PNX Metals Ltd (ASX:PNX) has commenced a seven hole drill program at the Langleys high grade gold prospect within the Burnside Project, 180 kilometres south of Darwin.

The program aims to define additional high-grade gold mineralisation to complement the already significant resources established at the nearby Hayes Creek gold-silver-zinc project.

Drilling will target high grade extensions grading up to 7.0 g/t gold, along strike from historical workings.

Assays are expected from mid-September.

James Fox, managing director, commented:

'Following on from our recent strongly supported placement, PNX is very pleased to have commenced drill testing prospective high-value gold targets in close proximity to the Hayes Creek gold-silver-zinc project.”


Background

PNX";s focus is on its four projects located in the Pine Creek Region, 180 kilometres south of Darwin.

- Hayes Creek Project (flagship);
- Burnside Project;
- Moline Project; and
- Chessman Project.

The Hayes Creek project contains the Iron Blow and Mt Bonnie gold-silver-zinc deposits, located less than 3 kilometres apart and situated on granted mineral leases wholly owned by PNX.

PNX is currently earning a 90% interest in Burnside, Moline and Chessman from Newmarket Gold NT Holdings Pty Ltd in 19 exploration licenses and 4 mineral leases covering 1,700 square kilometres.

A further $0.55 million is required to be spent by December 2016 to achieve the 51% stage one earn-in.


Hayes Creek growth strategy

The Hayes Creek pre-feasibility study will expand on the recently completed scoping study, which demonstrated a financially robust potential open pit and underground operation.

The study found a base case pre-tax project net present value (NPV) of A$109.4 million with an internal rate of return (IRR) of 58%.

This results in a payback period of less than 2 years, with a mine life in excess of 7 years. Production is planned to commence in 2019.

PNX believes these returns can be increased further by increasing the mineral resource inventory through the drilling programs about to commence at Langleys and exploration at other brownfields prospects.

The latest purchase of three mineral leases is part of this growth strategy.


Analysis

This drill program is significant as successful delineation of economic gold mineralisation at Langleys could provide additional feed to complement the existing resource base at Hayes Creek.

Delineation of economic gold oxide mineralisation would also have the potential for toll treatment.

PNX will continue to be leveraged to exploration success with resource infill and extensional drilling at Hayes Creek to commence immediately after the Langleys drilling.

Furthermore, additional exploration drill targets are to be tested later in the season.

Shares in PNX are up 110% year to date, currently trading at $0.021.

At the end of the June quarter PNX had $1.64 million in cash and also recently raised $1.5 million through a share placement.

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