The New Zealand veteran thought he'd missed the cut at Royal Queensland when he walked off on Friday at even par.
But bogeys in the final groups dropped the line by a shot, allowing Hendry to sneak in before he carded a bogey-free 64 to soar to seven-under.
Hendry sat inside the top 10 for most of the day and went to bed tied for 14th 10 shots back from leader Min Woo Lee but only three shots behind fifth.
"I managed to make a scrappy par (on the 18th) and walking off I thought that was it for the week," he said after a flawless third round.
"A bit of luck led to a positive outlook today and all of a sudden I had a good round.
"When you're that far back, you're thinking 'just go and play and have fun'."
Cut on the number ➡️ T8— PGA of Australia (@PGAofAustralia) @golfnewzealand_ | #AusPGA pic.twitter.com/ViimAe29aCNovember 25, 2023
The 44-year-old was diagnosed with leukaemia in April, the illness ruining his plans after he'd won his way into a British Open berth in July.
Following treatment he returned to the tour at the Queensland PGA earlier this month, but was then back in New Zealand for treatment and missed last week's Victorian PGA.
"It's painful even though I'm medicated but the day after there's no pain, so that's a real bonus because the first few really hurt for a few days," he said of the treatment he requires every three months.
"At the moment it seems to be doing what it's told but who knows what the future holds," he said.
"We'll just try to make hay while the sun shines."
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