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Phoenix Gold's Reserves Pass 1moz Milestone; To Monetise Projects

Phoenix Gold's (ASX: PXG) shares are set to lift higher as the company continues to rack up the milestones during 2013, and has now passed a reserve of one million gold ounces.

Total Phoenix reserves now stand at 26.8 million tonnes at a fully diluted grade of 1.23g/t gold for 1,057,830 ounces, which is up 90%. The Castle Hill Stage 1 Reserves are up 180% to 815,830 ounces.

The latest independent open cut reserve study and geotechnical and metallurgical test work results have further improved the economics of the Castle Hill project.

The project is located on the highly prospective Kunanalling shear zone in the heart of the Western Australian Goldfields, which is less than 50 kilometres from the regional mining centre of Kalgoorlie.

Jon Price, managing director, commented: "While the growth of Castle Hill has been quite remarkable over the last 3 years, we have always believed this area to be a new and very large gold camp with multiple stages.

"Phoenix has increased the Stage 1 resource 4-fold in 3 years and increased Stage 1 reserves from zero to 816,000 ounces."

Importantly - the large scale low strip ratio open pit, conventional milling at the mine with high recoveries and complementary heap leach operation - highlights the potential for healthy margins and significant organic growth.

Monetising the project

Phoenix is looking to monetise the more developed projects in 2014, with Price adding that Phoenix will continue to explore and grow the next stages at Castle Hill to extend the mine life well beyond the current 10 year mine life profile.

Pathways delivering optimal economic returns

Analysis of the recent geological model has confirmed two complementary treatment pathways delivering optimal economic returns.

The conventional carbon in leach processing plant will process the higher grade material with a cut-off grade greater than 0.8g/t gold producing a Reserve of 10.68 million at 1.71g/t gold for 588,380 ounces.

The heap leach processing plant will process the lower grade material with a cut-off grade of 0.4g/t gold producing a Reserve of 12.16 million at 0.58g/t gold for 227,450 ounces.

Mining study; Golder Associates

The updated Reserve of the Castle Hill Stage 1 project has been calculated after completion of an open pit and carbon in leach reserve study on Castle Hill Stage 1.

The mining study was completed by independent consultant, Golder Associates, and included:

- Pit optimisation using wall angles based on geotechnical drill holes, detailed geotechnical assessment and allowances for ramps;
- Mining costs based on budget quotations provided by local mining contractors;
- Detailed metallurgical test work from samples collected from recent diamond drilling representing all ore domains within the project;
- Assumption of a purpose built conventional carbon in leach (NASDAQ:CIL) processing plant is constructed at Castle Hill together with a heap leach processing plant in Year 2
- Milling and other operating costs based cost estimation completed by Mintrex based on recent metallurgical results and ore characteristics;
- 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 $A1,310 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 (A$1,260/oz net of royalties);
- Bulk densities were derived from test work;
- A discount factor of 10% was applied for all optimisations; and
- Reserves have been depleted by haulage up to and including 30 November 2013.

Analysis

Phoenix has proven that it can continue to grow its reserves, which have now passed the one million ounce milestone.

A next key catalyst is the completion of a Definitive Feasibility Study which is due early in the March quarter 2014, including development options and associated financial analysis.

Phoenix is looking to monetise the more developed projects in 2014.

Further drilling is also planned at Red Dam next year to continue to define the underground potential once the open cut is completed as is typical of gold projects in and around the Zuleika shear zone.

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