Phoenix Copper Limited (PNX): 2010 was a hallmark year in the...

Phoenix Copper Limited (PNX): 2010 was a hallmark year in the history of Phoenix Copper as the company made the transition from explorer to producer of Copper. Although the rate of production is currently modest, at just above 2 tonnes per day, the Leigh Creek Project is starting to produce substantial cash flows thanks to record copper prices above $9,000 per tonne (currently A$9,500). The rates of production should continue to increase substantially early this year. At a rate of 5 tonnes per day the Leigh Creek operation should deliver revenues above $1.0 million per month. Operating costs should be low and are expected to settle below $1.50 per pound, providing a substantial margin for the operation. I have modeled the company's future cash flows based on the expansion of production across two "hub and spoke" operations at Leigh Creek and Burra. The two operations combined could produce approximately 5,200 tonnes of Cu per annum. Over an eight year period the projects should generate more than $100m in free cash flow for PNX with an NPV of $1.10 at current copper prices.

There is also potential for substantial upside from the company's Yorke Peninsula tenements which are located next door to Rex Minerals large Hillside discovery. Exploration is scheduled to commence late in the 1st quarter of 2011 with drilling to follow in the June quarter. There is further upside provided by the potential to make significant discoveries on the company's tenements around Leigh Creek and from Burra to Kapunda.

Phoenix Copper is well funded following a $2.5m placement to a group of strategic investors from New Zealand at a premium to the share price. Cash flows should also provide funds for further exploration from now on.