PRECIOUS METALS

RCF to takeover cash-strapped NorZinc

The transaction with major shareholder RCF is aimed at addressing debt and capital funding needs

“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,” CEO Hazelton said.

“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,” CEO Hazelton said.

RCF, which currently holds about 48.31% of NorZinc, has agreed to acquire the company for C$0.0325 (US$0.02) in cash per share, which is a 3.5% premium to the 45-day VWAP of C$0.0314 per share, NorZinc said.

"Considering the interests of all stakeholders in the Company and its Prairie Creek Project, and in order to maintain the current development work at and accessing the site, The Board has explored all viable strategic alternatives," NorZinc's president and CEO Rohan Hazelton said.

He said the unsolicited all-cash offer to the minority shareholders has been deemed to be in the best interests of the company and its stakeholders.

"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," he said.

NorZinc has no operating revenue other than interest income and working capital of negative C$2,180 as of 30 June.

Red Cloud Securities analyst Timothy Lee said that while the offer is "well below" Red Cloud's target for NorZinc of C$0.15 per share, it appears to be the best move for the company given the current market conditions.

"To continue advancing its Prairie Creek project, NorZinc needs funding for construction efforts and to repay the bridge loan," he said.

"NorZinc has had positive permitting-related news released over the past few weeks, but its share price has not seen a significant response. If NorZinc is unable to raise funds, except through a very dilutive equity issue, an acquisition by its largest shareholder and lender appears to be the best option to move forward," he said.

The arrangement would see a bridge loan from RCF to NorZinc entered into in May of US$6 million increased to US$11 million and the date payable extended by 18 months to 31 March 2023.

"Prairie Creek remains one of the highest grade, undeveloped Zn-Pb-Ag projects in Canada, with a NPV8% of ~C$299 million and an after-tax IRR of 17.7% from the updated PEA released in October 2021," Lee said.

With a life of mine of 20.3 years, Prairie Creek is expected to have average annual payable production volumes of 2.55 million ounces silver, 122 million pounds zinc, and 101 million lbs lead.

"We believe progress will continue to be made on the project between RCF and NZC," he added, while noting the upcoming catalysts of an updated feasibility study in Q4 and ongoing exploration work.

The close of the transaction with RCF is expected in Q4.

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