According to Dundee Securities:

Canadian Zinc

BUY, Speculative Risk*
Dundee target: N/A

May 31, 2013

CZN raises $10mm through 1.2% NSR; ROFR on metals stream

Bottom Line: We believe that today's financing is a great first step in derisking the Prairie Creek project. The $10mm raise along with the potential of another $90mm (through a metals stream) will de-risk the project significantly on the financing side. We estimate that CZN will need ~$200mm to bring Prairie Creek into production. With this $10mm raise, and potential stream deal for $90mm, CZN will effectively has secured 50% of their capex needs. This will reduce future dilution and offer CZN more financing options.

That said, the main risks for CZN involve permitting at their Prairie Creek project. CZN currently has an active Land Use Permit to drill anywhere on the property but still requires the operating permits for a mine. The operating permits include the Mine Water License, the Mine Land Use Permit, Road Land Use Permit and the two Transfer Facility Land Use Permits. These permits are all expected to be in hand by the second half of 2013.

CZN is one of the few zinc levered stocks on the TSE. Canadian Zinc's Prairie Creek project is located in a politically stable jurisdiction with significant preexisting on-site infrastructure and the advantage of local support. We believe the project has the potential to begin operations (once permits and capital are in hand) by 2015. We have CZN on the Dundee Mineral Exploration Watchlist with a BUY recommendation, no target price, and a Speculative Risk rating. Our NAV for the company is $0.90/share.

Financing Details

CZN raised US$10mm by the sale of a 1.2% NSR on the Prairie Creek Mine to Sandstorm Metals & Energy. Further, Sandstorm has granted CZN the option, for a period of 30 months, to repurchase 100% of the NSR without premium or penalty for US$10mm. Along with this, CZN has agreed to offer Sandstorm a ROFR on a $90mm metal stream deal.

Plan of Operations - leverage to Zinc and Lead

The zinc project has infrastructure currently in place worth $200-250mm. The assets are approximately 30 years old, however, they have never been used. Once in production, the mine will be underground with an approximate life of 11 years according the current reserve estimates. The mine will run at a rate of approx. 1350 tonnes per day with an average LOM cash operating cost $144/t. The estimated recoveries are 75% for zinc, 88% for lead and 92% for silver. Production per annum will be ~70mm lbs of ZN and ~80mm lbs of PB over the LOM.