PERTH (miningweekly.com) – The board of ASX-listed Phoenix Gold has taken the decision to start a staged development at its Castle Hill and Red Dam gold projects, in Western Australia.

The development decision followed positive results from a definitive feasibility study, which assumed a standalone two-million-tonne-a-year processing plant at Castle Hill and a two-million-tonne-a-year heap leach plant to treat lower-grade ore material.

Over an eight-year mine life, the project is expected to produce about one-million ounces of gold, with production estimated at around 129 550 oz/y.

The project was estimated to cost A$136-million and would deliver A$1.3-billion in revenue. Its net present value was estimated at A$153-million and it would have an internal rate of return of 30% over the mine life.

As part of the study, a development option was completed that enabled the staged development approach, using existing spare milling capacity in the region.

Under this strategy, the project would deliver between 600 000 t/y and 800 000 t/y of ore which would be hauled and treated at a third-party mill.

Phoenix told shareholders on Monday that the company’s board had approved the staged development which would see mining start in the second half of 2014, with high-grade ore being transported to a third-party mill in close proximity, while the lower grade material would be stockpiled for treatment in the medium term.

“The board has approved a staged development strategy for the projects, whereby it will use spare milling capacity in the region to enable early net cash flow generation, and also potentially use existing agreements with Norton Gold Fields,” said MD Jon Price.

He noted that the prudent approach to the project, at a more modest capital cost, would benefit all shareholders, while the company continued to grow its mining inventory and deliver strong cash flow.

“We are extremely pleased to be taking the next step towards transforming Phoenix into a sustainable gold producer and are also excited by the substantial upside both within and outside these core projects that can take our mine life well beyond the initial eight years.”

Price noted that Phoenix was progressing discussions with parties in the region regarding toll milling arrangements, and expected to execute a formal agreement to facilitate gold production in 2015.

Base case gold production was expected to reach between 40 000 oz and 50 000 oz in 2015.