PNX Metals Ltd (ASX:PNX) has signed a non-binding term sheet for a proposed A$40 million commitment and joint venture to develop gold processing infrastructure at Fountain Head Gold Project in the Northern Territory.
An agreement with private company Halifax Capital (HC) and subsidiary Bridge Creek Mining (BCM) includes a capital investment by HC via BCM to fund the acquisition, construction and commissioning of a fit-for-purpose gold carbon-in-leach (CIL) processing plant and associated infrastructure.
This plant would facilitate profitable treatment of certain PNX and BCM gold mineral resources.
Mining and processing JV proposed
The agreement also proposes an unincorporated joint venture between PNX and BCM to mine and process mineral resources through the project infrastructure and to share 50/50 the gold produced with agreed direct operating costs to be paid by PNX and BCM in the same proportion.
PNX managing director James Fox said: “Through the proposed JV the company would have a clear path to monetising the Fountain Head gold resource and certainty around a funding solution that minimises dilution for PNX shareholders and significantly de-risks the project."
If HC’s proposed capital commitment exceeds that required to fund the project infrastructure, the excess would be used to fund other pre-development and post-development costs to be agreed and set out in the formal JV agreement.
Formal documentation for the proposed transaction is anticipated to be completed within 90 days with commercial gold production targeted for 2021 subject to receipt of Government and Environmental approvals which are well underway.
"Motivated and experienced"
Fox said: “Halifax and Bridge Creek are motivated and experienced partners and their involvement as initial owners and experienced operators of the project infrastructure will allow PNX to focus on generating a pipeline of additional gold resources for processing through regional exploration within its’ significant tenure in the NT.
“We look forward to working with Halifax and Bridge Creek to finalise the formal JV agreement and to jointly benefiting from the development of the Fountain Head Gold Project.”
PNX believes that the proposed capital commitment and JV represents a unique and significant opportunity to establish the project infrastructure necessary to fast-track the development of Fountain Head without any capital investment by PNX and to generate a continuous pipeline of gold mineral resources through which both PNX and BCM will benefit equally.
“Good foundation for both”
Bridge Creek director Joseph Mills said: “The deal sets a good foundation for both groups and a clear pathway to capitalise on the strength in the gold market for years to come.
“The opportunity also allows the JV to establish a key piece of infrastructure in the area to not only service our pipeline but other companies that have stranded assets that haven’t been able to access a gold mill.”
Clean technology is to be a clear focus for the JV with the aim of reducing negative environmental impacts through energy efficiency and sustainable use of resources.
Key terms include:
- HC to provide an unconditional and legally binding commitment at the time of the formal JV agreement being executed to fund up to $40 million of direct pre-development and development costs associated with the gold project infrastructure;
- BCM to be operator of the JV under the direction of the management committee (with equal PNX and BCM representation) that will be responsible for the co-ordination and delivery of the project infrastructure, operating performance, distribution of production share and invoicing of related costs;
- The project infrastructure is to be owned by HC and located on PNX’s tenure at Fountain Head;
- PNX is to be granted an option to acquire the project Infrastructure on payment of an agreed amount or an independent market value subject to processing of mineral resources has occurred for at least 7 years after commencement of commercial production, or all gold mineral resources from the PNX and BCM projects having been mined, whichever occurs first.
- PNX may, in its absolute discretion, at any time after 12 months from the date of commercial production at Fountain Head grant BCM an option to provide the full capital for the development of the Hayes Creek infrastructure on the same terms as capital for the project infrastructure with PNX giving BCM notice that it wishes to commence Hayes Creek infrastructure development;
- PNX would retain sufficient capacity in the Fountain Head mined out pit for future Hayes Creek tailings disposal; and
- The JV agreement is expected to contain customary warranties and representations by each party.
Formal documentation is anticipated to be completed within 90 days, during which time PNX will continue to work on the various technical studies to maintain the development timeline with any direct project expenditure incurred, and agreed in advance by the management committee, to be reimbursed by the JV.
Subject to receipt of government and environmental approvals, PNX anticipates gold production from Fountain Head could commence in the latter part of 2021.
A development schedule would be finalised during the period of formal documentation.
The company also intends to advance exploration activities on gold targets within the agreed project areas and PNX’s broader tenure within the Pine Creek region with the aim to provide a continuing series of gold mineral resources to process through the JV infrastructure.