Trade Publication Article

Amarillo Gold Corp.: Positive Economics from Pre-feasibility Study of Mara Rosa Gold Project Received

2011

Overview

Buddy Doyle, CEO and President of the Company, stated, \"Amarillo is pleased to have reached this milestone through the efforts of Frank Baker, our project manager, our staff and the consortium led by Coffey Mining International. We are also pleased with the very positive outcome of the PFS. The project economics have improved over those presented in our 2008 Preliminary Economic Assessment (\"PEA\") (See news release March 13th 2008). The improved results were achieved even after a sizable increase in the capital expenditure (\"CAPEX\") (PEA CAPEX = $80M, PFS = $184M). The superior economic results arise from better metallurgical recoveries, higher gold prices and increased annual through-put as compared to the PEA. The PFS CAPEX now includes Pre-Strip costs, owner operated equipment, and power line construction. The CAPEX estimate is supported by an extensive review of mining project costs in Brazil and the magnitude is comparable to other projects of our size and scope. This level of detailed engineering work conducted in the PFS has covered much of the work usually incorporated in a FS, and a number of key FS level components are already underway, including, environmental, hydrological, metallurgical and geotechnical studies. We expect the FS to be completed during 2012. The next step after completion of the FS would be the decision to become the next Brazilian-based producer of greater than 100,000 ounces per year, a task that is projected to be achievable by 2014.\" \"There is scope to increase the footwall slope: The current model uses a 40 degree footwall slope. The optimal pit slope would follow the dip of the ore-body at 45-47 degrees. However this is also is the dip of cleavage in the footwall. Accordingly the geotechnical experts at Coffey have chosen a more conservative 40 degree footwall slope to mitigate concern over increased footwall failure risk if the pit wall is carried parallel to cleavage. This has the effect of increasing the strip ratio from approximately 6:1 to 8:1. It should be noted that the previous mining operation at the deposit by Western Mining Inc. followed the dip of the ore-body and that pit had no geotechnical issues. Furthermore Western Mining also had plans to expand the pit using a 70 degree angle for the hanging wall and a footwall slope parallel to the ore body slope of 45-47 degrees. The country rock at Posse has few joints, is competent, not fissile, and there is a second stress direction that folds the cleavage plane that would help reduce the risk of slippage along this plane. Amarillo has already completed 70% of the Coffey designed geotech drilling program designed to generate the rock quality data and tri-axial stress test data needed to determine the definitive optimal slope angles for the Posse Pit. Amarillo's geologists are optimistic on the prospects for increasing the footwall slope once the analysis of the geotech drilling program has been completed by the relevant independent entity. The Posse Deposit was successfully mined by Western Mining Company (WMC) during the 1990s (mined areas are excluded from the above-stated resource figures), and is located in an area of excellent infrastructure: approximately 35 km NE of Yamana's Chapada open pit Cu-Au operation, some 60 km NE of Yamana's Pilar Au project (in Feasibility), 95 km NW of Votarintim's Niquelandia Ni laterite mine, 105 km from NE of Serra Grande's underground Au mine, and 105 km NNW of Anglo American's Ni laterite project at Barro Alto. Grid power to the site was established during WMC's open pit mining operation. The Serra da Mesa (450 MW) hydro-electric dam lies 35 km to the east.

• Publisher: Intrado Digital Media Canada Inc
• Subject: Baker, Frank / Doyle, Buddy