Majestic Gold Corp. (TSX VENTURE: MJS)(FRANKFURT: P5E) is pleased
to announce that Wardrop, A Tetra Tech Company, ("Wardrop") has
completed and delivered a positive Preliminary Assessment ("PA" or
"Preliminary Assessment") for the Songjiagou Gold Project located
in Shandong Province, People's Republic of China.
Highlights are as follows:
-- Net Present Value of US $525 million using a 10% discount rate
-- Internal Rate of Return of 78.6%
-- Payback in 1.4 years
-- Total gold production of 2.324 million ounces (average 105,645 oz/yr)
for life-of-mine
-- Life-of-Mine strip ratio 1.87 : 1 (waste to ore)
-- Mine-Life of 22 years.
"The Preliminary Assessment provided by Wardrop has exceeded our
expectations and will form the basis for our continued development
of the Songjiagou project," stated Rod Husband, President and CEO
of Majestic Gold Corp.
A summary of the main sections of the Preliminary Assessment are
as follows:
Resource
In 2006, Wardrop prepared a National Instrument 43-101 (NI
43-101) compliant, resource estimate of the Songjiagou deposit. On
the basis of additional data collected during 2006, Wardrop
prepared an updated estimate in late 2007.
In April 2010 Wardrop completed an update of the 2007 resource
estimate to take into account assay results from surface core
drilling and trenching that were carried out during 2007, as well
as depletion from surface mining since the time of the last
estimate. Depletion attributable to underground mining during the
same interval was negligible.
The April 2010 updated resource estimate was made using an
un-rotated block model, which is to say the blocks in the model
were oriented orthogonally east-west and north south. In October
2010, Majestic requested that the estimate be redone using a block
model rotated parallel to the trend of the deposit as well as a
lower cutoff (0.3 g/t versus 0.4 g/t gold).
The lower threshold grade (0.3 versus 0.4 g/t) is attributable
to a lower cost for contract mining and milling that Majestic
negotiated during the period between the two estimates.
The rotated orientation is consistent with previous estimates
and also aligns the block model with cross-sections that are cut
perpendicular to the strike of the deposit. The change in block
model orientation as well as the decrease in cutoff grade resulted
in an overall enhancement of both estimated tonnes and grade. This
report incorporates those changes. There has been no change in the
underlying data between the April 2010 estimate and the current
estimate.
The resource used in preparation of the Preliminary Assessment
is tabulated as follows:
----------------------------------------------------------------------------
Au (ii)Au Ounces Ounces
(i)Resource Cut-off Uncap Cap Au Au
Category (g/t) Tonnes g/t g/t Uncap Cap
----------------------------------------------------------------------------
Indicated 0.30 33,739,586 1.384 1.147 1,501,298 1,244,211
----------------------------------------------------------------------------
Inferred 0.30 38,812,054 1.500 1.467 1,871,755 1,830,576
----------------------------------------------------------------------------
(i) The preliminary assessment includes inferred mineral resources that are
considered too speculative geologically to have the economic considerations
applied to them that would enable them to be categorized as mineral
reserves, and there is no certainty that the preliminary assessment will be
realized. All figures have been rounded to reflect the relative accuracy of
the estimates.
(ii) gold grades were capped at 40.0 g/t
Open pit optimization was carried out using Whittle™ 4.3 which
uses a series of Lerchs Grossman (LG) pit shells at different
prices of gold to optimize the size of the pit while maximizing net
present value (NVP) of the deposit. The resulting LG shells
generated the highest discounted cash flow from the ore body at
varying prices of gold. The LG shell used for optimization does not
apply practical mining considerations and constraints.
The strategic planning using the generated LG pit resulted in
the following potential mineable resources, which forms the basis
of the preliminary Assessment:
----------------------------------------------------------------------------
(i)Potentially Mineable Resources
Classification Tonnes Grade, Au(g/t)
----------------------------------------------------------------------------
Indicated 29,875,527 1.207
----------------------------------------------------------------------------
Inferred 22,806,473 1.936
----------------------------------------------------------------------------
(i)Potentially Mineable Resources include the inferred mineral resources and
are not mineral reserves.
Preliminary Production Schedule
The life-of-mine strip ratio is 1.87 to 1 (waste to ore). Total
ounces contained in the resource are 3,074,787; of this 2,324,000
ounces are potentially recoverable as bullion during the mine
operations at an average annual production of approximately 106,000
ounces per year.
The following table summarizes the information from the
Preliminary Economic Assessment Production Schedule.
----------------------------------------------------------------------------
Preliminary Production Summary
Unit Years 1-8 LOM
------------------------------------------------------------
Process Feed
Gold g/t 2.12 1.52
Material Mined
Mill Feed kt 18,494 52,682
Waste kt 47,746 100,377
Ore Mined kt 18,494 52,682
Strip Ratio 2.33 1.87
Total Production
Gold koz 1,152 2,324
Average Production
Gold koz 144 106
----------------------------------------------------------------------------
The following table details the planned Production Schedule for
the Life-of-Mine:
Preliminary Production Schedule
(i)Tonnes Tonnes Stock- Tonnes Mill
Mined Moved pile Tonnes ROM feed
Including Total to Stock- to Waste Ore Strip Gold Gold
Stockpile Mined pile Mill Mined Milled Ratio Grade Rec.
Kt kt kt kt kt kt # g/t koz
Year 1 1,400 4,472 - 3,072 1,400 2.19 0.742 31
Year 2 2,442 7,644 237 - 4,965 2,442 1.85 3.431 256
Year 3 2,442 7,173 332 - 4,399 2,442 1.59 2.881 215
Year 4 2,442 10,500 344 - 7,714 2,442 2.77 1.868 139
Year 5 2,442 9,574 284 - 6,848 2,442 2.51 2.201 164
Year 6 2,442 10,354 304 - 7,608 2,442 2.77 1.696 126
Year 7 2,442 9,343 262 - 6,639 2,442 2.46 1.760 131
Year 8 2,442 9,150 207 - 6,501 2,442 2.45 1.803 134
Year 9 2,442 9,302 212 - 6,648 2,442 2.50 1.635 122
Year 10 2,442 7,640 222 - 4,976 2,442 1.87 1.316 97
Year 11 2,442 7,115 211 - 4,462 2,442 1.68 1.270 94
Year 12 2,442 6,671 202 - 4,027 2,442 1.52 1.450 107
Year 13 2,442 6,274 182 - 3,650 2,442 1.39 1.554 116
Year 14 2,442 6,006 185 - 3,379 2,442 1.29 1.539 115
Year 15 2,442 6,493 264 - 3,787 2,442 1.40 1.422 105
Year 16 2,442 6,772 319 - 4,011 2,442 1.45 1.162 86
Year 17 2,442 5,918 251 - 3,225 2,442 1.20 1.256 93
Year 18 2,442 5,871 316 - 3,113 2,442 1.13 1.226 90
Year 19 2,405 8,354 455 37 5,494 2,442 1.92 1.270 94
Year 20 754 3,289 82 1,688 2,453 2,442 2.93 0.486 34
Year 21 1,662 5,417 585 780 3,170 2,442 1.41 0.720 52
Year 22 363 604 5 2,079 236 2,442 0.64 0.478 33
TOTAL/
AVG 53,559 153,936 5,461 4,584 100,377 52,682 1.87 1.523 2,434
----------------------------------------------------------------------------
(i)Tonnes Mined Including Stockpile is Potentially Mineable Resources
category. The preliminary assessment includes inferred mineral resources
that are considered too speculative geologically to have the economic
considerations applied to them that would enable them to be categorized as
mineral reserves, and there is no certainty that the preliminary assessment
will be realized.
Capital Costs
Total capital costs are estimated at $129.2 million including
initial capital, initial working capital and sustaining capital.
The majority of sustaining capital is required in years 4 and 5 and
consists mainly of capital required to expand tailings storage
facilities. A more detailed breakdown of the capital costs is
provided in the following table.
----------------------------------------------------------
Capital Costs
000's US$
Pre-production (pre-strip) 0
Initial Capital 64,377
Initial Working Capital 7,120
Sustaining Capital 64,787
Total Capital Costs 129,163
----------------------------------------------------------
Operation Costs
Life-of-mine ("LOM") operating costs are estimated at US$11.67
per tonne milled, including mining, process and transportation
costs based on the current contract terms. The details of these
costs are tabulated as follows:
---------------------------------------------
Operating Costs
US$/tonne milled
Mining, Process and Transport 10.72
G&A and Quality Control 0.95
TOTAL OPERATING COSTS 11.67
---------------------------------------------
Operating Cash Flows
Operating cash flows based on pit optimization parameters
employed by Wardrop indicate that in years 1-8 the mine will
approximately produce a total of 1,152,000 ounces of gold (144,000
ounces annually) and generate US$841 million (US$105 million
annually) in operating cash flow compared with life-of mine
production of 2.32 million ounces of gold in concentrate (106,000
ounces annually) and operating cash flow of US$1.516 billion
(US$68.9 million annually).
The projected cash flows are tabulated below:
--------------------------------------------------
Operating Cash Flow
000's US$
Years 1-8
Total 841,334
Average 105,167
LOM
Total 1,515,927
Average 68,906
--------------------------------------------------
Economic Returns
Wardrop evaluated the economic viability of the Songjiagou
project using pre-tax discounted cash flow analysis based on the
engineering work and cost estimates discussed in the Preliminary
Assessment. Over the life of the mine, Songjiagou is estimated to
produce on average 106,000 ounces gold in concentrate per year.
Total gold produced for LOM will be 2.324 million ounces; with a
gold price of $973 per ounce and total operating cash flow of
US$1,516 million, the total cash cost is US$745 million or US$321
per ounce of gold. The pre-tax Net Present Value is US$525 million
and the IRR is 78.6%.
The following table illustrates the project NPV's using various
discount rates besides the 10% base case.
---------------------------------------------------------------------------
Economic Returns
Project NPV Unit Pre-Tax
--------------------------------------------------
14.0% discount rate million US$ 381
12.0% discount rate million US$ 446
10.0% discount rate million US$ 525
8.0% discount rate million US$ 624
Project IRR 78.6%
Payback Years 1.4
Mine Life Years 22
---------------------------------------------------------------------------
Sensitivity Analysis
Sensitivity analysis was conducted for gold price, exchange
rate, gold feed grade, operating costs and initial capital costs
over a +/- 30% range. The results are shown in following table and
graph.
----------------------------------------------------------------------------
Sensitivity Analysis (in US$
millions)
NPV @ 10% discount rate
Variable -30% -20% -10% 0% 10% 20% 30%
--------------------------------------------------------
Gold Price 276 359 442 525 608 691 774
Exchange Rate 553 544 534 525 516 507 497
Gold Feed Grade 277 360 442 525 608 691 774
Operating Cost 586 566 545 525 505 485 464
Initial Capital Cost 542 536 531 525 520 514 508
----------------------------------------------------------------------------
As the table shows and the following graph illustrates, the main
factors impacting the NPV are gold price and gold feed grade, while
exchange rate, operating costs and initial capital costs have a
much smaller effect on NPVs.
To view the graph titled "Pre-tax NPV @ 10% Sensitivity
Analysis", please visit:
http://media3.marketwire.com/docs/mjs-graph.pdf.
Based on the estimates in the Preliminary Economic Assessment,
Majestic plans to move ahead with continued development of the
project, including more detailed engineering studies and
applications for mining permits.
The Preliminary Economic Assessment was prepared by Wardrop
consultants, all of whom are independent of Majestic and are
Qualified Persons as defined by section 1.4 of National Instrument
43-101. The QP's have reviewed and approved the information in this
news release. The consultants (QPs) with their responsibilities are
as follows:
Wardrop, under the direction of Greg Mosher, P.Geo., for all
matters relating to geology and mineral resource estimate.
Wardrop, under the direction of Nory Narciso, P.Eng., for all
matters relating to mine planning, mine design and report
coordination.
Wardrop, under the direction of John Huang, P.Eng., for all
matters relating to mineral processing, metallurgical testing,
infrastructure, tailings management facility, environmental impact
considerations, license and permit, operating and capital cost
estimates and smelting terms.
Wardrop, under the direction of Miloje Vicentijevic, P.Eng.,
M.Eng. for all matters relating to economic analysis.
Mike Hibbitts, P.Geo VP Development and Exploration, and a
Director of Majestic, has read and approved the information in this
news release.
On Behalf of the Board of Directors
MAJESTIC GOLD CORP.
Rod Husband, P.Geo, President
This news release may contain forward-looking statements
including but not limited to comments regarding the timing and
content of upcoming work programs, geological interpretations,
receipt of property titles, potential mineral recovery processes,
etc. Forward-looking statements address future events and
conditions and therefore, involve inherent risks and uncertainties.
Actual results may differ materially from those currently
anticipated in such statements.
Neither 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.
Contacts: Majestic Gold Corp. Investor Relations (604) 681-4653
or 1-866-282-8398 info@majesticgold.net www.majesticgold.net
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