Positive feasibility study on Amarillo’s Posse Gold Project supports 10-year mine life at AISC of $738 per ounce of gold
TORONTO, June 02, 2020 (GLOBE NEWSWIRE) — Amarillo Gold Corporation (Amarillo or the Company) (TSXV: AGC, OTCQB: AGCBF) today announced the results of a positive definitive feasibility study (FS) for its Posse Gold Project on its Mara Rosa Property in Goiás State, Brazil.The FS supports an open pit mine and carbon-in-leach (CIL) operation with dry stack tailings that has low capital and operating costs and a strong financial return.HighlightsBase case assumes a gold price of $1,400 per ounce and foreign exchange rate of Brazilian Reais (R$)4.2 to U.S. dollars (US$)1.Current market rates assume a gold price of $1,730 per ounce and foreign exchange rate of R$5.3 to US$1.All dollar figures are in US$ unless otherwise noted.Mine life of 10 years.Gold production of 102,000 per year in the first four years, average annual gold production of 84,000 ounces.After-tax net present value 5% (NPV 5%) of $183 million, increasing to $360 million using current market rates.After-tax internal rate of return (IRR) of 25%, increasing to 50% using current market rates.Cash cost of $706 per ounce, decreasing to $631 per ounce using current market rates.All-in sustaining cost (AISC) of $738 per ounce, decreasing to $656 per ounce using current market rates.After-tax payback of 2.6 years, decreasing to 1.5 years using current market rates.Initial capital cost of $145 million, decreasing to $125 million using current market rates.Gold resources of 1.2 million contained ounces, based on 32 million tonnes grading 1.1 grams per tonne (g/t).Gold reserves of 902,000 contained ounces, based on 24 million tonnes grading 1.18 g/t.The Company has a strong social license to operate. It has received the Preliminary License and a Protocol of Intent to build the Posse Gold Project was signed with the governor of the State of Goiás on May 25, 2020.“We are very pleased to complete this important milestone in the development of our flagship Posse Gold Project,” said Mike Mutchler, Amarillo’s Chief Executive Officer. “We expect to receive our License to Install in the third quarter of 2020 and complete our construction financing then as well. Our goal is to break ground in April 2021.”“Our recently completed regional exploration program showed the potential to find more near-surface gold deposits, so we hope to extend our mine life in due course,” Mutchler continued. “With strong support from the Mara Rosa community, the Goiás State government, and the federal government of Brazil, we are excited to build and operate the Posse Gold Project for the benefit of all of our stakeholders.”Summary of key results and assumptions in the definitive feasibility studyTable 1: Production dataTable 2: Financial modelNotes
1See note on Non-IFRS financial measures.
Totals may not sum due to rounding.Sensitivity analysisThe feasibility study shows that the Posse Gold Project is highly leveraged to the price of gold. A 10% increase in the price of gold generates a 30% increase in the after-tax NPV 5%.Table 3: Sensitivity to price of goldTable 4: Sensitivity to foreign exchangeAbout the feasibility studySRK Consultores do Brasil Ltda (SRK) compiled the definitive feasibility study with input from other engineering companies and consultants.It sets out the mining method and schedule, pit design, and tailings management. It includes associated costs and an economic model. It also updates the mineral resource model, based on additional drilling and metallurgical testing.The following companies contributed to the study:SRK – Mining, Mineral Reserves and economic analysisAustralian Exploration Field Services, Australia – Geology and Mineral ResourcesAurifex Pty Ltd, Australia – Mineral processing and metallurgical testingAusenco do Brasil Engenharia Ltda. – Recovery methods and infrastructureDBO Engenharia Ltda, Brazil – Environmental and permitting studiesGeoHydroTech Engenharia, Brazil – Filtered tailings pile, waste dumps, and water damRamboll, Brazil – Mine closure.About the Posse Gold ProjectThe Posse Gold Project (Posse or the Project) is located on the Mara Rosa Property in the State of Goiás, central Brazil, approximately six kilometres north of the town of Mara Rosa. The Project encompasses a land area of 2,552 hectares across three mining concessions plus numerous exploration leases in areas surrounding the Posse mine area.The Project infrastructure will consist mainly of the processing plant, buildings, power line, water dam, filtered tailings pile, waste dumps, and low grade stockpile. The Project access road and most of the service roads already exist, minimizing earthworks and clearing vegetation. A 67-kilometre 138 kilovolt transmission line linking Porangatu and the mine site will need to be built.A recently completed regional exploration program on the Mara Rosa Property showed potential to find near-surface gold deposits along the Posse North Trend (see Amarillo’s news release dated May 5, 2020). Mineralization was discovered up to four kilometres northeast of the Posse Gold Deposit, which remains open at depth to the southwest. These mineralized targets to the northeast provide additional opportunities to expand the resources at Mara Rosa.Environmental studies and permittingOn May 25, 2020, Amarillo signed the Protocol of Intent to build the Posse Gold Project with the Government of the State of Goiás. The Protocol of Intent establishes the conditions for developing an industrial mining plant and outlines the government’s formal support of the Project. It is an important step towards receiving the License to Install (LI), expected in the third quarter of 2020.Amarillo applied for the LI in December 2019 and made a key modification to the Project as a result. The conventional tailings storage facility has been replaced with a dry stack filtered tailings pile and associated filtration plant. Although this modification increased the Project’s capex, it will reduce the environmental risk while significantly adding to the social license for the Project.The implementation of a tailings filtered pile will significantly reduce the raw water demand from the nearby Rio do Ouro from 720 cubic metres per hour (m3/h) to 136 m3/h. In late 2019, Amarillo applied for a water use permit from the National Water Agency and expects to receive it very soon.Amarillo completed an environmental impact assessment in 2015. This is a key part of the licensing process and is submitted to the regulatory agencies with the application for the Preliminary License (LP). The State of Goiás approved Amarillo’s LP in 2016.The Company also has a mine closure plan that includes a number of reclamation activities distributed over pre-closure, closure, and post-closure periods.MiningThe Posse Gold Project will use conventional drill, blast, load, and haul techniques for all mining areas and rock types. All of the fresh rock and 30% of the saprolite will be blasted and loaded with small excavators (74-tonne operating weight) into on-road mining trucks (45-tonne capacity), and hauled to the primary crusher, low grade stockpiles, or waste dumps. Direct mining will be applied to soft material such as soil and fill materials.The ore and ore/waste contact materials will be mined in five-metre high benches for selectivity purposes, while 10-metre double benches will be adopted for waste where there is no risk of dilution or ore loss. The mining method will generate variable quantities of low grade ore that will require the use of stockpiles. Front-end loaders will provide run-of-mine feed and stockpile re-handling. The mined waste will be distributed into six waste dumps.The mine schedule contemplates a production target of 2.5 million tonnes per year with a maximum annual rock movement (ore and waste) of 20.0 million tonnes a year. Using a variable cut-off grade strategy, high grades will be mined in the early periods while the low grades will be left to the end of the mining sequence.The life of mine sequence encompasses a 15-month pre-stripping phase followed by 7.9 years of primary mining and, finally, 1.7 years of re-handling low grade ore.Processing and recoveryThe Posse plant will process 2.5 million tonnes per year. The processing includes crushing, milling, pre-leach thickening, pre-oxidation and CIL adsorption, desorption, regeneration, and gold room. The process flow encompasses tailings detoxification and filtration. The filtered tailings will be transported to a lined dry stack tailings pile.The process flow sheet proposed for the Project involves well proven technologies in the gold processing industry, so no unusual risks are anticipated.Filtration testing at nominal slurry densities between 40% and 50% solids by weight (typical of unthickened process tailings) has shown filtered solids can be generated at moisture contents that will allow handling and placement. Plate and frame filter presses were selected as these are the most common equipment used for this process.Testing of Posse samples showed consistent leach extractions in the 90% range. Samples selected for metallurgical testing represented the deposit spatially and lithologically. Recoveries were not sensitive to location or lithology.Deleterious elements like arsenic or mercury were not present in the samples tested.Capital and operating costsCapital cost
The capital cost estimate for the Project is broken down by area including mining, crushing, processing plant, and associated infrastructure.