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Here’s a quick review of the technical background going into our PEA.
If we cast our minds back to just over a year ago, we were focused on copper through heap leach, with no gold recovery. If we had included plans for gold, it would at that time have been using the cyanide process, which would have delayed the whole project by a couple of years, as we sought the relevant environmental permits. With the price of gold still low, gold recovery was therefore set to one side. However, as the gold price started to move up, our USA team identified that a leaching process using ammonium thiosulphate as reagent had potential, so they started investigating this. ATS is environmentally friendly, of course, and getting an EP much easier. They took a new look at old pit data for copper and gold grades, now focussing on gold recovery, and found that gold now had economic potential, maybe ever better than copper. The bench scale laboratory testing moved to pilot plant, and that took us through to the autumn, and looked good for gold. Meanwhile, copper price had also started to move up, so they again revisited the recovery of copper AS WELL AS gold. It is this last stage which I believe has caused the short delay in preparation of the PEA, as they now determine which is the optimum configuration of the industrial process to recover the metals, and from that the capital costs. The objective now is to design a plant which will give the best recoveries of both copper AND gold while delivering the best economic case. That’s potentially a greater return for our investment, as well as possibly a faster build. And that’s where we are today, from what I understand. Now we wait for the PEA, to be delivered, I would guess, before end-January.
Sorry Fallingknife, I'm about to disappoint you, for our copper coins are today (and have been since 1992), 94% mild steel, and only 6% copper, which is as a plating. Please don't cry. I'll give you 9p for the lot.
For newcomers, here follows a little more background information about PXC. The “foreground” is represented by the Empire Open Pit mine, where we are promised the PEA “within weeks”. We expect shortly after that to receive finance for this project, and which will judge that project alone. Then behind (and relatively visible) is the Red Star silver zone, where we have already identified a rich silver seam, and plan to continue to map it out as soon as conditions permit. We are hopeful to see this happening next year, and perhaps in production in 2022. Meanwhile we are waiting for results from the Navarre Creek gold play, results which are long overdue due to COVID in the laboratories. This is a Carlin type deposit, and if we get good results, then this could be a bumper resource. Finally for the foreground, we have the Cobalt area, with Bighorn and Redcastle, which showed good cobalt results in their first look some time ago.
Now for the background, and here I speak rather of the depth, and the elephant which lies below the region. This is a massive porphyry, which is in essence the reservoir at depth which fed all the veins near to the surface we are chasing, and which I described above. These are typically MASSIVE, and this deposit types includes many of the world's largest deposits of copper, gold, molybdenum, silver, tin and tungsten and are often potentially world scale mining resources. Examples of porphyry copper deposits are El Salvador, Chile, and Bingham Canyon, Utah, which is the largest man-made excavation, and deepest open-pit mine, in the world, and which is considered to have produced more copper than any other mine in history. And it’s just round the corner from us! Or the Cerro Verde mine in Peru, one of the world’s largest, again a copper porphyry.
This is why our consultant geologist writes that we have discovered less than 1% of our potential resources in Empire to date.
So, in buying in today with the present price, which is exceptionally low for just the Empire Open Pit (what a bargain price), you are getting for free, all the rest of the potential, namely silver in Red Star, gold in Navarre Creek, Cobalt in Redcastle and Bighorn, and the elephant of them all, the deposits of copper in the deep. The Empire open pit mine project will generate the cash flow to maintain control for all the other projects, so keeping all the projects in-house for all our investors.
Now I hope you newcomers understand what you are buying into, and why today’s price represents a real bargain. Buy this share, put it under your bed, and come back in 5 years to find your pension!!
That's great Mr Negative. You sought precise communications, so here is one. The accusation that our largest shareholder, who inputted cash to our company at a 50% premium when we most needed the money, is selling, is not based on any known fact. Can we agree on that now? Please let this one go. It's a dead donkey, and flogging it any more will not make it come suddenly to life.
This is a start up company, which goes through quiet spells in between the major announcements. Can't you see that? But that does not change any of the facts which we know (and love) about this company. This is perfectly poised for the PEA, and then the finance. Just be patient please.
By the way, I did enjoy your post about Glencore. Thanks for posting.
Hi Mr Negative, I quite understand why you have concerns, and those show through with your clear message. Yes, the situation is vague, and that is because this is a start-up company, which has not yet completed the PEA required to raise the (as yet not achieved) financing, and for as yet unknown sum. Frankly I find this a trifle amusing, and I remember the days when I did not understand the market and also wanted security of knowledge, whilst also seeking a bargain price. Who in the world does not want this? So let me state the obvious. We have not yet seen the PEA, which will be presented at a yet undisclosed date (due to regulatory requirements), and following which we may (or may not) get the finance which should (or might not) take us through to design, engineering, construction, start-up and into production. But if we were in production today, the share price would be maybe £5.00. But we are not there yet, and we all have to be patient a little longer. Instead we have these unknowns, so you have to use your own judgement on whether to invest, or not, and in my opinion, not put any responsibility on to others, for these unknowns which cannot be solved. The BoD are doing their best to get this company financed and into production, I know that myself very, very well. And I think they are doing a very good job in the circumstances of a major pandemic.
Now I have to pick you up on a couple of your points. First, you say "not being able to properly assess what we have invested in". Could I ask what has changed since you first invested? And if nothing has changed, then why did you accept that challenge in the first place? I am genuinely curious as to what has changed.
Next you wrote "given the context of major shareholder selling". Could I ask where you get this information from? I feel you should disclose this to all. Who is this mysterious person who has this impact on the share price?
I understand you, and I see myself in you from the start of my investing career. I wanted to get maximum return from minimum risk. But sometimes that profile is not there. Indeed it is absent for the vast majority of companies (as otherwise everyone would have invested long ago). In our case we know very well why the PEA has not been delivered yet. But it is just a few weeks away, from what we have been told. And personally I have great confidence that it will be very good. So, knowing this information on the timeline, could I suggest you sit back and relax a little, for I do not think there is anything we could do these days which may have impact on the delivery of the PEA.
I hope these words set you at rest a little, but waiting is sometimes the most difficult thing to do.
Please don't be so bitter. Life happens. They've offered explanations (not excuses), and have suggested a revised date.
As a chemical engineer, I understand the situation exactly. They've been performing pilot plant work, and noticed some specific benefits from investigating different angles, particularly with the evolution in copper prices. I call that good work, and demonstrates flexibility. If they knew the answers before they started the tests, they would not have bothered with the tests.
They can't be held responsible for people selling stock (that's their loss), and I see no justification for the negative comments. This is a share to hold for the long term, and not to trade. What more do you want? Please be patient, and hold on.
Mr Negative. You wrote "... the PEA could be two weeks away , a month away or longer . Sure it will come when it comes and taking that approach , the BOD should say nothing about any future inflection point as everything will pass , sometime or another . Like I said choose a date that you know you can be certain of and deliver on that date . At the moment we have not had any updates and it would help shareholders if they understood what the problems are , if any . Sure , we can guess , Covid , lab time etc but that is exactly what it is guessing .
I think you missed a message from the company, which made this very clear, and responded precisely to your point. Here it is from their RNS dated 9th December, from Ryan their CEO:
"While the bulk metallurgical test work will continue well into the ongoing feasibility study process, with continued refinement of the process design, I anticipate that the initial metallurgical test work on all metals necessary to complete the PEA level studies will be completed in the next few weeks, allowing us to complete and publish an updated PEA shortly thereafter."
That's pretty precise, isn't it? I hope you are happy with this now?
As we move in 2021 towards the PEA, followed by finance, and into production for end 2021/2022, there is naturally a concern today over whether finance is possible, and any possible dilution the share may suffer. I think the easiest answer to this is to tell the story of Oxus Gold, in which several directors (but not all) had a hand.
Founded in 1996, Oxus was listed on AIM in 2001 producing gold and silver from its 50% stake in the Amantaytau Goldfields JV (AGF) in the Republic of Uzbekistan. AGF was situated on one of the world’s largest areas of gold endowment, the Tien Shan belt.
With the share price at about 6p and struggling to get project finance, because the banks were insisting on a large equity issue which would have resulted in substantial dilution, which they did not want for their shareholders, Oxus held off, and managed to raise $35 million through debt, a 100% loan. The moment they had the finance in place the share took a massive upwards turn, particularly after finance was just announced, and the sp went up fast to 90p (in under 2 years), giving the company a market cap of £500 million.
The company achieved this growth firstly because with finance in place, investors knew that production was imminent from the open pit, and secondly, because like PXC, they were there in anticipation of the metals in the deep.
However, in 2006, with large profits now being made, the Uzbeks started getting greedy, with the state sending the tax police in, as a prelude to eventual expropriation of Oxus’s mining assets.
The same directors are now in Idaho, and happy to be there. They see a similar technical environment, with PXC also starting from an open pit mine then moving to the massive potential in the deep. The key difference it that USA is a safe jurisdiction. They know that this will be a walk in the park getting the finance compared to Uzbekistan. I know it is likely the company will issue some equity to get the thing going, as that’s the simplest route and the sp is that much higher than it was with OXS (so the impact of dilution is lower), and there are people queuing at the door already offering finance. I know that the Directors are also extremely confident about seeing the same, or better, take-off in sp when the finance is put in place.
A number of former Oxus shareholders are also here (as I was), who know the story well, and are fully supportive, despite the adventures in Uzbekistan. What the directors did with Oxus they intend to do with Phoenix, but this time they don’t intend to have the tax police coming after them!!
Tavira1, there's no basis in fact for that. The largest shareholder (Martin Hughes) offloaded some shares earlier this year since for various reasons he had invested more than his normal ratio, and since then he has maintained his holding with no sales. This is clearly visible since the company are obliged to report all holdings above 3%. He is a friend of the Chairman and is said to be very happy indeed with his holdings here.
Good evening Mr Negative. I hope that your festivities have gone well.
I thank you for your kind words, but personally I believe that it is the company, and the BoD who should take the credit for the company. We owe a lot to the BoD, for this company would not exist without them. I know the history of several of them. After having their profitable company (Oxus Gold) taken away by the government of Uzbekistan, they searched the world, and identified a prolific metals region, then focussed on this mining zone, with fantastic potential. They then sank their pensions into it. I know their focus has been one of science and mining, and of seeking and reporting factual data. Yes, they have been weak in PR, and they know it, but they would rather see the pounds spent in exploration to generate the data, rather than in supporting empty publicity, and trust me, good PR comes at a price, and needs to be sustained, which would necessarily be from our pockets at the present time, for this company is not earning money yet. For the PEA, I know that the feel they are on to something, and I respect them to be focussed on producing genuinely good data, and so if their decision is to delay, I trust that they have a good reason.
But I must pick you up on one point. Your main grudge appears to be against the lack of information of the date of issue of the PEA. You may not know that this information is considered to be financially sensitive information, and according to the rules of the LSE, this information should not be put out before the event. So, in place of blaming PXC, I think it is the listing authorities who are to blame.
It is a balance between spending money (on PR), which they are not yet earning, and spending it on generating data to advance the project. All these issues are not necessarily clear to outsiders, but I would suggest your patience will most certainly be rewarded.
And then jumping over the company propaganda here follow a selection of the slides, walking you through it, starting from slide 17:
Slide 19 History has proven during times of fiscal disorder gold tends to outperform equities. Inverted twin deficits suggests a massive upward move in the gold to S&P 500 ratio is still ahead.
Slide 21 Fiat currencies around the world are in a race to the bottom. The price of gold has been rising across all of them.
Slide 23 Money printing only supports financial asset bubbles for so long. Ultimately, QE drives flows out of overvalued stocks and credit and into undervalued precious metals.
Slide 24 Negative and declining real yields are a macro driver for higher gold prices. Recent divergence indicates catch up trade for gold is due.
Slide 26 Majors have underinvested in exploration and must replace their reserves. Supply shortfall a macro positive for gold prices. Extremely bullish for junior explorers.
Slide 27 There were zero gold discoveries above 2 million ounces in the last 3 years. Precious metals companies are reluctant to spend capital even though gold prices have reached all - time highs.
Slide 29 Miners have been reluctant to spend capital even though gold prices have been moving higher. Thus, supply is constrained, an incredibly bullish fundamental backdrop for gold and silver.
Slide 31 The entire gold and silver mining industry is the beneficiary of today’s macro environment with strong balance sheets, high growth, and still incredible valuation.
Slide 34 Gold and silver mining stocks compared to global stocks are still near record lows.
Slide 36 Gold & silver junior mining companies have been leaving the broader stock market in the dust.
Slide 37 Gold mining companies acted in counter cyclical fashion to create wealth during the credit deflationary bust of the Great Depression.
There’s a fantastic presentation, from Crescat Capital, with detailed analysis of the precious metals industry, particularly gold and silver, with loads of curves and data. I really do recommend a read, and it says everything to me for why we should be in PXC. You can find it on hTTps://www.crescat.net/wp-content/uploads/Crescat-Precious-Metals-Fund-Presentation_December2020.pdf
For those with limited time, here are the key conclusions, noting that everything below are cuts and pastes:
• The gold and silver mining industry faces supply/demand imbalances that create an extraordinary opportunity for investors today.
• The new environment of record deficit spending and fiat money printing, including negative and declining real interest rates, presents the ideal macro setup for a new secular bull market in precious metals.
• Inflationary policies in the face of today’s historic asset bubbles in stocks and fixed income securities are likely to drive forward thinking investors out of these over-valued asset classes and into under-valued precious metals
Hi Kullybahia, I do not have a twitter handle, but do post on ADVFN as PantsonFire. As background, I am a chartered chemical engineer, and know many of the BoD from a previous life, where I worked in management of an oil refinery in Southern Kazakhstan, whilst they were building up a gold mine in Uzbekistan, which was eventually stolen from them when it started making large profits. And that is why they are now building this company in a safe jurisdiction. Many of those who lost money on that venture, are here, with no recriminations against the BoD. I know them to be genuinely good people, professionals, and honest. I speak with them often, which is how I gain quite a lot of knowledge, but nothing insider, of course. And finally, I know them to be very open and willing to speak with shareholders, so if you have any questions, do call them on the numbers given on the RNS's, and post whatever you learn here.
There’s been a lot of talk in recent period about PXC being undervalued. I thought I would try to do some benchmarking calculations to see if the consensus that we are undervalued was correct. In searching I found a table benchmarking 10 different African Gold companies, presented on the site of Africa Lion Gold PLC. They submitted a comparison of enterprise value, which is the market capitalisation divided by ozs of gold from M&I Resources, and I updated this for current values.
Very often African gold has higher grades, and is thereby lower cost to mine. However to balance that the geopolitical risk is a lot higher, so I have therefore simply balanced these and made a direct comparison.
Examining the comparison table, I found that the Enterprise Value had a median of 72.8 £/oz for the 10 explorer and developer companies. I then took the PXC M&I numbers for the Empire Open Pit mine, converted copper, silver and zinc to gold equivalents, divided by our market capitalisation, and came up with an enterprise value of 35.0 £/oz. Putting this the other way round, using the African Gold benchmarking, our company should today have a capitalisation of £53 million (now £25 million), or a share price of 82.2p.
Whilst I have my own opinion about the future of the company, based on my subjective knowledge of the business and the BoD, I also like objective research, such as with the above. From this I see that the company is undervalued by about 50%. That’s massive! Even if we dilute by 30% in our financing exercise, that still leaves a lot of undervalue, maybe 30%. Plus, and let’s not forget, we will have the silver in Red Star, the gold in Navarre Creek, the Cobalt in Redcastle and Bighorn, and the remaining polymetallic zones in Empire, plus the elephant at depth. This is a substantially undervalued company with the potential to be gigantic. A real Christmas gift for anyone feeling generous for their children’s stockings.
I believe that you are oversimplifying the story. They have produced a PEA before, as you know, but then the economics completely changed, which made gold a much more valuable target, hence the new PEA. I know from talking with the directors that the studies are looking at different configurations of plant, as well as throughput, which can change the capital costs. So, no, they do not know production rates, and no they do not know the plant configuration, and no they do not know the capital costs. So, no, they cannot go out for finance yet without this information. But when they do bring all these together, which is now just weeks away, they should have the green light for design, engineering and construction in a short period after. Have you talked with them about this? If not, then can I suggest that you give them a call. Then post it here...
A couple of points Sparky. First, the finance will be announced after the PEA, for until they know the full package, they do not know for instance the full project costs, which may have a bearing on the type of finance they use. So, whilst I can understand you impatient to know about finance, keep positive, for this day will come, and will come soon. Next, you mention "The idea of the stock markets is not to make retail mugs like us money, its about creating wealth for the professionals and they control the market. It is rigged". Why would anyone ever want to invest in the stock exchange if this was the ultimate truth? If we look at Phoenix, and its share register, I noticed with pleasure that Hargreaves Lansdown now hold 12.7% of the shares. That's an amazing climb up by the small investor (for this is what it is), for I remember last year H-L were at around 6%, if I'm not mistaken. Most of the other holders are also nominee accounts, which again are small investors, so if this share rises, as I expect, it's us small investors here who will profit. And it's not long now.
You are correct Dartron. It's only partially cleared it, and I got carried away. However, I believe that this does represent a good move for us, as we have raised some additional working capital, taking us closer to production. I feel it's also good as it sends a signal to the market that these warrants exist, and whilst you and I know about them, many smaller investors may not, and may take the cashing in of warrants as negative, whilst you and I would have them plugged into our spread sheets. I see that the market has responded positively to this news, which is also good, as it shows that shareholders do have strong confidence that this company is on the cusp of success.