In delivering a pre-feasibility study on the Hayes Creek zinc-gold-silver project in the Northern Territory in July 2017, PNX Metals (ASX: PNX) demonstrated it had a robust development opportunity on its hands.
The study, which was based on a project producing an average of 18,300 tonnes of zinc, 14,700 ounces of gold and 1.4 million ounces of silver a year for 6.5 years, gave Hayes Creek a net present value of $133 million using a 10 percent discount rate, an internal rate of return of 73 percent and a payback period of 15 months.
These are good numbers by anyone’s standards, but PNX wanted to make sure the project was absolutely bulletproof and would have no difficulty attracting the modest amount of capital required to bring it into production. In this regard, bankers tend to be more comfortable if mine life is more than 10 years.
Cue the aggressive near-mine and regional exploration program the company has been conducting on its tenements in the Pine Creek region of the Northern Territory since the end of last wet season in April 2018.
In that period PNX has spent approximately $2 million on exploration and drilled 7,800 metres as it seeks to define additional sources of feed for Hayes Creek and extend the life of the project beyond the magical 10-year mark.
One of the focuses of the program has been the Fountain Head mineral leases, which were acquired in early 2018 from Canadian-listed Kirkland Lake Gold, and have been earmarked as the site for the future Hayes Creek processing plant and tailings facility.
PNX’s maiden reverse circulation drilling program at Fountain Head returned multiple high-grade gold intercepts, supporting the company’s view that the historic Fountain Head and Tally Ho pits are the near-surface expression of a larger and previously overlooked gold system.
The RC drilling also resulted in a new discovery, Banner, to the north-west of the historic pits, which returned an impressive intercept of 6 metres grading 39.5 grams of gold per tonne from a depth of 54 metres, including 1 metre at 215 grams of gold per tonne from 54 metres.
Speaking about the potential at Fountain Head late last year, PNX managing director James Fox said: “This gold system is no doubt significant in scale as it extends over 1.6km at surface and remains open at depth all along the strike extent.
“We are confident that with continued exploration success, Fountain Head can add significant value to the Hayes Creek project and improve the already robust case for its development.”
Should Fountain Head prove to be economically viable as a source of feed for Hayes Creek, PNX still anticipates being able to establish the processing plant and tailings facility on the mining leases.
Another prospect within PNX’s broader tenement holding that was prioritised as part of the 2018 field program – and appears to have come up trumps – is Cookies Corner.
Cookies Corner lies within the Burnside project, in which the company now owns a 90 percent interest after meeting its expenditure commitments under an earn-in agreement with Kirkland Lake subsidiary Newmarket Gold.
Drilling to test an approximately 1km long 0.1 g/t gold-in-soils anomaly intersected gold mineralisation over a continuous 500 metre strike. All 16 initial holes were successful, with better intercepts including 20 metres grading 1.93 grams of gold per tonne from a depth of 12 metres, and 6 metres grading 3.72 grams of gold per tonne from 71 metres.
Aside from Cookies Corner and Fountain Head, PNX has multiple other targets in the region including the Moline exploration project, any of which could add a new dimension to Hayes Creek.
While the wet season typically restricts exploration activity in the NT, the company will remain busy digesting the information gathered in recent drilling and progressing feasibility work on Hayes Creek until it can get on the ground again.
This content is produced by Star Investing in commercial partnership with PNX Metals. This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
Don’t miss a thing, subscribe now