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Phoenix Gold's Maiden Ore Reserve Exceeds 550,000 Gold Ounces

Phoenix Gold (ASX: PXG) continues to deliver positive newsflow from its gold assets in Western Australia, and has now achieved another milestone in a maiden gold reserve.

The reserve is a big one too, coming in at 14.1 million tonnes at a diluted grade of 1.24g/t gold for 559,000 ounces.

Jon Price, managing director, commented: "We are delighted to deliver such a robust maiden Reserve, we see this as the first step in growing both the Resource and Reserve significantly through 2013.

"Our 215,000 metre drilling program and Definitive Feasibility Study are now well underway. Results to date have delivered strong economics from the low cost base load open cut at Castle Hill to the higher grade satellite pits in close proximity.

"The latest resource and reserve does not include results from drilling in the December Quarter and we look forward to updating the geological models and re-optimising the pits given the exciting drill results intercepted at Castle Hill Stage 1."

A further breakdown is a mill feed component estimated at 8.6 million tonnes at 1.63g/t gold for 450,000 ounces, and a heap leach component estimated at 5.5 million tonnes at 0.63g/t gold for 111,000 ounces.

Importantly - the ore is predominantly shallow highly weathered oxide material with excellent metallurgy.

Reserve / resource growth potential

Highlighting the reserve / resource growth potential for Phoenix, the reserve does not include the latest drilling results from December quarter such as 94 metres at 2.6g/t gold from 88 metres.

Currently Phoenix has a total resource of 2.5 million gold ounces, which impressively represents an increase of 324% since initial project acquisition in 2010 - and exceeds the interim target set early in 2012.

Reserve breakdown

The maiden reserve of the company's projects has been calculated after completion of an open pit reserve study on Castle Hill and surrounding gold deposits situated on Phoenix tenements.

A metallurgical review of existing test work was completed by Independent Metallurgical Operations Pty Ltd ('IMO'). The study indicated the optimal processing route for these deposits was through a conventional CIL plant and heap leach facility. The Reserve Mining Study was completed by an independent consulting company, Goldfields Mining Services Pty Ltd, and included:

- Pit optimisation using wall angles based on geotechnical drill holes where available, independent geotechnical advice and allowances for ramps;

- Mining costs based on indicative quotations provided by local mining contractors;

- Milling and other operating costs based cost estimation completed by IMO using current known metallurgical parameters and ore characteristics;

- Haulage from satellite pits was based on known contract rates and it was assumed that mine haul roads would be used;

- Metallurgical parameters were derived from test work or assumed using production data if the deposit had been previously mined or derived from available data from nearby deposits within the same geological setting;

- Mining Recovery and mining dilution was varied by deposit width and geometry, ranging from 95% to 98% and 10% to 25% respectively;

- All Inferred Resources were excluded from the optimisation for estimation of reserves;

- A gold price of $A1,500 per ounce was used to estimate reserves;

- W.A. state and third party royalties were subtracted from the gold price as part of the optimisation process;

- Bulk densities were derived from test work and/or production data;

- A discount factor of 10% was applied for all optimisations; and

- Stockpiles have been depleted by haulage up to and including the 21st November 2012.

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