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  • Phoenix Gold: Cash Generating Explorer On The Road To 4M Ounces 0 comments
    Oct 13, 2013 11:54 PM

    Phoenix Gold (ASX: PXG) deserves to hold the title of a self-funded explorer, with the company successfully monetising non-core gold assets as it progresses an aggressive exploration campaign in the Western Australian Goldfields, 50 kilometres from Kalgoorlie.

    Recently Phoenix increased its resource to 52.7 million tonnes at 1.7g/t gold for around 3 million ounces, with the company targeting 4 million ounces by the end of the year. This target includes a one million ounce reserve.

    Phoenix's key asset is Castle Hill, which is emerging as a new gold camp with multiple stages.

    The company has already drilled over 75,000 metres at Castle Hill, where resources continue to grow, and remain open in all directions, with recent deeper drilling to 500 metres confirming mineralisation at depth.

    Currently the company's focus is Castle Hill Stage 1. The resource stands at 21.8 million tonnes at 1.6g/t gold for 1.137 million ounces, and importantly 70% of the metal is in the Indicated category.

    The total Castle Hill resource is 30.9 million tonnes at 1.6g/t gold for 1.62 million ounces.

    Better still - the latest metallurgical tests yield recoveries of 92% to 98% with high gravity component.

    Castle Hill Stage 1 is being developed with Red Dam followed by Castle Hill Stage 2. CMS CAPEX estimate is A$110 million, with all in costs of around A$950 per ounce. The project is emerging as a new large scale gold camp.

    An independent review of Castle Hill Stage 2 and Red Dam is currently pending.

    Phoenix has a ten-year mine plan centred on Castle Hill and Red Dam, with a conventional 2 Mtpa processing facility targeting +100,000 ounces per annum at 1.6- 1.8g/t mill feed grade at 94% recovery.

    The Castle Hill processing plant offers attractive CAPEX, and low to moderate OPEX, with a straight forward modular design, proven technology, staged capital expenditure.

    Statutory approvals processes are well advanced, with key applications lodged.

    Aggressive drilling

    Drilling continues to be conducted at speed, following Phoenix kicking off a 217,000 metre reverse circulation and diamond drilling program close to a year ago.

    Phoenix's has an exploration budget of A$19 million for 2013/2014.

    Cash generating explorer

    Phoenix held $16.4 million in cash at the end of June 2013 and is generating cash internally, with Blue Funnel recently coming on board as the second in a series of small mining projects to generate cash, with the target $3 million in the near term.

    Jon Price, managing director

    The importance of a successful company is experience, which Jon Price, managing director, brings. Price is a metallurgist and minerals economist with over 25 years' experience in the gold sector.

    Price has developed open cut and underground operations near Kalgoorlie and project managed milling and heap leaching projects in Australia and overseas.

    Previous positions include general manager of the Paddington Gold Operations, and prior to that role general manager of St Ives gold mines in the Goldfields.

    Analysis

    Phoenix has been a success story in the cash generating stakes, utilising non-core assets to help fund an aggressive 217,000 metre drilling program.

    Defining features for Phoenix is that its operations are in a world-class infrastructure rich mining region near Kalgoorlie, and importantly the company is headed by Jon Price - who has the experience to develop and monetise.

    With a Definitive Feasibility Study remaining on track for completion before the end of 2013, and a near 3 million ounce resource - targeting 4 million ounces before the end of the year - Proactive Investors has no reason to change our share price target for Phoenix Gold of $0.26 - $0.28 within 6-9 months from the current $0.15.

    Phoenix is attractive on any investment metric, with an EV/Resource <$20/oz. Discovery costs are less than $10/oz.

    A development decision is anticipated in December 2013, with project financing discussions progressing.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

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