PNX Metals Ltd has signed an agreement with a subsidiary of Kirkland Lake Gold Ltd for the acquisition of four Mineral Leases at Fountain Head in the Pine Creek region of the Northern Territory, Australia. 100% ownership of the high-grade Hayes Creek zinc-gold-silver project has also been affirmed.
The acquisition of the MLs represents a key milestone in the development of the Hayes Creek project as it secures the proposed location for the project’s process plant. The area was identified through the PFS as being the preferred plant site for a number of reasons, including:
- Close proximity to the mining areas at Iron Blow and Mt Bonnie (approximately 12km)
- Excellent existing infrastructure including high-voltage power, rail, gas, water and roads
- It is an existing disturbed site with historic open pits proposed for use as tailings storage.
With the agreement to acquire Fountain Head, the proposed process plant location has now been finalised and the project environmental Notice of Intent will now be submitted to the Northern Territory Environment Protection Authority.
The transaction will result in no cash outlay for PNX and cements the significant project capital and operating cost savings this site provides as identified during the PFS.
As part of the agreement, PNX will also take 100% ownership of the Moline Exploration Project which is highly prospective for gold and base metals (currently owned 51% by PNX under an existing farm-in agreement with KL Gold.
In return for the acquisition of Fountain Head and balance of the Moline Project, PNX has agreed to carve out three exploration areas within the Burnside project area that are also part of the farm-in agreement and 51% owned by PNX. The transfer of these areas will allow KL Gold to continue with its regional gold exploration program in those areas and PNX will retain the right to explore for base metals.
PNX is also pleased to report that KL Gold’s option to clawback 30% of the Hayes Creek project has now lapsed, affirming PNX’s unencumbered 100% interest in the project. This simplified ownership structure will allow for a more efficient process to finance and develop the Hayes Creek project and potentially improve the financial returns.
PNX Managing Director James Fox said; “We are pleased to have finalised the agreement for the acquisition of the process plant site at Fountain Head for no cash outlay to PNX.
“The benefits of the area are significant for the project as it is the preferred location for the Hayes Creek process plant and tailings facility as contemplated in our PFS due to being located on granted MLs with excellent infrastructure and in close proximity to the mining areas at Iron Blow and Mt Bonnie.
“We will continue to advance the project development particularly in light of the strong appreciation in base metals prices and further tightness in the zinc concentrate market since the PFS was published in mid-2017. The project DFS is expected later in 2018 with the potential for production in early 2020.
“Acquiring the remaining 49% of the Moline Project is also an excellent outcome as it contains a number of strong zinc and gold exploration targets, and we look forward to drilling these during 2018.”
In mid-2017 PNX completed a PFS over the Hayes Creek project confirming it to be a promising future low-cost, high-margin zinc and precious metals mine.
The PFS is based on the development of the high-grade Iron Blow and Mt Bonnie zinc-gold-silver VMS deposits which are located less than 3km apart on wholly owned Mineral Leases and 12km to the south of Fountainhead, within the Pine Creek region of the Northern Territory, 170km south of Darwin.
The PFS forecasts the project to generate a NPV10 of $133 million, based on net smelter revenue from the sale of zinc and precious metals concentrates of $628 million over a 6.5 year mine life through annual production of 18,200 t zinc, 14,700 oz gold, and 1.4M oz silver (39,100 t of zinc equivalent). With a low $58 million initial capital expenditure requirement, the project is forecast to have a 73% IRR, and very short pay-back period of 15 months. The short pay-back period coupled with this acquisition, project risk continues to be effectively managed and reduced.
It is envisaged that the project can be ready for development in 2020 and will directly employ approximately 130 people.
The DFS and Environmental Impact Statement are now well underway with GR Engineering Services recently engaged to provide process design and engineering expertise. The DFS is expected to build on the excellent outcomes achieved in the PFS.