PNX Metals Limited (ASX:PNX) (FRA:4P1) is committed to progressing its flagship Fountain Head Gold Project and nearby Hayes Creek Zinc-Gold-Silver Project in the Northern Territory towards development.
The company said FY20 had set the stage for a transformational year.
Following a review of its assets, PNX made a significant strategic decision to target near-term gold production from Fountain Head prior to the development of Hayes Creek and to preserve its future value at a time of lower than anticipated zinc prices and higher than anticipated processing charges.
Monetising gold resource
Significant value still exists at Hayes Creek and the company is assessing options to advance development once Fountain Head is operational.
The proposed $40 million funding for Fountain Head and a joint venture with Halifax Capital Pty Ltd’s subsidiary Bridge Creek Mining Pty Ltd (BCM) provides a clear path to monetising the Fountain Head gold resource.
It also provides certainty around a funding solution that minimises dilution for PNX shareholders and significantly de-risks the Fountain Head project.
This will also allow the company to focus on generating a pipeline of additional gold resources for processing at Fountain Head, through regional exploration within its significant tenure in the NT.
PNX Metals chairman Graham Ascough said: “We are committed to progressing the company and growing our flagship Fountain Head and Hayes Creek projects towards development for the benefit of all shareholders.
Further updates will be provided as the company’s activities “move forward in 2021”.
He added: “The board and management are confident that continued technical studies and exploration work will be successful in growing our resource base and that the completion of development studies at Fountain Head will provide a clear pathway for this exciting production opportunity, that has the potential to deliver strong returns for PNX shareholders.”
Fountain Head development
The company has signed a non-binding term sheet for a proposed $40 million financial commitment that will fast-track the development of Fountain Head.
Formal binding documentation for the transaction is expected to be completed this month, with commercial gold production targeted for late 2021, subject to receipt of Mining and Environmental approvals.
PNX Metals expects to submit the Environmental Impact Statement (EIS) for the Fountain Head project by the end of 2020.
An updated mineral resource announced in June 2020 estimates 156,000 ounces of contained gold in the indicated and inferred categories at an average grade of 1.7 g/t.
The company is now finalising the EIS and incorporating updates related to the proposed carbon-in-leach process route, and tailings and water management.
Various mining and processing options were assessed, including heap leaching, to determine low-cost, scalable options for rapidly monetising and generating early cashflow from the existing gold resources at Fountain Head.
This strategy may also provide an opportunity to enhance overall Hayes Creek project economics and extend the project mine life with the larger mined-out Fountain Head pit available for use as tailings storage from subsequent sulphide flotation of ore from the Mt Bonnie and Iron Blow deposits at Hayes Creek.
The deal with Halifax Capital will see the funding of gold carbon-in-leach processing infrastructure and related costs required to fast-track Fountain Head and a 50/50 production joint venture with BCM.
This proposed funding commitment by Halifax Capital and the joint venture with BCM will, if finalised, provide a clear pathway for the development of Fountain Head.
It will also allow the company to focus on generating a pipeline of additional gold resources for processing at the Fountain Head infrastructure, through regional exploration within its significant tenure in the NT.
The development options at Fountain Head will also look to preserve the value of the Hayes Creek project and potentially enhance the economics and extend mine life.
To accelerate activities at Fountain Head, funds were re-allocated from the Hayes Creek definitive feasibility study (DFS) with the majority of the DFS activities deferred until the completion of the Fountain Head studies.
This decision meant that DFS activities on Hayes Creek were suspended until the conclusion of the Fountain Head studies.
Major review of exploration projects
PNX Metals has initiated a major review of its exploration projects, namely the Burnside and Moline regional prospectivity, to identify new targets within those projects with the potential to host significant standalone gold deposits.
The aim is also to supplement future proposed gold processing operations at Fountain Head.
An early observation to emerge from the work is that large areas of the exploration tenements remain untested by drilling with the majority of previous work centred on known gold deposits and their immediate areas.
The goal of the exploration strategy is:
➢ Phase 1 – Identify new economic mineralisation to supplement Fountain Head;
➢ Phase 2 – Delineate additional reserves for processing at Fountain Head; and
➢ Phase 3 – Discover an ore body of sufficient scale to justify standalone development.
The company holds a 90% interest in a further 19 tenements in the Pine Creek region of the NT (Burnside and Chessman projects) under joint venture with Newmarket Gold NT Holdings Pty Ltd.
Its project areas are:
➢ Burnside (PNX 90% and Newmarket 10%) – gold and base metals – Surrounds the Fountain Head and Hayes Creek lease areas;
➢ Moline (PNX 100%) – gold and base metals, about 65 kilometres east of Hayes Creek; and
➢ Chessman (PNX 90% and Newmarket 10%) – gold and base metals, around 20 kilometres due east of Katherine at the southern margin of the Pine Creek Orogen.