The Conversation (0)
The company is in production, has advanced, fully funded expansion plans, as well as a large and growing resource base.
Phoenix Gold (ASX:PXG) released an updated JORC resource statement last week, lifting its resource inventory in the historic Coolgardie gold mining region of Western Australia to over 4 million ounces.
Specifically, the company’s total resource now sits at 4.02 million ounces, and is comprised of mill feed of 54.2 million tonnes at 1.7 grams per tonne (g/t) (2.9 million ounces) and heap leach feed of 58.3 million tonnes at 0.6 g/t (1.1 million ounces). The resource figure is an amalgamation of 17 prospects within Phoenix’s large lease package.
Phoenix was floated in 2010 on the back of a large land holding north of the historical Western Australian mining town of Coolgardie, near Kalgoorlie. Although it has been heavily worked and explored for decades, the company felt that sufficient prospectivity remained to be exploited by virtue of there being multiple mills in the region that were forecast to be in search of feed in the near term.
While grades at Phoenix’s holdings might appear low by historical standards, the combination of toll treating at existing mills, parallel heap leach operations and the proximity of all prospects to the major mining center of Kalgoorlie offers the potential for entering production at a very low capital cost.
Post IPO, Phoenix’s resource base grew quickly, and in early 2014, a definitive feasibility study was completed at its flagship Castle Hill project; it was based around a new mill producing close to 130,000 ounces per year for a capital cost of some AU$136 million and an all-in sustaining cash cost of AU$989 per ounce. At the time, however, the company conceded that funding such a project in the markets as they were would be problematic and heavily diluting of existing shareholders — an alternate strategy was thus put forward.
The company indicated that it was well advanced in discussions with neighboring mill owners with a view to a much smaller start-up operation of 20,000 to 30,000 ounces per year using toll treating. These discussions advanced quickly, and following a small capital raising in March 2014 of AU$7.8 million, operations commenced within months at a capital cost of less than AU$1 million, with first gold poured in October 2014. Additional discussions with other mills in the region have also advanced, and the company is moving toward incrementally increasing its modest gold production in manageable steps, providing cash flow that it has invested back into drilling and resource expansion.
The company then would seem to have multiple options. It is in production, albeit on a small scale, has expansion plans well advanced and fully funded and has a large and growing resource base that could form the basis of a major production expansion once the economic options have been assessed.
Securities Disclosure: Brad George holds no investment interest in any of the companies mentioned.
Brad George is a geologist by trade, and has spent over 25 years working in the mining industry around the world in a variety of capacities. Primarily focused on exploration, Brad has gained extensive experience in iron ore, base metals and gold on five continents. He has extensive experience in the management of public resource companies.
Upon completing an MBA, Brad spent several years in London as a partner in a boutique brokerage house, developing a franchise as a rated mining and metals analyst. Brad now resides in Perth, Western Australia.