PNX has picked up some more prospective ground right next to its existing projects in the Northern Territory, with the new area showing strong potential for gold, base metals and uranium, and having previously delivered bonanza hits of gold.
PNX Metals (ASX:PNX) has successfully satisfied the terms of a farm-in agreement that makes it the new owner of eight new licences, two of which have already granted mining leases.
The new ground, which sits adjacent to the company’s 100%-owned Hayes Creek zinc-gold-silver project, is prospective for gold and base metals and is the site of extremely high-grade historic drill hits including 4m at 118 grams per tonne (g/t) gold from just 40m.
PNX acquired the new area – which comprises two granted mining leases, one mining lease application and five exploration licences – from private operators Oz Uranium and Rockland Resources for an initial $60,000 cash payment and earn-in expenditure of $80,000.
Oz Uranium will be granted a 1% net smelter royalty over all minerals and retain the uranium rights until late 2023.
Managing director James Fox said the completion of the earn-in to obtain 100% ownership of the five exploration licences and the hard rock rights over three mining leases contiguous with PNX’s Hayes Creek zinc-gold-silver project continued to improve the company’s development prospects and strengthen its position in the highly prospective Pine Creek area.
“These titles contain a number of advanced gold exploration targets which we have reviewed and now look forward to testing,” he said. “The location of these titles also provides additional flexibility around proposed infrastructure.”
PNX now plans to map and sample the best of the new gold targets, as well as complete an expanded drone magnetic survey that is being co-funded by the Northern Territory government.
Near-term production opportunity
This new landholding and the Hayes Creek project are part of PNX’s proposed staged development that will start with the Fountain Head gold project, which hosts a resource of 2.94 million tonnes at 1.7g/t for 156,000oz of gold.
Fountain Head is shaping up to become a regional processing hub for mineral deposits in the Pine Creek region and is closing in on a resource upgrade at the Glencoe deposit.
A prefeasibility study (PFS) on the Fountain Head gold and Hayes Creek gold-silver-zinc projects highlighted a robust, multi-commodity, two-stage mine development that would have an initial mine life of 10 years, a pre-tax net present value (NPV) of $171m and a pre-tax internal rate of return (IRR) of 63%.
Life-of-mine production estimates of metals recovered to dore and concentrates are 250,000oz gold, 11.4 million ounces of silver and 116,000 tonnes of zinc.
Both NPV and IRR are metrics used to assess the profitability of a project – the higher the number is above 0, the more profitable it will be.
The staged development envisages that the Fountain Head project will be brought into production first, with the near-surface oxide and free-milling gold and silver from the Mt Bonnie, Glencoe and Fountain Head open pits to be processed through a 750,000-tonne-per-annum plant over the first five years.
The Hayes Creek gold-silver-zinc project would then be brought into production in year four. The processing plant has capacity potential of up to 900,000 tonnes per annum.
The Company is finalising Government and Environmental approvals, with an updated Environmental Impact Statement submission due next month.
Zinc supply squeeze pushing prices north
Zinc stockpiles at the London Metal Exchange have hit record lows, which is forcing buyers to pay a premium for the base metal.
The premium for spot zinc over futures is the widest it has been since 1997, according to a Bloomberg report.
Stockpiles are expected to further reduce with a shortage of new zinc supply coming online and Europe’s energy crisis resulting in smelter disruptions.
While the situation is expected to ease somewhat in the near-term with China starting to export, these new shipments of zinc are only going as far as Taiwan and Singapore, Reuters reported.
And over the medium to longer term, more zinc mines are going to be needed as demand continues to climb and current producers fall short on supply.
This article was developed in collaboration with PNX Metals, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.