Explorer takes wing to producer status

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 19 Dec 2012   Posted by admin


WITH 600 square kilometres of tenure spanning three world-class gold structures – the Zuleika Shear, Kunanalling Shear and Ora Banda-Grants Patch goldfield – near Kalgoorlie, Phoenix Gold rapidly increased its mineral resources by 276 per cent in the 18 months to August 2012.
In December 2011 Phoenix outlined its key goals for 2012, all of which have been achieved or will be by the year’s end. The company was aiming for another gold resource increase (targeting 2.5 million ounces); further acquisitions to consolidate its highly-prospective tenure; and the completion of a five-year mine plan for its flagship Castle Hill project.
Phoenix’s resources have now increased to 2.24moz, with further increases imminent. During 2012, the company also purchased the Kintore tenements and, in a separate transaction, purchased the leases between Broads Dam and Castle Hill.
Furthermore, a conceptual mining study (CMS) has been released outlining a five-year mine plan for Castle Hill that will enable Phoenix to release a maiden reserve in late 2012 as part of its transition from explorer to producer.
Castle Hill
Castle Hill has the potential to become a multi-million ounce gold project for Phoenix. Obtained by the company in late 2010, it comprises a number of deposits about 50km northwest of Kalgoorlie-Boulder in the heart of the WA goldfields.
At the time of acquisition, the project had mineral resources of 5.57 million tonnes grading 1.5 grams per tonne of gold for 253,000oz. Phoenix was attracted to Castle Hill due to the large-scale nature of the mineralised system, which is about 9km in length, and the fact that historic exploration had targeted only a small number of sites.
The company reported that previous project managers had focussed activity on the large Mick Adam and Wadi deposits, with relatively little exploration and evaluation of the higher-grade lodes in the system.
Phoenix began by evaluating five historic drilling databases before starting drilling in January 2011.
To date, 122 reverse circulation (RC) and diamond holes have been drilled for 11,800m, returning intercepts including 10m grading 9.92g/t, 15m grading 6.63g/t and 13m grading 7.40g/t.
In August, on the back of its recent successful drilling campaigns and strategic acquisitions, Phoenix announced a significant upgrade in mineral resources at Castle Hill to more than 1moz: resources now stand at 21.7mt grading 1.5g/t gold for 1.06moz gold, with total mineral resources of 40.5mt grading 1.7g/t for 2.24moz.
Exploration success reported in the tenements adjacent to Phoenix’s landholding indicated that the entire 9km strike was highly prospective.
This interpretation was the foundation for the company’s exploration and acquisition strategy, culminating in its May 2012 purchase of the Kintore tenements and their namesake deposit, which boasts a resource of 450,000oz. This transaction means the company now owns 100 per cent contiguous title across the majority of the complex, from Mick Adam and Wadi in the south to Kintore in the north.
All deposits are open in all directions and delineating their extents through bullish drilling programs has become a priority task for Phoenix, starting with the 400,000oz Mick Adam lode.
The successful Mick Adam campaign, reported in September, represented some of the deepest holes drilled at Castle Hill. The program demonstrated the continuity of mineralisation to about 170m: doubling the known vertical extent of the deposit. Based on this success, the company will continue staged drilling programs at Mick Adam with the aim of doubling the current resource towards 800,000oz.
Exploration within a 15km radius of Castle Hill is also being progressed as Phoenix anticipates further increases at neighbouring deposits such as Telegraph, and higher-grade mineralisation at Broads Dam and Blue Funnel.
Only 15km from Castle Hill, Broads Dam boasts high-grade gold mineralisation and remains open in all directions. Phoenix has completed diamond and RC drilling along strike and at depth, targeting high-grade underground systems.
The recent Red Dam acquisition further consolidated the area, and drilling is planned for November.
Described as a “cash generator” by the company, Blue Funnel had 48,000t grading 4.5g/t mined out of an open pit until 1993. The open pit is unfinished, with 16,877oz grading 3.5g/t remaining on the pit floor witha small cutback to the south.
At Kintore, an extensive drilling program has been planned for the December quarter. Exploration at Kintore is in its very early stages, with the shallow drilling coverage essentially confined to the northwest corner of the deposit. However, wider-spaced drilling outside the zone intersected high-grade gold intercepts and provided encouragement that the current 450,000oz resource could grow to more than 1moz.
On October 17, Phoenix reported that it had completed a CMS into the development of Castle Hill and Broads Dam. The company reported that CMS consisted of a five-year mining schedule, with a plant design based on a nominal 1.65 million tonnes
per annum throughput utilising a three-stage crushing circuit and a single-stage grinding circuit, followed by gravity and carbon in leach (CIL) circuits. A heap leach facility with a nominal 1.2mtpa capacity has also been planned to treat low-grade ore.
The crushing circuit has a nominal design throughput of 4mtpa to cater for both the CIL circuit and heap leach facility. This configuration is flexible and allows for easy expansion as throughput needs change.
The CMS assumed a mining program of 600,000 bank cubic metres per month during the five-year schedule, expected to deliver an average of about 2.8mtpa of ore and 1mpta of waste. The estimated capital cost was $131 million, which included first fill and processing start up but excluded working capital.
The CMS used the mineral resources as announced on August 22 this year. Therefore, recent deeper diamond drilling at Castle Hill, reported in September, was not included in the study.
At Castle Hill, the pit design reaches 85m below surface but the results of recent drilling have extended the depth of the mineralisation and it is expected the resource boundary will be significantly deepened when Phoenix announces its next mineral
resource estimate.
“It is very pleasing to see the study demonstrating such strong economics, given it does not include the recent deeper drilling results or several advanced projects that sit outside our 15km development radius,” Phoenix managing director Jon Price said.
“The CMS has identified the work we need to do to progress to a definitive feasibility study in the next 12 months and make a decision to move ahead with construction,” he said.
“We will continue to grow our resources as fast as possible while we continue studies to determine optimal mining and processing routes for our core projects.”
On October 18, the company placed its shares in a trading halt as it finalised a major capital raising following completion of the CMS.
Catherwood Phoenix completed a bankable feasibility study (BFS) on its Catherwood mine near Castle Hill in 2011, including a mine design comprising a two-stage cutback to the existing pit. The Stage 1 and Stage 2 designs envisaged production of 313,600t grading 2.69g/t gold for 27,000oz and up to $15.6 million in free cash flow.
Since the BFS was announced and following mining approvals, Phoenix has treated ore from Catherwood through a toll treatment mill in Coolgardie – reported in December last year – to verify metallurgical assumptions within the BFS and also generate cash for the company.
Due to positive results from the treatment of the ore, Phoenix completed infill drilling of the supergene hanging wall zone within the Stage 1 design in early 2012, with significant intercepts announced in May including 25m grading 4.14g/t gold from 11m and 2m grading 18.02g/t gold from 18m.
On October 10, Phoenix reported it had executed a ‘right to mine’ agreement with Norton Goldfields for development of the Stage 1 cutback at Catherwood. Norton will fund the mining, haulage and treatment of ore from the Catherwood cutback, while Phoenix will retain ownership of the project. Ore will be processed at Norton’s 3.5mtpa Paddington processing facility about 35km east of Catherwood. Compensation to Phoenix will comprise an initial deposit prior to the start of mining, after which payments will be made to Phoenix on an agreed rate per ounce recovered.
“This agreement, combined with earlier stockpile sales agreements with Norton, have satisfied our objective of generating cash internally to self fund further work on our core projects,” Mr Price said.
“Monetising historic stockpiles and our non-core mining projects provides funds without risk or distraction so we can focus on our strategy, which is to grow resources at our larger projects as fast as possible.
“Along with this we plan to complete mining studies to determine optimal mining and processing routes for our core projects.”
Development of the mine is expected to begin within the next three months, and first gold production is anticipated in the March quarter 2013.
Other projects
A recent discovery by Phoenix, the Red Dam deposit has a resource of 229,000oz grading 2.1g/t, and remains open along strike and at depth. The company, which has started a CMS on the project, reported that Red Dam could potentially be developed
as a high-grade open cut operation transitioning to an underground mine.
Just 4km east of Castle Hill and boasting about 3km of strike length, the Telegraph deposit represents another new gold system, with recent drill results including 8m grading 19.7g/t from 136m and 4m grading 11.8g/t from 39m. Follow-up drilling
has been planned for the December quarter.
2013 and beyond Phoenix has grown its overall gold resource this year while completing feasibility studies as it looks to advance near-term mining projects to generate early cash flow and become a self-funded gold explorer.
In 2013, the company reported that it aimed to continue exploration of its high-priority targets to expand its current resource base, particularly at Broads Dam and Castle Hill, before progressing toward a BFS.
With the monetisation of historical stockpiles and non-core mining deposits to fund further exploration just months away — as well as a slew of large, high-grade projects just minutes from Kalgoorlie — Phoenix has positioned itself to become one of WA’s ‘next big things’ in gold.


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