Phoenix Gold (ASX:PXG) continues to progress its gold production plans with the award of key mining contracts for the Kintore West open cut development as part of the Castle Hill staged development plan.
All statutory approvals have now been received and mining equipment mobilisation has also commenced for mining to begin in the September Quarter.
The mining contract was awarded to Alliance Contracting Pty Ltd while the haulage contract was awarded to MLG Oz Pty Ltd.
A two year agreement is already in place with FMR Investments for the processing of 600,000 - 800,000 tonnes of ore annually.
"Development of Kintore West is a significant milestone for Phoenix and will be the first in a series of mines under the staged development plan," managing director Jon Price said.
"We received over 20 proposals for the mining contract and over 10 for the haulage contract demonstrating a very competitive tender process in what is an improving cost environment.
"We look forward to working with our contracting partners who are committed to utilising a local workforce and service providers given we are only 30 minutes' drive from the City of Kalgoorlie-Boulder.
He added the company is now focused on transitioning the business from exploration to producer, continuing to work with Norton Gold Fields on the Castle Hill Stage 1 development and completing the updated heap leaching Feasibility Study for the Castle Hill area.
The mining contract was awarded to Alliance Contracting Pty Ltd, a mining contractor operating locally in the Goldfields region.
The fleet will consist of a Komatsu PC2000 primary excavator, Komatsu HD785 dump trucks and ancillary fleet to maintain roads, floors, stockpiles and waste dumps.
Mobilisation of mining fleet to site has commenced with site establishment expected to be complete in early August.
The haulage contract was awarded to MLG Oz Pty Ltd, a locally based haulage company that has operated in the region for over 13 years.
Ore will be transported on existing roads to FMR Investments' Greenfields Mill, 27 kilometres to the south using quad road trains with 100 tonne payload.
Kintore West, part of the Castle Hill Stage 2 project area is the first mine in a series of smaller scale mines to be developed under the staged development plan.
Its maiden Ore Reserve consists of:
- Mill feed at a 0.8 grams per tonne gold cut off of 2.0 million tonnes at 1.33g/t gold for 86,100 ounces; and
- Heap leach feed at a 0.4g/t cut off of 2.6Mt at 0.54g/t gold for 46,000 ounces.
The Stage 1 Castle Hill Project has Castle Hill has Ore Reserves of over 280,000 ounces of heap leach gold in addition to 878,180 ounces of mill feed ore.
Heap leach resources at Castle Hill will benefit from its agreement to acquire a heap leach plant in Western Australia from St Ives Gold Mining Company for $2 million.
The 2.3 million tonne per annum St Ives heap leach processing facility is well maintained and located just 100 kilometre to the south of Phoenix's projects.
With mining contracts awarded and mining due to begin in the current quarter, Phoenix Gold is well on its way towards starting gold production at an initial rate of 40,000 to 50,000 ounces per annum in the December quarter.
It has also set the stage for further developments with approval to start development of the Kintore West open cut, which falls under the second stage of the Castle Hill project.
Castle Hill Stage 1 is expected to generate $18 million in cash for the company over 18 months at A$1,400 per ounce gold price.
Share price milestones ahead include:
- Norton Gold Field's decision in mid-August to participate in Castle Hill Stage 1;
- Start of mining in the September 2014 quarter;
- Gold production in the December 2014 quarter; and
- Completing the acquisition of the heap leach gold plant.
There is good momentum building at Castle Hill with significant price catalysts ahead for Phoenix. On our estimates, we can see steady price appreciation.
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