Phoenix Gold (ASX:PXG) primary focus will remain the Norton Gold Fields joint venture at Castle Hill Stage 1 and the heap leach project.
The Norton JV is planned to commence in coming months pending the execution of the formal License to Mine and Ore Sale Agreement.
Under the Agreement, Norton will fund upfront capital, mining, haulage and milling, with Phoenix receiving 50% of the cumulative cash surplus.
The heap leach feasibility study is completed and project financing underway.
Phoenix is engaged with a number of domestic and international financiers, and expects to complete a financing package for the heap leach project in the June quarter.
Jon Price, managing director, commented:
“Core business for Phoenix has always been the development of the Mick Adams and Wadi projects with Norton that can deliver significant cash flow and the heap leach with a current NPV of A$41 million.
"We look forward to updating you further on these core projects in coming weeks.”
Price added that while the grade at Kintore has been lower than expected, the company remained focussed on improved grade performance to the completion of the mine in April and milling in the June quarter.
Small mining projects update
Phoenix advises that mining at its Kintore West project will complete this month, with milling continuing into the June quarter.
The company said the selective mining of high grade vein sets within a lower grade stockwork system more amendable to bulk mining has led to lower mined grades than anticipated.
Drill and blast performance was poor, increasing mining dilution, which has compounded the issue. Results from Kintore West are being collated and will be published in the next Quarterly report.
In addition to toll mill feed, over 12,000 ounces of heap leach feed has now been mined and stockpiled at Kintore West, which will be available for the heap leach project development.
Plans to mine additional projects such as Burgundy, Red Dam and Nazzaris will remain under review pending the outcome of the Norton JV and cash flow from the Mick Adams and Wadi open pit developments.
Accordingly, Phoenix has issued a termination notice with respect to its toll milling agreement with FMR Investments that comes into effect at the end of the current milling campaign.
Heap Leach Project Financing
Project financing for development of the heap leach project is underway, with engagement from a number of domestic and international financiers.
Phoenix expects to complete a financing package for the heap leach project in the June quarter.
The heap leach facility will process lower grade ore mined at Castle Hill and nearby satellite pits.
Results of a definitive feasibility study on the Heap Leach facility, announced 18 March 2015, estimated total net cash flow to the company (after capex, before tax) of A$70 million over the project’s current 7 year life.
Based on the study’s assumed gold price of A$1,500 per ounce, the study demonstrated robust financials with a pre-tax net present value of A$40.6 million (at an 8% discount rate) and strong IRR of 45%.
These economics could improve with the current A$1,560 gold price.
