SILVER PEAK, Nevada – It has taken two weeks, a trip to a Nevada mine, eight hours in a truck and a miner’s dozen hours on conference calls, Skype and e-mail. But I finally figured it out.
Golden Phoenix (OTC:BB: GPXM, Stock Forum), two years ago a rubber-band’s width from Chapter 11 insolvency, has engineered a strategy for gold production, footprints in three nations and royalties that one day could become an El Dorado annuity of income for shareholders.
Longtime director and investment banker Thomas Klein is the earth mover in Golden Phoenix’s rise from the ash-pit. Mr. Klein joined Golden Phoenix during the 2007-’08 credit crisis. Since then, the 50-year-old Montreal resident has erased nearly all debt, settled lawsuits, downsized, eliminated royalty obligations and sealed what looks like a potent joint venture at Scorpio Gold’s Mineral Ridge Gold Project in Nevada.
On the face of it, Golden Phoenix looks like a hornet’s nest of 80-20 and 70-30 partnerships, earn-ins and negotiating hurdles. Not to mention the usual nail-biting about milling permits, equipment and of course, adjacent exploratory drilling at Mineral Ridge on properties called Coyote Ridge and Vanderbilt. Blow-by-Blow of three-nation rollout and principal properties:See presentation.
Yet some investors, including those with stakes in Canada-traded Scorpio Gold (TSX: V.SGN, Stock Forum) and USA-traded Golden Phoenix, are recognizing that Mr. Klein’s stubbornness might lead to an 11,000-acre district of high-grade gold and silver.
“Tom gets credit for bringing everyone to the table,” says Peter J. Hawley, an Ottawa-based executive at Scorpio Mining (TSX: T.SPM, Stock Forum) and as of Jan. 1, CEO of sister company Scorpio Gold. Mr. Hawley’s Scorpio Gold is running the Nevada venture with Golden Phoenix at mothballed Mary Mine and now emerging Mineral Ridge properties and joint venture. The mine and surrounding area from the late 1800s until its closing, because of the 1942 USA War Act, produced about 550,000 ounces of gold, with plenty of high-grade silver.
Our tour of the property came under the stewardship of Paul Dockweiler, a geologist, consultant and someone who gets credit for recognizing the mineralized quartz and intruding granites of the region. Paul and several potent analysts, investors and writers joined us on the tour this week. (Photo: Bob Moriarty, left, Paul, center, Tom Klein, right)
Paul and his Silver Spartan LLC consulting firm of Las Vegas were early into this historic mining area, approximately 5,600 feet altitude and fours’ northwest of Vegas. The 32-year-old Mr. Dockweiler claimed many of the parcels around here and also at one time served as lead geologist for Golden Phoenix Minerals, which is still contracting his services.
“See these granite foot walls,” Paul Dockweiler tells a small group of us, including Thomas Klein and Mr. Moriarty of www.321gold.com. “Tremendous potential for an open pit.”
The rig (photo here) on site is already stockpiling ore for crushing. Part of the intricate link with Scorpio Gold and the Mineral Ridge joint venture is a requirement that Mr. Hawley be producing gold for delivery if he is to raise his interests’ stake t0 80 percent of the venture from 70 percent. (All photos – Thom Calandra)
He wants it all
Mr. Hawley, a 54-year-old engineer and McGill-trained geologist, says gold output is almost a certainty by mid-2011, even with heap leach recoveries of just 60 percent to 65 percent. Better recoveries will require an on-site mill.
“Look, it takes three to four years to permit for a milling facility in Nevada and we have started that process so before the pad expires we will have built and started a mill,” Mr. Hawley says. “My interest is getting the entire 100 percent of everything here and that would be cash for Golden Phoenix based on a third-party assay of reserves and resources.”
Peter Hawley says his 2011 goal is for one million old-equivalent ounces in a “proven and probable” resource category. “In our Drinkwater pit we already have 375,000 ounces proven and probable,” he says. “I had a theory that the primary mineralization was around the Mary Mine. It was these north-40-west stress faults and north-northeast wrenching faults and a secondary pulse with large dilation zones, my theory that is. We drilled a hole to test one of my theories and we hit 46 feet of 1.1 ounces per ton gold.” That was three miles to the west of the open pit on-site here at Silver Peak, Nevada.
Mr. Hawley tells me Mr. Klein has come a long way in several years of de-toxing Golden Phoenix’s debt load, sloppy strategy and deadwood employees and directors. “Tom Klein mentioned this project to me and (Canada asset manager) Eric Sprott was an investor because of a Golden Phoenix moly mine (this one in the USA). But the company was truly distressed and between Tom and Eric they said this is a rebuild. We’ve done a lot of boot and hammer work since then, 450 samples … and 78 percent came back ore grade. That’s half-an-ounce of gold or better per ton.”
For his part, Thomas Klein acknowledges he is burning the Golden Phoenix candle at three ends: Shining Tree in Ontario, Peru (five properties) and Nevada. His Nevada take: “It is in Peter’s (Hawley) interest to make this a $1 billion project and to pay us $200 million.”
And for my part, I believe we’ll see Peter Hawley and the joint venture ramp up steady gold (and silver) production from the 53 miles of drifts beneath Mineral Ridge as soon as January or February 2011.
Next week, if all goes as planned with an intended property purchase, tiny Golden Phoenix will become entrenched in what appears to be Ontario’s latest hot-button gold district, Shining Tree. It’s halfway between Sudbury and Timmins.
A geologist at a company working in Ontario, Trueclaim Exploration (TSX: V.TRM, Stock Forum), describes Shining Tree as an east-west trending greenstone belt composed of archean felsic-calaalkaline-intermediate-felsic volcanic and metasedimentary rocks with intrusions of mafic to ultramafic rocks as well as later feldspar porphyrys.
Trueclaim’s Bob Komarechka says, “Currently a number of juniors are working in the area such as Goldeye (TSX: V.GGY, Stock Forum), Creso (TSX: V.CXT, Stock Forum), Temex and others. Most of the activity has been for gold exploration although interest in silver is becoming more active.” Trelawney Mining (TSX: V.TRR, Stock Forum) is also in the area.
Note:Thom Calandra owns none of the stocks in this report. Next week, Thom heads back to Nevada to see something at the southern end of the Carlin Trend. Ticker Trax, the subscriber report, today (Friday) cites two publicly- traded Colombia prospects – neither of them in the news -- that appear to be ripe for acquisition. And no, Seafield Resources most certainly is not one of them. See: www.tickertrax.com.
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THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom was founding editor of MarketWatch, CBS MarketWatch and FT MarketWatch. He was the voice of Thom Calandra's StockWatch and The Calandra Report. Thom has been covering life-sciences and natural resources since 1988.
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