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Phoenix Gold To Generate Over A$3m Net Cash From Blue Funnel Ore Processing

Phoenix Gold (ASX: PXG) has some impressive metrics from the development of Stage 1 of the Blue Funnel Gold Mine is, which is progressing in line with expectations.

Mining kicked off last month and ore processing has now commenced under a toll milling arrangement with FMR Investments at its Greenfield's Mill in Coolgardie.

Blue Funnel will deliver near term total net cash flow to Phoenix in excess of A$3 million, based on a gold price of A$1,350/oz.

This is a modest base price considering gold is currently fetching over A$1,550/oz.

The project required minimal start-up capital costs and Stage 1 delivers 86,000 tonnes at 3.5 g/t at a total cash cost of A$980 per ounce, with toll milling to produce over 9,000 ounces at 93% recovery.

Jon Price, managing director, commented: "It is pleasing to report that mine development and operations for Blue Funnel are on track for a six to eight week processing program which is a credit to the mining team and our local mining contractors.

"By commencing processing now we are leveraging off a strengthening Australian dollar gold price which provides us with the opportunity to increase our margins and deliver more cash into the business."

Blue Funnel forms part of the Broads Dam project area, which is located on the highly prospective Zuleika shear zone in the heart of the Western Australian Goldfields. Phoenix holds 95% of the Blue Funnel project.

Analysis

Phoenix has positioned itself as a self-funded explorer by using non-core projects to generate cash, with Blue Funnel Stage 1 the second of a series of cash generating mines for the company.

The +A$3 million in net cashflows from Blue Funnel could be just a starting point, as this was based on a gold price of A$1,350/oz - which has now soared to over $1,550/oz.

Proactive Investors expects these impressive metrcis to move the Phoenix Gold share price higher from the current $0.20 level.

Phoenix holds A$16 million in cash and continues to generate funds internally, which is extremely important in the current difficult fund raising markets.

The company is targeting a 4 million ounce resource with one million in reserves by December 2013, while also being on track to complete a DFS before the end of the year.

Highlighting the aggressive drilling program to grow ounces, Phoenix recently passed 93,000 metres of reverse circulation and diamond drilling, which is part of a 217,000 metre campaign.

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