HAYES CREEK

PNX acquired the 14 mineral leases containing the Iron Blow and Mt Bonnie polymetallic deposits from Newmarket Gold NT Holdings Pty Ltd (‘Newmarket’) in 2014 (refer ASX release 18 August 2014 for full details of the acquisition and related farm-in agreement), and named it the Hayes Creek Project (Figure 1). The Project is located approximately 170km to the southeast of Darwin and is well positioned in regard to mining infrastructure, rail, road, high voltage powerlines, water, and Newmarket’s mining operations.

PNX’s goal is to establish an economic zinc-gold-silver mining project at Hayes Creek by 2019.

Figure 1 - Hayes Creek Project

Figure 1 – Hayes Creek Project

The Iron Blow and Mt Bonnie deposits were first discovered in the late 1800s, and limited open pit and underground mining occurred around that time. During the mid-1980s, oxide and supergene ore was mined in small open pits for gold and silver, but the primary sulphide orebodies remain.  Mineralisation is hosted within the Mt Bonnie Formation of the South Alligator Group within the regional Margaret Syncline as shown below.

MtBonnieFormation

Figure 2 – Iron Blow and Mt Bonnie Deposits

Hayes Creek Scoping Study Highlights

PNX completed a Scoping Study in March 2016 over the Hayes Creek Project (Project) which indicates a robust economic base case and confirms the potential for the Project to become an economically viable operation. The level of capital investment that has been scoped provides for a modest mining and ore throughput rate and demonstrates, at the metal prices assumed, a fast Project payback period of under two years. This is likely to be attractive to stakeholders and/or other financiers, as is the inherent commodity mix of zinc, gold and silver.

The Mineral Resources established at Iron Blow and Mt Bonnie formed the basis for the Study’s mining planning and scheduling that generate a near-surface, high-grade mining inventory totalling 2.81Mt at 5.02% zinc, 2.11g/t gold, 143g/t silver, 1.17% lead, and 0.3% copper.

The production model contemplates open-pit mining at Mt Bonnie commencing 2019 for an initial 1.8 years of production followed by a further 5.2 years of underground mining at Iron Blow for a total mine life of 7 years. Construction of a central stand-alone mineral processing facility is assumed to treat the ore from both deposits at a nominal 400,000tpa feed rate.

Figure 3(b) - Mt Bonnie Pit Shell Model

Figure 3(a) – Mt Bonnie Pit Shell Model (Scoping Study)

Figure 3 - Iron Blow Underground Mine Model

Figure 3(b) – Iron Blow Underground Mine Model (Scoping Study)

Key results from the Study (see ASX release 31 March 2016 for detail, including cautionary statements):

  • Base case pre-tax project Net Present Value of $109.4 million with an Internal Rate of Return of 58%, giving a payback period of less than 2 years (at published consensus forward price estimates)
  • Initial capital expenditure of $54 million for processing plant and infrastructure, plus a further $10.9 million in year 2 of underground development capital
  • Estimated average annual payable metal sales of 13,700 tonnes of zinc in concentrate, and 1,290,000 oz silver and 14,000 oz gold in doré from production of 400,000 tonnes of ore per year
  • Indicative mine life of 7 years commencing in 2019 with total metal revenues of $631 million
  • Annualised Life-of-Mine pre-tax net cash flows of $35 million (net of ongoing underground development capital) resulting in a total Life-of-Mine pre-tax net cash flow of $244 million
  • Project revenues split between zinc (41%), silver (34%), and gold (25%), providing a natural hedge against fluctuations in individual commodity prices

Project upside – the Company will continue to delineate resources and test exploration targets with VMS and gold potential in close proximity to Iron Blow and Mt Bonnie to increase the resource base. Target stratigraphy can be traced on the surface for at least 10km with numerous additional areas identified within the broader Burnside project to be followed up. A regional exploration program has commenced to map and sample the prospective horizon, and to ground truth new prospective areas.  Other opportunities for Project enhancement include

  • increasing metal recoveries through optimisation of the mineral processing route
  • improving capital and operating cost efficiencies

A Pre-Feasibility Study (PFS) is underway to increase the confidence level of Resources in the mining inventory to at least Indicated status and undertake further detailed metallurgical test work and analysis of various options of revenue streams vs costs to allow more detailed process engineering. Other development activities associated with the PFS include:

  • Investigating the economic merit of processing historic oxide stockpiles that exist on the Iron Blow and Mt Bonnie Mineral Leases
  • Commencing the approvals strategy and stakeholder engagement to reduce the risk of delay to the start of the Project
  • Optimising the engineering of the processing plant and mine infrastructure, including reviewing tailings treatment facility location (and type), and location of waste dumps, to meet required Capital and Operating Cost estimate confidence levels

Hayes Creek – Mineral Resources

As noted previously, the Hayes Creek total mineral resource estimate is 2.81Mt at 5.02% zinc, 2.11g/t gold, 143g/t silver, 1.17% lead, and 0.3% copper from the deposits at Iron Blow and Mt Bonnie.

This translates into approximately 178,000 tonnes of zinc, 257,000 ounces of gold, 16.3 million ounces of silver, and 40,000 tonnes lead.

ResourceTable1

Notes relating to Tables 1 and 2

  • Due to effects of rounding, totals may not represent the sum of all components.
  • Mt Bonnie – zinc domains are reported above a cut-of grade of 1% zinc, gold domains are reported above a cut-off grade of 0.5 g/t gold and silver domains are reported above a cut-off grade of 50 g/t silver.
  • Iron Blow – a variable gold-equivalent cut-off grade was used corresponding to an RL at which mineralisation could be extracted with open cut versus underground methods.
  • In order to assess the potential value of the total suite of minerals of economic interest in the mineral inventory, formulae were developed to calculate metal equivalency for the gold and zinc (see below). Metal price assumptions were updated during the Mt Bonnie estimation to reflect average consensus forecasts for the period 2017 through 2021, (consensus forward price forecasts compiled from a group of domestic and international mining analysts and financial institutions).
  • Metallurgical recovery information for Iron Blow was assigned prior to any diagnostic testwork by PNX and was based on what was considered reasonable in similar operations. Metallurgical recovery information for Mt Bonnie was sourced from test work completed on diamond drill core from the Iron Blow deposit, and historical test work on the Mt Bonnie deposit.  Mt Bonnie and Iron Blow have similar mineralogical characteristics and are a similar style of deposit; hence the assumption that metallurgical characteristics are similar between the two deposits is considered reasonable by the Competent Persons.
  • The formulae below were applied to the estimated constituents to derive the metal equivalent values:
  • Gold Equivalent (field = “AuEq”) (g/t) = (Au grade (g/t) * (Au price per ounce/31.10348) * Au recovery) + (Ag grade (g/t) * (Ag price per ounce/31.10348) * Ag recovery) + (Cu grade (%) * (Cu price per tonne/100) * Cu recovery) + (Pb grade (%) * (Pb price per tonne/100) * Pb recovery) + (Zn grade (%) * (Zn price per tonne/100) * Zn recovery) / (Au price per ounce/31.10348)
  • Zinc Equivalent (field = “ZnEq”) (%) = (Au grade (g/t) * (Au price per ounce/31.10348) * Au recovery) + (Ag grade (g/t) * (Ag price per ounce/31.10348) * Ag recovery) + (Cu grade (%) * (Cu price per tonne/100) * Cu recovery) + (Pb grade (%) * (Pb price per tonne/100) * Pb recovery) + (Zn grade (%) * (Zn price per tonne/100) * Zn recovery) / (Zn price per tonne/100)
  • Iron Blow Resource – See ASX release 3 November 2014, ‘High Grade Mineral Resource Estimate for Iron Blow Deposit’, where further details are provided. All material assumptions and technical parameters underpinning the resource estimate announced on 3 November 2014 continue to apply and have not materially changed.  Results of drilling by PNX since October 2014 have not been included in the estimate but if they were, they would not likely result in a material change to the October 2014 resource estimate.
  • Mt Bonnie Resource – See ASX release 1 February 2016, ‘Mt Bonnie Resource Estimate Boosts Hayes Creek Project, NT’ where further details are provided. All material assumptions and technical parameters underpinning the resource estimate announced on 1 February 2016 continue to apply and have not materially changed.

Both the Iron Blow and Mt Bonnie deposits hold the potential to contain additional mineralisation external to the mineral resources already defined. At Iron Blow this includes a near-surface extension to the western lode where there is limited drilling, and the prospect of additional high grade gold mineralisation at depth as seen in drill hole IBDH007.

Drilling in 2015 at Mt Bonnie (see PNX ASX release 18 June 2015) highlighted the potential for high grade shoot(s) of mineralisation to extend underneath the current limit of drilling, and discovered a southerly extension to mineralisation in 2 drill holes (MBDH034 and MBDH036) which has not been defined or closed-off.

Summary of Achievements to Date – Hayes Creek

Since the Company acquired the Hayes Creek Project in 2014, key achievements have included:

  1. Completion of a Scoping Study – March 2016
  2. Inferred and indicated mineral resource (JORC 2012) defined at Mt Bonnie – January 2016
  3. Inferred mineral resource (JORC 2012) defined at Iron Blow demonstrating that it is one of the best undeveloped zinc deposits in Australia – November 2014
  4. An initial 2 hole diamond drill program at Iron Blow (Nov/Dec 2014) returned the highest-grade intersection of massive sulphides yet recorded there
  • IBDH023 intersected significant widths of high grade of zinc, gold and silver:
    • Eastern Lode: 50.39m @ 10.12% Zn, 2.66 g/t Au, 283 g/t Ag, 0.57% Cu, 1.39% Pb from 155.72m, including 19.45m @ 15.48% Zn, 2.65 g/t Au, 492 g/t Ag, 0.56% Cu, 2.52% Pb from 156.5m.
    • Western Lode: 19.0m@ 3.45% Zn, 1.33 g/t Au, 18.2g/tAg, 0.38% Cu, 0.1%Pb from 229m, including 3m@ 11.53% Zn, 1.60 g/t Au, 22.4 g/t Ag, 0.30%Cu and 0.1%Pb from 240m

Refer Figures 4-6 below, and refer ASX releases 8 Dec 2014 and 22 Jan 2015 for full detail.

IronBlow

Figure 4 – Cross Section of Iron Blow showing Drill Hole023

Figure 5 -IBDH023 high grade massive sulphide core–the interval between 162m-165m as marked assayed 19.4%Zinc, 2.7g/t Gold, 630g/t Silver, 0.85% Copper, and3.2% Lead

Figure 5 -IBDH023 high grade massive sulphide core–the interval between 162m-165m as marked assayed 19.4%Zinc, 2.7g/t Gold,

Figure 6 - Schematic long section of Iron Blow deposit with initial structural interpretation (Note: Drill-hole IBDH024 is off section)

Figure 6 – Schematic long section of Iron Blow deposit with initial structural interpretation (Note: Drill-hole IBDH024 is

5.  13 holes RC and Diamond drill program at Mt Bonnie completed in October 2015 yielded high-grade zinc results:

  • 8.78m @ 7.16% Zn, 1.04g/t Au, 215g/t Ag, 0.34% Cu and 1.62% Pb from 55m in MBDH033
  • 42.25m @ 2.96% Zn, 0.59g/t Au, 35g/t Ag and 0.33% Pb from 25.75m in MBDH034, including:
    • 3.1m @ 10.77% Zn, 3.34g/t Au, 133g/t Au, 0.39% Cu and 1.21% Pb from 63.9m

Refer ASX release 17 December 2015 for detail

6.  An initial 12 hole 1,114m RC drill program completed at Mt Bonnie in May 2015 was successful in delineating near-surface massive sulphide mineralisation containing high grades of Zn-Au-Ag. A lower conductive zone was identified with the potential to double the size of the deposit. Highlights included:

  • 8m @ 12.6% Zn, 2.4g/t Au, 328g/t Ag, 0.5% Cu, and 2.8% Pb from 89m in MBRC014
  • 12m @ 8.4% Zn, 2.57g/t Au, 228g/t Ag, 0.7% Cu, and 2.0% Pb from 48m in MBRC015
  • 15m @ 7.0% Zn, 0.8g/t Au, 157g/t Ag, 0.5% Cu, and 1.1% Pb from 54m in MBRC016
  • 26m @ 4.0% Zn, 1.3g/t Au, 137 g/t Ag, 0.3% Cu, and 1.0% Pb from 57m in MBRC024

The overall grades and style of mineralisation encountered at Mt Bonnie is very similar to that observed at the Iron Blow resource.

Refer Figures 7-9 below and ASX releases in 3/18 June 2015 and 6 July 2015 for further detail.

Figure 7: Mt Bonnie drill collar locations and interpreted outline of massive sulphide lode

Figure 7: Mt Bonnie drill collar locations and interpreted outline of massive sulphide lode

Figure 8 - Mt Bonnie Orthogonal Long Section

Figure 8 – Mt Bonnie Orthogonal Long Section

Figure 9 - Mt Bonnie historical open pit looking to the north-west

Figure 9 – Mt Bonnie historical open pit looking to the north-west

FARM-IN PROJECTS: REGIONAL EXPLORATION

The Company’s project areas in the Northern Territory are shown below.

Figure 1 - PNX Northern Territory Project Areas

Figure 1 – PNX Northern Territory Project Areas

The Company has a pipeline of prospects in the Northern Territory at various stages of exploration, ranging from purely grassroots targets with no historical exploration to brownfields prospects along mineralised structures beneath historical open pits.   These prospects are being field assessed, ranked and progressively explored to provide development opportunities beyond and potentially integrated with the Hayes Creek Project.

The Company’s main objective and highest priority is to establish sufficient mineral resources within the Hayes Creek project, at Iron Blow and Mt Bonnie to commence development of these resources. Notwithstanding, regional exploration prospects will gradually be tested for future development extensions.

Burnside-Moline-Chessman Projects

PNX is currently earning up to a 90% interest from Newmarket Gold NT Holdings Pty Ltd (‘Newmarket’) in 19 Exploration Licenses and 4 Mineral Leases covering 1,700km² in the Pine Creek region of the NT. The Farm-in consists of two stages: a 51% interest will be earned by spending $2 million by 15 December 2016, and a 90% can be earned by spending a further $2 million by December 2018.

The Pine Creek region is one of the most prospective geological regions of Australia, with recorded gold production of over 3.2 Moz and known resources of approximately 9 Moz*. The Project licences and leases, referred to as the Burnside, Moline and Chessman Projects, contain numerous historically mined deposits, unmined mineralisation and potential to discover new mineralisation.

In 2016, PNX has focussed on prioritising the exploration program for the coming dry season. This included digitising historical data and QA/QC of a large amount of historical drilling and geochemical soils information.   As a result, a number of new previously unknown areas have been highlighted for both gold and base metals potential (Figure 2).

PNX is in the process of prioritising the exploration targets to proceed with heritage clearance and ground-truthing in preparation for drilling activities.

*Ahmad and Munson, 2013 (Northern Territory Geological Survey Special Publication 5)

Figure 2: Burnside Exploration area, Yellow = gold targets, Pink = base metals targets, lined areas are excluded from exploration earn-in with Newmarket

Figure 2: Burnside Exploration area, Yellow = gold targets, Pink = base metals targets, lined areas are excluded from