A Robust Polymetallic Project
We (Kamara Group) currently value PNX at A$0.058/share, based on a valuation of approximately A$34m, incorporating an appropriate discount for risk.
PNX are due to publish the results of a PFS for the Hayes Creek VMS project in the Northern Territory, Australia in 1H’17.
The Hayes Creek deposits remain open along strike and depth, with both proximal and distal gold mineralisation identified which could provide a boost to project economics.
Recent encouraging drilling results at Moline (7m @ 12g/t Au) has seen us add a modest amount to our valuation for exploration potential.
Further drilling results at the prospect, 65km from Hayes Creek, are due in coming weeks.
Preliminary capital of A$54m has been estimated for development of Hayes Creek, with expected low cash costs and production in 2019.
Key Points
Discovery Potential: The deposits are open along strike and at depth. Recent drilling at Mt Bonnie indicates additional open cut potential along strike.
Proximal gold mineralisation (such as Moline) may also prove a boost to the project, should exploration delineate a potentially mineable resource.
Metallurgy upside: PNX is examining the potential for increased recovery of all payable metals, including options for a Merrill Crowe circuit for gold/silver doré, base metal concentrates (Pb/Cu) and potential for sale of a bulk concentrate.
PNX recently reported (2Q’16) improved flotation recoveries of gold, silver and zinc at Mt Bonnie in comparison to Iron Blow.
Location: 170km south of Darwin and well positioned close to existing infrastructure including rail, road, high voltage powerlines, water, and Kirkland Lake’s gold mining operations (TSX: KL, formerly Newmarket/Crocodile Gold).
Valuation Summary
Our post-tax NPV is calculated at US$68.5m (A$91.3m). On a pre-tax basis, using an 8% discount rate, we obtain an NPV of A$120m.
Taking only 35% of the project valuation for risks relating to the pre-development PFS stage, we obtain a valuation of A$34.1m.
We have used flat, nominal costs and revenue based on recent spot pricing (29/11/16) LOM for most inputs for the DCF. Key differences in our model and the Scoping Study are minor and include:
- Addition of silver-offtake financing with associated royalty (net reduction in NPV).
- Assumed higher gold recovery at Mt Bonnie (70% vs 50% in scoping study).
- Use of spot pricing rather than consensus estimates (similar net pricing in revenue terms).
- We quote a post-tax NPV (rather than pre-tax) and use an 8% Weighted Average Cost of Capital (WACC) compared to 10% in the Scoping Study.
- We have taken out sustaining capital (mainly underground) from the operating costs, and added this item into ongoing capital requirements.