Phoenix Metals’ flagship is the Greenwood project in the Boundary region of southern British Columbia, roughly 10 km east of the town of Greenwood along the Highway 3 corridor near the US border. The land package is about 12,000 hectares covering dozens of past-producing mines, including the historic Phoenix pit, Lexington, Golden Crown and the South Skarn area, plus a 200 tonne per day mill and permitted tailings facility on care and maintenance. In this conversation I asked the CEO about his background, share ownership and compensation, how the asset was assembled out of receivership, the 55,000 metre drill program now underway, treasury, a possible mill restart, and risks.
TL;DR
They have about C$50 million in the bank after a C$1.25 IPO in early July, a two-year budget of roughly C$38 million, one rig turning today and four more rigs being contracted, and no assays out yet. First results are targeted for mid-October, a second batch late November, then news flow every two to four weeks after that. He was clear this first 55,000 metres is not designed to deliver a maiden resource, it is a wide-spaced systematic program to work out which targets carry tonnage, so a resource at Phoenix and JD Golden Crown is probably two years away, with Lexington the nearest term candidate. He also flagged a possible restart of the existing 200 tpd mill, with a PEA targeted for the first half of next year and roughly C$12 million of restart capital he wants to fund with straight debt rather than equity. He owns just over 2 million shares at an average cost around C$1.24 and says he has put roughly C$2.4 million of his own money in.
What have they done for shareholders lately?
Not much yet in terms of hard results, and he was upfront about it. They completed the IPO in the first week of July at C$1.25, raising about C$46 million with an order book he says reached C$63 million, then started drilling. They are on their ninth hole at Lexington, with 12 holes planned there to validate the historic model and vector into the high-grade zone before following up on open pit potential. Six holes drilled last year all hit mineralization, including a half-metre intercept around 100 g/t gold. He has also been buying stock in the market below the IPO price, which shows up in his SEDI filings, and says other insiders have too. Existing resources on the property total roughly 160,000 gold equivalent ounces measured and indicated plus inferred, split between Lexington at about 424,000 tonnes grading 6 g/t gold and 1% copper, and Golden Crown at about 187,000 tonnes grading 10 g/t gold and 0.5% copper.
How much money do they have and what are they spending it on?
They have about C$50 million in the bank and a roughly C$38 million two-year program, leaving about C$12 million of headroom he says could go toward more drilling. There are 90 million shares out, a market cap around C$113.5 million at a C$1.26 share price, no warrants outstanding as far as he is aware, a 52-week range of C$1.15 to C$1.29, and average daily volume of about 150,000 shares. Spending goes to the 55,000 metre drill program, brownfield remediation and care and maintenance work, two years of environmental baseline work needed before permitting, G&A that will run higher than normal because of the site obligations, and C$2 million to C$4 million a year on marketing including conferences, interviews, landing pages and a targeted investor list through Adelaide. The capital history is worth knowing: about C$7 million raised privately at C$0.20, a C$5 million round at C$0.50 largely to position Beedie Capital, then the C$1.25 IPO. Insiders hold about 22%, retail about 28%, with Sean Roosen, Beedie and Franklin each around 7%, Peter Brown’s entity and the Osoyoos Indian Band each around 6%, Nebari 4% and RIVI about 3%. I asked about lock-ups and he said the C$0.50 round, all insiders and all pre-IPO 5% holders are locked for six months, expiring in early January, though roughly 3 million shares of C$0.20 paper were free trading and sold in the first week, which he called a frustration and something he did not structure. His comp is C$350,000 base, a short-term incentive of up to 100% of base, 750,000 ten-year options struck at C$1.25, and 24 months on change of control. He said his KPIs have not yet been set by the board. Financing outlook: he would be very surprised to raise in the next three to six months, would not be surprised next year, prefers flow-through if the share price supports it, and wants straight debt rather than a convertible for the roughly C$12 million restart.
Upcoming catalysts
Technical: first assay batch of at least eight holes from Lexington targeted for mid-October, a second batch from JD Golden Crown and the South Skarn around late November, then results every two to four weeks, plus deep holes up to 1,000 metres to test for feeder zones, and met test work tied to the restart. Operational: four additional rigs under contract negotiation, with the aim of running through the full 55,000 metres and compressing the two-year plan into 12 to 18 months.
Corporate: two data releases in the next month, one on Lexington including the 170 historic holes and one summarizing the Phoenix target area, a site visit in roughly the third week of October, a PEA on the mill restart in the first half of next year, and lock-up expiry in early January. He explicitly declined to guide on timing for a maiden resource estimate.
Risks
The CEO named forest fires, rig and crew availability in a tight drilling market where competitors have far deeper pockets, and the share price sitting below the IPO price as the things costing him sleep. Beyond that, the program is exploration with real miss risk, the targets are large and wide-spaced, and by his own account the market may have to wait two years for a meaningful resource at Phoenix and JD Golden Crown. Metallurgy at JD Golden Crown is oxidized and unresolved, and historic mill performance ran around 76.9% recovery against a 90% assumption in the historic resource, which he attributes to feeding oxide material in with sulphides. There is an inherited environmental liability of about C$860,000 tied to tailings management and remediation, a 2% NSR to RIVI with only half buyable for about C$2.5 million, no impact benefit agreement yet with the Osoyoos Indian Band despite a letter of support, no free cash flow, and a lock-up expiry in early January.
Phoenix Metals CEO Interview
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