Amarillo Files Application For Preliminary Licence to Operate Mine at Mara Rosa Project, Brazil

Amarillo Gold Corp. (TSX-V: AGC) (“Amarillo” or the “Company”) announces that the application for the preliminary license, which is the first step in the permitting process to allow mining of the Posse deposit, was filed May, 2012. The application was accompanied by the required environmental base line study and impact report compiled by Amarillo’s environmental consultants, Neotropica Tecnologia Ambiental (Neotropica).  The application was filed at the Secretariat for the Environment and Hydrology ('SEMARH'), a department of the Goias state government.

Although mine permitting is governed and administered by each state, the process is very similar throughout Brazil.  The process has three stages, the preliminary license (“LP,”), the initial license (“LI”), and finally the license to operate (“LO”).  SEMARH, having received Amarillo’s application for an LP, will on average take 3 to 6 months to review the application. An official public hearing organised by SEMARH and the district judge must be held as part of this process.  Upon completion of this review, and if there are no issues, Amarillo will receive the LP. The LI can be applied for immediately after the LP is received as long as certain provisions are met. (see below for details).  Once the LI is received, the applicant is authorized to commence mine construction. The final step, the LO, is applied for when the plant is completed but before operation commences. To obtain this license the finished plant and facilities are inspected by SEMARH to ensure that the company has complied with the plan agreed to in the LI. The LO is granted if the plant and facilities are found to comply with the LI and production may then commence.

During the LI review period, Amarillo and SEMARH are required to devise a mutually acceptable environmental, social, and economic plan for the mine.  Also required for the grant of the LI is an agreement with the surface rights holders (or purchase of their land), permissions for water use, a contract to buy the “reserve legal”,  and forestry permits.  “Reserve legal” requires the purchase of a parcel, somewhere in the district, to compensate for the area of the proposed mine disturbance,  (approximately 190ha: 25% of the size of the mine area), to be put aside as a nature reserve.  The completion of these steps, and the LI process, should take approximately 2-6 months.

  The company anticipates that the public hearing component of the LP and the community consultation process will proceed smoothly as over the last 12 months it has already held a number of local community public meetings in conjunction with the Prefieto (Mayor) of the Mara Rosa village and Goias State regarding the Mara Rosa project in particular, and mining in general.  The proposed mining of the Posse deposit was consistently well received by the community during these meetings. The primary focus of the community during all these meetings was on the employment benefits that the project would bring to the area.

An additional factor providing further confidence is the track record of mine permitting in Goias State as reflected by the recently permitted  Anglo American's Barro Alto nickel laterite mine and Yamana's Pilar gold mine (which is of similar scope to the Mara Rosa project) now under construction 82 kilometres away.  Both mines are located in the same district as the Posse deposit within Goias State.

The NI 43-101 compliant qualified person for this news release is Frank Baker, a metallurgist with over 30 years experience and a member of AUSIMM and the IOM3.

About Amarillo Gold Corp.

Amarillo Gold Corp. is focused on acquisition, discovery, and definition of gold resources in Brazil.  The Company’s principal projects are the Mara Rosa Project in the state of Goias, and the Lavras do Sul Project in the state of Rio Grande do Sul.  The Posse Deposit at Mara Rosa contains 1,174,900 ounces of measured and indicated gold contained in 20.85 MT at 1.75 g/t Au, and 156,400 ounces of gold inferred from 3.63 MT at 1.38 g/t Au (0.5 g/t cut-off grade) (NI 43-101 compliant resource as independently determined by Australian Exploration Field Services Pty. AEFS).  The Mara Rosa Gold Project has received a positive economic assessment from a Pre-feasibility study and is preparing to proceed to a bankable feasibility study. Should this continue to be positive it would be possible to commence mining by 2014.

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 80 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.

The Lavras do Sul Project is an advanced exploration stage property (190 sq. km.) comprising more than 19 prospects centered on historic gold workings, with encouraging gold mineralization discovered and defined by more than 16,000 metres of drilling.  The initial resource estimate at the Butia prospect reported 215,000 ounces of gold indicated from 6.4 MT at 1.05 g/t Au, and 308,000 ounces of gold inferred from 12.9 MT at 0.74 g/t Au using a0.3 g/t cut-off grade in a NI 43-101 compliant resource as independently determined by Atticus Consulting 2010.  Lavras do Sul is also located near excellent infrastructure.  The Company also has a portfolio of earlier stage projects and all properties under Amarillo’s management are located in areas of good infrastructure and mining-friendly communities.

 

ON BEHALF OF THE BOARD OF DIRECTORS

AMARILLO GOLD CORP.

           

Per:      “Buddy Doyle”                       

          Buddy Doyle, President


 
Contacts:
Amarillo Gold Corp.
+ 1-604-689-1799 (Canada)
+55-31-3261-5974 (Brazil)
info@amarillogold.com

 

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FORWARD LOOKING STATEMENTS:-

This news release contains Forward Looking Statements regarding our intentions and plans. The PFS model presented in this news release is not a production forecast by the company. There remains at present insufficient certainty in the PFS to reliably estimate future production and economics, further engineering and geology studies are requires to determine this.  The scope of this PFS was to deliver a project with plus or minus 20% accuracy in its estimates.  Various factors may prevent or delay our plans, including but not limited to, contractor availability and performance, weather, access, mineral prices and success and failure of the exploration and development carried out at various stages of the program. The planned DCF is designed to achieve a higher accuracy in our engineering and economic estimates. At the end of the DCF the company should have enough information to attract bank financing on the project, should it be still be suitably economically and risk attractive.  Permission, from the Government and community is also required to proceed with future mining production. There many mining projects in the state of Goias and several recently permitted mines. This would suggest successful permitting of the Mara Rosa project is highly likely. However, each mine is treated separately in the permitting process and the project is not yet far enough along the permitting process to guarantee if environmental permits will be received. In particular the company will require the funds to make the surface right purchases and the reserve legal mentioned in this news release.  Readers should review risk factors applicable to junior mining exploration companies generally to understand the variety of risks that can affect the Company.