Amarillo Gold has announced on March the results of an updated Pre-feasibility Study on the Posse gold deposit within its 100% owned Mara Rosa project located in the state of Goias, central Brazil. Two open cut mining scenarios were investigated in the updated PFS, one where the mining equipment is owner operated, the other where the mining is carried out by contractors. The contract mining scenario was selected as our main base case, primarily due to a significantly lower initial CAPEX and a higher internal rate of return (IRR). A gold price of US$1,200 per troy ounce and a USD/BRL exchange rate of 3.20 were applied in the base case economic model, all currencies are quoted in US dollars unless otherwise specified.
Highlights of the contract mining scenario follow:
- Initial capital expenditure (including working capital) $148M USD;
- Post-tax internal rate of return (IRR) of 35.2%;
- Post-tax net present value using 5% discount rate of $178M USD;
- Post-tax project payback of 2.2 years;
- Cash operating cost: $545/oz Au;
- All-in sustaining costs (AISC) of $627/oz Au*
- EBITDA: Average $85.6M USD per year over first 4 years;
- Average annual gold production 140,000 ounces over first 4 years
- Average Life of Mine (LOM) production 112,000 ounces per year over 8 years;
- Proven and probable mineral reserves of 997,536 ounces of gold (2011: 945,000 ozs).
- Total gold recovered over LOM is 892,000 ounces- after considering dilution 3% and plant recovery 92%;
- Average operating strip ratio for waste to ore of 4.5:1 for LOM.
* AISC: Total cash costs + Royalties + Transportation & Refining + Sustaining Capital + Closure + Corporate G &A
The updated PFS indicates that the Mara Rosa project represents a robust, rapid pay-back, single open pit mining operation with key economic metrics showing a marked improvement compared to the previous 2011 study. The principal factors driving these changes are local currency devaluation, reduced strip-ratios, low grade stock piling, optimized pit scheduling and post 2011 drilling which increased gold reserves.
The project is expected to have a positive impact on the GDP of the surrounding region, generating over $1 billion of gross revenue and contributing approximately 300 permanent jobs over Life of Mine.
Buddy Doyle, Amarillo CEO commented: “This updated Pre-feasibility Study firmly establishes superior economics for our Mara Rosa project. The project benefits from being a simple, open pit, proposed mining operation with a rapid after-tax payback period of only 2 years”. He further stated “Amarillo is pleased to be in the pro-mining state of Goias where we are surrounded by excellent infrastructure and multiple operating mines, the project has already received it’s LP permit and we have a clear road map to obtaining our, LI permit, which gives permission to mine.”.
The updated PFS was initiated in January 2017 after the release of an updated Resource Estimate for the Posse deposit in July 2016 which included geotechnical investigations and other fieldwork to support the study. The updated PFS was prepared and led by SRK Consulting in collaboration with ONIX Engineering & Consulting, both based in Belo Horizonte – Brazil. The resource statement was supplied by Australian Exploration Field Services out of Ballarat, Australia.
