Canadian Zinc: Every Dog Has Its Day

Flagship Property: Prairie Creek = 100% Ownership … 1 Point

Resource Base = 50,352,658 oz Ag (Includes Lemarchant, Boomerang & Long Lake) … 1 Point

F/D Share Structure = 280,433,387 … -1 Point

Recent Price = US $0.12

F/D Market Cap = US $33,652,006

After-tax IRR = 18.4% … -1 Point

NPV/CapEx = 67% … 1 Point

F/D Market Cap per Resource Ounce = $0.67 … 1 Point

In other words, each ounce in the ground is valued at $0.67 by market cap.

Share Price Valuation by Resources in the Ground

Each share is worth 0.18 Ag ounces in the ground. In other words, each share is worth $2.93 @ US $16.27/oz Ag. This is low. In an ideal world, Canadian Zinc would either have fewer shares or more resources. But this metric is not a deal-breaker, especially as this is not a primary silver producer.

Cost Structure = 92% … -1 Point

Cost Structure exceeds FCM’s ideal < 50% level, but this is a mine wherein Ag is a byproduct of primary Zn & Pb mining. Overall costs per tonne are not only competitive, but have successfully been reduced in the 2017 PFS by as much as 2.6%.

Resource Valuation as a Percentage of Market Cap

Value of Resources @ $16.27/oz Ag = US $819,237,746

= 4%

In other words, the market cap is valued at 4% of the value of the Ag resources in the ground. This is low. There is room for substantial market cap growth.

Near-Term Cash Flow = US $2,667,000 … Unrated

Near-Term Cash Flow Multiple = 13x … 1 Point

Future Cash Flow @ $100/oz Ag = US $178,500,000 … Unrated

Debt Coverage = 0 Debt … 1 Point

Projected Future Market Cap = US $503,526,580 … Unrated

Projected Future Market Cap Growth Percentage = 1,396% … 1 Point

Location: Northwest Territories … 1 Point

Conclusion

We stalked Canadian Zinc for several years before we took our first stake in early June of 2018. Prairie Creek is fully permitted and most infrastructure is in place. Startup is expected to begin within 2.5 years of financing. The project economics are robust and the mine life is long, with considerable exploration potential. We have a target price of US $1.80 a share.

Score

5/11


Key

Flagship Project: 100% Ownership … 1 Point

After-tax IRR = > 20% … 1 Point

NPV/CapEx = > 1 … 1 Point

EV/Resources = < 1 … 1 Point

Cost Structure = < 50% … 1 Point

Resource Base = > 80 Mlbs. U308 … 1 Point

Future Cash Flow = Unrated

Future Cash Flow Multiple = > 5x … 1 Point

Share Structure = < 200 M … 1 Point

Debt Coverage = > 50% (or No Debt) … 1 Point

Projected Future Market Cap = Unrated

Projected Future Market Cap Growth Percentage = > 500% … 1 Point

Location: Friendly = 1 Point

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