Thursday, 28 June 2012

Rubicon Minerals’ Phoenix gold deposit poised to be next major Red Lake project

Rubicon Minerals Corp. (TSE:RMX) (NYSE:RBY) recently touted its Phoenix gold deposit in Red Lake, Ontario as “one of the most unique opportunities out there”.

The deposit, located on a high grade gold camp near the mining friendly community of Red Lake, already boasts an indicated resource of 1.02 million tonnes, grading 14.5 grams per tonne (g/t) gold for a total of 477,000 ounces of gold, and an inferred resource of 4.23 million tonnes, grading 17.0 g/t gold for a total of 2.31 million ounces of gold.

In an annual general meeting on Wednesday with its shareholders, Rubicon gave an update on the year ahead for the Phoenix project, under the leadership of its new president and COO Michael Lalonde, who will assume the role of CEO after a six month transition period.

Current CEO David Adamson started the meeting by providing an update on the Phoenix gold project, saying he is “very excited about where this project is going.”

“It’s taken a huge amount of effort from a huge team here and we’re very happy to have Michael Lalonde on board for the next stage.

“In a nutshell, we believe this [the Phoenix gold project] is one of the most unique opportunities out there.”

The project’s location, access to infrastructure and economics make it quite low risk.

“The project is well advanced, and we’re in a fantastic jurisdiction,” Adamson said of the gold-rich, historic mining community of Red Lake. “Red Lake is a great place for geology, exploration and development.”

The Phoenix project has a $214 million capex, is fully permitted and funded and has produced a “positive preliminary economic assessment” (PEA) that allowed the company to go to market in earlier this year with bought deal equity financing of 49,000,000 common shares of the company at a price of C$4.10 per share.

Rubicon closed the financing at the end of February, raising C$200.9 million.

Adamson said that with Ontario being the “lowest tax jurisdiction in Canada”, the Phoenix project will be sheltered from taxes for its first two to three years of production because of $400 million in accumulated tax pools and losses.
Because of this, shareholders can reap the benefits of money generated flowing back into the project for capital expenses.

For the company, the tax break means that Rubicon may be able to spend the capital to explore the so far under-explored 100 square miles that it controls in Red Lake – aside from the Phoenix deposit.

“We feel that one of the reasons we’ve outperformed our peers in the last three, six and 12 months is because we have these unique advantages,” said Adamson.

New president and COO Lalonde also addressed shareholders, pointing out his over 25 years of experience in gold mining - 15 of them in narrow vein gold deposits.

“What I see is a really good story and soon we’ll make it a great story,” he said.

Lalonde spoke to the geology of the project and said that of the two second generation folds in the camp, one lines up directly through the Phoenix project.

“For the last year, we have been doing additional drilling [in the areas near the indicated resource] and we feel we’ve done sufficient drilling that we believe we can upgrade a large amount of this material into the indicated status,” said Lalonde.

“The focus of drilling for the next year will be on expansion drilling, rather than infill drilling.”

The company plans to do 16,000 metres of expansion drilling between now and September.

“Results will be reviewed at the end of the program and at the same time we’ll be doing some optimization studies,” Lalonde said at the meeting. “We feel that there is a lot of room to optimize the project.”

Rubicon’s intention in the next six months is to deepen the Phoenix shaft to the 610 metre level, expected to be complete by the end of the year. Once the shaft is down, the company will resume infill drilling.

Another area of focus will be mill construction at the site.

“Without the mill, we can’t process this material into gold bars,” he stressed.

The mill foundation is underway, the shell has been ordered and the building will be erected by January.

Last month, Rubicon released an update on exploration activities at its F2 Gold system, part of the Phoenix gold project.

The company is carrying out a 12-month, $82.8 million program designed to optimize certain aspects of its preliminary economic assessment, accelerate site infrastructure and expand on current engineering studies.

“Over the next three months, we will concentrate on introducing lower cost mining methods to drop the operating cost,” said Lalonde.

“We will modify the infrastructure for improved flexibility and productivity with the objective of these studies being to improve the [project’s] net present value (NPV) and internal rate of return (IRR).”

At a five per cent discount rate, the 100 per cent-owned F2 gold system - part of the Phoenix gold project – has a net present value (NPV) of $433 million with gold prices at $1,100 an ounce.

At current prices of about $1,500 an ounce, the project has an NPV of about $933 million.

The Phoenix project is expected to produce 180,000 ounces of gold per year for the 12 years of mine life, with grades of roughly 14 grams per tonne (g/t) and a forecasted 92.5 per cent recovery.
Lalonde said Rubicon is looking to begin “producing gold bars” in early 2014 under the existing PEA.
Rubicon controls over 100 square miles of prime exploration ground in the prolific Red Lake gold district, which hosts Goldcorp's (TSE:G) high-grade Red Lake Mine.

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