwise noted
1 After Lead credits deducted
2 All-In-Sustaining-Costs (“AISC”) are C1 Costs plus Sustaining Capital and Financing Costs
NEWS RELEASE JULY 7, 2020
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The President and CEO, Mr. Mark Haywood, commented: “ We are very excited to deliver the results of our Scotia
Mine’s PFS by our independent panel of mining industry experts. The Project’s economics are very robust, with
relatively low capital requirements and a short payback period which includes proposed financing costs structured to
be greatly non-dilutive to our shareholders.
“The Project is set to produce high quality Zinc and Lead concentrates for over 14 years, at low operating costs, via
conventional open pit mining methods, with a steady ore processing rate of 2,700 tonnes per day. Through detailed
planning and analyses, we believe the technical team have resolved many of the mine’s historical bottlenecks and poor
performance issues to develop a low-risk development and life of mine production plan.
“Importantly, the PFS shows that commercial Zinc and Lead concentrate production can be achieved within 9 to 12
months of project financing of approximately $30M, with an average annual cash flow of $14M. The extensive facilities
already in place on site, combined with the short pre-stripping period, enable the Scotia Mine to potentially demonstrate
a free cash flow of $8.4M in the first year of commercial production alone.
“ScoZinc is also of the view that there are additional opportunities to further improve the Project’s economics and
extend the operation’s 14-year mine life.
“On the basis of these very positive PFS results, ScoZinc will be actively pursuing the necessary finance to begin
commercial production as soon as possible.”
A summary of the Pre-Feasibility Study is provided below. The complete NI 43-101 Technical Report will be provided
on the Company’s website at www.ScoZinc.com once the report has been filed on SEDAR.
Location, Ownership & History
The Scotia Mine consists of a fully permitted mine and mill which are 100% owned by ScoZinc. The Scotia Mine is
located at approximately 45°02′ North, 63°21′ West, or 62 kilometres northeast of Halifax, Nova Scotia, in the Halifax
Regional Municipality. Year-round access to the Project is by paved highway roads and is approximately 15 kilometres
off the Nova Scotia provincial highway along Route #224. The Halifax International Airport is located 33 kilometres
southwest of the mine site. The Project consists of 648 hectares of mineral rights in the form of three contiguous mineral
leases, including land with exploration potential for zinc and lead mineralization. ScoZinc also owns real estate property
of 712.5 hectares, which includes the mineral leases and adjoining areas.
In February 2011, Selwyn Resources Limited (“Selwyn”) purchased ScoZinc Limited and all of its assets, including the
Scotia Mine and ScoZinc’s exploration claims, for $10 million less a deduction relating to increased reclamation bonding
requirements that were being determined at the time of the acquisition. Selwyn changed its name to ScoZinc Mining
Ltd., and owns 100% of the ScoZinc Limited subsidiary, which in turn holds the mineral rights to the Main and Getty
Zones, the mining rights and surface rights (real property rights) for the Scotia Mine deposit and an environmental
assessment (environmental registration) for the Scotia Mine.
ScoZinc also currently holds five exploration licenses covering 41 claims in the immediate vicinity of the Scotia Mine
Deposit. Each individual claim covers an area of approximately forty acres (16.2 hectares). In total, the 41 claims cover
approximately 664 hectares (1,641 acres). These licenses are located along strike from the Scotia Mine Deposit and
include favourable host rocks similar to that at the mine site.
Geology and Mineralization
The Scotia Mine Deposit consists of three main zones of mineralization referred to as the Main (formerly Gays River
deposit), Getty and Northeast Zones. The Main zone lies along the southside of the Gays River main branch, immediately
east of the confluence with the Gays River south branch. The Getty zone lies just northwest of the Main and North-East
zones on the western side of Gays River. The two zones are separated by less than one kilometre.
The Gays River Formation mineralization has long been considered a Mississippi Valley-type lead-zinc deposit. This
type of deposit is carbonate-hosted, classified as a typical open space filling type, and hosted in a dolomitized limestone.
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The limestone developed as a carbonate build-upon an irregular pre-Carboniferous basement topographic high where
conditions allowed for growth of reef-building organisms.
The zinc/lead-bearing Gays River Formation trends in an east-north east direction across the Property. Locally, the
mineralisation dips up to 45º on average, and up to vertical in places, to the north-northwest which is the depositional
slope of the front of the Gays River reef unit. The dip tends to be horizontal in the back reef area (south of the main
trend). The mineralisation is present as sphalerite and galena and grades from massive Pb-Zn mineralized material in
the fore reef to finely disseminated, lower grade material in the back reef. In the mine area, the Gays River Formation
is overlain either by the evaporites of the Carroll’s Corner Formation and/or overburden.
Exploration and Data Management
The Scotia Mine has extensive diamond drilling and blast-hole drilling on a large portion of its mining leases and
associated exploration licences. A total of 1,831 holes or 121,870 metres has been drilled to date. All of the data from
these holes has been included in this Pre-Feasibility Study and the 2019 mineral resource estimation by SRK (the “2019
MRE”).
Royalties
For the Scotia Deposit, ScoZinc owns the real property covering all the defined mineral resources on the mining leases,
so no royalty to any landowner is applicable. However, there is a small 25-acre portion on ScoZinc’s real property that
is subject to a sand, gravel and fill royalty of $1.00 per metric tonne to Gallant Aggregates. This royalty does not impact
the Scotia Mine’s Pre-Feasibility Study.
For the Getty deposit, ScoZinc has a 1% royalty with Globex Resources Ltd (“Globex”), which provides Globex with a
1% Gross Metal Royalty (“GMR”) interest in the associated claims. Agreement terms also allows ScoZinc to purchase
50% of the GMR for $300,000. ScoZinc’s Life of Mine plan indicates that such a royalty would only be applicable in
the last few years of the 14-year mine life.
Nova Scotia provincial royalty of 2% also applies on all net revenue generated from the Project.
Mineral Resource Estimate
A Mineral Resource estimation was completed in December 2019 for the Scotia Mine Deposit, including the Main,
Getty and Northeast Zones (“2019 MRE”). The mineral resources for the Scotia Mine Deposit have been classified as
Measured, Indicated and Inferred categories based on CIM Definition Standards in accordance with NI 43-101
reporting guidelines, and are reported with respect to cut-off values calculated using the assumed processing costs and
recoveries, and metal prices. The resource is also constrained by an optimized (WhittleTM) pit shell, which is based on
optimistic metal prices, in order to demonstrate that the defined resources have reasonable prospects of eventual
economic extraction, which is a CIM Definition Standards criterion. All classification categories (Measured, Indicated
and Inferred) were considered in the resource pit optimization.
The Scotia Mine Deposit mineral resource summary statement in provided in Table 2, with an effective date of
December 14, 2019.
The 2019 MRE resulted in an increase in Measured & Indicated tonnage of 105% (to 25,450,000 tonnes at a Zinc
equivalent grade of 2.84%) and an increase in Inferred tonnage of 7% (to 5,010,000 tonnes at a Zinc equivalent grade
of 2.13%) from previous resource estimates on the deposit.
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Table 2: Scotia Mine Resource Statement, Dec 14, 2019 – SRK Consulting (U.S.), Inc.
Classification Zone Mass (kt) Zn (%) Pb (%) ZnEq (%)
Measured
Getty 60 1.38 1.25 2.58
Main 4,130 2.57 1.30 3.81
North East 130 3.18 1.88 4.98
Total 4,320 2.57 1.32 3.83
Indicated
Getty 8,090 1.24 0.81 2.02
Getty South 840 1.58 0.25 1.82
Main 9,870 1.92 1.01 2.89
North East 2,330 2.88 1.15 3.98
Total 21,130 1.75 0.92 2.64
Measured and
Indicated
Getty 8,150 1.24 0.82 2.03
Getty South 840 1.58 0.25 1.82
Main 14,000 2.11 1.09 3.16
North East 2,460 2.89 1.19 4.04
Total 25,450 1.89 0.99 2.84
Inferred
Getty 950 1.35 0.54 1.87
Getty South 770 1.53 0.25 1.77
Main 2,980 1.49 0.79 2.25
North East 310 2.01 0.74 2.72
Total 5,010 1.50 0.66 2.13
Source: SRK, 2019
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that
any part of the Mineral Resources estimated will be converted into Mineral Reserves;
Open-pit resources stated as contained within a potentially economically minable open-pit; pit optimization was based on
assumed prices for zinc of US$1.35/lb, and for lead of US$1.14/lb, a Zn recovery of 86% and a Pb recovery of 93%, mining
and processing costs varying by zone, and pit slopes of 45 degrees in rock and 22 degrees in overburden;
Open-pit resources are reported based on a Zinc Equivalent (ZnEq) cut-off grade of 0.90%. The ZnEq. grade incorporates
Zn and Pb sales costs of US$0.19/lb and US$0.11/lb respectively, and a 2% royalty charge; and,
Numbers in the table have been rounded to reflect the accuracy of the estimate and may not sum due to rounding.
Mineral Reserve Estimate
The Scotia Mine Mineral Reserve Estimates are classified as either Proven Reserves or Probable Reserves and are
provided in Table 3. Total Mineral Reserves are 13.66 million tonnes with a Zinc Equivalent grade of 3.09 percent.
Table 3: Scotia Mine Mineral Reserve Estimates
Mineral Zone Classification Tonnage
(t)
Zinc Grade
(%)
Lead Grade
(%)
Zinc Equivalent
Grade (%)
Scotia Mine Proven 3,370,000 2.46 1.21 3.62
Scotia Mine Probable 10,290,000 1.88 1.07 2.91
Scotia Mine Total 13,660,000 2.03 1.10 3.09
Notes: 2020 Mineral Reserves are as of 01 May 2020 and based on a design cut-off grade of 1.5% ZnEq grade. Cut-off grades
are based on a Zinc metal price of US$1.10/lb, recovery of 89%, a Lead metal price of US$0.95/lb, and mining recovery of 92%.
Average unplanned dilution and mining recovery factors of 12% and 92%, respectively, are assumed.
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Mining
The Scotia Mine deposit covers a total strike length of approximately 4 kilometres, with some surface constraints in
between, and a vertical distance of approximately 120 metres. All mining is from open-pit operations with an expected
mine life of approximately 14 years. Mining operations will be conducted utilizing 4 shifts, 12 hours each shift, covering
24 hours per day. The 4 shifts will be on a 4-days on, 4-days off, 4-nights on, 4-nights off rotation.
The Scotia Mine mineral resources will be extracted using conventional load and haul (truck & shovel) mining methods
as determined by optimized pit designs and life-of-mine schedules. Mining operations will be completed using an
owner/operator of excavators, loaders, haul trucks and ancillary support equipment as well as some rental equipment.
Equipment requirements have been determined based upon required production rates and haulage cycles using
equipment specifications provided by local authorized equipment suppliers and manufacturers.
The open-pits will be mined on 5-metre-high benches with double benching being utilized on the lower benches which
are primarily comprised of hard rock. Drilling and blasting are only required for 40 percent of the total material mined
over the life of mine plan, which accounts for all of the hard rock to be mined from the pits. The remaining 60 percent
is largely comprised of overburden and has been proved to be free digging material based on past operations and will
not require blasting. Drilling and blasting will be performed using contract services.
Figure 1 illustrates the ultimate open-pit and waste dump design.
Figure 1: Ultimate Pit and Waste Dump Design
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The Ultimate Pit Design was divided into 6 phases to optimize development sequences and production requirements.
Waste has been subdivided into overburden, gypsum, and carbonate waste rock. Inferred resource material inside the
Ultimate Pit Design has been included as carbonate waste rock and totals approximately 1,450,000 tonnes at 1.5% Zn
and 0.7% Pb. Waste storage will consist of a combination of backfilling the mined pits and stockpiling in the waste
dump. Using the Ultimate Pit Design and the pit phase sequencing, a Life-Of-Mine (“LOM”) mining schedule was
developed by month and is based on operating 24 hours/day, 365 days/year. The LOM production schedule is based on
providing a mill feed of approximately 1 million tonnes per annum at an average grade of 2.03% Zinc and 1.10% Lead,
which equates to a Zinc Equivalent grade of 3.09%.
The water table at the Scotia Mine is divided into two horizons: the overburden horizon and the bedrock horizon.
ScoZinc plans to utilize 60 geotechnical depressurizing pumping wells, in conjunction with in-pit pumping via
submersible sump pumps, to dewater the overburden horizon. The bedrock horizon will be dewatered using the existing
deep well infrastructure in conjunction with in-pit temporary wells that access the underground workings. Horizontal
wells will also be utilized in the karst gypsum to deal with the localized trapped water and will be allowed to drain into
strategically placed in pit sumps which will then be pumped to the tailings storage facility (“TSF”). All in pit water will
be pumped to the TSF. Water from the 60 depressurizing pit perimeter wells will be discharged into either a reservoir
or the Gays River, however most of this water will be used as processing water in the mill. A similar setup will be
utilized in the North East and Getty pits.
Metallurgy and Mineral Processing
Metallurgical data from past production data and more recent metallurgical test work is available on the carbonate hosted
zinc-lead deposit. The combined data shows that the zinc and lead minerals liberate well from the host rock, resulting
in relatively high metal recoveries and concentrate grades. The simple mineralogy and metallurgy present the
opportunity to consistently achieve high recoveries and concentrate grades over the life of mine plan.
The process design criteria, based on historical data and plant design improvements, include overall average zinc
concentrate grades of 57% with an average 86.6% recovery, and the overall average lead concentrate grade of 71% with
an average 89.1% recovery. Due to the carbonate hosted deposit, the zinc and lead concentrates have very low levels of
impurities or deleterious minerals, resulting in the ScoZinc concentrates to be proven to be a clean, high-ranking
concentrate.
The ScoZinc concentrator plant (or Mill) was last operated in 2009 at 2,200 tonnes per day from the original name plate
design of 1,500 tonnes per day using conventional crushing, grinding flotation, concentrate dewatering/drying, and
rehandling loadout. After extensively reviewing all past production and incomplete engineering work, new final design
work as part of the Pre-Feasibility Study has confirmed that with relatively minor upgrades to the comminution, flotation
and dewatering circuits, the plant can consistently operate at 2,700 tonnes per day without major capital expansion.
The new overall plant layout and plant flow diagram are provided in Figure 2 and Figure 3, respectively.
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Figure 2: Overall Plant Layout
Source: Ausenco, 2020.
Figure 3: Plant Flow Diagram
Source: Ausenco, 2020.
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Site Infrastructure
The Scotia Mine is conveniently located 33 kilometres from Halifax’s International Stanfield Airport (YHZ) in Nova Scotia
with excellent infrastructure in place including processing facilities, waste dumps, a tailings pond, grid-power, all-season
port terminal access, and all-season highways. Building infrastructure in place has an area of approximately 131,585 square
feet. The mine site infrastructure is well established, as it has been on high level care & maintenance since 2009. ScoZinc
equipment and spare parts asset inventory is assessed at approximately $5.3 million.
As the Scotia Mine is fully permitted for operations, relatively minor upgrades and improvements to the mining and
processing facilities to enable the operation to commence commercial production within a relatively short time frame of
months. ScoZinc intends to expand the existing operations with the additions of ROM based primary and secondary crushers,
a container handling yard, mobile fleet fuel bay and additional mobile fleet maintenance workshop. Some of these
opportunities require permitting and have been included in the Pre-Feasibility Study by way of temporary additions until
permanent permitting can be provided. All mining and maintenance operations will be conducted by ScoZinc.
Electrical grid power systems are currently onsite with transformers and major motor control centres in place. Some of these
systems will be replaced during the pre-production phases in order to ensure performance and reliability during commercial
production.
Water for mineral processing is provided from pit perimeter wells designed to un-saturate the pit slopes and to provide clean
water to the plant for optimal water quality. Water may also be sourced from the tailings pond. Additional water is sourced
from the nearby Gays River and treated for potable water site needs and fire suppression.
The Tailings Storage Facility is permitted with 8 million tonnes of capacity. ScoZinc intends to either seek approval to
expand the capacity by 6 million tonnes or use in-pit tailings deposal into its completed pits in approximately year 6 of the
life of mine.
Site Access
The Scotia Mine is located adjacent to sealed Highway 224, with a permanent 900 metre access road providing all season
access to the operation. The Mine is located in the Halifax Regional Municipality, which is approximately 62 kilometres to
downtown Halifax. Due to its convenient location and quality of potential personnel, ScoZinc expects most of its workforce
will be sourced from the region.
The transport and handling of freight and concentrate is possible year-round due to ScoZinc’s location on an unrestricted
highway. The Scotia Mine is also located near a Canadian National Railway line siding, the Nova Scotia provincial highway
(102), deep-water ports and container handling terminals, and the Trans-Canadian National Highway.
Concentrate Marketing
The Scotia Mine’s carbonate-hosted orebody will produce high-quality zinc and lead concentrates through its 2,700 tonnes
per day processing plant on the mine site. The concentrates will be loaded directly into lined 20’ shipping containers, which
will be sampled, sealed and weighed on site. ScoZinc personnel will transport the containers by all season highway to either
the Fairview Cove Container Terminal or a nearby Canadian National Railway siding. The Scotia Mine’s concentrate
container handling system will avoid excessive costs and risks associated with rehandling, contamination, concentrate losses
and excessive moisture build up employed historically.
ScoZinc has an initial offtake agreement by way of a Memorandum of Understanding, dated 3rd April 2018, with MRI Trading
AG, for the Scotia Mine’s lead and zinc concentrates for approximately 10 years of the 14-year mine life. The agreement
provides competitive terms for 333,000 wet metric tonnes of zinc concentrate and 133,000 of lead concentrate from the
Scotia Mine. ScoZinc expects to establish firm concentrate purchase contracts with one or more metal trading companies
under terms consistent with the current market terms. ScoZinc is engaged in negotiations with a number of offtakers but has
not yet finalized an arrangement due to the preparation of this Pre-Feasibility Study which represents a significant change
from ScoZinc’s recent Preliminary Economic Assessment.