Phoenix Gold steps closer to cash flows, secures second milling option

Phoenix Gold (ASX: PXG) has entered into an agreement with FMR Investments for the treatment of a parcel of Phoenix ore through FMR’s 1 million tonne per annum Greenfields processing facility near Coolgardie, Western Australia.

The Greenfields mill is a private toll treatment facility located 25 kilometres south of Phoenix’s southern tenements and is well serviced by haul roads in all directions.

“This agreement allows Phoenix to realise early cash flow from our surface stockpiles that are now economic in the current high gold price environment with minimal haulage required,” managing director Jon Price said.

“We are now in a position where we have flexibility and options for the treatment of our ore in the short to medium term as we continue to grow our resource base.”

Phoenix currently has around 19,000 ounces in stock piles at various grades which it is looking to begin processing in the December quarter.

Under the terms of the FMR agreement, Phoenix will deliver an ore parcel to the mill and will pay a cost plus toll treatment charge on an A$ per tonne basis.

The processing circuit will be configured with site personnel under the direction of Phoenix management to enable optimal conditions to maximise recoveries and minimise costs.

Treatment of the batch of ore will also provide valuable metallurgical information and confirm gold recovery values used in project evaluation. A long term agreement with FMR for the treatment of 150,000 tonnes per annum has been drafted and is expected to be finalised in the December quarter.

Other milling options
Phoenix has already positioned itself to leverage the high gold price, and recently entered into a gold ore agreement with Kalgoorlie Mining Company (ASX: KMC) to treat ore that could see Phoenix gain cash flows in 2012.

Under the terms, a binding Ore Treatment Agreement will be executed by both parties within 12 months, locking in ore treatment capacity for Phoenix in 2012. Phoenix is looking at three milling options for the company’s ore.

Moving forward

The Kalgoorlie-based company aims to become a short to medium term self-funded explorer and to significantly grow its JORC Resources.

It plans to do this through an extensive two year exploration program comprising 70,000 metres of drilling. Phoenix has applied a budget estimate to the exploration of up to A$10 million.

Earlier this month the company announced further gold hits from its Broads Dam gold project in the Goldfields region of Western Australia. The reverse circulation highlights from the Broads Dam central deposit included 13 metres at 4.85 grams per tonne (g/t) gold from 16 metres and 2 metres at 13.74g/t gold from 105 metres.

Analysis

With a total mineral resource base of 1.385 million ounces of gold, current valuation of Phoenix Gold by the market looks light relative to its peers. Phoenix's gold resources at six projects are within 50 kilometres of Bullant, so there is no shortage of mill feed. With recent tolling announcements, Phoenix is on its way to becoming a short to medium term self-funded explorer.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/20930/phoenix-gold-steps-closer-to-cash-flows-secures-second-milling-option-20930.html