NorZinc agrees sale to investment fund with Dehcho mine in doubt
NorZinc, the company trying to develop the Dehcho’s Prairie Creek Mine, has agreed to sell itself to a private investment fund as its debts mount.
In a news release on Friday, NorZinc said it had no reasonable alternative. The buyer, RCF VI CAD, is a Delaware-registered branch of Resource Capital Funds, which already held 48 percent of NorZinc’s shares.
The sale agreement, which must be ratified by shareholders in the coming months, comes as RCF provides NorZinc with an additional US$11 million loan “to address the company’s near-term liquidity needs.”
RCF is offering NorZinc shareholders $0.0325 cash per share, a slight premium on the 45-day average of $0.0314. On Friday afternoon, shares were trading at $0.035 each on the Toronto Stock Exchange.
The fate of the Prairie Creek Mine is unclear.
NorZinc bills the mine, on a parcel of land entirely surrounded by the Nahanni National Park Reserve, as “Canada’s next high-grade zinc, silver and lead mine.”
But finding anyone with the money to get the mine built has been difficult.
In theory, the mine could be operational by 2025. Regulatory permits for a mine to be constructed were received earlier this year and a winter road to the mine site has been in development.
On Friday, however, NorZinc said it had debts of more than $6 million, was at “material risk” of defaulting on that debt without a sale to RCF, and had “explored all viable strategic alternatives” to a sale without success.
The news release made plain that Prairie Creek is by no means certain to go into production, despite president and chief executive Rohan Hazelton’s statement on Friday that he and the company “remain bullish on the long-term viability of the project and the positive impact it will have on the local region.”
Several paragraphs later, the news release stated: “The company requires significant funding to advance its Prairie Creek project – particularly at this crucial point, as major work on site and access development is in progress.
“The company currently has limited cash and negative working capital to fund the necessary capital projects … has been seeking funding to support its long-term business plan since early 2021, and has been unsuccessful to date.
“It will be several years before the Prairie Creek project reaches commercial production, if at all.”
NorZinc has tried to drum up interest in Prairie Creek by pointing to zinc’s addition to Canada’s critical minerals list – a list of minerals “considered critical for the sustainable economic success of Canada and our allies,” according to the federal government.
But the company has faced trouble building its winter road and has not always enjoyed healthy relations with nearby First Nations.
In a letter to regulators earlier this summer, Fort Liard’s Acho Dene Koe First Nation highlighted the proposed mine’s potential impacts, such as increased heavy traffic and metals runoff.
“Our position is that our concerns have not been heard, have not been considered, and have not been accommodated,” the First Nation wrote.
“We look at how this project has been proposed and can’t help but feel there are better alternatives to the successful construction and operation of the Prairie Creek Mine.”
The Nahɂą Dehé Dene Band, in Nahanni Butte, stressed in a letter of its own that the mine site and proposed access road are entirely within its traditional territory.
Elder Jim Bedsaka said that while the community of Nahanni Butte supports the mine, the community had been “getting a lot of interference” from other communities claiming rights.
“We should be the one who approves it.” he said at the time. “There are so many little concerns outside of the community slowing down the project. We have money now. Let’s, if we can, approve it.”
The company, it transpires, did not have enough money to keep going without outside intervention.
“While we believe this asset has an exciting future, given the current capital markets, debt and equity position of the company, we believe this is the best alternative for the company and its shareholders at the present time,” Hazelton said of the proposed sale on Friday.
“We are proud of the recent milestones achieved in permitting and Indigenous community agreements that have advanced Prairie Creek development.”