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Phoenix Gold intersects more gold, looking at cash flows in December quarter

Phoenix Gold (ASX: PXG) continues to deliver a string of gold hits from the company's operations, which are strategically located in the Goldfields region of Western Australia.

Phoenix is currently focusing on the Broads Dam gold project, which is located on the Zuleika Shear, a major northwest trending lineament and host to numerous multi-million ounce gold deposits.

The outcome of the recent strategic acquisitions by the company is that Phoenix now has interests in contiguous tenements covering 14 kilometres of strike of highly prospective mafic, ultramafic and intrusive rocks associated with the Zuleika Shear.

The latest reverse circulation highlights are from the Broads Dam central deposit, and included 13 metres at 4.85 grams per tonne (g/t) gold from 16 metres, 2 metres at 13.74g/t gold from 105 metres, 4 metres at 4.92g/t gold from 70 metres, and 2 metres at 9.04g/t gold from 108 metres.

The program comprised 44 holes for 3800 meters, and aimed at testing the continuity of mineralisation between the Broads Dam north prospect and the recently acquired Blue Funnel prospect to the south.

Phoenix said analysis of the results shows mineralisation is continuous between the two prospects and repeat structures to the east and west have been defined but are yet to be fully tested.

The strike length of the mineralised corridor is now over 2.5 kilometres and remains open in all direction and at depth.

Significantly, the majority of the historic work was restricted to the top 70 metres and follow up drilling will continue to test along strike and at depth commencing in November.

Drilling has now moved to the plus 500,000 gold ounce Castle Hill project testing further strike extensions to the north and south. Results from the first campaign are expected to be released in November.

Three potential ore agreements

Jon Price, managing director, told Proactive Investors today that the company is currently looking at three milling options for the company's ore.

"We currently have 19,000 ounces in stock piles at various grade, and we are targeting processing of this ore in the December quarter 2011.

"Our aim is to become a short to medium term self- funded explorer."

Phoenix leveraged to high gold price

Phoenix has already positioned itself to leverage the high gold price, and recently entered into a gold ore agreement with Kalgoorlie Mining Company (ASX: KMC) to treat ore that could see Phoenix gain cash flows in 2012.

Under the terms, a binding Ore Treatment Agreement will be executed by both parties within 12 months, locking in ore treatment capacity for Phoenix in 2012.

Kalgoorlie Mining Company's proposed Bullant mill will be located 5 kilometres to the north of Phoenix’s Broad’s Dam Project and only 20 kilometres north east of the 526,000 gold ounce Castle Hill.

In total Phoenix hosts 1.39 million ounces of gold resources at six projects within 50 kilometres of Bullant, so there is no shortage of mill feed.

Importantly - the area is well serviced by haul roads in all directions.

The agreement allows for the treatment of up to 300,000 tonnes annually of Phoenix's ore at Kalgoorlie Mining's 700,000 tonne per annum mill and processing facility.

The Bullant Gold Mine facility is expected to be fully operational in mid-2012.

Extensive two year exploration campaign

Phoenix is a company on the move, and has already mapped out an exploration program for the medium term.

The company's plan is for 70,000 metres of drilling over the next two years, with the campaign only recently starting - with around 5000 metres completed to date.

The program which has a goal of significantly increasing the resource base, includes:

– 20,000 metres of reverse circulation drilling to extend Castle Hill laterally and at depth;
– 20,000 metres of reverse circulation drilling extending Broad Dam along Zuleika shear;
– 5,000 metres of diamond drilling testing depth extensions at Broads Dam; and
– 25,000 metres of rotary-air-blast on green fields exploration.

Phoenix has already applied a budget estimate to the exploration of up to A$10 million.