Amarillo Gold Corporation (“Amarillo” or the “Company”)
(TSX.V: AGC) (OTCQB: AGCBF) is pleased to announce results
of the updated Pre-Feasibility Study (“2018 PFS”) for the Posse
gold deposit at its 100% owned Mara Rosa Project (the “Project”).
Highlights:
- After tax internal rate of return (IRR) of
51% at US$1,300/oz gold (Au)
- After tax net present value
(NPV5%) of
US$244 million at US$1,300/oz Au and a USD/BRL
exchange rate of 3.60 (US$198M at US$1,200/oz)
- After tax project payback of 2.6 years at
US$1,300/oz Au
- Average annual gold production 144,000
oz over first 4 years
- Average life of mine (LOM) production 123,000
oz per year over 8 years, and
total production of 985,000 ounces after
91% recovery
- LOM cash operating cost of US$545/oz Au, and
all-in sustaining cost (AISC*) of US$655/oz
Au
- Upfront capital expenditure of US$123M
- Updated Proven and Probable Reserves of 1,087,000
oz - 23.8 million tonnes (Mt) @ 1.42 g/t
Au
- Proven 513,000 oz – 9.6 Mt @ 1.65
g/t Au, and
- Probable 574,000 oz -14.2 Mt @ 1.26
g/t Au
Note: * AISC: Total cash operating cost + Royalties +
Transportation & Refining + Sustaining Capital + Closure +
Corporate G &A
Mike Mutchler, CEO of Amarillo Gold commented
“We are very excited to have the Mara Rosa Project reviewed and
optimized with the help of Whittle Consulting and their Enterprise
Optimization techniques. As anticipated, despite an increase
in royalties, we have been able to improve the project economics by
approximately 10% from the prior study when compared at the same
gold price. In addition to the scheduling opportunities identified
in the Whittle study, we have been able to reduce the capex from
$148M to $123M based on declines in the Brazilian Real. See Table 1
below for a comparison at different gold prices and discount rates.
Following the ongoing 10K meter exploration drilling program we
will update the mineral resource and re-run the Whittle optimizer
model to generate an optimal project for the Feasibility Study
starting early next year.”
Table 1: Project Sensitivity to Gold
Price
Au price |
US$/oz |
$1,000 |
|
$1,100 |
|
$1,200 |
|
$1,300 |
|
$1,400 |
|
$1,500 |
|
IRR |
% |
23 |
% |
33 |
% |
42 |
% |
51 |
% |
59 |
% |
68 |
% |
Payback Period |
Years |
4.2 |
|
3.3 |
|
2.8 |
|
2.6 |
|
2.4 |
|
2.3 |
|
NPV0% (After
Tax) |
US$M |
138 |
|
202 |
|
263 |
|
324 |
|
386 |
|
447 |
|
NPV5% (After
Tax) |
US$M |
91 |
|
144 |
|
194 |
|
244 |
|
295 |
|
345 |
|
NPV7.5% (After
Tax) |
US$M |
73 |
|
121 |
|
167 |
|
213 |
|
259 |
|
305 |
|
NPV10% (After
Tax) |
US$M |
57 |
|
101 |
|
143 |
|
185 |
|
228 |
|
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SRK Consulting (Australasia) Pty Ltd (SRK) was
retained by Amarillo to review and update the 2011 PFS and the 2017
PFS Update for the Project, which is located in the municipality of
Mara Rosa in the state of Goias, Brazil, 360 km to the north of the
state capital Goiania. The Project consists of an open pit
mine and related processing facilities for approximately 24 million
tonnes of ore at a rate of 2.5 – 3.0 million tonnes per year
(Mtpa).
The 2011 PFS for the Project was originally
prepared by Coffey Consultoria e Serviços Ltda (Coffey). The
2017 PFS Update was prepared and led by SRK Consultores do Brasil
Ltda in collaboration with ONIX Engineering & Consulting, both
based in Belo Horizonte, Brazil. Both reports are filed on
SEDAR and are available on our website
www.amarillogold.com. The resource statement was
supplied by Australian Exploration Field Services (AEFS) out of
Bendigo, Australia. Both ONIX and AEFS were involved in the 2011
and 2017 studies. This updated 2018 PFS replaces and supersedes the
2016 mineral resource estimate and the reserves and economic model
used in the 2011 and 2017 studies.
The main alterations that serve as justification
for this update are:
- Incorporates the scheduling opportunities and alternative
grinding size options identified in a Whittle Consulting Enterprise
Optimization Study
- Updates the 2016 mineral resource estimate to correct a
topography misalignment between the historical open pit mine floor
and in-pit dump
- Updates the gold price to $1,300/oz
- Updates Plant Capex and Opex to reflect a local exchange rate
of R$3.60 to the US dollar.
Mineral Resource Estimate
Recent pit and mine optimization work on the
Posse project conducted by Whittle Consulting has indicated that
some material will be economic to mine at a cut-off grade of 0.216
g/t Au. Accordingly, the cut-off grade used for the Mineral
Resource Estimate has been lowered to 0.2 g/t Au to ensure that all
blocks which may be bought into mineral reserves are included in
the resource.
Table 2: Mineral Resource
Estimate
Category |
Tonnes (Mt) |
Grade Au (g/t) |
Ounces Au (oz) |
Measured Mineral Resource |
12 |
1.40 |
560,000 |
Indicated Mineral Resource |
19 |
1.20 |
710,000 |
Total of Measured and Indicated Mineral
Resource |
31 |
1.30 |
1,270,000 |
Inferred Mineral Resource |
11 |
0.92 |
330,000 |
|
|
|
|
Table 2 Notes:
- Mineral Resources are not Mineral Reserves and do not have
demonstrated economic viability. There is no certainty that
all or any part of the Mineral Resources estimated will be
converted into Mineral Reserves.
- Due to rounding numbers may not sum.
Mineral Reserve Estimate
The Mineral Resource Model was diluted into a
Mining Model utilising the following parameters:
- Ore Loss of 3%
- Dilution of ore of 3%, dilutive material grading 0.16 g/t
- A variable cut-off grade was utilized based on the
grind-throughput-recovery (GTR) of the Mill.
The Reserve Model assumes highly selective
mining in the mineralized zones.
Table 3: Mineral Reserve
Estimate
Ore Reserve |
Diluted Tonnes |
Diluted Grade |
Contained Au |
Estimated Au |
Recoverable Au |
(Mt Dry) |
(g/t) |
(oz) |
Recovery (%) |
(oz) |
Proven |
9.6 |
1.65 |
513,000 |
90.4 |
464,000 |
Probable |
14.2 |
1.26 |
574,000 |
90.8 |
521,000 |
Total Mineral Reserve |
23.8 |
1.42 |
1,087,000 |
90.6 |
985,000 |
|
|
|
|
|
|
Table 3 Notes:
- Mineral Reserves stated above are contained within and are not
additional to the Mineral Resource.
- Due to rounding numbers may not sum.
Project Overview
The PFS proposes a single open pit mined by
conventional shovel and truck methods at a nominal ore mining rate
of 2.5 to 3 Mtpa for approximately eight years. A total of 139 Mt
of material will be mined to produce 24 Mt of ore (strip ratio of
4.8: 1). The project will employ contract mining with conventional
open-pit mining using drill and blast, hydraulic excavators, haul
trucks, and auxiliary mobile equipment to support the mining
operation.
The processing plant will consist of a
conventional crushing circuit (including tertiary crushing)
followed by primary and then secondary milling in closed circuit
with cyclones. The final pulp at a P80 of 45 µm is
pre-oxidized in agitation tanks using oxygen gas from a PSA oxygen
plant at a high pH of 12 for a total of 12 hours to oxidize
tellurides to enable successful cyanidation of the gold. The pulp
is contacted with cyanide and activated carbon in a typical CIL
circuit of six agitated tanks for a total of 24 hours.
Loaded carbon is extracted daily from the CIL
circuit and processed in a typical Zadra style elution circuit at
up to 140° C with a 4 tonne capacity. The eluted solution is passed
continuously to the electrowinning cells until efficient desorption
has been achieved. At intervals the gold is removed from the
cells and smelted into Doré bars for refining and sale. The
activated carbon is regenerated in a gas fired rotating kiln before
being sent back to the CIL circuit.
The tails from the CIL circuit is thickened to
recover some of the solution before the thickened pulp is subjected
to detoxification with SO2/air and a copper sulphate catalyst to
destroy free cyanide before being pumped to a tailings storage
facility (TSF). The supernatant from the TSF is recirculated
to the plant under conditions of zero discharge.
The Project benefits from good infrastructure
development with the planned mine-site layout facilitating a
compact design with pit-proximal process plant, TSF and waste dump.
There is a railway within 1.5 km of the pit, a major national
highway 11 km away and Mara Rosa, a small town of 12,000 people, 5
km away. A 4 km gravel road connects the deposit to a recently
asphalted state highway. Electrical power for the project
operations will be provided by installing a 64 km long, 138 kV
power line. The present 64 kV power line does not contain enough
excess capacity to be used during construction period.
Filing of the Updated
Report
SRK will provide the NI 43-101 2018 PFS update
report which will be filed on SEDAR and Amarillo’s website
shortly.
Qualified Persons
The principal Qualified Person for this news
release is Anthony Stepcich, FAusIMM(CP), of SRK (Australasia),
Perth, Australia who prepared in part and has supervised the
preparation of, or approved the scientific and technical disclosure
in this news release. Keith Whitehouse, MAusIMM CP(Geo), of
Australian Exploration Field Services of Bendigo, Australia,
prepared the resource statement in this news release. Frank Baker,
Amarillo’s Project Manager and a Qualified Person, was responsible
for the project components process, plant, and infrastructure,
based on work by ONIX Engineering. Mike Mutchler, President and
Chief Executive Officer of the Company and a Qualified Person, has
reviewed and approved the scientific and technical disclosure in
this news release.
An updated presentation reflecting these results
has been posted to the Company’s website.
Amarillo Gold Upcoming Marketing
and Investor Conferences
- Marketing in New York, September 13-14, 2018.
One-on-One’s, Lunch and Dinner are available.
- Marketing in Denver, September 19, 2018.
One-on-One’s, Lunch are available.
- Precious Metals Summit 2018, September
20-22, Beaver Creek, Colorado at Park Hyatt
Hotel.
- Marketing in Calgary, September 26, 2018.
One-on-One’s and Lunch are available.
- Marketing in Vancouver, September 27, 2018.
One-on-One’s, Lunch and Dinner are available.
- Metals Investor Conference 2018,
September 28-29, Vancouver at the Rosewood Hotel.
Interested parties that wish to schedule a
meeting, or who would like more information please contact Karen
Mate, Director of Communications at (416) 230-6454, or email:
karen.mate@amarillogold.com. Please visit the Company’s
website at www.amarillogold.com for the presentation.
ABOUT AMARILLO
Amarillo is developing an open pit gold resource
at its Mara Rosa Project in the mining friendly jurisdiction of
Goias State in Brazil. The Mara Rosa Project was awarded its main
(LP) permit which provides the social and environment permission to
mine. Amarillo is progressing toward obtaining an installation
permit (LI). Based on the NI 43-101 2018 PFS update to be filed
shortly, the Posse Deposit at the Mara Rosa Project contains
estimated 513,000 ounces of gold in the Proven category from 9.6 Mt
at 1.65 g/t Au, and 574,000 ounces gold in the Probable category
from 14.2 Mt at 1.26 g/t Au, for total estimated Reserves of
1,087,000 ounces from 23.8 Mt at 1.42 g/t Au. In addition to
the Mara Rosa Project, Amarillo has an advanced exploration project
with excellent grades at Lavras do Sul, Brazil. A Mineral Resource
Estimate Study (NI 43-101 technical report) for Lavras do Sul was
filed on SEDAR on October 4, 2010. The Lavras do Sul Project is an
advanced exploration stage property (190 sq. km.) comprising of
more than 22 prospects centered on historic gold workings. The
initial resource estimate at the Butia prospect reported 215,000
ounces of gold in the Indicated category from 6.4 Mt at 1.05 g/t
Au, and 308,000 ounces of gold in the Inferred category from 12.9
Mt at 0.74 g/t Au using a 0.3 g/t cut-off grade. Both projects have
excellent nearby infrastructure.
For further
information, please
contact:
Mike MutchlerPresident
& CEO416-294-0736mike.mutchler@amarillogold.com |
|
or |
|
Karen MateExternal
Communications 416-230-6454karen.mate@amarillogold.com |
|
|
|
|
|
32 Richmond St. East Suite 201Toronto, ON
Canada, M5C 1P1Website: www.amarillogold.com
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this release.
FORWARD LOOKING STATEMENTS:
This news release contains Forward Looking
Statements regarding the Company’s current expectations regarding
future events, including with respect to the Company’s business,
operations and condition, and management’s objectives, strategies,
beliefs and intentions. Various factors may prevent or delay our
plans, including but not limited to, the trading price of the
Common Shares, the ability of the Company to obtain approvals from
the TSX-V in respect of the transactions contemplated hereby,
contractor availability and performance, weather, access, mineral
prices, and success and failure of the exploration and development
carried out at various stages of the program. Permission from the
Government and community is also required to proceed with future
mining production. Readers should review the Company’s ongoing
quarterly and annual filings, as well as any other additional
documentation comprising the Company’s public disclosure record,
for additional information on risks and uncertainties relating to
these forward-looking statements. Readers should also review the
risk factors applicable to junior mining exploration companies
generally to better understand the variety of risks that can affect
the Company. The Company undertakes no obligation to update
publicly or otherwise revise any Forward Looking Statements whether
as a result of new information or future events or otherwise,
except as me be required by law.
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