PXC Phoenix Copper Limited

Phoenix Copper Limited / Ticker: PXC / Sector: Mining

15 May 2024

Phoenix Copper Limited

('Phoenix', the 'Company', or the 'Group')

 Final audited results for the year ended 31 December 2023

Notice of Annual General Meeting ("AGM")

Phoenix Copper Ltd (AIM: PXC, OTCQX ADR: PXCLY), the AIM quoted USA focused base and precious metals emerging producer and exploration company, is pleased to announce its audited results for the year ended 31 December 2023. All references to $ are United States dollars.

Highlights

Corporate & Financial

-       Investment in Empire Mine increased to $38.43 million (2022: $33.10 million)

-       Group reports loss of $1.57 million (2022: loss of $1.57 million)

-       Year-end Group net assets of $37.19 million (2022: $37.84 million)

-       Company reports a profit of $0.51 million (2022: loss of $0.07 million)

-       Company loans to Idaho operating subsidiaries increased to $32.54 million (2022: $26.19 million)

-       Placing, subscription and retail offer to raise $3.52 million completed in January 2024

-       $2 million unsecured short-term loan refinanced into 18 month unsecured term loan in March 2024

-       Subscription letter received to fully subscribe a minimum of $80 million of floating rate corporate copper bonds. Closing of bond issue subject to resolutions being passed at the AGM

-       Andre Cohen to retire as a director after the AGM and to join the Advisory Board

Operational

-       Empire open-pit mineral resources upgraded to mineral reserves. Inaugural mineral reserve statement announced

-       Proven & Probable mineral reserves of 10.1 million tonnes containing 109,487,970 lbs of copper, 104,000 ounces of gold and 4,654,400 ounces of silver

-       Mineral reserves estimated using assay data from 485 drill holes, extensive geological modelling, metallurgical recovery test work, geotechnical evaluation, and mine design

-       Empire open-pit mine compliant Pre-Feasibility Study and related economic model nearing completion

-       28 holes (3,300 metres) of drilling completed on 60-hole Navarre Creek gold drilling programme

Annual General Meeting

The Company also announces that the Annual General Meeting ("AGM") will be held at The Washington Hotel, 5 Curzon Street, London W1 5HE on 29 May 2024 at 11.00 BST.

The Notice of AGM and Forms of Proxy will be despatched to shareholders on 16 May 2024 and will be available on the Company's website at https://phoenixcopperlimited.com from 15 May 2024. 

The Company's Annual Report and Consolidated Financial Statements for the year ended 31 December 2023 will also be available on the website from 15 May 2024.

CHAIRMAN'S STATEMENT

Dear Shareholders

As I write copper is trading close to the symbolic $10,000 per tonne, having rallied strongly in recent weeks. Despite several delays and disappointments, we are hopeful that our stars are finally aligning. Uncertainties over the Chinese and US economies meant that it took longer for the drivers of electrification and supply issues to reassert their influences on the copper price. It now looks as if the penny has finally dropped. Several new catalysts have appeared since my last statement, including the astonishing "own goal" closure of First Quantum's Cobre Panama mine, which has removed approximately 350,000 tonnes per annum or 1.5% of global mined copper production from the market; and the rapid rise of the AI sector. Commodity leviathan Trafigura estimates that AI and data centre demand alone could add a further 1 million tonnes per annum to overall copper demand by 2030 and forecast a 35% supply gap by the end of the decade.

This is against a background of the long-term decline in copper grades at existing mines, and several disappointments on the supply side. Previous misdemeanours by the mining sector have ushered in an era in which the ESG lobbies and NGOs have so lengthened the time it takes to put a new mine into production that many companies and investors have given up funding new projects. Antofagasta and Twin Metals invested several hundred million dollars in the Maturi project in Minnesota, which did not receive a mining permit. Similarly, the Pebble deposit in Alaska, one of the largest polymetallic deposits on the planet, on which exploration work commenced in 1987, containing over 30 million tonnes of copper, is unlikely ever to receive permission to mine. As the BHP Group bid for Anglo American Plc shows, it is more expedient to expand your copper reserves by buying somebody else's, rather than developing your own. As in politics, investment decisions, however beneficial in the long term, are seldom taken by people who may not be around to see the rewards, yet suffer if there are any delays in execution. This all points to a "higher for longer" scenario for the copper price which the Board anticipates will be responsible for some 70% of the Company's predicted revenues from the Empire open pit mine in Idaho, USA, a State with a proven and ongoing reputation for permitting mining projects.

Although the UK stock market, and AIM in particular, was shunned by investors for much of the year, I am delighted to report that our floating rate corporate copper bond issue has been fully subscribed at a minimum of $80 million. Recently Blackrock estimated that a copper price of $12,000 per tonne would be necessary to justify spending on new mines - this would equate to a coupon of 11.3% on our bonds.  I am glad to say that the bond finance, once received, is expected to fully fund the Company into production and allow the Company to substantially reduce both estimated capital expenditure and lead times through the purchase of pre-owned equipment. As an example, our recent purchase of two ball mills which we acquired at a significant discount to the price of the same equipment when new, saved circa $6-7 million in capital and sustaining costs. I would like to thank all of you who joined us in the recent small equity raise which enabled the Company to buy this equipment while awaiting the completion of the bond issue.

On the operational front I am grateful to Ryan and his team for producing a mine plan and reserve which is both profitable and economic to mine at trailing copper, gold and silver prices, as opposed to the $12,000 per tonne copper price cited earlier as needed to stimulate spending on new mines. Our consultants analyzed and tested several different processes and in the one we have chosen they have managed to keep overall costs to pre-Covid / Ukraine war levels. The new designs enable us to produce copper, gold and silver simultaneously, largely on patented (owned by the Phoenix Group) land. This should simplify the permitting process. In addition, the plant we propose to use for the open-pit oxide ore will also be capable of processing the underground sulphide ores. This will assist the Company as we embark upon our next quest - proving up the existence of mineable sulphides below the open pit oxide mine.

Gold and silver prices have also risen considerably since my last statement. Precious metals are currently estimated to contribute 30% of the revenue stream from the Empire open-pit mine. The bond funding will also enable us to conduct further exploration within our mineralized district at Empire, including our Navarre Creek gold exploration project and our high-grade lead-silver deposit at Red Star.

The ESG team has had a busy year, with several meetings of the Mackay, Idaho-based KCAT committee of representatives of local interests have taken place. This is a valuable sounding board and has enabled our local operating company to deal with potential issues, such as access roads, before they arise. We have taken on board many of their suggestions. We believe the citizens of Mackay are very largely in favour of the development of the Empire mine and we thank them for their support, particularly as the currently proposed mine plan will reduce further the environmental impact of our operations on the local area and community.

In this respect, we have recently retained our overall rating of "A" in the annual Digbee ESG survey of mining companies, including a score of "AA" for the Empire mine project operations, as reported in the Company's 2023 Sustainability Report being published alongside these annual accounts.

Regarding board matters, Andre Cohen, our senior independent non-executive director since our IPO in 2017, will retire from the board at the end of our forthcoming Annual General Meeting in order to spend more time pursuing opportunities in the transportation finance sector whilst scaling down on other professional activities. The Company and the Board have all benefitted from his considerable knowledge of financial and legal matters, and his attention to detail, and we are pleased that he will remain with us on Phoenix's advisory board. We wish him well and thank him for his contribution to date.

Finally, I thank all of you shareholders who have continued to support the Company, in often challenging circumstances. Now that we have our bond financing being finalised, an economic and profitable project in a mining-friendly jurisdiction, and a path to production, we look forward to sharing with you the benefits of a rerating of the Company's shares as Phoenix makes the move from a junior mining development company to a mining producer.

Marcus Edwards-Jones

Executive Chairman

14 May 2024

CHIEF EXECUTIVE OFFICER'S REPORT

2023 was an exceptionally busy year as the Company focused on the technical aspects required to move the Empire open pit mine closer to production. We achieved a major milestone in this complex process with the estimation of the Company's first Proven and Probable mineral reserves, which include copper, gold, and silver. Mineral reserves meet the requirements of geologic certainty, accessibility, and economic viability, and are estimated after allowing for mining dilution, and thus represent the recoverable contained metal that will be delivered to the processing plant. I am pleased to report that the Company's mineral reserves within the open pit project amount to 66,467 tonnes of copper equivalent.

I appreciate that some of the shareholders have been frustrated with a perceived lack of news, but I can assure them that this did not reflect a lack of complex engineering or solid progress. Developing a plan to bring a mine into production is a lengthy and complex engineering process involving numerous consultants and contractors gathering and synthesizing large volumes of data and exploring numerous optimization scenarios. Each optimization step is iterative, with the results of one building on another, and on another, and so on. Once a preferred option is identified, the emphasis then moves to finding as many incremental improvements as possible, then testing and assessing them before finally settling on a final plan.

Over the past year the prices of all three of our contained metals have been volatile but generally moving on an upwards trajectory. Many commentators believe that copper in particular is at the beginning of a long-term bull market and are predicting prices to rise over the coming years which would improve the economics of the Empire Mine project significantly. However, our aim has been to design a project that will be as robust and profitable as possible, and economically attractive using prices below current levels and in order to report a NI 43-101 compliant economic model.

Empire Proven and Probable Mineral Reserves

A proven and probable reserve estimate was completed by Hardrock Consulting in April 2024 and reported for the polymetallic Empire Mine open pit oxide deposit. The estimate reports Proven and Probable reserves in the Empire open-pit oxide deposit of 10,097,000 tonnes containing 49,677 tonnes of copper, 104,000 ounces of gold, and 4,654,400 ounces of silver, for a combined 66,467 tonnes of copper equivalent metal. It was estimated using assay data from 485 drill holes, extensive geological modelling, metallurgical recovery test work, geotechnical evaluation, and mine design.

Mineral Reserve Statement for Empire Mine, after Hard Rock Consulting April 2024

Fully diluted tonnes at a Net Smelter Return cut-off of $22.59 / tonne

Metallurgy and Process Design

In 2022, 3,502 feet (1,067 metres) of core was drilled in the oxide portion of the Empire copper deposit for the purpose of collecting representative samples of the copper, gold, and silver mineralization within the boundaries of the resource pit. Initially, the metallurgical work was intended to further develop a commercial leaching design using only ammonium thiosulfate ("ATS") as the primary reagent for recovering copper, gold and silver.  Following the initial test work, our metallurgists determined that adding a flotation step upstream of the leaching circuit and generating a saleable concentrate stream containing all three of the metals would provide an immediate revenue stream, reduce the quantity of ore feeding the downstream leaching circuit, and therefore reduce the total quantity of leaching reagent used. The reduction in reagent usage equates to lower overall processing costs. The flotation-leaching circuit has a much smaller footprint than a classic heap leach, allowing for the processing plant to be sited on the Group's patented (private) mining claims nearer the open pit.  The proximity of the plant to the open pit will reduce overall operating costs by reducing the ore haulage distance.  The improved haulage cycle-time gained from the shortened haulage distance also allows for the use of smaller, less expensive haul trucks.

In addition to the cost benefits of a smaller footprint plant sited on private land, the flotation-leaching circuit will be capable of processing sulphide material currently being explored elsewhere on the Empire property.  From an environmental permitting standpoint, siting the processing plant on private land should help to simplify the overall permitting process.

The flotation + leaching metallurgical recovery results and reserve pit optimization parameters are shown in the table below. Optimization of the processing circuit is ongoing.

Red Star - Exploration

Red Star is a high-angle silver-lead vein system hosted in andradite-magnetite and located 330-metres north-northwest of the Empire oxide pit.  Red Star was identified from a 20-metre wide surface outcrop across a skarn structure.

The year began with the receipt of assay results from our 2022 drilling season at Red Star. That drilling campaign had been shorter than initially anticipated due to limited drill rig availability, the third consecutive year of disruption. The shortages of equipment, supply chain weaknesses and delays that resulted from Covid appear now to have thankfully passed.

875 feet of reverse-circulation drilling was completed that tested the magnetic anomalies identified during the ground magnetics survey.  Assay results from the 2022 drilling program were received in Q2 2023. The assay values for copper, silver, lead, and zinc were consistent with previous drilling programs.   Of particular interest are the results from drill hole RS22-02, which tested the western margin of a strong magnetic anomaly, assaying 7.62 metres of 142.7 grammes/tonne ("g/t") silver, 2.94% lead, and 1.54% zinc.  Additionally, drill hole RS22-04 assayed 9.15 metres of 1.56 g/t gold and 0.62% copper, including 1.52 metres averaging 7.59 g/t gold and 0.58% copper. While our primary focus is on the engineering and development of the Empire Open-Pit Mine, further exploration and the delineation of additional drilling targets will continue at Red Star in 2024.

Red Star - High-grade Silver Inferred Resource

In early May 2019, the Company announced a small maiden Inferred sulphide resource of 103,500 tonnes, containing 577,000 ounces of silver, 3,988 tonnes of lead, 957 tonnes of zinc, 338 tonnes of copper, and 2,800 ounces of gold, as summarized in the table below.

2023 Navarre Creek Drilling Program

During the summer of 2023, we completed a short drilling campaign on the Navarre Creek gold property. Similar to the results from Red Star that were received in April 2023, the initial assays from Navarre Creek showed low-grade mineralization worthy of further investigation. As a result, we staked a further 400 acres to the south-west of the Lehman Creek fault target, expanding our Navarre Creek claim block to 197 unpatented claims covering 4,070 acres. While our attention remains firmly focused on engineering and design of the Empire open-pit reserves, we will continue exploration and drill target development at Navarre Creek in 2024.

While there is no guarantee that future Navarre Creek exploratory programs will result in the discovery of a viable ore deposit, the geology, mineralogy, and geochemistry of Navarre Creek fits all the criteria necessary for a potentially significant gold bearing system.

Empire Mine Expansion - Horseshoe, Whiteknob, and Windy Devil

The Horseshoe, Whiteknob, and Windy Devil claim blocks, located immediately north of the Empire Mine project, are situated within the core of the Empire mineralization and remain attractive exploration targets. The core Empire claim group has grown to 8,434 acres (34.13 sq kms) by expanding north to the former Horseshoe and Whiteknob Mines and onto Windy Devil. This expansion covers approximately 30 historic adits, shafts and prospects, which exhibit geology and mineralogy similar to Red Star, and which will be the subject of further exploration going forward.

Idaho Cobalt Belt - Redcastle and Bighorn Projects 

The Company owns two strategically located properties on the Idaho Cobalt Belt in Lemhi County, Idaho - Redcastle and Bighorn.  The Redcastle property is held by Borah Resources, our 100% owned, Idaho registered subsidiary. In May 2021, the Redcastle holding was signed to an earn-in agreement with Electra Battery Materials Corporation (formerly First Cobalt Corporation), the Toronto-based owner of the Iron Creek Cobalt Mine, which shares a common border with the Redcastle property. 

The Bighorn property, located on the northern end of the Idaho Cobalt Belt, is held by Salmon Canyon Resources, another 100% owned, Idaho registered subsidiary.  Bighorn is situated east of the historic Salmon Canyon copper cobalt underground mine and shares a common border with New World Resources' Colson cobalt-copper project.

In addition to copper, cobalt is a critical metal for electric vehicles and global electrification projects.  Cobalt deposits are rare, particularly in first world jurisdictions. The Company's cobalt projects are located in the USA's only prospective cobalt region, the Idaho Cobalt Belt, approximately 100 miles north of the Empire Mine. In 2018 we announced the results of our 2017 reconnaissance program of 46 surface grab samples which gave cobalt values ranging from 2 ppm to 0.31% cobalt.  

Other Business

The Company spent significant time and resources in 2023 and early-2024 locating and procuring pre-owned capital equipment in advance of mine construction.  Included in the purchases to date are all of the laboratory assets from the former AuRIC Metallurgical Laboratories which include the analytical equipment and supplies necessary for the onsite laboratory that will service the Empire Mine once it is in operation, two grinding mills (ball mills), and a disk filtration circuit for filtration and dewatering of process tails.  The Company believes that the purchase of this equipment at a significant discount to the price of the same equipment when new, should have a material positive impact on the Empire mine project economics, as well as reducing the time required to purchase these long lead-time items.

Outlook

The commodities market has started 2024 strongly, and there appears to be growing consensus that the long-term lack of investment in new mining projects has caused a shortfall at precisely the time that the world requires more copper than ever to meet the electrification targets that have been adopted globally. With its location in one of the most stable, mining friendly locations in the world, the Empire Mine is well placed to take advantage of this supportive environment.

Now that we have developed proven and probable mineral reserves, our focus is on completing all of the necessary feasibility level engineering required to successfully permit and construct the open pit mine.  As our process design includes the siting of the plant on private, patented mining claims, we will reduce the operational footprint on public lands and place ESG considerations at the heart of our operation. As the regulatory authorities looked closely at our operating plan application two years ago, I am confident that in due course the plan will be approved. 

In the meantime, we will complete the necessary engineering and continue to source the plant and equipment required to bring the mine into production. As with the ball mills we recently acquired, we believe there are many additional opportunities to reduce the cost of capital significantly through the sourcing of quality, pre-owned equipment.

We will also continue exploration activities on the Empire sulphide vein system, Red Star, and Navarre Creek.  It is important to remember that these projects provide an attractive and varied pipeline of opportunities to the Company. 

It is an exciting time to be involved in this project, and I look forward with confidence and optimism to the rest of the year.

Key Performance Indicators ("KPIs")

To date, the Group has focused on the delivery of the project evaluation work programs to assess the available mineral reserves and resources and the extraction methods to apply, each within the available financial budgets. This work will continue until the relevant feasibility studies are completed, and construction commences.

At that stage, the Group will consider and implement appropriate operational performance measures and related KPIs as the objective of recommencing commercial production at the Empire Mine nears fruition.

Conclusion

As metal prices continue to rise, so does the demand for global electrification and the raw materials needed to meet that demand.  We continue to perform the steps necessary for Phoenix to become one of the next domestic US producers of metals vital to the transportation, manufacturing and energy sectors in the US and abroad.  Our team of engineers, geoscientists, and industry consultants are completing the engineering necessary to develop the Empire Mine into a producer of copper, gold, and silver in a stable, mining friendly jurisdiction.

The Company endeavors to meet the timelines it develops for itself and shareholders.  It is of particular importance to me that everyone understands that the nature of the studies we undertake to generate the best mining and production outcomes can be time-consuming and not always predictable. I appreciate everyone's patience as we complete each step of the engineering required to ensure that we build the most robust operation possible. Mining is a long-term, capital-intensive business, and we believe the time spent on optimizing the mine plan and processing design at this stage can bring significant financial benefits to the project over the life of the mine.

As always, I want to thank all of our staff, consultants and advisors, all of whom work tirelessly to accomplish our common goal of metal production.  And I would like to thank our community liaisons, shareholders, and directors for their considerable support.  I look forward to reporting further positive news as we continue our exploration and development programs during 2024.

Ryan McDermott

Chief Executive Officer

14 May 2024

The financial statements were approved by the Board of Directors and authorized for issue on 14 May 2024.

On behalf of the Board 

Richard V L Wilkins

Director