PNX Metals Ltd's (ASX:PNX) positive pre-feasibility study (PFS) outlines the technical and financial payoff involved with bringing its Fountain Head gold and Hayes Creek gold-silver-zinc projects into production.
The gold and base metal producing hopeful presented the study this morning, breaking down the estimated financial performance and production metrics linked to its Northern Territory assets.
Fountain Head and Hayes Creek are both roughly 170 kilometres south of Darwin and each of the multi-commodity projects is wholly owned by the company.
Under the study, PNX hopes to achieve its first gold pour mid next year, although it is exploring any opportunities to expedite this timetable with stakeholders.
Preparing to move into production
PNX Metals managing director James Fox said: “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.
“Positive results from the PFS provide strong validation for the staged development process and an accelerated schedule to achieve a near-term gold production target of mid-2022.
“The project environmental impact assessment is now open for public consultation, with approvals targeted for late 2021. The company is working with its engineers to finalise the plant and infrastructure scope of works.
“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.”
Financial performance
In order to form the PFS, PNX Metals has relied on static commodity prices, locked in at US$1,733 per ounce of gold, US$25 per ounce of silver and US$1.31 per pound of zinc.
PNX has ultimately determined an 8% pre-tax net present value (NPV) equal to A$171 million, while the 8% post-tax NPV is estimated at A$127 million.
The pre-tax internal rate of return for production at Fountain Head and Hayes Creek is 63%, while the post-tax statistic is calculated at 55%.
Taking into account a decade-long life of mine, the gold and base metals explorer has calculated an all-in sustaining cost equal to A$1,119 per ounce of gold, net any zinc by-product credits.
PNX anticipates it can generate A$972 million in undiscounted revenue. Breaking that down, the ASX-lister believes it could secure A$352 million in net revenue, returning a net cash position of A$276 million after-tax.
Earnings before interest, taxes, depreciation and amortisation are predicted to hit A$413 million - 42% of the undiscounted revenue.
In order to develop a mine and gold plant, as well as cover any infrastructure costs and provide general working capital, PNX estimates upfront capital costs will total $46 million.
While financing for stage one is yet to be secured, PNX believes a potential cash injection will involve a mix of debt and equity funding.
Beyond this initial investment, the project is self-funded on a cashflow basis to continue into stage two development.
Production metrics
PNX’s multi-commodity assets have also been evaluated based on their production potential over a 10-year life of mine.
Overall, the total combined mining inventory available to PNX exceeds seven million tonnes. Under the life of mine production estimates, the company anticipates it could produce 250,500 ounces of gold, 11.4 million ounces of silver and 116,300 tonnes of zinc at the Northern Territory projects.
PNX believes gold will be the largest contributor to life of mine revenue at 48% while silver production is expected to account for 28% of revenue and zinc will deliver 25%.
As it begins to outline its next steps, PNX has also noted there is potential to boost its production profile as it continues to grow the mineral resource and make new discoveries within its 1,500-square-kilometre Northern Territory exploration tenure.
Speaking to this, managing director James Fox said: “In parallel with project development activities, PNX will continue to actively explore its large NT exploration tenure, where numerous opportunities to further delineate additional resources that have the potential to enhance project returns have been identified.
“We look forward to getting on the ground and starting drilling shortly.”