Mr. Mike Mutchler reports
AMARILLO UPDATES PRE-FEASIBILITY STUDY ON THE MARA ROSA PROJECT
Amarillo Gold Corp. has released results of the updated prefeasibility study for the Posse gold deposit at its 100-per-cent-owned Mara Rosa project.
Highlights:
After-tax internal rate of return (IRR) of 51 per cent at $1,300 (U.S.)/ounce gold (Au);After-tax net present value (NPV 5 per cent) of $244-million (U.S.) at $1,300 (U.S.)/ounce Au and a U.S.-dollar/Brazilian-real exchange rate of 3.60 ($198-million (U.S.) at $1,200 (U.S.)/oz);After-tax project payback of 2.6 years at $1,300 (U.S.)/ounce Au;Average annual gold production 144,000 ounces over first four years;Average life-of-mine (LOM) production 123,000 ounces per year over eight years, and total production of 985,000 ounces after 91-per-cent recovery;LOM cash operating cost of $545 (U.S.)/ounce Au, and all-in sustaining cost (AISC) of $655 (U.S.)/ounce Au;Upfront capital expenditure of $123-million (U.S.);Updated proven and probable reserves of 1,087,000 ounces -- 23.8 million tonnes at 1.42 g/t Au: Proven 513,000 ounces -- 9.6 million tonnes at 1.65 g/t Au;Probable 574,000 ounces -- 14.2 million tonnes at 1.26 g/t Au.
Mike Mutchler, chief executive officer 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 per cent 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 $148-million to $123-million based on declines in the Brazilian real. See [the associated table] for a comparison at different gold prices and discount rates. Following the ongoing 10,000-metre exploration drilling program we will update the mineral resource and rerun the Whittle optimizer model to generate an optimal project for the feasibility study starting early next year."
PROJECT SENSITIVITY TO GOLD PRICEAu priceUS$/oz$1,000$1,100$1,200$1,300$1,400$1,500IRR% 23% 33% 42% 51% 59% 68%Payback period years 4.2 3.3 2.8 2.6 2.4 2.3NPV 0% (after tax)US$M 138 202 263 324 386 447NPV 5% (after tax)US$M91 144 194 244 295 345NPV 7.5% (after tax)US$M73 121 167 213 259 305NPV 10% (after tax) US$M57 101 143 185 228 270
SRK Consulting (Australasia) Pty. Ltd. 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 kilometres 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 million to 3.0 million tonnes per year.
The 2011 PFS for the project was originally prepared by Coffey Consultoria e Servicos Ltda. 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 the company's website.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/ounce; Updates plant capex and opex to reflect a local exchange rate of 3.60 reais to the U.S. 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.
MINERAL RESOURCE ESTIMATE CategoryTonnesGrade Au Ounces Au(Mt) (g/t)(oz)Measured mineral resource 121.40 560,000Indicated mineral resource191.20 710,000Total of measured and indicated mineral resource311.30 1,270,000Inferred mineral resource 110.92 330,000
Mineral reserve estimate
The mineral resource model was diluted into a mining model utilizing the following parameters:
Ore loss of 3 per cent;Dilution of ore of 3 per cent, 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.
MINERAL RESERVE ESTIMATE Ore reserveDiluted tonnes Diluted grade Contained Au Estimated Au Recoverable Au (Mt dry) (g/t) (oz) recovery (%) (oz)Proven9.61.65513,000 90.4464,000Probable 14.21.26574,000 90.8521,000Total mineral reserve23.81.421,087,000 90.6985,000
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 million to three million tonnes per annum for approximately eight years. A total of 139 million tonnes of material will be mined to produce 24 million tonnes 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 micrometres is preoxidized 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 (carbon in leach) 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 four-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 dore 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 (sulphur dioxide)/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, five km away. A four 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-kilovolt power line. The present 64-kilovolt power line does not contain enough excess capacity to be used during construction period.
Filing of the updated report
SRK will provide the National Instrument 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. Mr. Mutchler 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.
About Amarillo Gold Corp.
Amarillo is developing an open-pit gold resource at its Mara Rosa project in the mining-friendly jurisdiction of Goias state in Brazil. An updated prefeasibility study (National Instrument 43-101 technical report) for the Mara Rosa project was filed on SEDAR on May 4, 2017. 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).
We seek Safe Harbor.
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