Exploration junior PNX Metals (ASX: PNX) has revealed results of a pre-feasibility study (PFS) that supports the sequential development of its wholly-owned Fountain Head gold and Hayes Creek gold-silver-zinc projects in the Northern Territory.
Both projects are located about 170km south of Darwin in the territory’s Pine Creek region and host a combined mineral resource of 470,000 ounces of gold, 16.2 million ounces of silver and 177,000 tonnes of zinc, of which 68% is classified in the indicated category.
The proposed development envisages initial gold mining and processing at Fountain Head for five years with a total upfront capital cost of $46 million, to be followed by gold-silver-zinc development at Hayes Creek from year four onwards.
The combined project is forecast to generate total undiscounted revenues (net of treatment, refining and transport costs) of $972 million over its 10-year mine life from a total mining inventory exceeding 7 million tonnes. Gold will be the largest contributor to life-of-mine revenue at 48% followed by silver at 27% then zinc at 25%.
Other PFS metrics include a pre-tax internal rate of return (IRR) of 63% with an approximate 18-month payback period and net revenues of $352 million, returning a net cash position of $276 million after tax.
The study was modelled on a gold commodity price of US$1,733 per ounce, a US$25/oz silver price and a zinc price of US$1.31 per pound, with a foreign exchange rate of US$0.77/A$1.00.
The life of mine all-in sustaining costs (AISC), net of zinc by-product credits, has been estimated at A$1,119/oz gold equivalent.
PNX managing director James Fox said positive results from the PFS provide strong validation for a 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, and the company is working with its’ engineers to finalise the plant and infrastructure scope of works” he added.
Gold processing will take place at a proposed carbon-in-leach (CIL) plant located at Fountain Head and the Hayes Creek development will use the mined-out Fountain Head pit for tailings storage. The proposed CIL plant and infrastructure will be capable of treating 750,000t per annum with a capacity potential of 900,000tpa.
Stage one, the first five years of the project, will involve processing near-surface oxide and free-milling gold and silver ore from three open pit mines at Fountain Head, Mt Bonnie and Glencoe.
For stage two, the CIL plant will be upgraded to incorporate a sulphide flotation circuit capable of processing the Hayes Creek high-grade gold-silver-zinc massive sulphide ores into two valuable product streams, zinc concentrate and a precious metals concentrate. These concentrates will be trucked to the Port of Darwin and then shipped to international markets for sale and smelting and refining.
The PFS forecasts an initial capital outlay of $40.3 million for the stage one pre-production mine development, plant and associated infrastructure, including engineering procurement construction and management (EPCM) costs.
Plant first fill and critical path spares are expected to be a further $1.69 million and an additional $4 million working capital component has been included in the financial model to manage the cost of the project through the commissioning phase.
Stage two construction of infrastructure to process the Hayes Creek sulphide ore is estimated to cost an additional $58 million. This is expected to start in year three and be funded from operating cash flows after the payback of the initial stage one capital.
First gold production is targeted from mid-2022 and the project is forecast to produce (in the form of dore and concentrates) a total of 250,000oz gold, 11.4Moz silver and 116,300t zinc over the 10-year life of the mine.
EIS approval awaited
Approval has been received from the NT Government for a variation to PNX’s mine management plan to allow dewatering of the Fountain Head pit.
The Fountain Head Environmental Impact Statement (EIS) was also submitted to the NT Environmental Protection Authority (NTEPA) in late May with the public consultation period underway and EIS approval anticipated by the end of the year.
Reverse circulation drilling is also planned to commence in mid-June to test for new mineralised positions with the potential to increase the mineable gold contained within the existing pit shells at Fountain Head and Glencoe.
“We look forward to getting on the ground and starting drilling shortly,” Mr Fox said.