Mr. Scott Eldridge reports
AMARILLO GOLD COMMENCES PRE-FEASIBILITY UPDATE AT MARA ROSA PROJECT
Amarillo Gold Corp. has commenced an update of the 2011 prefeasibility study (PFS) on the Posse deposit at its Mara Rosa project in central Brazil.
The PFS update will be done in accordance to NI 43-101 guidelines and based on the recent resource estimate (news release July 21, 2016). SRK Consulting has been selected to carry out the study, using its Belo Horizonte-based team. ONIX Engineering & Consulting, also based in the Belo Horizonte area, has been retained to provide cost estimations on the equipment and plant.
Since the PFS on Posse by Coffey Mining (news release Nov. 28, 2011) a number of criteria have changed which the company considers warranting an updated economic model. In addition to renewing external inputs SRK will include a recalculation of the reserve figure given that the resource update increased the combined measured and indicated ounces and the pit shape will differ due to changes of the pit slope based on the 2013 geotechnical study and other factors. Optimization studies will also be carried out, using various equipment types, scheduling and stockpiling scenarios.
Table one summarizes some of the key factors that need to be considered for the new study and how they compare with 2011. Some will be positive like the U.S. dollar:Brazilian real exchange rate and steeper footwall slopes in the planned pit, other factors such as the need to line the tailings dam and higher energy prices will increase costs, whereas the gold price has remained fairly neutral. The company awaits the results of this study to see how all these factors affect the overall economic model.
2011 PFS CRITERIA COMPARED WITH THE CURRENT UPDATE IN PROGRESS (1)
Category 2011 PFS by Coffey
Exchange rate U.S.$:BRL 1.9
Pit slope (interramp slope) 67 deg HW 40 deg FW
Resource M & I combined 0.5 g/t cut-off 1,174,900 oz Au, 5.46MT at 2.04 g/t Au measured,
15.39MT at 1.65 g/t Au indicated
Reserve 945,000 oz Au
Stockpiling Not evaluated
Mining fleet 110-tonne trucks imported and 45-tonne domestic
Mining cost $1.40 per tonne owner operated
Engineering Clay-lined tailings dam
Energy $U.S. 0.05 per kwh
Gold price $1,100/ounce pit, $1,200/ounce economic model
Category 2017 PFS (provisional)
Exchange rate U.S.$:BRL 3.2(2)
Pit slope (interramp slope) 65 deg HW 48 deg FW (3)
Resource M & I combined 0.5 g/t cut-off 8.887MT @ 1.98 g/t Au measured, 13.149MT @1.53 g/t Au indicated
Reserve New reserve to be determined as per result of this study
Stockpiling To be evaluated
Mining fleet 45 tonnes only to be investigated for lower CAPEX higher OPEX
Mining cost Costs expected to increase (5)
Engineering Membrane-lined tailings dam(6)
Energy $U.S. 0.08 per kwh
Gold price Gold prices are similar today to that of 2011 PFS study
Notes
(1) NB -- the 2017 PFS study numbers are subject to change as the study progresses.
(2) Current exchange rate.
(3) New ramp interslope angles based on the geotechnical study announced May 16, 2013.
(4) New resource statement released Sept. 27, 2016, by Keith Waterhouse QP prepared in accordance to NI
43-101 compared with the resource announced in the 2011 PFS by the same QP.
(5) Guidance based on other open-pit mining operations, mining cost in Brazil and other recent 43-101 PFS
and feasibility studies from Brazil.
(6) The authorities have requested the tailings facility should be lined as part of the preliminary licence
(LP), this will increase the capital expenditures compared with 2011.
SRK has indicated that the base case gold price to be used in the updated economic model will remain at $1,200 (U.S.) per ounce, this will allow easy comparison between the studies, likewise a spread of gold prices will be given in a sensitivity analysis similar to the 2011 PFS. The same mill throughput of 2.5 million tonnes a year will also be used.
With regard to mining costs a second scenario where a contract fleet would be used rather than an owners fleet has also been requested as part of the new study.
After release of the PFS update, expected in the first quarter of 2017, SRK will be retained to evaluate further measures to reduce capital expenditures such as using a smaller plant throughput or staged builds, after which time Amarillo will seek tenders to engineering consulting firms to complete as feasibility study.
This release has been reviewed and accepted for its technical content by the qualified person for the company, Frank Baker, a metallurgist with over 40 years of experience, and a member of the AusIMM and IOM3.
We seek Safe Harbor.
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