PNX Metals leveraged to silver and gold upside

PNX Metals is better known for its Fountain Head gold project in the Pine Creek region of the Northern Territory, but the junior explorer also has exposure to the other hot precious metal right now — silver.

Following news of massive silver exchange traded fund inflows and physical buying, a retail investor buying frenzy earlier in February put a rocket under silver-exposed stocks.

Despite not being as well known for its silver assets, PNX Metals (ASX:PNX) was no exception, soaring as much as 43 per cent to 1c.

PNX Metals (ASX:PNX) share price chart:

The company has a 16.2-million-ounce silver resource hosted within its Hayes Creek zinc-gold-silver project in the Northern Territory.

Silver recently hit a nearly eight-year high with most-active futures rising as much as 13 per cent to over $US30 ($39) an ounce on the back of a flood of demand.

Geoff Muers, analyst for Resource Capital Research, said in a new research report that the value of PNX’s Hayes Creek polymetallic deposit was increasing with improved silver and zinc prices.

However, Muers says PNX is still flying under the radar despite the rising value of its resource inventory.

“PNX continues to add value through exploration and project development (planning, approvals) which is yet to be reflected in the share price or valuation of the company, despite the improved environment for precious metal development companies,” he said.

“Progression towards production combined with growing gold inventory could change this, leading to re-rating.”

PNX holds close to 400,000 oz of gold and 16.2 million oz of silver excluding the recent Glencoe gold project acquisition.

2021 share price catalysts

Muers said potential share price catalysts in 2021 for PNX included resource upgrades, further positive exploration results and progress on mine development at Fountain Head.

He estimates resource growth of up to 150,000oz gold to reach a total of 700,000oz gold equivalent this year, which puts its modest resource peer comparison at $40/oz or 40 to 50 per cent of Resource Capital Research’s conceptual net present values for PNX’s Hayes Creek and Fountain Head projects.

This has prompted the firm to place a 12-month price target on PNX of 2.5c per share – a 213 per cent increase on the current share price.

“This is based on the expectation of ongoing discovery and a growing resource base in 2021, combined with a continuation of the buoyant gold price environment seen in 2020,” Muers said.

“The Hayes creek project is unique in many ways, with the high gold and silver content making it more attractive with >50 per cent at spot prices despite modest recoveries. There is upside to the recoveries utilised both in the PFS, and in our conceptual model.”

The Hayes Creek project hosts an overall resource of 4.1 million tonnes at 124 grams per tonne (g/t) silver, 1.8g/t gold, 4.2 per cent zinc + lead/copper.

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.