PNX Metals Ltd (ASX:PNX) has received a Buy Recommendation and a $0.03 per share price target from PAC Partners.
The target is three times higher than the current valuation. The following is an extract from the report.
Key points
- Metallurgy confirmation de-risks feasibility work;
- Potential for development of a viable zinc and precious metals mine, with pre-tax NPV of A$133m (as announced) and C1 cash cost globally competitive on our estimates;
- Undervalued compared to risk-adjusted DCF valuation;
- High grade gold potential in surrounding district with the end of wet-season signalling a re-start of drilling;
- Good potential to grow resources organically in both base and precious metals; and
- Valuation of A$0.034/share vs A$0.013/share last price.
Investment Summary
We see PNX as having good potential for re-rating should the DFS confirm the project potential, and exploration underway in the interim identify further potential ore-feed, with any upwards movement in precious metal and zinc prices in A$ terms a bonus from these levels.
We Initiate with a Buy Recommendation and a price target of $0.034/sh (+150% on current price of $0.013/sh).
PFS Released
PNX Metals (ASX: PNX) has released the results from the pre-feasibility study into the Hayes Creek zinc and precious metals project (“The Project”) in the Northern Territory. The PFS largely confirms what was announced in March 2016 in the Scoping Study, with some variations, primarily on the preferred processing route for the ore.
In Summary, the PFS has indicated the following:
- Up to 50% of revenue from Gold and Silver, with an average of 1.2Mozpa of silver and 12kozpa gold in concentrate;
- Up to 50% of revenue from Zinc, producing 14ktpa of contained zinc plus additional revenue from lead and copper (up to 10%);
- First 2.2yrs open-cut at Mt Bonnie (1Mt) followed by 4.5 years underground (2Mt) at Iron Blow;
- Pre-production capital of US$43m (A$58m @ US0.74) approx. with additional capital of US$6m from Year 3 for underground development;
- Announced Pre-tax NPV based on forward price curve of A$133m greater than the Scoping Study (A$109m); and
- Higher zinc recovery than expected (90% vs 80% used in Scoping Study) and +15% increase in zinc production.
The next phase of development includes completion of a Bankable Feasibility Study by 2018 to coincide with anticipated project approval 2H’18.
The project could be in production by late 2019, considering the anticipated short time frame of construction (12 months) subject to any long-lead items and wet-season impacts.
In the interim, exploration has re-commenced for gold and base metals could enhance project economics over the next twelve months as the BFS is completed.