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Top-line metrics show PNX’s Fountain Head, Hayes Creek projects will turn a good profit
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The headline numbers from a preliminary feasibility study on PNX’s Fountain Head gold and Hayes Creek gold-silver-zinc projects show it will be a profitable long-life operation.
Emerging producer PNX Metals (ASX:PNX) has completed a prefeasibility study (PFS) on a two-stage mine development in the Northern Territory that has delivered some extremely positive metrics and confirmed the technical and financial viability of a multi-commodity project.
The plan is to bring the Fountain Head project 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 combined operation, which would have an initial mine life of 10 years, is estimated to have a pre-tax net present value (NPV) of $171m and a pre-tax internal rate of return (IRR) of 63 per cent.
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.
These high-end numbers could see the project paid off in just 18 months.
A two-stage operation would produce 250,500oz of gold, 11.4 million oz of silver and 116,300 tonnes of zinc over the course of its life, delivering net revenues of $352m and giving PNX a net cash position of $276m after tax.
This would be achieved at an all-in sustaining cost over the life of the mine of $1,119 an oz, net of zinc by-product credits.
That is based on an assumed gold price of $US1,733 ($2,275) an oz, but it could be an even more profitable operation with gold currently fetching around $US1,819 an oz.
PNX estimates it will cost $46m to fund the Fountain Head mine and processing plant development and a further $58m to upgrade the plant to process the Hayes Creek sulphide ore.
“Much of the past year has been spent conducting a comprehensive evaluation of the various development options for our considerable gold, silver and zinc resources at Fountain Head and Hayes Creek, to determine the best outcome for shareholders,” managing director James Fox said.
“Positive results from the PFS provide strong validation for a staged development process, and an accelerated schedule to achieve a near-term gold production target of mid-2022.”
Fox said in parallel with project development activities PNX would continue to actively explore its large Northern Territory exploration tenure, where numerous opportunities to further define additional resources that could enhance project returns had been identified.
“We look forward to getting on the ground and starting drilling shortly,” he said.
Major exploration upside
In late April, PNX announced an initial inferred resource for the Glencoe deposit. PNX currently has a total resource inventory of 470,000 oz of gold, 16.2 million oz of silver and 177,000 tonnes of zinc across its projects.
Glencoe is located on an already granted mining lease just 3km north of the Fountain Head project and is the first of several opportunities PNX has identified in the Northern Territory’s Pine Creek region to substantially grow the scale of Fountain Head.
Reverse circulation drilling is slated to take place from mid-June 2021 to test for new mineralised positions, with the potential to increase the mineable gold contained within the existing pit shells at Fountain Head and Glencoe.
PNX has submitted its Environmental Impact Statement to the Northern Territory government and expects to receive environmental approval later this year.
The company has already received government approval to dewater the Fountain Head pit.
“The Project Environmental Impact Assessment is now open for public consultation, with approvals targeted for late 2021, and the company is working with its engineers to finalise the plant and infrastructure scope of works,” Fox said.
“Moving into production will be an exciting and significant milestone for the company and we look forward to keeping stakeholders informed as the project progresses.”
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.
