REG - Phoenix Copper Ltd - Interim Results
29/09/2022 07:00
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RNS Number : 0752B Phoenix Copper Limited 29 September 2022
Phoenix Copper Limited / Ticker: PXC / Sector: Mining
29 September 2022
Phoenix Copper Limited
("Phoenix" or the "Company", together with subsidiaries the "Group")
Interim Results
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 unaudited interim results for the six months ended 30 June
2022 (the "period").
Year to date Highlights
Corporate & Financial
· Investment in Empire Mine increased to $29.73 million (2021: $18.61
million)
· Net assets increased to $38.22 million (2021: $37.70 million)
· Group reports loss of $1.052 million (2021: $199,481), after charging
an unrealised foreign exchange loss on sterling denominated assets of $503,593
(2021: foreign exchange gain of $303,077)
· Period end cash balance of $9.05 million (2021: $22.88 million)
· Company loans to operating subsidiaries increased to $25.23 million
(2021: $16.19 million)
· Company acquisition of third-party royalties payable by Empire Mine
· Issue of floating rate, listed, secured, non-convertible, minimum 8.5%
copper bonds due 2028-2032 underway. Initial tranche currently under
negotiation
Operational
· Ongoing core drilling at the Empire open pit copper mine to support
metallurgical recovery and process design using non-toxic, environmentally
friendly ammonium thiosulphate
· Ongoing feasibility engineering and environmental permitting at the
Empire open pit copper mine
· Further mineralisation encountered at both Red Star silver-lead
deposit and the Navarre Creek gold project
· Further exploratory drilling commencing at Red Star
· 2023 Navarre Creek drilling programme approved by US Forest Service
· Local Community Advisory Team created as part of the Company's ESG
Programme
Chairman's Statement
We entered 2022 optimistic that we were close to finalising our financial
model and mine plan. We had already had very positive discussions with
potential financiers seeking to fund construction of the Empire open pit mine.
Our strategy of getting into early production of copper and using the proceeds
to fund further exploration of the underground, high-grade sulphides that lie
beneath the open pit, which have already given exciting indications of their
potential, was well on track.
However, the outlook has deteriorated, at least in the short-term. Copper and
sterling have both been extremely volatile, and currently sit at around 30%
below their highs for the year. The aftermath of Covid and the war in Ukraine,
with the associated effects on energy prices, reagent costs and steel supply,
have made it nearly impossible to complete an accurate feasibility study,
which needs stable and firm quotes in order to estimate operating and
sustaining capital costs through the life of the operation. Less visible, but
just as important, supply chain difficulties are having a hugely disruptive
effect on the mining industry: damaged parts can take months to replace, a
problem affecting everything from drilling parts to tyres.
However, this is not necessarily bad news for Phoenix Copper. As a company
that is not yet in production, we are able to design our processes with an eye
on these challenges. We are extremely confident in the long-term demand for
the metals which will define the coming decades and which the Empire Mine
holds in abundance.
Our activity in the past six months has focused on two areas: fundraising and
optimising our plans to be as robust and profitable as possible. Our steadfast
aim remains that of getting into production with no further equity issues, and
we have embarked upon our corporate copper-linked bond issue, which, despite
the current inflation and interest rate outlook, has attracted significant
demand. We hope to update you more fully on this in the near future.
We have also used this hiatus in what we still believe to be a long-term bull
market in copper and other critical metals, to optimise our mining and
processing plans, and look forward to updating you with progress on all fronts
in the coming months. We are refining our engineering plans and examining
methods of improving cashflow through environmentally innovative ore haulage
and recovery processes. If successful, this would significantly reduce our
spend on diesel and reagents, which are typically in the region of 60% of the
cost of metal production.
During the current state of volatility, and with the temporary weakness in the
copper price, it makes sense to bide our time, refine our plans, and make sure
that we can fully realise the value of the Empire Mine for our shareholders.
Many market commentators predict a global recession in the near future. If a
slowdown does occur, as we await permitting and prepare to go into production,
this may ultimately work in our favour, leading as it should, to a sharp
recovery in the copper price when the global economy rebounds.
The recent share price performance has mirrored the weakness in markets in
general, and the mining sector in particular. Many funds holding small cap and
mining stocks have faced a stream of redemptions, as investors worry about the
ability of non-cash generating companies to continue to finance development.
As I write, sterling is trading at $1.08, its lowest level for a generation.
However, I am glad to report that, after our fund raise of March 2021, our
cash balances remain healthy. We converted sufficient funds for our non-capex
related US dollar requirements at a rate of $1.38. The vast majority of our
assets are, and all our earnings will be, in US dollars.
We have also been spending a great deal of time on optimising already strong
relationships with the local community and other stakeholders. I draw your
attention to Catherine Evans's report, and would like to thank her and Lenie
Wilkie, and the rest of the team for all the hard work they have done on
enhancing our ESG credentials.
In summary, your Company is well-positioned to weather the current crisis. I
would like to thank you all for your support and perseverance and look forward
to delivering good news, not only at Empire, but also at Red Star, where we
are planning to drill anomalies revealed by last year's magnetics survey, at
Navarre Creek, where we have been granted permission to drill, and from our
cobalt joint venture at Redcastle.
Marcus Edwards-Jones
Chairman
Chief Executive Officer's Report
The Company entered 2022 encouraged by a bull copper market climbing through
$5.00/lb and gold and silver topping $1,800/oz and $23/oz, respectively.
Carrying on from a string of positive accomplishments in 2021, the Phoenix
team constructed and executed robust work plans for 2022 that include
continued feasibility engineering and environmental permitting on the Empire
Open Pit Copper Mine, exploration at the North Pit/Red Star silver-lead
deposit, Navarre Creek Gold Project, and the underground copper sulphides, as
well as the advancement of the Company's ESG Program and PR and IR
initiatives. Work being conducted this year ties-in perfectly with the
announcement of the US Defense Production Act, which provides for an increase
in the domestic production of metals for national defense, electric vehicles,
and the transmission and storage of renewable energy necessary to achieve
these goals. At the same time, media reports from the likes of S&P
Global, Wood Mackenzie, and Goldman Sachs continue to highlight the effect of
increased demand for metals like copper on dwindling global supply, with
shortfall anticipated to exceed seven million tonnes by 2030.
2022-2023 Drilling Programs
Core drilling in the Empire open pit copper deposit was initiated in June for
the purpose of collecting samples three-dimensionally representative of the
oxide portion of the deposit for copper, gold and silver recovery testing
using the environmentally friendly cyanide alternative, ammonium thiosulfate
("ATS"). The program anticipates the completion of 5,000 feet of core
drilling and will run through November. The North Pit/Red Star project is also
scheduled for approximately four weeks of drilling beginning in October.
Drilling will target magnetic anomalies identified in the 2021 ground
magnetics survey.
The Company completed a core drilling program in the Empire underground
sulphides in 2021, encountering the first notable copper sulphide intercept of
8.3% in the sulphide horizon situated below the open pit. That intercept
provided us with valuable information regarding the "roots" of the sulphide
system and will anchor future drilling programs targeting the deeper
sulphides. The Company also completed ground magnetics and hyperspectral
mineral geophysical surveys at Red Star, Horseshoe, and Navarre Creek. The
results of those surveys were positive and have provided critical targeting
information for future drilling programs, which are anticipated for 2023.
The Company's Navarre Creek drilling plan was approved by the US Forest
Service in August, clearing the way for a 2023 drilling program comprised of
up to 60 reverse-circulation ("RC") drill holes on 30 drill pads that will
target geochemical and geophysical anomalies identified from surface sampling
programs conducted over the past several years.
Additional long-term monitoring wells will be constructed in October and
located northeast of the proposed processing facility. These wells will
expand the current monitoring well network completed in 2021. Data from the
monitoring wells will augment data collected in a Controlled Source
Audio-frequency Magnetotellurics ("CSMAT") survey conducted in late summer and
designed to identify geologic structures and rock characteristics that control
groundwater movement, providing vital hydrological information for future
operations.
Open Pit Permitting and Feasibility Engineering
The environmental permitting process for the Empire open pit mine began in
late 2017 with the initiation of environmental baseline studies, which have
all been completed with no critical issues identified, and enabled the
submission of an initial Plan of Operations to the regulatory authorities in
2021. The mine and process design engineering necessary for completing a
feasibility study is in progress and combines all the drilling, analytical,
and engineering data collected on the project to date. The Feasibility Study
is designed to convert the existing Empire resource into a reserve category
using average metal prices and current equipment, reagent, and supply pricing.
The current preliminary economic assessment level cash flow model shows
pre-production capital of $52 million with payback in less than two years;
gross revenue of $836 million over 10 years of mine life, and $43 million
post-tax cash flow in year one at a $3.60/lb copper price. These project
economics are expected to improve significantly as a result of ongoing
economic and environmental optimization.
Cobalt
The Company's cobalt holdings at the Redcastle Idaho Cobalt Belt property in
Lemhi County were signed to an earn-in agreement with Electra Battery
Materials ("Electra") in 2021. Electra, the Toronto-based owner of the Iron
Creek cobalt mine that shares a common border with the Redcastle property,
initiated an IP Geophysical Survey and core drilling this year on an area of
cobalt mineralization known as the Ruby Zone. Redcastle is located 1.2
kilometers south of the Ruby Zone and shares similar stratigraphy. Electra
announced they will be conducting further exploration on the Redcastle
property. The earn-in agreement includes an initial payment of cash and
Electra shares to Phoenix, followed by two work commitments of $1,500,000 each
over a five-year period, thereby earning Electra a 75% interest in the
property.
Other Business
2022 also saw the formation of our Konnex Resources community advisory team,
KCAT, which is comprised of citizens and business owners near our Empire Mine
project in Custer County, Idaho. The KCAT group was developed out of our ESG
Program and has been promoted by Catherine Evans and Lenie Wilkie, our ESG
Director and ESG Coordinator. This group of liaisons provides a valuable
link between the Company and the community, and an avenue for community input
regarding the Company's proposed operations.
I have said this many times before, and I will repeat it again. Phoenix has
been provided a unique opportunity with the variety and grade of
mineralization located on our Idaho properties. The mix of "green metals"
like copper and cobalt, and the prospective gold and silver targets, all
residing within the Company's current claim holdings, puts us in an enviable
position for near term production and years of exploration potential.
2022 has not been without its challenges. Equipment and supply shortages,
contractor staffing shortages, and the wildly volatile metals and supply
markets are presenting delays that are being shared by the industry as a whole
and will likely not be resolved in the immediate future. However, the Phoenix
team has the singular focus to accomplish the goals outlined for 2022 and
beyond. I fully expect that we will continue to encounter many of the same
supply chain and staff challenges as we move forward, and I also fully expect
that our team will continue to overcome those challenges as they are presented
to us.
Mineral Resources
An updated NI 43-101 compliant resource was completed by Hardrock Consulting
in October 2020 and reported for the polymetallic Empire Mine open pit oxide
deposit. The updated resource showed a 51% increase in the Measured and
Indicated category from the previous year's resource. Including the Inferred
resources, the Empire open-pit oxide deposit now contains 129,641 tonnes of
copper, 58,440 tonnes of zinc, 10,133,772 ounces of silver and 355,523 ounces
of gold.
Mineral Resource Statement for Empire Mine, after Hard Rock Consulting October
2020
Class Tonnes Cu Average Grade Metal Content
Equiv
%
Cu Zn Ag Au Cu Zn Ag Au Cu
Equiv
% % g/t g/t Tonnes Tonnes Ozs Ozs Tonnes
Measured 8,289,719 0.81 0.42 0.22 11.4 0.327 34,655 18,160 3,031,791 87,036 67,013
Indicated 14,619,340 0.72 0.36 0.18 9.7 0.322 52,888 25,711 4,563,407 151,370 105,899
M+I 22,909,059 0.75 0.38 0.19 10.3 0.324 87,543 43,871 7,595,198 238,406 172,912
Inferred 10,612,556 0.75 0.4 0.14 7.4 0.343 42,098 14,569 2,538,574 117,117 79,296
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. 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.
Class Tons Ag Ag Au Au Pb Pb Zn Zn Cu Cu
(x1000) g/t oz g/t oz % lb % lb % lb
(x1000) (x1000) (x1000) (x1000) (x1000) % (x1000)
Inferred 114.13 173.4 577.3 0.851 2.8 3.85 8,791.20 0.92 2,108.80 0.33 745
Outlook
We have seen significant volatility in the metals markets so far this year,
with copper ringing in 2022 at $4.42/lb, rising to an all-time high of
$5.03/lb in March, and retreating to $3.20/lb in September. Gold has also
seen fluctuations of $377/oz and silver over $8.50/oz since the beginning of
the year. We are seeing similar volatility in the pricing of leaching
reagents, structural steel, heavy equipment, and fuel. I am not surprised to
see fluctuations in the price of metals so much as I am surprised at the wild
fluctuation in the cost of equipment, supplies, and consumables required for
constructing and maintaining a modern mining operation. The volatility
across all of these sectors creates challenges in estimating capital and
operating costs, particularly when estimating future costs. I think it is
well understood that current market volatility has resulted from a combination
of material and labor shortages in the manufacturing and fabrication sectors
arising from Covid-19, the war in Ukraine, and global inflation. While I am
growing increasingly frustrated by using Covid as an excuse for manufacturing
and delivery delays, it appears to be a reality that we must accept for the
time being.
Despite all of this, the fact remains that copper is in the top three of the
most consumed metals in the world, trailing only behind iron and aluminum.
The heavy focus on green energy metals for power generation, transmission,
and transportation will increase demand, as we are already beginning to
realize. Clean energy initiatives in the United States, Canada, and Europe
have already begun to drive demand for copper, cobalt and lithium. As other
countries develop similar initiatives, demand will outweigh global supply.
Some analysts are estimating copper demand to exceed supply beginning as
early as 2024. Should the war in Ukraine begin to resolve, the
reconstruction of the country will place an additional demand on metal
resources.
Although the copper price has decreased on the year, it remains significantly
higher than in the few years preceding Covid, during which the average price
was below $3.00/lb. Compared to those years, the copper market continues to
perform well, with prices holding above $3.50/lb and cobalt above
$55,000/tonne. I expect to see the metals markets, particularly copper and
cobalt, continue to perform well as the EV and "green energy" initiatives
continue to grow globally. I also expect that the spending on the 10 year,
$1.2 trillion US Infrastructure Bill and the recently introduced U.S. Defense
Production Act will increase metal demand and boost pricing in the short term.
The roughly $550 billion earmarked for the construction of roads, bridges,
ports, power transmission, and large water projects, as well as the advancing
EV initiatives, will require significant quantities of metal.
The mineralized systems at our Idaho projects contain a variety of EV metals,
as well as precious and other base metals, all of which will feed the numerous
infrastructure and green energy projects in the global pipeline. This
variety provides the Company significant optionality in a world of fluctuating
prices. Our story becomes even stronger with the realization that these
resources are all located in known mining districts in the geopolitically
stable, pro-mining jurisdiction of Idaho, USA.
While I fully anticipate further challenges as we move forward, I also fully
anticipate that our talented and dedicated team of hardworking professionals,
our supportive shareholder base, and our strong relationship with the local
community will overcome the current market headwinds. My outlook for the
Company remains positive and I am excited to see and report our
accomplishments in 2022.
Key Performance Indicators ('KPIs')
To date the Group has focused on the delivery of the project evaluation work
programs to assess the available mineral 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
We are well positioned to become a producer of metals that are vital to our
everyday lives. The transportation, manufacturing and energy sectors are
dependent upon the suite of metals hosted by our Idaho projects, and in turn
we are dependent upon the goods and services provided by those sectors. We
remain well funded and have the right team to move the Empire Mine into
production and to properly explore the Navarre Creek, Red Star, and the Empire
underground sulphides projects.
I would like to thank all our professional 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 2022.
Ryan McDermott
Chief Executive Officer
ESG & Sustainability Committee Chairman's Report
It gives me great pleasure to report on the significant progress we have made
with respect to ESG & Sustainability in the last six months. Our central
aim remains clear: to build and run a clean mining operation with as low a
carbon footprint as possible.
The new Phoenix website went live in August of this year, and we have placed a
great deal of emphasis on providing clear information on metrics relating to
ESG and Sustainability to interested parties. Konnex will soon have its own
website, the key benefit being communicating ESG & Sustainability issues
and local activities to those of our stakeholders who will be directly
affected.
We regard gaining and maintaining the support of our community as the
cornerstone of our success. As we reported in February 2022, we formed the
KCAT, the Konnex Community Advisory Team, comprised of three representatives
of Phoenix/Konnex, our Idaho registered operating subsidiary, and ten
independent residents of Custer or Butte Counties with diverse experience from
one or more of the following sectors: citizens, municipal, land-users,
socio-economic (business) and research/training. We are highly fortunate to
have such interested and engaged individuals with such a wealth of experience
to facilitate open communication between the Company and the community. Since
its formation, the committee has met four times, including a visit to the site
of Empire Mine. As detailed on our website, the role of the KCAT is to
finalise the formation of a Good Neighbour Agreement, to formulate a grievance
process which will address concerns and complaints, and to be instrumental in
their resolution. Further, we wish the KCAT to identify ways in which the
Company can be of benefit to the community and to compile a local
vendor/supplier list so that we can support local businesses wherever
possible.
Drawing on SASB's (Sustainability Accounting Standards Board) Metals &
Mining Standard 2021, the ESG Team has spent a great deal of time focusing on
Materiality Assessments in order to determine what our current ESG risks are
and what they will be when we are in production. We have determined these
risks not only from our own perspective, but have also taken into account
issues of concern to our stakeholders. The KCAT will be able to provide a
great deal of qualitative input into this project, and will have an important
role in refining and verifying this data.
In our ongoing effort to provide investors and stakeholders with transparent
and reliable information on our activities, we have contracted with Digbee
ESG, an ESG disclosure platform for the mining industry, offering 'a
future-looking, right-sized set of frameworks, aligned to the key global
standards.' We have supplied highly detailed information to Digbee via two
questionnaires: one corporate and the other project-specific, focused on the
Empire Mine. This information will subsequently be verified by Satarla, a risk
& ESG training consultancy & research firm. For reasons of
confidentiality, our responses to their questions will not be available for
public view, but they will award us with an overall score which can be viewed
and accepted by leading stakeholders. Each mining project is unique, and from
an investor standpoint, Digbee allows fair comparisons between them from an
ESG perspective.
We are confident that Digbee has been able to provide us with the larger part
of a solution to a highly complex problem. ESG & sustainability disclosure
requirements are becoming increasingly onerous, and we will continue to
monitor the disclosure horizon carefully.
At all stages of our decision-making process, ESG & Sustainability
considerations are awarded high priority. As reported in February 2022, we
continue to investigate the feasibility of building an aerial tramway to
transport ore from the mine site to the leach pads, instead of using trucks.
The tram remains our preferred option for a large number of environmental
reasons, including a substantial reduction in water requirement, and will
considerably reduce operating costs over the life of the mine, thereby
justifying the necessary upfront investment. The development of the Empire
open pit mine will provide high quality employment opportunities, and will
also generate business for local suppliers and entrepreneurs, but we remain
mindful that we are operating in an area of outstanding natural beauty and are
determined to make every effort to ensure that we are good neighbours and good
long-term stewards of the environment.
We look forward to providing further updates on our progress in the near
future.
Catherine Evans
Non-Executive Director
Financial Overview
The Group reports a loss for the six months of $1.052 million (2021: loss of
$199,481). This includes an unrealised foreign exchange loss on sterling
denominated assets of $503,593 (2021: foreign exchange gain of $303,077), and
a charge of $36,623 (2021: $90,953) relating to non-cash share-based payments
attributable to warrants or options extended or granted during the period, and
which amount is simultaneously credited back to the retained deficit.
Net assets at 30 June 2022 totalled $38.22 million (2021: $37.70 million),
including cash of $9.05 million (2021: $22.88 million).
During the period the Company raised a further $1.39 million through the issue
of 5,055,942 ordinary shares pursuant to the exercise of warrants. Since the
period-end a further 157,000 ordinary shares have been issued pursuant to
further warrant exercises. The outstanding share capital of the Company is
currently 122,628,622 shares.
During the period the Company charged its subsidiary entities $465,000 (2021:
$405,000) in respect of management services provided, and $610,653 (2021:
$361,678) in respect of interest at 6% per annum on the Company's
inter-company loan to Konnex Resources Inc ("Konnex"), owner of the Empire
Mine, the latter eliminating on consolidation. At 30 June 2022 the Company's
loan to Konnex stood at $22.95 million (2021: $15.33 million). The Company has
also advanced $2.28 million (2021: $859,900) to Lost River Resources Inc, a
wholly owned subsidiary of the Company, to acquire real estate commercial and
residential property and mining claim blocks to support the Empire Mine. These
loans will be repaid from Konnex's operating cash flow in due course and are
intended, together with royalties receivable from Konnex, to form a platform
for a future proposed dividend policy to return money to shareholders.
During the period the Group acquired the remaining 1.25% royalty payable by
Konnex Resources to Honolulu Copper Corporation ("Honolulu") for consideration
of $450,000. The Group had previously acquired 1% of the 2.5% royalty payable
to Mackay LLC, and 1.25% of the royalty payable to Honolulu, as well as
Honolulu's underlying patented and unpatented mining claims, for consideration
of $1.3 million. As a result, Konnex Resources will now pay a 1% royalty or a
2.5% royalty to the Company from future production at Empire, depending which
claim blocks are being mined.
The Company is currently undertaking a corporate copper bond financing in
order to accelerate the ongoing development of the Empire Mine and surrounding
mineralised district. The bonds are non-convertible, and repayable after 10
years, unless the Company offers early redemption after five years, and the
bondholder accepts, or the bondholder requests early redemption after six
years. The bonds will pay a semi-annual coupon linked to the average monthly
closing copper price on the London Metal Exchange during any given coupon
period, subject to a minimum annual coupon of 8.5% at a $3.60 / lb or lower
copper price, and a maximum annual coupon of 20% at a $11.26 / lb or higher
copper price. The bonds will be secured on the Company's patented mining
claims and listed on The International Stock Exchange in the Channel Islands.
An initial tranche is currently under negotiation.
The Directors recognise the importance of sound corporate governance and have
applied the Quoted Companies Alliance's Corporate Governance Code 2018. The
Company's Corporate Governance Statement dated 25 March 2022 can be viewed on
the Company's website at https://phoenixcopperlimited.com
(https://phoenixcopperlimited.com) .
Richard Wilkins
Chief Financial Officer
Unaudited Unaudited Audited
Condensed consolidated income statement 6 months to 6 months to 12 months to
30 June 30 June 31 December
2022 2021 2021
Note $ $ $
Continuing operations
Revenue 3 - - -
Exploration and evaluation expenditure - - -
Gross loss - - -
Administrative expenses 4 4 (1,057,717) (295,368) (1,065,950)
Other operating income 9 - 106,340 106,340
Loss from operations (1,057,717) (189,028) (959,610)
Finance income 6,107 - 3,708
Finance costs - (10,453) (13,348)
Loss before taxation (1,051,610) (199,481) (969,250)
Taxation - - -
Loss for the period (1,051,610) (199,481) (969,250)
Loss attributable to:
- Owners of the parent company (1,038,033) (185,550) (942,850)
- Non-controlling interests (13,577) (13,931) (26,400)
(1,051,610) (199,481) (969,250)
Basic and diluted loss per share - cents 5 (0.86) (0.20) (0.90)
The revenue, expenditures and operating result for each period is derived from
acquired and continuing operations in North America and the United Kingdom.
Condensed consolidated statement of comprehensive income Unaudited Unaudited Audited
6 months to 6 months to 12 months to
30 June 30 June 31 December
2022 2021 2021
$ $ $
Loss for the period and total comprehensive income for the period (1,051,610) (199,481) (969,250)
Total comprehensive income for the period attributable to:
Owners of the parent company (1,038,033) (185,550) (942,850)
Non-controlling interests (13,577) (13,931) (26,400)
(1,051,610) (199,481) (969,250)
Condensed consolidated statement of Unaudited Unaudited Audited
financial position
Note 30 June 30 June 31 December 2021
2022 2021
$ $ $
Non-current assets
Property, plant and equipment - mining property 6 29,731,139 18,606,061 26,124,030
Intangible assets 7 345,844 310,665 330,844
Total non-current assets 30,076,983 18,916,726 26,454,874
Current assets
Trade and other receivables 8 780,299 140,721 365,778
Finance assets 9 56,340 56,340 56,340
Cash and cash equivalents 9,045,669 22,875,013 13,046,529
Total current assets 9,882,308 23,072,074 13,468,647
Total assets 39,959,291 41,988,800 39,923,521
Current liabilities
Trade and other payables 10 478,302 619,099 883,196
Other liabilities 11 250,000 2,907,500 250,000
Total current liabilities 728,302 3,526,599 1,133,196
Non-current liabilities
Other liabilities 11 250,000 - 250,000
Provisions 12 757,702 757,702 757,702
Total non-current liabilities 1,007,702 757,702 1,007,702
Total liabilities 1,736,004 4,284,301 2,140,898
Net assets 38,223,287 37,704,499 37,782,623
Equity
Share capital 13 - - -
10
Share premium account 44,848,384 42,981,253 43,460,747
`Retained deficit (6,684,755) (5,362,458) (5,751,359)
Translation reserve (18,588) (18,588) (18,588)
Capital and reserves attributable to the owners of the parent company 38,145,041 37,600,207 37,690,800
Non-controlling interests 78,246 104,292 91,823
Total equity 38,223,287 37,704,499 37,782,623
Condensed consolidated statement of changes in equity
Share premium Retained Translation reserve Total Non-controlling interests Total
deficit Equity
$ $ $ $ $ $
Balance at 1 January 2021 19,251,964 (5,517,549) (18,588) 13,715,827 118,223 13,834,050
Loss for the period - (185,550) - (185,550) (13,931) (199,481)
Total comprehensive income for the period - (185,550) - (185,550) (13,931) (199,481)
Shares issued in the period 25,539,057 - - 25,539,057 - 25,539,057
Share issue expenses (1,809,768) - - (1,809,768) - (1,809,768)
Share-based payments - 340,641 - 340,641 - 340,641
Total contribution by owners 23,729,289 340,641 - 24,069,930 - 24,069,930
Balance at 30 June 2021 42,981,253 (5,362,458) (18,588) 37,600,207 104,292 37,704,499
Loss for the period - (757,300 - (757,300 (12,469) (769,769)
Total comprehensive income for the period - (757,300) - (757,300) (12,469) (769,769)
Shares issued in the period 479,494 - - 479,494 - 479,494
Share issue expenses - - - - - -
Share-based payments - 368,399 - 368,399 - 368,399
Total contribution by owners 479,494 368,399 - 847,893 - 847,893
Balance at 31 December 2021 43,460,747 (5,751,359) (18,588) 37,690,800 91,823 37,782,623
Loss for the period - (1,038,033) - (1,038,033) (13,577) (1,051,610)
Total comprehensive income for the period - (1,038,033) - (1,038,033) (13,577) (1,051,610)
Shares issued in the period 1,387,637 - - 1,387,637 - 1,387,637
Share issue expenses - - - - - -
Share-based payments - 104,637 - 104,637 - 104,637
Total contribution by owners 1,387,637 104,637 - 1,492,274 - 1,492,274
Balance at 30 June 2022 44,848,384 (6,684,755) (18,588) 38,145,041 78,246 38,223,287
Condensed consolidated statement of cash flows Unaudited Unaudited Audited
6 months to 6 months to 12 months to 31 December 2021
30 June 30 June
2022 2021
$ $ $
Loss before taxation (1,051,610) (199,481) (969,250)
Adjustments for:
Depreciation
Share-based payments 36,623 90,953 191,856
Consideration equity shares - (56,340) -
(1,014,987) (164,868) (777,394)
Changes in working capital
(Increase)/decrease in trade and other receivables (414,521) (18,421) (299,818)
Increase/(Decrease) in trade and other payables (404,894) 425,162 689,259
Cash (used in)/generated from operating activities (1,834,402) 241,873 (387,953)
Investing activities
Purchase of intangible assets (15,000) (33,770) (53,949)
Purchase of property, plant and (3,539,095) (3,567,369) (10,238,492)
equipment
Net cash outflow from investing activities (3,554,095) (3,601,139) (10,292,441)
Cash flows from financing activities
Proceeds from the issuance of ordinary shares 1,387,637 25,539,057 25,939,203
Share-issue expenses - (1,809,768) (1,809,770)
Proceeds from the issue of loan notes - 2,100,000 -
Repayment of loan notes- - (741,500) (1,549,000)
Net cash inflow from financing activities 1,387,637 25,087,789 22,580,433
Net (decrease)/increase in cash and cash equivalents (4,000,860) 21,728,523 11,900,039
Cash and cash equivalents at the beginning of the period 13,046,529 1,146,490 1,146,490
Cash and cash equivalents at the end of the period 9,045,669 22,875,013 13,046,529
An amount of $68,014, (30 June 2021: $249,688, 31 December 2021: $517,184) in
respect of the charge for share-based payments was capitalised into mining
property.
1. Basis of preparation and principal accounting policies
This condensed consolidated interim financial information was approved for
issue by the Board on 28 September 2022.
This condensed consolidated interim financial information has not been audited
and does not include all of the information required for full annual financial
statements. While the financial figures included within this interim report
have been computed in accordance with IFRS applicable to interim periods, this
report does not contain sufficient information to constitute an interim
financial report as set out in International Accounting Standard 34: Interim
Financial Reporting.
Basis of consolidation
Principles of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power to direct the
activities of the entity. Subsidiaries are fully consolidated on the date on
which control is transferred to the Group. They are deconsolidated from the
date that control ceases.
The acquisition method of accounting is used to account for business
combinations by the Group.
Intercompany transactions, balances and unrealised gains of transactions
between Group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment to the transferred
asset.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated income statement, consolidated statement of
comprehensive income, statement of changes in equity and consolidated
statement of financial position respectively.
2. Information on the Group
Phoenix Copper Limited (the "Company") and its subsidiary undertakings (the
"Group") are engaged in exploration and mining activities, primarily precious
and base metals, primarily in North America. The Company is domiciled and
incorporated in the British Virgin Islands on 19 September 2013 (registered
number 1791533). The address of its registered office is OMC Chambers,
Wickhams Cay 1, Road Town, Tortola VG1110, British Virgin Islands. The Company
is quoted on London's AIM (ticker: PXC) and trades on New York's OTCQX Market
(ticker: PXCLF; ADR ticker PXCLY).
3. Revenue
The Group is not yet producing revenues from its mineral exploration and
mining activities. During the period the Company charged its subsidiary
entities $465,000 (30 June 2021: $405,000; 31 December 2021: $885,000) in
respect of management services provided.
4. Administrative expenses
Administrative expenses include $503,593 of foreign exchange losses (30 June
2021: foreign exchange gains of $303,077; 31 December 2021: foreign exchange
gains of $173,358).
Administrative expenses also include share-based payments of $36,623 (30 June
2021: $90,953; 31 December 2021: $191,856). The related credits to equity are
taken to the retained deficit.
5. Loss per share Unaudited Unaudited Audited
6 months to 6 months to 12 months to 31 December 2021
30 June 30 June
2022 2021
$ $ $
Loss for the period attributable to equity holders of the parent company (1,038,033) (185,550) (942,850)
Number Number Number
Weighted average number of ordinary shares for the purposes of basic and 104,213,499
diluted loss per share
121,105,350 91,856,320
Loss per share - basic and diluted (cents) (0.86) (0.20) (0.90)
Non-current assets
6. Property, plant and equipment - mining property
Mining Property
$
Cost or valuation
At 1 January 2021 14,789,004
Additions 3,817,057
At 30 June 2021 18,606,061
Additions 7,517,969
At 31 December 2021 26,124,030
Additions 3,607,109
At 30 June 2022 29,731,139
Depreciation
At 30 June 2021, 31 December 2021 and 30 June 2022 -
Net book value:
30 June 2021 18,606,061
31 December 2021 26,124,030
30 June 2022 29,731,139
Mining property assets relate to the past producing Empire Mine copper - gold
- silver - zinc project in Idaho, USA. The Empire Mine has not yet recommenced
production and no depreciation has been charged in the statement of
comprehensive income. Due to the ongoing development of the property, no
impairment has been charged in any period.
The property is owned by Konnex Resources Inc, an 80% owned subsidiary of the
parent company, registered and domiciled in Idaho.
7. Intangible assets
Exploration and evaluation expenditure
$
Cost or valuation
At 1 January 2021 276,895
Additions 33,770
At 30 June 2021 310,665
Additions 20,179
At 31 December 2021 330,844
Additions 15,000
At 30 June 2022 345,844
Net book value:
30 June 2021 310,665
31 December 2021 330,844
30 June 2022 345,844
Exploration and evaluation expenditure relates to the Bighorn and Redcastle
properties on the Idaho Cobalt Belt in Idaho, USA. The Bighorn property is
owned by Salmon Canyon Resources Inc. The Redcastle property is owned by Borah
Resources Inc. Both companies are wholly owned subsidiaries of the parent
entity, and are both registered and domiciled in Idaho. The Redcastle property
is subject to an Earn-In Agreement with First Cobalt Idaho, a wholly owned
subsidiary of Electra Battery Materials Corporation (formerly First Cobalt
Corporation) of Toronto, Canada.
8. Trade and other receivables Unaudited Unaudited Audited
30 June 30 June 31 December 2021
2022 2021
$ $ $
Other receivables 671,335 88,845 207,949
Prepayments 108,964 51,876 157,829
780,299 140,721 365,778
Other receivables include $464,417 of costs incurred in respect of a proposed
corporate bond issue currently being undertaken by the Company. These costs
will be allocated against the bond proceeds when the issue is concluded.
9. Financial assets Unaudited Unaudited Audited
6 months to 6 months to 12 months to 31 December
30 June 30 June 2021
2022 2021
$ $ $
Quoted investments 56,340 56,340 56,340
In May 2021 the Group entered into an earn-in agreement with First Cobalt
Idaho, the wholly owned subsidiary of Toronto-based Electra Battery Materials
Corporation (formerly First Cobalt Corporation) ("Electra"), in respect of the
Group's Redcastle cobalt property on the Idaho Cobalt Belt. The Group received
consideration of $50,000 and 200,000 shares in Electra valued at $56,340, a
total initial consideration of $106,340.
10. Trade and other payables Unaudited Unaudited Audited
30 June 30 June 31 December 2021
2022 2021
$ $ $
Trade creditors 478,302 597,667 862,907
Other creditors - 21,432 20,289
Need
478,302 619,099 883,196
11. Other liabilities Unaudited Unaudited Audited
30 June 30 June 31 December 2021
2022 2021
$ $ $
Current liabilities
Loan notes - 2,907,500 -
Deferred consideration 250,000 - 250,000
250,000 2,907,500 250,000
Non-current liabilities
Deferred consideration 250,000 - 250,000
In April 2021 the Group entered into an agreement with Mackay LLC to acquire
1% of the 2.5% net smelter royalty payable on mining leases on the Empire Mine
in Idaho, USA. Total consideration payable to Mackay LLC is $800,000, of which
$300,000 has been paid. Deferred consideration comprises two further payments
of $250,000 each, due on 31 December 2022 and 31 December 2023.
12. Provisions Unaudited Unaudited Audited
30 June 30 June 31 December 2021
2022 2021
$ $ $
Decommissioning provision 100,000 100,000 100,000
Potential future royalties payable 657,702 657,702 657,702
757,702 757,702 757,702
The provision of $100,000 for decommissioning the Empire Mine is based on the
directors' estimate after taking into account appropriate professional advice,
and is included within mining property.
The other provision of $657,702 arises from a business combination in 2017 and
comprises potential royalties payable in respect of future production at the
Empire Mine. This liability will only be payable if the Empire Mine is
successfully restored to production and will be deducted from the royalties
payable.
13. Share capital Unaudited Unaudited Audited
30 June 30 June 31 December 2021
2022 2021
Number Number Number
Allotted and issued
Ordinary shares with no par value 122,471,622 116,328,102 117,415,680
The Ordinary Shares rank pari passu.
In the period the Company issued 5,055,942 ordinary shares pursuant to the
exercise of warrants raising $1,387,637 with an average issue cost of 27.4
pence.
Since the period end a further 157,000 ordinary shares have been issued
pursuant to the exercise of warrants.
14. Events after the reporting date
Since the period end the Company has commenced a corporate copper bond
financing in order to accelerate the ongoing development of the Empire Mine
and surrounding mineralised district. The bonds are non-convertible, and
repayable after 10 years, unless the Company offers early redemption after
five years, and the bondholder accepts, or the bondholder requests early
redemption after six years. The bonds will pay a semi-annual coupon linked to
the average monthly closing copper price on the London Metal Exchange during
any given coupon period, subject to a minimum annual coupon of 8.5% at a $3.60
/ lb or lower copper price, and a maximum annual coupon of 20% at a $11.26 /
lb or higher copper price. The bonds will be secured on the Company's patented
mining claims and listed on The International Stock Exchange in the Channel
Islands.
Market Abuse Regulation (MAR) Disclosure
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which has been incorporated into UK law by the European
Union (Withdrawal) Act 2018. Upon the publication of this announcement via
Regulatory Information Service, this inside information is now considered to
be in the public domain.
Contacts
For further information please visit www.phoenixcopperlimited.com or contact:
Phoenix Copper Limited Ryan McDermott Tel: +1 208 954 7039
Brittany Lock Tel: +1 208 794 8033
Richard Wilkins Tel: +44 7590 216 657
SP Angel (Nominated Adviser) David Hignell / Caroline Rowe Tel: +44 20 3470 0470
Tavira Financial Limited (Joint Broker) Jonathan Evans / Oliver Stansfield Tel: +44 20 7100 5100
WH Ireland (Joint Broker) Harry Ansell / Katy Mitchell Tel: +44 207 2201666
Panmure Gordon (UK) Limited (Joint Broker) John Prior / Hugh Rich / Ailsa Macmaster Tel: +44 20 7886 2500
EAS Advisors (US Corporate Adviser) Matt Bonner / Rogier de la Rambelje Tel: +1 (646) 495-2225
BlytheRay Tim Blythe / Megan Ray Tel: +44 20 7138 3204
(Financial PR)
Notes
Phoenix Copper Limited is a USA focused, base and precious metals emerging
producer and exploration company, initially targeting copper and zinc
production from an open pit mine.
Phoenix's primary operations are focused near Mackay, Idaho in the Alder Creek
mining district, at the 80% owned Empire Mine property, which historically
produced copper at grades of up to 8%, as well as gold, silver, zinc and
tungsten, from an underground mine.
Since 2017, Phoenix has carried our extensive drill programmes which have
defined a NI 43-101 compliant PEA (preliminary economic assessment) for an
open pit heap leach solvent extraction and electrowinning ("SX-EW") mine,
which was updated in October 2020. The contained metal in all NI 43-101
compliant categories of resources, Measured, Indicated and Inferred, stand at
129,641 tonnes of copper, 355,523 ounces of gold, 10,133,772 ounces of silver
and 58,440 tonnes of zinc. Phoenix updated its economic model in February 2021
to include the processing of all contained metals through a two phased
approach.
In addition to Empire, the district includes the historic Horseshoe, White
Knob and Blue Bird Mines, past producers of copper, gold, silver, zinc, lead
and tungsten from underground mines. A new discovery at Red Star, 330 metres
northwest of the Empire Mine proposed open pit, has revealed high grade silver
/ lead sulphide ore, and from three shallow exploration drill holes a maiden
resource of 103,000 tonnes containing 173.4 g/tonne silver, 0.85 g/tonne gold
and 3.85% lead (1.6 million ounces silver equivalent) was reported in an NI
43-101 technical report published in May 2019. Additionally, the district
includes Navarre Creek, a volcanic hosted precious metals target in a 14.48 sq
km area. The Company's total land package at Empire comprises 8,034 acres
(32.51 sq kms).
At Empire, it is estimated that less than 1% of the potential ore system has
been explored to date and, accordingly, there is significant opportunity to
increase the resource through phased exploration. The stated aim of the
Company is to fund this phased exploration through free cashflow generated by
its initial mine. A Plan of Operations in respect of the initial open pit mine
was filed with the relevant regulatory authorities in June 2021.
Phoenix also has two wholly owned cobalt properties on the Idaho Cobalt Belt
to the north of Empire. An Earn-In Agreement has been signed with Electra
Battery Materials (formerly First Cobalt Corporation), Toronto, in respect of
one of those properties.
Phoenix is listed on London's AIM (PXC), and trades on New York's OTCQX Market
(PXCLF and PXCLY (ADRs)). More details on the Company, its assets and its
objectives can be found on PXC's website at https://phoenixcopperlimited.com/
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