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Phoenix Gold Continues High Grade Gold Discoveries At Castle Hill

Phoenix Gold (ASX: PXG) has extended gold mineralisation at depth and along strike of its Castle Hill Stage 1 deposit in Western Australia after drilling intersected up to 39 metres at 4.8 grams per tonne gold.

The extension drilling north of Castle Hill 1 followed up on the large intercept of 94 metres at 2.6g/t gold released in December 2012.

"The excitement around the large intercept reported at the end of last year has certainly been justified with these latest results from the extensional program," managing director Jon Price said.

"Given these results will potentially increase the resource envelope up to 300 metres north and at depth demonstrates the potential of our first large scale mine development.

"The drill out of Castle Hill Stage 1 is now complete and I look forward to releasing the results aimed at converting our Inferred resource to Indicated category, as well as a resource update for Stage 1 over the coming weeks."

He added that Stage 1 was going to be a very large low strip ratio open cut gold mine with mineralisation starting at surface.

Other notable results from the 44 hole reverse circulation drilling campaign include:

- 67 metres at 2.1g/t gold from 76 metres;
- 85 metres at 1.2g/t gold from 57 metres;
- 22 metres at 3.2g/t gold from 108 metres;
- 63 metres at 1.12g/t gold from 17 metres;
- 47 metres at 1.5g/t gold from 47 metres; and
- 14 metres at 3.9g/t gold from 127 metres.

The results demonstrate mineralisation extends within the Kintore Tonalite - the main host to gold mineralisation at Castle Hill - showing continuous grade and widths along strike and at depth.

Drilling activity

Drilling in the area has been conducted on a 50 metre by 25 metre grid pattern to enable conversion to Indicated category for inclusion in the open pit Reserve study as part of the Definitive Feasibility Study due for completion in December 2013.

Phoenix has also completed the infill drilling program at Castle Hill Stage 1 with results expected in the September quarter and has started the extensional reverse circulation and diamond drilling programs.

Two diamond and two reverse circulation drill rigs are currently drilling at Castle Hill Stage 2, Red Dam and north along the eastern contact of what the company believes will become Castle Hill Stage 3.

With $20 million in cash as of 31 March 2013, the company is well funded to focus on growing the resource position at Castle Hill and Red Dam and achieving its interim target of 4 million ounces by December 2013.

Castle Hill

Phoenix's wholly-owned Castle Hill project is located on the highly prospective Kunanalling shear zone in the heart of the Western Australian Goldfields less than 50 kilometres from the regional mining centre of Kalgoorlie.

The resource currently stands at 23.54 million tonnes at 1.6 g/t gold for 1,178,000 ounces though recent exploration successes are likely to result in a substantial upgrade.

Phoenix has also recently engaged key independent specialist technical consultants to assist with the $1.5 million Definitive Feasibility Study for both the Castle Hill and Red Dam projects.

The DFS is due for completion in December 2013 to enable a final investment decision to commence mine development and process plant construction in early 2014.

It follows up on a Conceptual Mining Study completed in October 2012 that demonstrated a robust and highly profitable project centred on Castle Hill and Broads Dam.

The CMS delivered strong returns over a 5 year period with production rates between 100,000 - 120,000 ounces per annum with a total cash cost of $900 to $950 per ounce and a capital estimate for the 2 million tonne per annum CIL processing plant at $110 million.

Drilling at Castle Hill Stage 2 - located less than 10 kilometres north of Stage 1 - has also returned significant intercepts including 7 metres at 8.5g/t gold from 139 metres and 71 metres at 1.2g/t gold from 179 metres.

Analysis

All signs are pointing towards Phoenix Gold reporting a substantial upgrade to the Castle Hill gold resource with the latest drilling results including 39 metres at 4.8g/t gold another step towards its meeting the targeted 4 million ounce resource.

A larger and higher certainty resource, as more gold is moved to the Indicated category, will further improve the economics of the project, which in turn make a development decision early next year likely.

With these near-term milestones, the recent selldown in resource stocks renders the Phoenix Gold valuation as out of kilter with its cash of $20 million, or about 75% of its current market capitalisation of $26.4 million further highlighting the upside potential of its assets.

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