Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from gold explorer Phoenix Gold
(ASX:PXG) is Managing Director, Jon Price. John welcome to FNN. First up, what’s your focus and where are your projects located?
Jon Price: Our focus is gold. Phoenix Gold floated at the end of December in 2010 and we looked to a number of packages and we decided on the WA goldfields as the best place for us, particularly because we knew it so well. All of our guys have probably got collective 125 years’ of experience out in that region, so we’re about 55 kilometres northwest of Kalgoorlie. Roads, rail, power, people and everything is there and our registered office is in Kalgoorlie, where it should be.
Clive Tompkins: Thanks Jon. Since acquiring your assets, what increase have you seen in your resource base and what is the potential of each project area?
Jon Price: The resources when we first began before listing in 2010, we had about 595,000 ounces in resource that we acquired. We floated on the back of those resources and we quickly moved that from 595,000 to 997,000 - just under a million ounces, through the consolidation of a number of databases that really had never been pulled together into one cohesive database before.
So then we set ourselves a target at IPO to increase those resources by 50 per cent, to 1.5 million and we did it by 72 per cent and we are now at 1.68 million. It’s made up of about nine projects, the key one is Castle Hill followed by Broads Dam, Ora Banda and Kunanalling. So four key project areas, all of them with that million ounce potential and that’s what we’re working towards.
Clive Tompkins: Good thanks. So what’s your share price and market cap?
Jon Price: We’re market capped around $25 million at the present; share price is around 23 cents, we floated at 20 cents and raised about $8 million. So we’re only a year old, we’re in the money and our short options which came with the IPO, around 36 million of those, they expire next week. And that’ll deliver $7.2 million cash into the kitty and sort of have us well funded. So we have a market structure of about 110 million moving up to about 146 million shares, which is quite a tight structure.
Clive Tompkins: And Jon can you tell us a little bit about your experience and those of the Board?
Jon Price: Yeah certainly Clive. I’m a metallurgist by profession and I’ve probably had 20/25 years’ experience out in the WA goldfields, predominantly working in gold. And we’ve been out – I worked with many companies out in the region. We’ve also got Dale Rogers our Non-Executive Chair; he’s the mining engineer/underground specialist, again 20/25 years’ experience out in the north-western goldfields and the goldfields proper. And rounding out the Board is our Non-Executive Director, Clay Gordon who’s a geologist. So we have a mining engineer and a geologist and a metallurgist that sit on the Board. So a very technical and development orientated Board that have a lot of experience in finding it, mining it, milling it and selling it. And you know, it’s a good balance and we all get on which is pretty rare for those three disciplines.
Clive Tompkins: Jon turning to your projects now and starting with flagship Castle Hill project. What is the size of the resource and grade?
Jon Price: Castle Hill is certainly the most exciting and the most advanced of our development projects. When we started it was around 225,000 ounces, it’s now over 600,000 and growing as we speak. We’ve been working on the lateral extent of Castle Hill, looking at it to the north and the south which it still remains open. To the east and the west it remains open and at depth it remains open. So we’ve been focusing in our first year, understanding how big this resource could be in the first 70 metres from surface. So we are yet to test the ore body below 70 metres from surface and we’re now sitting at just under 600,000 ounces in resource. So it’s been a great start and it’s probably one of our most exciting projects and can deliver bulk, you know, moderate grade ore at around the two gram mark.
Clive Tompkins: And what stage is the project?
Jon Price: Castle Hill is predominantly in measured indicated – it’s about 40 per cent measured indicated, 60 per cent inferred resource. We’re still getting to terms with how big this thing is, so we’re still drilling it, we’re drilling it right now. In fact we started drilling last week and we’ll do another 20,000 metres of drilling into Castle Hill this year. That will define not only the extremities we believe, unless it continues to grow, but then we are starting to look at the depth extension. So we want to move Castle Hill from a resource, improve the quality of the resource up into the indicated status. And then complete feasibility study work on it, so we can make a development decision on the best way to proceed with growing and getting the gold out of the ground.
Clive Tompkins: And Jon, to your Broads Dam project. What is the current size of the resource and plans for further exploration?
Jon Price: Broads Dam sits on Zuleika Shear and Castle Hill sits on the Kunanalling Shear, so the Zuleika Shear’s probably the most famous in the goldfields. Our property had been disjointed and fragmented over many, many years and we have been pulling it back together, currently it sits at 326,000 ounces of gold at around 2.2 grams a tonne. We’re looking really for the next big million ounce underground in that area. To the south of us is the Kundana goldfield, there are a million ounce undergrounds because the guys have done the work, done the deeper drilling and honoured the geology. We are now looking at the exact same work in our area that hasn’t had that work done on it. So we see Broads Dam really becoming the next exciting high-grade underground in that area, which is really just sitting between existing million ounces within the same geology. We’ve just got to do the work and again, we’re going to be spending $2 million to $2.5 million into the Broads Dam project, 20,000 to 25,000 metres of drilling and our aim is to discover that large underground system. But along the way, we know that there are open cuts in that region that we can mine and make money along the way.
Clive Tompkins: And to your most advanced project Kunanalling and your Catherwood deposit. What did the feasibility study last year reveal?
Jon Price: The Catherwood work because it’s the most advanced; it’s made up of a main lode and an east lode. It’s an existing open cut that was mined in the ‘70s that we’re now cutting back, and the current feasibility study has us delivering around 25,000 ounces, 322,000 tonnes at 2.7 grams a tonne. And it delivers around $15.6 million net cash flow at a gold price of around $1,500 an ounce. The reason we worked on Catherwood is because it had the most data and it was the most advanced, and a feasibility study had already been completed in 2005. So we took that and redid it under the modern consumptions, gold prices have gone up and so have costs, so we redid the feasibility study to deliver those results. And Catherwood, the reason we did that was because it has the ability to generate cash and at the moment, our grand plan is to grow the resource base and build a large production company. Catherwood has the ability to generate realistically, you know, $8 million to $10 million cash through a third party mill. And if we can deliver that cash into the kitty, then we’re keeping dilution at a minimum and we’re generating our own cash to be a truly self-funded or a self-funding explorer. Then we have another mine called Blue Funnel that is exactly in the same boat and we can deliver those, you know eight or 10. They’re only one year projects and they can potentially deliver $8 million to $10 million each into the kitty which is again, part of our self-funding. We also have a number of stockpiles that once upon a time, they were mineralised waste. Now they’re economic ore and they’re no risk to us, we sell them or we’ve done deals with third party mills in the region. We poured our first gold bar and we’ll continue to do so, because it’s all about cash to grow the grand plan which is to build a significant development and production company.
Clive Tompkins: And Jon onto financials now. What’s your cash position and are you funded for the rest of the year?
Jon Price: Cash position at the end of the December quarter’s around $1.4 million. Our short options expire on the 28
th of February, they deliver $7.2 million into the kitty and they are fully underwritten. So that gives us that guarantee that we’re extremely well-funded through the next 12 to 18 months, as we deliver the resource growth target of 2.5 million ounces and the reserve target of 0.5 million ounces. So that we’re sitting here having a chat in December 2012 and we are ready to make that big development decision, and we’ve grown the resource 50 per cent before and we demonstrated that we can. And we don’t see any reason why we can’t grow it at 50 per cent again.
Clive Tompkins: Jon Price thanks for introducing Phoenix Gold.
Jon Price: Thank you very much Clive.
Ends
