The golden phoenix rises
Kalgoorlie-based explorer and miner Phoenix Gold is taking full advantage of the high price of yellow metal as advances great projects in Western Australia.
Rising from the ashes of the global recession is Phoenix Gold (ASX: PXG, “Phoenix”), an exploration and development company enjoying the sustaining high gold price with a suite of strong assets.
The Western Australian team has a large range of potential exploration targets and its tenure covers 455 square kilometres within 50 kilometres of Kalgoorlie across three world-class gold structures: Zuleika Shear, Kunanalling Shear and Ora Banda-Grants Patch.
The company’s board is equally well-stocked, consisting of a metallurgist, mining engineer and geologist, giving it the expertise required to get the best out of its highly prospective ground.
“We found a project that we all thought was fantastic and had enormous potential and we’re just starting to realise that potential now,” managing director Jon Price says, speaking to AuBJ just days before Phoenix poured its first gold bar from the treatment of remnant stockpiled ore from its Catherwood project, at the Greenfields Mill.
“We kept on coming back to an area in Western Australia that we all knew,” he says.
“We knew the geology, we knew the people and we knew how to do business in this country—so we ended up picking up a project that contained about 595,000 ounces of gold and we floated off the back of that.”
The dream team
Running operations at Phoenix is a trio that have known and worked with each other for many years.
“The non-executive chairman Dale Rogers used to be my boss and we spent 13 years together at a gold company in Western Australia, where he was the general manager and I was assistant manager,” explains Price.
“The other non-executive director Clay Gordon was also with us at the same company where he was the geological head, Rogers ran the mine and I ran the mill.
“Essentially we’ve all known each other for more than 20 years,” he adds.
In applying this wealth of mutual experience to Phoenix’s assets, the board has focused on increasing targets across its Western Australian operations.
“When we started we had 595,000 ounces and we set ourselves a goal of growing that by 50 per cent,” says Price.
“Before we even listed we found five databases of information that hadn’t been put together before, because the area had previously been so fragmented in their ownership.”
“We collated and consolidated all of these databases, and when we floated we had increased our resource to 977,000 ounces without even drilling a hole,” he adds.
“Across our whole property the average drill depth is only 49 metres, so it’s been very shallowly drilled in areas that haven’t been drilled at all.
Price says that the company has enjoyed fortunate market timing, picking up great ground as gold continues to soar.
“We’ve grown [the resource] to 1.4 million ounces already from recent drilling and we’ve spent a lot of time prioritising the areas that will give us the best bang for our buck,” he adds.
“They are Castle Hill, Broads Dam and Ora Banda. We’re now accelerating the drilling programme at all of those sites, which each have million-ounce potential.”
Growing the resource
While the company may set its sights on opportunities in South America and Asia in the future, it is wisely focusing on the job in hand in the present.
“What we’re doing now is sticking to what we know, proving this resource, generating as much cash as we can, and using the next 18 months to get into a position where we can look at a serious development scenario by building a mill and commencing operations at the larger mines,” remarks Price.
“We’ve got a brilliant in-house technical team and we’re very much focused on resource growth,” he adds. “Growing that resource from 1,400,000 ounces and doubling it again is our internal strategy, but we do have a number of mines that we can actually start mining to generate cash flow.
“Therefore, our aim in 2012 is to become a self-funded explorer and I often challenge anyone to find the same sort of company that is actually able to self-fund its own exploration while producing gold at the same time.”
Speaking just days before news of the first gold bar produced from stockpiles at Catherwood, Price reiterates the project’s role in Phoenix’s portfolio.
“It’s an open-cut mine and over a year’s mining has put $10 million dollars into the tin, which is an enormous cash bonus for us that we can funnel back into more exploration and mine development,” he notes.
“Catherwood is probably one of our most advanced mines,” says Price. “We’ve completed a visibility study on it and it’s ready to mine.”
The high price of gold is helping fuel Phoenix Gold’s fast growth as it reaches its target of attaining self-sufficiency, but the assets and watchful eye of experienced company heads are not to be underestimated.
“We see the gold price staying where it is and I can even see it possibly climbing,” says Price.
“But we’re conservative when we design our mines and if the gold price is $2,000 an ounce then that’s great as we can increase the cash in our tin.”
“We believe 2,500,000 ounces in resource and 750,000 to 1,000,000 ounces in reserve is the right number before we make a big decision on building a mill,” he remarks.
“That will cost about a $100-120 million, which is a big investment to make and we want to make sure that we’ve got a really strong seven to 10 year plan of mines in the pipeline that can deliver cash year on year.”
“Investing in gold mining companies is a great way to achieve capital growth,” says Price. “We’ve got a growing resource in a fantastic gold producing area and we’re on track for further exploration and mine development.”
On track to deliver superb results in the coming year, Phoenix Gold continues to advance its projects under favourable prices and firm leadership; a strong prospect for any investor.