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Phoenix Gold evolves into gold producer with ore agreement at nearby Greenfields mill

Kalgoorlie based Phoenix Gold (ASX: PXG) has transitioned into a cash flow generating company by entering into a gold ore processing agreement, but this could be just the beginning.

Taking advantage of the high gold price, Phoenix will deliver an initial 25,000 tonne ore parcel from Catherwood mine stock piles to FMR Investment’s Greenfields mill - which will take about ten days.

The big plus for the agreement is the mill is located just 25 kilometres south of Phoenix’s southern tenements, and is well serviced by haul roads in all directions.

Importantly - the processing circuit has been configured to enable optimal conditions to achieve maximum recovery and minimal costs.

Treatment of the ore will also provide valuable metallurgical information and confirm gold recovery values used in the Catherwood Mine Feasibility Study.

Jon Price, managing director of Phoenix, told Proactive Investors today that current and potential future ore agreements may allow the company to achieve an annualised ore processing rate from agreements of 500,000 tonnes by 2012.

“This is a significant milestone for Phoenix as we produce our first gold and work towards becoming a self-funded explorer.

"The cash flow generated will enable further exploration and development of the first in a series of gold mines in our project pipeline.”

The FMR agreement follows the execution of a Memorandum of Understanding with Kalgoorlie Mining Company (ASX: KMC) for the treatment of up to 300,000 tonnes per annum of Phoenix ore through the Bullant processing facility - which is forecast to be in operation by June 2012.

Phoenix conducting extensive drilling campaigns

Highlighting how the company continues to push the Kalgoorlie based operations forward, work continues on the up to two year drilling program to increase the resource base at the Castle Hill and Broads Dam Projects before testing early-stage exploration targets principally within the Ora Banda – Grants Patch gold camp.

In the 2012 financial year, phase 1 of the program consists of 32,000 metres of a combination of reverse circulation drilling for resource growth and rotary air blast drilling for target generation in greenfields areas.

To date over 3800 metres have been drilled at the Broads Dam project and 3840 metres at Castle Hill, with results expected in the December 2011 quarter.

Castle Hill currently has a resource of 526,000 gold ounces.