Located 42 km east of Hay River in Northwest Territories, Canada, the Pine Point zinc project contains 46
known zinc-rich deposits over a strike length of approximately 62 km, 10 of which were subjected to a
NI 43-101 technical report in 2014.

The Pine Point district, under the ownership of Cominco Ltd., was once one of Canada’s most prominent mining districts, with production deriving from 49 separate open-pit and two underground mines along a 35-kilometer (km) trend. Approximately 64 million mt of ore were mined between 1964 and 1987 at average grades of 7.1% zinc and 3.1% lead. Operations were shut down in 1987 due to low metal prices, exhaustion of near-plant high-grade resources, and the high cost of maintaining the Pine Point town-site, which accounted for 30% of costs.

Darnley Bay’s project is envisioned as mining a series of 10 open-pit deposits in sequence, using dense media separation followed by traditional grinding and flotation to produce separate zinc and lead concentrates. Mineral resources included in the PEA mine plan total 25.8 million mt of measured and indicated resources grading 2.94% zinc and 1.12% lead, plus 3.7 million mt of inferred resources grading 2.9% zinc and 0.77% lead.

Preproduction capital costs to develop the project are estimated at C$153.8 million, including a 15% contingency, with a payback period of 1.8 years. Sustaining capex is estimated at C$117.5 million over the life of the mine and will be entirely funded out of cash flow.

Mining rates will range from 4,000 mt/d to 6,800 mt/d of mineralized material for processing over the life of the mine, using a fleet of 90-mt trucks, 8-m3 shovels and 8-m3 front-end loaders.

Mineral processing will include a combination of portable and fixed crushers and dense media separation plants located near each deposit, which will produce pre-concentrates that will be trucked to a central 1,800-mt/d milling facility, where they will be subjected to standard grinding and flotation methods to produce final concentrates.

Total production across a 13-year mine life is estimated at 1.35 billion lb of zinc and 536 million lb of lead in concentrates. Total shipments are estimated at 1.23 million mt (dry) of zinc concentrate grading 58.9% zinc and 394,000 mt (dry) of lead concentrate grading 65% lead. Net of byproducts, the average cash cost to produce zinc is estimated at $0.60/lb. The concentrates will be trucked to the Hay River railway facility for shipment to markets.

Darnley Bay President and CEO Jamie Levy said, “This PEA supports that management’s confidence in this project was well-placed when it was purchased this past December. What is also very encouraging is that there are multiple opportunities, including underground mining, to enhance the economics and extend the project life. The company plans to initiate a feasibility study in the near future while drilling to add additional resources to the mine plan.”

Conversion of historical resources into measured and indicated resources through confirmation drilling represents one opportunity to expand future Pine Point production. Historically, there are 46 undeveloped deposits on the Pine Point project, and of these, just 10 are included in the PEA. Darnley Bay intends to evaluate the remaining deposits and, where considered appropriate, to initiate confirmation drilling programs in an effort to add additional deposits to the mine plan prior to the feasibility study.

The company will also explore for additional deposits. Although more than 100 distinct deposits have been outlined historically in the Pine Point district, several portions of the mineralized trends remain underexplored. The company’s 2017 exploration budget has been set at C$5 million.