Final results for the year ended 31 December 2020

RNS Number : 5319X

Phoenix Copper Limited

05 May 2021

 

Phoenix Copper Limited / Ticker: PXC / Sector: Mining

5 May 2021

Phoenix Copper Limited

("Phoenix" or the "Company")

Final audited results for the year ended 31 December 2020

Notice of AGM

Phoenix Copper Ltd (AIM: PXC, OTCQX: PXCLF), 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 2020. All references to $ are United States dollars.

Highlights

Corporate & Financial:

-  $4.65 million raised during the year

-  $26.75 million raised since the year-end

-  Investment in Empire Mine in Idaho, USA increased to $14.79 million (2019: $11.67 million)

-  Net assets increased to $13.83 million (2019: $10.56 million)

-  14% decrease in net loss to $0.97 million (2019: $1.13 million)

-  Phoenix loan to operating subsidiary increased to $11.28 million (2019: $8.29 million)

-  Ryan McDermott appointed as Chief Executive Officer

-  In 2021, Catherine Evans appointed as an Independent Non-Executive Director, and

-  Harry Kenyon-Slaney appointed to the Advisory Board

Empire Mine, Idaho, USA:

-  Updated Measured & Indicated open pit resource increased by 51% over the 2019 resource, containing 87,543 tonnes of copper (+19% over 2019 resource), 43,871 tonnes of zinc (+47%), 238,400 ounces of gold (+72%) and 7.6 million ounces of silver (+26%)

-  Open pit Measured & Indicated resource in-situ value of $1.4 billion, plus $0.6 billion of Inferred resource

-  Open pit mine pre-production capital expenditure of $52 million, payback less than two years; gross revenue of $836 million over 10 years, $43 million post-tax cash flow in year 1 (at $3.60 copper price)

-  Completion of environmental base line studies for both the open pit and Red Star silver-lead deposit, with no critical issues identified

-  Environmentally friendly non-toxic processing technology to recover precious metals

-  2021 drilling programme at Red Star silver-lead deposit, Navarre Creek gold zone, and historically mined high grade Empire underground sulphide copper deposit

-  ESG Programme Coordinator appointed

The Company also announces that the Annual General Meeting ("AGM") will be held by webinar at 16.00 BST on 24 May 2021. Details of how to access the webinar platform and vote by proxy will be set out in the Notice of AGM.

The Notice of AGM and Forms of Proxy will be despatched to shareholders on 6 May 2021 and will be available on the Company's website at www.phoenixcopperlimited.com .

The Company's Annual Report and Consolidated Financial Statements for the year ended 31 December 2020 will also be available on the website from 6 May 2021, as will the new Memorandum & Articles of Association, proposed to be adopted at the AGM.

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

  Contacts

For further information please visit www.phoenixcopperlimited.com or contact:

Phoenix Copper Limited	Ryan McDermott Dennis Thomas Richard Wilkins	Tel: [phone]  Tel: [phone] Tel: [phone]
SP Angel (Nominated Adviser)	David Hignell / Caroline Rowe	Tel: [phone]
Brandon Hill Capital (Joint Broker)	Jonathan Evans / Oliver Stansfield	Tel: [phone]
WH Ireland (Joint Broker)	Harry Ansell / Adam Pollock / Katy Mitchell	Tel: [phone]
Panmure Gordon (UK) Limited (Joint Broker)	John Prior / Hugh Rich / Ailsa Macmaster	Tel: [phone]
EAS Advisors (US Corporate Adviser)	Matt Bonner / Rogier de la Rambelje	Tel: [phone]
Blytheweigh (Financial PR)	Tim Blythe / Megan Ray	Tel: [phone]

Notes

Phoenix Copper Limited is a USA focused, base and precious metal emerging producer and exploration company, which has carried out a drilling programme and generated a copper, gold, silver and zinc resource on which it is carrying out a feasibility study to bring the historically producing Empire Mine in Idaho, USA, back into production. It is also evaluating the silver and gold resources around three other past producing mines within the 23 km ² Empire claims block as well as cobalt in two claims blocks north of Empire in Idaho.

Phoenix's primary operations are focused near Mackay, Idaho in the Alder Creek mining district. This district includes the historical Empire, Horseshoe, White Knob and Blue Bird Mines, past producers of copper, gold, silver, zinc, lead and tungsten from underground mines in the first half of the twentieth century. Additionally, the district includes Navarre Creek a Carlin-trend gold discovery which hosts a 6.1 km gold strike length within a 9.8 km² area.

Phoenix acquired an 80% interest in the historical Empire Mine property in 2017 and, based on a total of 320 drill holes, an oxide resource was completed in late 2017. A NI 43-101 compliant PEA (preliminary economic assessment) for an open pit heap leach solvent extraction and electrowinning ("SX-EW") mine was completed in April 2018. In 2018 a further 8,600 metres in 93 holes was completed to upgrade the oxide resources, provide samples for ongoing metallurgical test work, geotechnical and hydrological studies and condemnation drilling for the heap leach pad site, waste dump and plant site. An updated NI 43-101 compliant resource was completed in early May 2020 and October 2020 for all metals. Present contained metal in all NI 43-101 compliant categories of resources, measured, indicated and inferred, stand at 355,523 ounces of gold, 129,641 tonnes of copper, 10,133,772 ounces of silver and 58,440 tonnes of zinc. Following the latest NI 43-101 compliant resource, Phoenix updated its economic model in February 2021 to include the processing of all contained metals through a two phased approach.

Since acquiring the Empire project, Phoenix has increased the claim area from 818 acres (3.3 sq km) to 6,877 acres (27.8 sq km), mainly to the northwest and west, and in so doing has increased the potential for additional oxide and sulphide copper resources, as well as the potential for stand-alone gold and silver resources, along a strike length of approximately 5.4 km towards the other brownfield mines of the Horseshoe, White Knob and Blue Bird Mines now within the property boundary. In particular, a new discovery at Red Star, 330 metres north west of the Empire Mine proposed open pit, has revealed high grade silver / lead sulphide ore and from three shallow exploration drill holes a NI 43-101 compliant maiden resource of 1.6 million silver equivalent ounces was reported.

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.

More details on the Company, its assets and its objectives can be found on PXC's website at www. phoenixcopperlimited.com

CHAIRMAN'S STATEMENT

Dear Shareholders

It is with a mixture of pleasure, and relief, not to mention a large quantity of gratitude, that I present our fourth annual report as a public company. Reading through last year's statement I see copper was trading at $4,716/tonne ($2.14/lb.) in April 2020, compared with its recent peak at over $9,300 ($4.22/lb.). On an annualized basis, this is tantamount to an $82 billion swing in the aggregated revenues of copper miners. Similarly, silver is now trading at $25/oz compared with $11, as the Covid-19 panic set in over a year ago - a $12 billion swing in global silver mining income. Although it has been a year of unprecedented volatility, our Company has nonetheless survived and strengthened its position.

Thanks to your support, and the skills and efforts of our technical team, we were able to make substantial increases in the values of contained metal across all categories. Our October 2020 resource update shows a 51% increase on 2019 in the Measured and Indicated category at the Empire open pit project, with the value of contained metals rising by $350 million, in what has been a transformational year for Phoenix. With the new resource, as announced in February 2021, which utilizes copper, gold and silver, we have a robust economic model showing a pre-tax 7.5% NPV of $105 million and an IRR of 57%, using a $7,934/tonne ($3.60/lb) copper price. This gives us a clear path to go into production at the Empire open-pit project at the end of next year.

We expect to be going into production just as the surge in demand for copper, created by incremental demand from the transition to green energy, builds momentum. The Goldman Sachs Commodities Research team in their excellent recent note, "Copper is the new oil," see incremental annual demand for copper, generated by the construction of wind and solar energy power plants, electric vehicles, charging stations and such like,  rising to between 5.4 million and 8.7 million tonnes per annum by 2030, compared with total global annually-mined production of some 22 million tonnes, and total consumption, including scrap, of 30 million tonnes in 2020, ushering in the strongest phase of growth in copper demand ever seen. If they are correct, and copper rises to $15,000/tonne ($6.80/lb.), our economic model would show life-of-mine, post-tax cashflow of $548 million, generating a post-tax 7.5% NPV of $370 million and an IRR of 198%. Reducing the discount rate to 5%, a number now widely used by North American miners, increases the NPV to $419 million. This is at the Empire starter pit alone. The $50 million capital required for construction would be repaid in less than one year in such a scenario, and we are already in discussions with several project finance funders with a view to providing this, with no further recourse to the equity markets.

Recent valuable work by Jefferies and Deutsche Bank analysts on copper supply points out that much of the future supply will come from projects located in countries not noted for the ease of their operating conditions or stable tax regimes. The increasing importance of ESG also means that permitting takes longer, and is more difficult. The concerns being aired regarding the outcome of the current elections in Peru, which supplies 11% of the world's copper, are a case in point.

Astute planning by our technical team meant that Covid-19 did not affect us as badly as initially feared, in that we were able to practice social distancing without reducing the numbers of drillers and geologists, who usually work in small teams. However, later in the year, we began to experience severe delays at the assay laboratories and the metallurgical test work facilities, which we estimate delayed operations by some three to six months. Nonetheless, we managed to demonstrate successful use of ammonium thiosulphate ("ATS") - the environmentally-friendly alternative to cyanide, to recover the gold and silver at Empire, with gold recoveries exceeding 97% in the laboratory.  This is a major positive for us in terms of permitting and keeping capital spending down. We also managed to process 90 surface samples at our gold exploration project at nearby Navarre Creek. Over 50% of these showed detectable gold grades of up to 0.569 g/t, and we look forward to an exciting exploration campaign there, as well as at the adjacent Red Star deposit for silver, starting next month. Successful aero-magnetic surveys, followed up by drilling campaigns on these two properties, will increase further our "optionality" in terms of near-term production decisions and strategy.

Since our year-end, we have completed an £18.4 million ($25.4 million) over-subscribed share placing and open offer at 35p, which we hope will be our last equity raise for quite some time. I would like to thank all of you who participated and welcome several new institutional and individual shareholders from both sides of the ocean. These funds will enable us to make significant progress on all our projects - the Empire open pit, Red Star high-grade silver/lead, Navarre Creek gold, the cobalt projects, and - the ultimate prize, our high-grade copper sulphides underneath the open pit. With production at Empire and Red Star planned to be funded for the most part with debt-related instruments and/or metal offtake finance, we are now several steps closer to our goal of proving up a world-class deposit of metals essential to the green, carbon-emission free economy, in a friendly, first world jurisdiction.

Your support in the recent financing has enabled us to expand the operations team in Mackay, Idaho as we prepare to submit the Plan of Operations for the final stages of mine-permitting. In particular, we welcome Zach Black as General Manager of Konnex Resources, our Idaho registered operating subsidiary.

I would also like to welcome Ms. Catherine Evans as an independent non-executive director. Catherine has over twenty years of experience in institutional investment sales in the UK, Europe, Hong Kong and South Africa. She started her career with a US brokerage firm, before joining Pictet Asset Management. She then spent ten years working in alternatives, specifically hedge funds, before joining the founding team of Fundsmith as Institutional Sales Director prior to the launch of the highly successful Fundsmith Equity Fund. 

As we expand and look to develop several of our projects simultaneously, the necessity of having high quality advice becomes increasingly important. To this end we have formed an advisory board, to which we can appoint persons whose input we would value. Our founder, former CEO and Head of Investor Relations, Dennis Thomas, has kindly agreed to be one of the first members, while continuing his executive role as head of IR.

We are also delighted that Harry Kenyon-Slaney has joined our newly formed advisory board. He is Chairman of Gem Diamonds Limited, a non-executive director of Sibanye-Stillwater Ltd, a member of the advisory board of Schenck Process AG and a senior advisor to McKinsey & Co. Harry, who is a geologist by training, has more than 37 years of experience in the mining industry, principally with Rio Tinto PLC. As a member of Rio Tinto's Group Executive committee, he held the roles of Chief Executive - Energy, and before that, Chief Executive - Diamonds and Minerals.

Finally, I would like to thank the citizens of Mackay, Idaho for their continued support and enthusiasm as we move into the development phase at Empire.

I look forward to updating you all as another exciting year unfolds for our Company.

Marcus Edwards-Jones

Executive Chairman

4 May 2021

CHIEF EXECUTIVE OFFICER'S REPORT

Principal activities and review of the business

The Company entered 2020 with a renewed enthusiasm for the suite of metals at the Empire Mine and surrounding properties.  The decline in copper price throughout 2019 and early 2020 focused our attention on the gold, silver, lead, and zinc resources that had been significantly increased in the 2019 resource update and were the subject of our consulting geologist Nigel Maund's in-depth study and subsequent report.  Our increased focus on the polymetallics at Red Star and Empire led to successful drilling programmes at both projects.  The Empire drilling programme resulted in the October 2020 open pit resource update adding over $350 million in gross metal value from the May 2019 resource, and the Red Star drilling programme confirming the orientation and continuation of the high-grade silver and lead system discovered by Phoenix geologists in 2018.

This focus on the upgraded gold and silver resources, and the need to develop a process design for their recovery, ultimately led to successful recovery testing using the non-toxic and environmentally friendly cyanide alternative ammonium thiosulfate ("ATS").  Initial ATS gold recoveries exceeded 97% in the laboratory.  These positive results have advanced the testing programme to include larger sample volumes and sample frequencies and continues as we move toward feasibility and development.  An updated open pit economic model was developed using the 2020 drilling and metallurgical data. The model shows an impressive "starter" operation containing 14.3 million tonnes of Measured & Indicated ore processed in an initial copper and zinc phase followed by a gold and silver processing phase over a 10-year operating life that delivers revenue of $784 million with a pre-tax 7.5% NPV of $105 million and an IRR of 57%, using a $3.60 copper price.  This is a significant increase in the NPV from the previous August 2019 model and is a testament to the efforts of the Phoenix team to understand and develop the polymetallic system from the exploration stage to the pre-development stage.

In order to transition the Empire Mine oxide open pit from the exploration stage to the pre-development stage, the Company filled a key position by appointing Zach Black as General Manager of Operations, to help build and direct the team on the ground in Idaho as we prepare to submit the Plan of Operations for mine permitting, and also continue with substantial exploration efforts at Red Star, Horseshoe, and in particular at the Company's latest significant accomplishment, the recently mapped and sampled Navarre Creek gold project. Assay results from surface samples collected at Navarre Creek in 2020 showed gold values above detection limits in 53 of 90 samples collected and a high of 0.569 grams/tonne ("g/t") gold in a volcanic-hosted geological terrane similar to the volcanic terranes of the Carlin Trend in Nevada, USA. 

The variety and grade of mineralization encountered thus far on the many claim blocks that make up the Empire group is providing Phoenix with the unique opportunity to exploit metals other than just copper, allowing us some flexibility as metals markets fluctuate.  2020 was witness to copper prices ranging from near $2.00/lb to the current $4.00/lb, gold swinging from $1600/oz to above $2,000/oz, and silver climbing from $14.00/oz to over $26.00/oz.  Even zinc had a bull run from $0.85/lb to nearly $1.30/lb.  We believe the mix of metals at Empire puts us in a good position to weather any fluctuating market. With that in mind, the Company continues to optimise and refine the engineering and design aspects of the project in preparation for submitting the Plan of Operations this year and moving into development and then production, targeted for late next year. 

The Company is well positioned, with a variety of metallic resources with early production and exploration potential. Careful logistical planning and the team's strict adherence to the Company's Covid-19 protocols were successful in keeping the projects running smoothly and minimizing interruptions, allowing the team to accomplish the goals outlined for the year.  In March 2021 the Company completed an over-subscribed $25.4 million financing and is now poised to join the ranks of global metal producers at a time when U.S. Administration backed initiatives in electrification and manufacturing, and the desire for non-toxic manufacturing methods, are at the forefront. 

Empire Mine - Polymetallic Open Pit Oxide Deposit

In October 2020, an updated NI43-101 compliant resource was completed by Hardrock Consulting (HRC) 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 Equiv %	Average Grade				Metal Content
			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

Phoenix is continuing down the feasibility and permitting pathways with the polymetallic resource, most recently completing two years of environmental studies directly applicable to the permitting and mine planning.  Discussions are underway with potential debt financiers to construct the project, and production is targeted for late 2022.

Red Star - High-grade Silver

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. Surface mineralisation is a mix of copper and iron oxides and sulphides, with strong chrysocolla and bornite showings, exposed in a heavily timbered canyon. In 2018, three reverse circulation ("RC") drill holes were drilled on the target and assay results reported the presence of high-grade lead and silver sulphides including intercepts of 20% lead and 1,111 g/t silver. 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

Following the estimation of the Inferred resource, a second ten-hole diamond drilling programme was completed in 2020.  The assay results from that programme confirmed the presence of the high-grade silver and lead veins drilled in 2018, but also confirmed the need for greater understanding of the structural geology in order to direct further exploration.  An extensive review of the structural geology of Red Star was conducted in 2020 and a ground-based magnetics survey will be performed in Q2 2021 prior to a 2021 diamond drilling programme. 

Navarre Creek - Volcanic-Hosted Gold Project

The Navarre Creek claim block is located to the north west of the Empire Mine and was acquired in 2019 as a gold exploration project with geology similar to the volcanic-hosted gold fields on the Carlin Trend in Nevada, home to several multimillion- ounce gold deposits.

During the summer of 2020, the Phoenix exploration team mapped and sampled the Company's Navarre Creek property, which is comprised of 9.79 square kilometres (2,420 acres) of unpatented mining claims and is located approximately five kilometres north-northwest of the Empire Mine.  90 rock chip and grab samples were collected in the hydrothermally altered volcanic rocks that make up the Navarre Creek claims and sent to ALS Laboratories in Reno, Nevada for geochemical analysis.

Of the 90 samples, 53 were above the detection limit for gold with a high of 0.569 g/t, and 25 above the detection limit for silver.  There was also a strong correlation between elevated gold values and elevated antimony values, typical in Carlin-type epithermal gold systems.  With the exception of one sample, all samples with a gold value greater than 0.1 g/t occur within the same alteration type, that being predominantly a jasperoid-hosted quartz stockwork and micro-veining system. This provides valuable information for future sampling and drill targeting.  The quartz stockworking and micro-veining appear to occur predominantly in felsic volcanic tuff units in the Navarre Creek area.  One anomalous sample, 32519, registered a gold value of 0.387 g/t, in a magnetite skarn sample located on the southern end of the Navarre Creek claim block where the skarn body occurs as subcrop through the surface volcanics tuffs. Additionally, the presence of limestone in surface float near the skarn sample location is evidence that the Paleozoic sedimentary rocks that occur at the Empire Mine may be near the surface.  The Empire orebody is partly comprised of a magnetite skarn body hosted in Paleozoic limestone.  Additional sampling is planned to be conducted in the area around sample 32519, as well as a ground magnetics survey.  It was also noted that volcanic outcropping across the Navarre Creek area is strongly weathered and highly leached to depths of two to four metres.

A sampling of the assay results from rock chip and channels from the 2020 exploration season is presented in the table below:

SAMPLE	Gold	Silver	Antimony
ID	g/t	g/t	g/t
32452	0.31	4.2	119
32453	0.1	3.9	3160
32477	0.139	2.6	45
32482	0.256	7	36
32483	0.181	4.4	39
32485	0.569	7.3	85
32499	0.049	10.9	9
32510	0.047	2.8	101
32511	0.09	2.6	933
32519	0.387	ND	87
32532	0.21	ND	11
32539	0.077	ND	15
32540	0.115	3.2	70

An initial RC drilling programme at Navarre Creek is planned for Q3 2021.

Empire Mine Expansion - Horseshoe, Whiteknob, and Windy Devil

We have made a point of focusing our efforts on our flagship Empire Mine projects. However, we have also increased our land position from time-to-time as our geologists recognize prospective and strategic opportunities.  At the time of the Company's IPO in mid-2017, our Empire Mine property consisted of 818 acres. Since then, we have increased the core Empire claim group to 3,297 acres 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.

Empire Mine - Polymetallic Sulphide Potential

The Red Star vein system appears to be a distal, near-surface expression of a deeper, copper rich sulphide vein system that lies below the oxide-copper open pit and was mined extensively underground until the 1940s. Two deep diamond drill holes drilled in late 2017 confirmed the presence of higher-grade sulphide mineralisation in the skarn structures at depth. Both of the core holes intersected mineralised skarn over much of their length and the analytical data from both drill holes intersected numerous significant intervals of copper, gold, silver, zinc, lead, and tungsten throughout their depths. The tungsten values were particularly interesting as they positively reinforced the Company's consulting geologist's predictions of the Empire system being the uppermost horizon of a larger molybdenum-tungsten porphyry.  In 2018 five drill holes intercepted copper sulphide mineralisation. One hole returned 5.53% copper, 7.67 g/t gold, and 120 g/t silver, and was further north of any historical underground mining, whilst another returned 5.19% copper adjacent to historical underground workings. The gold and silver grades generally are major considerations, ranging to 7.93 g/t gold and 256 g/t silver. Further drilling into the underground sulphides is planned for Q3 2021.

Borah Resources - Idaho Cobalt Belt

Borah Resources is a 100% Idaho registered subsidiary of the Company. Comprised of two strategically located properties, Redcastle and Bighorn, the Company believes that they are an important asset in a time of global electrification and the rarity of cobalt resources from first world jurisdictions, as well as being strategically 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 programme of 46 surface grab samples which gave cobalt values ranging from 2 ppm to 0.31% cobalt.

The Company continues to keep the claim blocks in good standing whilst we consider the optimal way forward to develop these properties, including perhaps cooperation with a third party.

Outlook

Despite the challenges that we have all faced this year, my outlook on the Company has never been brighter or more positive.  The Phoenix team embraced these challenges and managed to accomplish everything in the year's operational plan.  The updated economic model for the Empire open pit is coinciding with elevated copper and silver markets, a stable zinc market, and a respectable gold price. The new administration in Washington D.C. is actively encouraging the clean energy revolution which would include the development of metals essential for electrification projects. Our Empire copper resources are ideal for that initiative, and our use of environmentally friendly ATS for the processing of precious metals shows our desire to align with safe and responsible processing practices.

I expect to see these positive trends continue as we move further away from the challenges of 2020.  The completion of our latest economic model provides us with a clear path through feasibility and development, and the variety of metals in our Empire resource provides some optionality as we move forward.  The exploration potential of our other projects, including the Red Star high-grade silver vein system, the Empire polymetallic sulphide vein system, the very prospective volcanic-hosted gold system at Navarre Creek, and two strategically located cobalt properties, all within the same geopolitically stable, pro-mining jurisdiction, add significant future value beyond our flagship Empire Mine. 

It is also important to mention as we move into the Plan of Operations permitting stage at Empire, that we have collected three years of extensive baseline environmental data, including the research of flora, wildlife, hydrological, and archaeological studies, which indicate that we have no critical habitat for threatened or endangered plant and wildlife species, including Sage Grouse.  The studies also concluded that no legacy impacts to surface or groundwater occurred as a result of any historical mining operations on the Empire Mine properties.  Archaeological studies were also unable to identify any significant cultural artefacts on the Empire property.  These findings are important as they clear the path to permitting of Red Star, the Empire oxide-copper deposit, and the deeper sulphide system.  That is three metal-rich systems with favourable environmental conditions.

Our successes thus far are related directly to the local community support we receive from the citizens of Custer County, Idaho.  We are fortunate to work in an area rooted so deeply in mining and with a population understanding of the economic benefits of the industry and so incredibly supportive of our efforts. 

Key performance indicators ('KPIs')

To date the Group has been focused on the delivery of the project evaluation work programmes 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 especially motivated by the upward trend in the copper price, and the positive effect it has had on our project. With the successful rollout of vaccination programs, the global interest in electrification and green metals, and what appears to be the signs of a return to "normal", Phoenix is well positioned in terms of timing to transition seamlessly into development.  We are also well financed as a result of the recent equity fund raising.

In conclusion I would like to thank the dedicated and highly motivated team of professional staff, consultants and advisers, community liaisons, shareholders, and directors who continue to put forth a significant amount of effort, often away from home and family, in order to ensure the Company's success.  I look forward to providing further updates as we continue our exploration and development programmes during 2021.

On behalf of the board

Ryan McDermott

Chief Executive Officer

4 May 2021

	Consolidated income statement		Year  Ended 31 December	Year  Ended 31 December
			2020	2019
	Continuing operations	Note	$	$
	Revenue	4	-	-
	Exploration & evaluation expenditure		-	(3,429)
	Gross loss		-	(3,429)
	Administrative expenses		(922,647)	(1,101,811)
	Loss from operations		(922,647)	(1,105,240)
	Finance income		-	-
	Finance costs		(49,203)	(22,911)
	Loss before taxation		(971,850)	(1,128,151)
	Tax on loss on ordinary activities		-	-
	Loss for the year		(971,850)	(1,128,151)
	Loss attributable to:
	Owners of the parent		(956,656)	(1,116,563)
	Non-controlling interests		(15,194)	(11,588)
			(971,850)	(1,128,151)

	Loss per share attributable to owners of the parent:
	Basic and diluted EPS expressed in cents per share	5	(1.66)	(2.76)

	Consolidated statement of comprehensive income		Year  Ended 31 December	Year  Ended 31 December
			2020	2019
			$	$
	Loss for the year		(971,850)	(1,128,151)

Total comprehensive income attributable to:
Owners of the parent		(956,656)	(1,116,563)
Non-controlling interests		(15,194)	(11,588)
		(971,850)	(1,128,151)

	Consolidated statement of financial position
					31 December	31 December
					2020	2019
		Note			$	$
	Non-current assets
	Property, plant and equipment - mining property	6			14,789,004	11,671,660
	Intangible assets	7			276,895	246,895
					15,065,899	11,918,555
	Current assets
	Trade and other receivables	8			122,300	267,932
	Cash and cash equivalents				1,146,490	210,591
					1,268,790	478,523
	Total assets				16,334,689	12,397,078
	Current liabilities
	Trade and other payables	9			193,937	282,900
	Borrowings	10			1,549,000	-
					1,742,937	289,900
	Non-current liabilities
	Borrowings	10			-	800,000
	Provisions for other liabilities	11			757,702	757,702
					752,702	1,557,702
	Total liabilities				2,500,639	1,840,602
	Net assets				13,834,050	10,556,476
	Equity
	Ordinary shares	12			-	-
	Share Premium				19,251,964	15,627,730
	Retained loss				(5,517,549)	(5,186,083)
	Foreign exchange translation reserve				(18,588)	(18,588)
	Equity attributable to owners of the parent				13,715,827	10,423,059
	Non-controlling interests				118,223	133,417
	Total equity				13,834,050	10,556,476

Consolidated statement of changes in equity		Ordinary shares	Share premium	Retained loss	Foreign exchange Translation reserve	Total	Non-controlling interest	Total equity
		$	$	$	$	$	$	$
At 1 January 2019		-	13,362,353	(4,338,436)	(18,588)	9,005,329	145,005	9,150,334
Loss for the year		-	-	(1,116,563)	-	(1,116,563)	(11,588)	(1,128,151)
Total comprehensive income for the year		-	-	(1,116,563)	-	(1,116,563)	(11,588)	(1,128,151)
Shares issued in the period		-	2,540,200	-	-	2,540,200	-	2,540,200
Share issue expenses		-	(274,823)	-	-	(274,823)	-	(274,823)
Share-based payments		-	-	268,916	-	268,916	-	268,916
Total transactions with owners		-	2,265,377	268,916	-	2,534,293	-	2,534,293
At 31 December 2019		-	15,627,730	(5,186,083)	(18,588)	10,423,059	133,417	10,556,476

At 1 January 2020		-	15,627,730	(5,186,083)	(18,588)	10,423,059	133,417	10,556,476
Loss for the year		-	-	(956,656)	-	(956,656)	(15,194)	(971,850)
Total comprehensive income for the year		-	-	(956,656)	-	(956,656)	(15,194)	(971,850)
Shares issued in the period		-	3,908,477	-	-	3,908,477	-	3,908,477
Share issue expenses		-	(284,243)	-	-	(284,243)	-	(284,243)
Share-based payments		-	-	625,190	-	625,190	-	625,190
Total transactions with owners		-	3,624,234	625,190	-	4,249,424	-	4,249,424
At 31 December 2020		-	19,251,964	(5,517,549)	(18,588)	13,715,827	118,223	13,834,050

Consolidated statement of cash flows	31 December	31 December
	2020	2019
	$	$
Cash flows from operating activities
Loss before tax	(971,850)	(1,128,151)
Adjustments for:
Share-based payments	229,904	268,916
	(741,946)	(859,235)
Decrease/(increase) in trade and other receivables	145,632	(55,416)
Decrease in trade and other payables	(88,963)	(218,402)
Net cash (used)/generated from operating activities	(685,277)	(1,133,053)
Cash flows from investing activities
Purchase of intangible assets	(30,000)	(39,735)
Purchase of property, plant and equipment	(2,722,058)	(1,794,962)
	(2,752,058)	(1,834,697)
Cash flows from financing activities
Proceeds from the issuance of ordinary shares	3,908,477	2,540,200
Share-issue expenses	(284,243)	(274,823)
Proceeds from the issue of loan notes	879,000	800,000
Repayment of loan notes	(130,000)	-
Net cash generated from financing activities	4,373,234	3,065,377
Net increase in cash and cash equivalents	935,899	97,627
Cash and cash equivalents at the beginning of the year	210,591	112,964
Cash and cash equivalents at the end of the year	1,146,490	210,591

Significant non-cash transactions:

During the year the Directors capitalised $109,770 of fees into shares (2019: $180,960), and an amount of $395,286 (2019: $nil) in respect of share-based payments charge was capitalised into mining property.

1	General information
	Phoenix Copper Limited (formerly Phoenix Global Mining Limited) is 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).
2	Going concern
	The Group has no income and meets its working capital requirements through raising development finance. In common with many businesses engaged in exploration and evaluation activities prior to production and sale of minerals the Group will require additional funds and/or funding facilities in order to fully develop its business plan. The directors believe that such funds are likely to come from a combination of further equity issues and the arrangement of appropriate debt and/or offtake finance arrangements. Ultimately the viability of the Group is dependent on future liquidity in the development period and this, in turn, depends on the availability of funds.  Discussions are ongoing to secure appropriate structured finance for the development of the Empire Mine and, as set out in note 24, since the year end the Company has raised a further $25.39 million before expenses by way of a subscription, placing and open offer to new and existing shareholders, and a further $2.72 million from the issue of unsecured loan notes. The Covid-19 pandemic has had a significant, immediate impact on the operations and funding of many businesses both in the USA and globally. However, the Group has recently raised funds, has very few operational employees in Idaho, and the Empire Mine is geographically remote from areas significantly currently impacted by the pandemic.  The directors prepare annual budgets and forecasts in order to ensure that they have sufficient liquidity in place and that they comply with the terms and conditions of their obligations in relation to the ongoing development of the mining assets and the Group's environmental and other commitments. In addition, in response to the rapidly evolving Covid-19 situation, the directors, in formulating the plan and strategy for the future development of the business, have considered a period beyond that for which formal budgets and forecasts are prepared. At the date of approval of these financial statements it is not clear how long the current circumstances are likely to last and what the long-term impact will be. However, having regard to the above, and based on funds recently raised and their latest assessment of the budgets and forecasts for the business of the Group, the directors believe it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

3	Basis of preparation
	This preliminary information does not comprise full financial statements. The significant accounting policies and other information contained within this preliminary announcement has been extracted from the Company's audited financial statements a copy of which is available on the Company's website: www.pgmining.com. The financial information is presented in US dollars.

4	Revenue The Group is not yet producing revenues from its mineral exploration and mining activities. The Company charged its subsidiary entities $535,000 (2019: $563,476) in respect of management services provided.

5	Loss per share	31 December	31 December
		2020  $	2019 $
	Loss attributable to the parent used in calculating basic and diluted loss per  Share	(956,656)	(1,116,563)
	Number of shares
	Weighted average number of shares for the purpose of basic earnings  per share	57,527,529	40,862,399
	Weighted average number of shares for the purpose of diluted earnings  per share	57,527,529	40,862,399
	Basic loss per share (US cents per share)	(1.66)	(2.76)
	Diluted loss per share (US cents per share)	(1.66)	(2.76)

Basic earnings per share amounts are calculated by dividing net loss for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.  

Where the Group has incurred a loss in a year or period the diluted earnings per share is the same as the basic earnings per share as the loss has an anti-dilutive effect.

The Company has potentially issuable shares of 11,264,978 (2019: 10,265,195) all of which relate to the potential dilution in respect of warrants and share options issued by the Company.

6	Non-current assets			Mining	Total
				Property
				$	$
	At 1 January 2019			9,876,697	9,876,697
	Additions			1,794,963	1,794,963
	At 31 December 2019			11,671,660	11,671,660
	At 1 January 2020			11,671,660	11,671,660
	Additions			3,117,344	2,952,009
	At 31 December 2020			14,789,004	14,623,669

	Net book value
	At 1 January 2019			9,876,697	9,876,697
	At 31 December 2019			11,671,660	11,671,660
	At 31 December 2020			14,789,004	14,789,004

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. There has been no impairment charged in any period due to the early stage in the Group's project to reactivate the mine.

7	Intangible assets
				Exploration  and evaluation expenditure
				$
	At 1 January 2019			207,160
	Additions			39,735
	At 31 December 2019			246,895
	At 1 January 2020			246,895
	Additions			30,000
	At 31 December 2020			276,895

Exploration and evaluation expenditure relates to the Bighorn and Redcastle properties on the Idaho Cobalt Belt in Idaho, USA. The properties are owned by Borah Resources Inc, a wholly-owned subsidiary of the parent entity, registered and domiciled in Idaho.

8	Trade and other receivables
				31 December 2020	31 December 2019
				$	$
	Other receivables			68,847	243,928
	Prepaid expenses			53,453	24,004
				122,300	267,932

There were no receivables that were past due or considered to be impaired. There is no significant difference between the fair value of the other receivables and the values stated above.

9	Trade and other payables
				31 December 2020	31 December 2019
				$	$
	Trade creditors			156,116	178,093
	Other creditors			8,355	100,270
	Accrued interest			29,466	4,537
				193,937	282,900

All liabilities are payable on demand or have payment terms of less than 90 days. The Company is not exposed to any significant currency risk in respect of its payables.

10	Borrowings
				31 December 2020	31 December 2019
				$	$
	Current liabilities
	Loan notes			1,549,000	-
				1,549,000	-
	Non-current liabilities
	Loan notes			-	800,000

The Company has outstanding loan notes with a total redemption value of $1,549,000 (2019: $800,000).

$929,000 relates to 12% unsecured loan notes, with a final redemption date of 30 September 2021. Andre Cohen, a director of the Company, is the beneficial owner of $75,000 of these loan notes. Since the year end $741,500 of loan notes have been repaid, including $50,000 due to Andre Cohen..

The Company has also issued an unsecured loan note in the amount of $620,000 (£500,000), repayable on 31 March 2021 plus a fixed rate coupon equivalent to 6.5% of principal value. Since the year end this amount has been repaid, and the Company has issued a new unsecured loan note in the amount of $2.72 million (£2 million), repayable on 9 November 2021 plus a fixed rate coupon equivalent to 6.0% of principal value.

11	Provisions
				31 December 2020	31 December 2019
				$	$
	Decommissioning provision			100,000	100,000
	Royalties payable			657,702	657,702
				757,702	757,702

There has been no change to provisions in the year ended 31 December 2020.

The provision of $100,000 for decommissioning the Empire Mine is based on the directors' estimate after taking into account appropriate professional advice.

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. The amount of the provision will be reassessed as exploration work continues and also on commencement of commercial production.

12	Share capital
					Group and Company		Group and Company
					Number		Number
				2020		2019
	Number of ordinary shares of no par value
	At the beginning of the year			44,784,881		33,078,999
	Issued in the year			18,521,866		11,705,882
	At the end of the year			63,306,747		44,784,881

The Company does not have an authorised capital and is authorised to issue an unlimited number of no par value shares of a single class.

In the year the Company issued 18,521,866 ordinary shares at an average issue price of $0.21 per share to raise $3.9 million before expenses of issue. All issued shares were fully paid.

Since the year end the Company has issued a further 52,567,518 shares at $0.49 (£0.35) per share by way of a subscription, placing and open offer to new and existing shareholders. The Company currently has 116,313,396 ordinary shares in issue.

The ordinary shares in the Company have no par value. All ordinary shares have equal voting rights in respect of shareholder meetings. All ordinary shares have equal rights to dividends and the assets of the Company.

The Company has issued warrants to subscribe for additional shares to existing shareholders and loan note holders. Each warrant provides the right to the holder to convert one warrant into one ordinary share of no-par value at exercise prices ranging from £0.16 to £0.60. At 31 December 2020 the number of warrants in issue was 7,589,978 (2019: 7,115,195).

Since the year end a further 4,812,396 warrants have been issued with an exercise price of £0.385, and 439,132 warrants have been exercised.

The Company has issued options to subscribe for additional shares to the directors and senior management of the Group. Each option provides the right to the holder to subscribe for one ordinary share of no par-value, subject to the vesting conditions, at exercise prices of £0.17 and £0.30. At 31 December 2020 the number of options in issue was 3,675,000 (2019: 3,150,000).

13	Share-based payments

The Company has issued 7,589,978 (2019: 7,115,195) warrants to subscribe for additional share capital of the Company. Each warrant entitles the holder to subscribe for one ordinary equity share in the Company. The right to convert each warrant is unconditional. 

Additionally, the Company has issued 3,675,000 (2019: 3,150,000) share options to directors and senior employees of the Company. Each share option entitles the holder to subscribe for one ordinary equity share in the Company once the vesting conditions have been satisfied. The right to subscribe for ordinary shares in the Company is subject to a minimum 6 month holding period for 50% of the share options and up to 24 months holding period for the balance of 50% of the share options.

In the periods presented the Company has settled remuneration liabilities by the issue of equity in lieu of cash payments for services but has not operated any equity-settled share based incentivisation schemes for employees.

Equity-settled share-based payments are measured at fair-value (excluding the effect of non-market-based vesting conditions) as determined through use of the Black-Scholes technique, at the date of issue. The warrants were issued as exercisable from the date they were issued and there are no further vesting conditions applicable.

	Warrants issued		Weighted	31 December	31 December
			Average	2020	2019
			Exercise price	Number	Number
	At the beginning of the year		£0.30	7,115,195	1,896,206
	Issued in the year		£0.16	386,000	-
	Issued in the year		£0.18	905,467	-
	Issued in the year		£0.20	-	800,000
	Issued in the year		£0.28	159,541	4,418,989
	Exercised in the year		£0.18	(375,000)	-
	Exercised in the year		£0.20	(100,000)	-
	Exercised in the year		£0.28	(369,225)	-
	Lapsed		£0.20	(132,000)	-
	At the end of the year		£0.29	7,589,978	7,115,195

	Share options issued		Weighted	31 December	31 December
			average	2020	2019
			Exercise price	Number	Number
	At the beginning of the year		£0.28	3,150,000	1,225,000
	Issued in the year		£0.30	1,750,000	1,925,000
	Lapsed in the year		£0.45	(1,225,000)	-
	At the end of the year		£0.23	3,675,000	3,150,000

The total share-based payment charge for all warrants and options in the year was $625,190 of which $229,904 has been charged to profit and loss and $395,286 allocated to Mining Property (2019: $268,916 and $nil respectively). The share-based payment charge was calculated using the Black-Scholes model. All warrants issued vest immediately on issue. Share options vest up to a 24-month period from the date of issue.

Volatility for the calculation of the share-based payment charge in respect of both the warrants and the share-options issued was determined by reference to movements in the Company's quoted share price on AIM. 

The inputs into the Black-Scholes model for the warrants and share options issued and warrants modified in 2020 were as follows:

		31 December	31 December
		2020	2020
		Warrants issued	Share options issued
	Weighted average share price at grant date	£0.26	£0.28
	Weighted average exercise prices	£0.19	£0.30
	Expected volatility	133.99%	140.97%
	Expected life in years	2.65	0.46 to 0.96
	Weighted average contractual life in years	2.65	0.71
	Risk-free interest rate	1.5%	1.5%
	Expected dividend yield	0%	0%
	Fair-value of warrants and options granted (pence)	£0.18	£0.11

The warrants were issued in eight placements. The share prices at the date of grant were between £0.11 to £0.32. The warrant exercise prices at the date of grant were between £0.16 to £0.28. Additionally, the exercise dates for 1,196,462 existing warrants with exercise prices between £0.21 to £0.40, and expiring during the year, were extended to 30 June 2022. These extensions have been valued as new instruments as at 24 June 2020 and the fair-values included in the charge for the year. The share options were issued on the same date in two equal tranches with lives of 0.46 and 0.96 years respectively, the share price at the date of grant was £0.28 and the exercise price for both tranches was £0.30.

The expected volatility ranged from 53.37% to 144.93%. The fair-values of warrants issued in the year were from £0.02 to £0.29. The expected life of the outstanding warrants and options ranged from 0.46 to 3.09 years.

	Share-based payments allocation of charge			31 December	31 December
				2020	2019
				$	$
	On issue of share options			210,924	38,622
	On issue of warrants			331,701	229,736
	On modification of warrants			82,565	558
	Total charge			625,190	268,916
	Allocation:
	Mining property			395,286	-
	Administrative expenses			229,904	268,916
				625,190	268,916

14	Events after the reporting date

Since the year end the Company has raised a further $25.39 million before expenses by way of a subscription, placing and open offer to new and existing shareholders, and a further $2.72 million from the issue of unsecured loan notes. The Company has also repaid $1.36 million of existing unsecured loan notes.

 

END

 

 

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