Vancouver, British Columbia – January 16, 2019 – Callinex Mines Inc. (the “Company” or “Callinex”) (TSX-V: CNX) (OTC: CLLXF) is pleased to provide its year-end letter to shareholders from President and CEO, Max Porterfield:
I want to thank you on behalf of our team for your support of the Company throughout the past year. In 2018, Callinex aggressively advanced its zinc-rich assets in the Bathurst Mining District. The milestones achieved were highlighted by an updated resource estimate that confirmed a major expansion of the Nash Creek Deposit and a maiden Preliminary Economic Assessment (“PEA”) that outlined attractive economics and opportunities to further enhance the potential economic benefits.
Positive results from the Company’s exploration activities since mid-2017 contributed to a substantial increase in the size of the Nash Creek Deposit that was announced in April. The Indicated zinc equivalent resource increased to 963 million pounds, a growth of 74% since the project was acquired in 2016. Additionally, the Inferred zinc equivalent resource increased by 385%, to 407 million pounds (See Table 1 and News Release dated April 16, 2018). The rapid expansion of the deposit highlights the exploration potential of the area based on limited historic drilling.
The most significant milestone achieved over the past year was the maiden PEA that was announced in May. The PEA outlined a high-margin, open-pit mine plan that generates a healthy pre-tax internal rate of return of 34.1% and Net Present Value at an 8% discount rate of $230 million based on a zinc price of US $1.25 (See News Release dated May 14, 2018).
The key to the exploration success that led to the major expansion at the Nash Creek Deposit was from utilizing a 2011 Induced Polarization (“IP”) survey for drill targeting. This led the company to commence a district-scale IP survey in September that will cover 17 km along trend south of the Nash Creek Deposit.
Since the start of the ongoing IP survey, two holes were drilled at the end of the 2018 drilling campaign to test an initial target. Results from these drill holes confirmed that IP is the most effective method to directly target near-surface mineralization. This was a critical exploration success as the ability of the IP survey to accurately vector towards increased sulphide mineralization, which generally correlates with higher grade mineralization at the Nash Creek Deposit, is very encouraging to apply over the 150 km2 district-scale land package. This approach will allow for a cost-effective 2019 exploration program that can test the potential for additional deposits over a much larger area.
The past year was met with significant volatility in the zinc market. Zinc prices started off the year with a great deal of optimism at US$1.53 per pound and quickly rallied to US$1.64 in February. That optimism for prices in the short term was doused by the start of the ongoing trade war between the United States and China and the potential impact it could have on future global growth. This scenario triggered the zinc price to commence a significant decline before bottoming out around US$1.04 by September.
It is our view that the zinc market has been significantly oversold based upon pessimism over potential global growth concerns, which we anticipate will be resolved as the US and China negotiate an end to the ongoing trade disputes. It is anticipated that an increase in global demand will continue to play out developed and emerging economies expand their infrastructure programs. Recently, steel has been thrusted in the spotlight with the US government shutdown over the debate for construction of a wall along the southern border with Mexico. That discussion, which is turning towards a wall constructed of steel, highlights the critical role zinc plays in the global economy. The majority of all zinc consumed is related to the galvanization of steel, which is a major component of global infrastructure projects.
Despite the dramatic pullback in prices the market has not seen any significant growth in inventories, in fact today LME inventories remain near a decade low. As of mid-December LME inventories were at 122,000 tonnes, down from 180,000 tonnes in January 2018 when prices reached $1.60 per pound and now make up less than a week’s supply of global demand. This critically low inventory level is comparable to 2006 when the zinc price exceeded $2.00 per pound.
Moving forward we are focusing near term efforts on generating compelling exploration targets that can, if successful, cause a material impact to the Company’s valuation. We are eager to complete and receive results from the ongoing district-scale IP survey at the Nash Creek Project. The maiden PEA completed on the project highlighted the opportunity to further improve economics by sequencing additional higher grade and/or near surface mineralization early in the mine plan. We believe that IP is the best exploration tool to discover additional mineralization at the Nash Creek Project based on the success we’ve had to date.
Furthermore, Callinex also plans to complete an IP survey over key stratigraphy at the Company’s Pine Bay Project located in the Flin Flon Mining District of Manitoba. The goal of the survey is to model lowly conductive pyrite that has the potential to host high-grade zinc, copper, gold and silver mineralization. Previous exploration discovered multiple pyrite-rich massive sulphide intersections that are very poorly conductive and as a result traditional electromagnetics has been an ineffective vectoring tool in this geological environment. The discovery of an economic deposit is critical for the future for the community of Flin Flon, where Hudbay’s 777 mine will be shut down in three years and no new discovery has been made to fill the impending void.
The Company plans to drill test the most compelling targets generated from ongoing exploration programs in New Brunswick and Manitoba this year.
Our team is very excited about the opportunities to advance our project portfolio through exploration underpinned by strong fundamentals for zinc as well as other base and precious metals in 2019.
President & CEO
J.J.O’Donnell, P.Geo, a qualified person under National Instrument 43-101 and a Consultant for Callinex, has reviewed and approved the technical information in this news release.
Cautionary Note on PEA. The PEA is preliminary in nature and it includes 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. There is no certainty that the PEA will be realized
Table 1: Comparison of Mineral Resources Since Acquisition in 2016
|Timeframe1||Classification2||Cut-off, ZnEq3,4 (%)||Tonnes||Zn
|Ag (gpt)||ZnEq3,4 (%)||ZnEq3,4 Contained (lbs)|
|Percent Change||N/A||N/A||+ 74%||– 1%||+ 5%||– 2%||0%||+ 74%|
|Percent Change||N/A||N/A||+ 389%||+ 1%||– 10%||– 23%||– 1%||+ 385%|
(1) Callinex reported closing the acquisition of the Nash Creek Property on August 15, 2016. The effective date of the “Pre-Acquisition” mineral resource estimate is March 27, 2009, the effective date of the “Post-Acquisition” mineral resource estimate is March 21, 2018. The 2009 mineral resource is considered to be historical and has been superseded by the mineral resource estimate with effective date March 21, 2018.
(2) Classification conforms to NI 43-101, Companion Policy 43-101CP, and the Canadian Institution of Mining, Metallurgy and Petroleum (“CIM”) Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM council, as amended. Inferred Resources have been estimated from geological evidence and limited sampling and must be treated with a lower level of confidence than Measured and Indicated Resources.
(3) Pre-acquisition zinc equivalency (ZnEq) was calculated as Zn% + 0.633*Pb% + 0.008*Ag_ppm, the Post-Acquistion zinc equivalency is calculated as Zn%+ 0.747*Pb% + 0.006*Ag_ppm.
(4) The Post-Acquisition estimate is reported using a 1.5% ZnEq cut-off value, which is reduced from a 2% ZnEq cut-off that was used to report the Pre-Acquisition estimate.
(5) A bulk density value of 2.76 was used in the Pre-Acquisition estimate, and bulk density was calculated based on relationship to grade for the Post-Acquisition estimate using the formula 2.74+0.028*(Zn%+Pb%).
(6) Tonnes and ZnEq contained pounds are rounded.
About Callinex Mines Inc.
Callinex Mines Inc. (TSXV: CNX) (OTCQX: CLLXF) is advancing its portfolio of zinc rich deposits located in established Canadian mining jurisdictions. The portfolio is highlighted by its Nash Creek and Superjack deposits in the Bathurst Mining District of New Brunswick. A 2018 PEA outlined a mine plan that generates a strong economic return with a pre-tax IRR of a 34.1% (25.2% post-tax) and NPV8% of $230 million ($128 million post-tax). The projects have significant exploration upside over a district-scale land package that encompasses several high-grade mineral occurrences along a 20 km trend. Click here to view a video overview of the Nash Creek Project.
Callinex has a project portfolio that also includes projects within the Flin Flon Mining District of Manitoba that are located 25 km to an operating processing facility that requires additional mining feed. The Company’s projects host Indicated resources of 13.6 Mt averaging 3.2% Zn Eq. totaling 963 million pounds and Inferred resources of 23.2 Mt averaging 5.2% Zn Eq. totaling 2.7 billion pounds (See News Release dated April 16, 2018).
For additional information, please contact:
Callinex Mines Inc.
Max Porterfield, President and Chief Executive Officer
Phone: (604) 605-0885
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Some statements in this news release contain forward-looking information. These statements include, but are not limited to, statements with respect to future expenditures. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include, among others, the ability to complete the proposed drill program and the timing and amount of expenditures. Except as required under applicable securities laws, Callinex does not assume the obligation to update any forward-looking statement.