Positive Metallurgical Results Indicated for Posse Deposit - Tenders for Pre-feasibility Study Underway

Amarillo Gold Corp. (TSX-V: AGC)(“Amarillo” or the “Company”) received an update on the metallurgical studies conducted for the Posse Deposit, part of the Mara Rosa project in the northern Goias State, Brazil.

Amarillo recently released an updated resource estimate at Posse and this estimate as summarized in  table 1.

Table 1.  Posse Deposit resource estimate using 0.5g/t gold cut-off.*

Cut-off Category Tonnes Grade Contained Gold Oz
0.5g/t Indicated 12,453,000 1.62 650,000
  Inferred 10,611,000 1.38 471,000

* NI 43-101 compliant estimate by Keith Whitehouse of AMC and Hugo Hoogvliet, independent consultant.

There had been a moderate-sized body of work on Posse’s gold metallurgy completed before the most recent tests were commissioned.  The Posse mine was operated in the mid-1990’s and employed a minus 80 mesh grind, followed by whole ore cyanide leaching in the presence of bubbled air and carbon.  Based on mine records, the average gold head grade was about 3.0 g/t and the cut-off grade was 2 g/t.  The recovery achieved was 85% and a roughly linear decrease in recovery with grade was observed.  A Barrick Gold document written in the late 1990’s detailed a variety tests completed by a variety of persons and companies; the results of these tests were not always mutually consistent, but a common theme was that basic cyanide bottle rolls gave poor recoveries (40-60%).  More recently, in 2008, Amarillo sent drill pulps, milled to 75 microns, to FUNMINERAL, the Goias State mining entity, which reported basic cyanide bottle roll recoveries of between 68% and 91%, averaging 84%.  It is now thought that these relatively high recoveries where achieved due to weak oxidation of the sample, after exposure to air and time.  There is a general consensus that while about 50% of the gold at Posse comes in native form, the rest of the gold is associated with a telluride complex, and that this fraction is at least weakly refractory.  However, it is thought that this refractory gold complex can be liberated by moderate oxidation.

The Company commissioned Testwork Desenvolvimento de Processo Ltda(“Testworks”) to further study the metallurgy of the deposit.  Testwork’s facilities are located in Nova Lima; its previous clients include AngloGold Ashanti’s Cuiaba mine, Serra Grande’s (AGA-Kinross JV) Crixas mine and ASX listed Mundo Minerals’ Engenho mine.

Testworks were to have delivered results in early 2010, however, they encountered a series of inconsistent results that caused delays.  Amarillo commissioned Coffey Ltd. in April 2010 to act as our metallurgical consultant to help understand the problem and guide the metallurgical tests to conclusion.  Coffey are International mining engineering consultants with a Brazilian presence.  The subsequent investigation determined that poor sample homogenization explained the inconsistent results.  All sub-samples were therefore recombined, mixed and re-sampled and the inconsistency was eliminated.  Amarillo, Coffey and Testworks then designed some key tests to bring this stage of work to an expedited conclusion.

The highlight of the subsequent work is that while basic cyanide bottle rolls yielded poor recoveries (40-60%), high gold recoveries are achieved by chemically oxidizing the telluride component of the sulphide gold mineralization.  For example, a recovery of 92.2% to 92.6% was achieved on a 1.46g/t Au sample by pre-oxidizing a sample with calcium hypochlorite followed by bottle roll cyanide leaching.  Fine milling of a 1.14 g/t Au sample subject to the same method achieved 97.3% recoveries.

Another test conducted on a sample grading 1.14 g/t Au yielded an 83.7% recovery by using flotation methods.  The flotation concentrate was then pre-oxidized using calcium hypochlorite followed by cyanide leaching to yield a recovery of 96.4%.  The flotation tails were then cyanide leached resulting in a recovery of 53.5% and a consequent global recovery of 89.4%.  Coffey considers an enhanced variation of this last test will likely deliver the least capital intensive metallurgical circuit with highest gold recoveries.

A working theory Coffey favors is a selective flotation process that separates the telluride fraction from the other sulphide minerals.  The small volume telluride concentrate would then be subjected to ultra-fine milling and injected air for purposes of oxidization (Albion Process); alternatively, a chemical oxidant could be used.  After the pre-oxidization, the telluride concentrate would be cyanide leached.  The sulphide concentrate would also be treated by cyanide in separate tanks.  The flotation concentrates are at a maximum 5% of the mineralization by weight.  Therefore, significant capital and operating cost savings on vessel size and chemical consumption respectively may be achieved by treating only these concentrates.  Further tests have been recommended to refine and optimize this metallurgical process route.

Linton Kirk of Coffey said, "Based on the current and historical test work on the Mara Rosa project and the development of new technology for processing of refractory gold mineralization's, it is Coffey's opinion that the mid to low grade Posse ore could be treated successfully with potential recoveries in the order of 85% to 90%."

Preliminary Economic Assessment (PEA) studies indicate that the deposit is economically viable at gold prices above $US600/ounce and that the project has an NPV-5% of approximately $150m pre-tax at $1000/oz Au price levels.  These economic studies have assumed baseline metallurgical recoveries of 80%.  The sensitivity analysis that accompanies these economic studies suggests that for each 1% change in metallurgical recoveries, the NPV-5% changes by approximately $6m at $1000/oz Au and by $10m at $1500/oz Au.

Amarillomanagement is encouraged by these results and has decided to commence a pre-feasibility study which would incorporate the continuing metallurgical studies.

To this effect the company has circulated pre-feasibility tender documents to several engineering consulting firms.  The successful tender(s) will be announced when the selection(s) have been made.

The qualified person for this news release, as per the guidelines within NI 43-101, is Buddy Doyle, a geologist of 29 years experience and a member of the Australian Institute of Mining and Metallurgy.  

ABOUT AMARILLO:

Amarillo Gold Corp. is a company focused on the acquisition, definition and discovery of gold resources in Brazil. Its principal projects are the Mara Rosa project in the state of Goiás and the Lavras do Sul project in the state of Rio Grande do Sul. The Posse Deposit at Mara Rosa was found by an independent 43-101 compliant preliminary economic assessment study carried out by Whitehouse and Hoogvliet to contain 650,000 ounces indicated from 12.4MTonnes @ 1.62 g/t Au, 471,000 ounces inferred from 13.8MTonnes @ 1.38 g/t Au at a 0.5g/t cut-off grade and the project is in the economic evaluation stage.  The Posse deposit is located in an area of excellent infrastructure located some 35 km NE of Yamana’s Chapada open pit Cu-Au operation, 105 km NE of Serra Grande’s underground Au mine, 105 km NNW of Anglo American’s nickel laterite project (in construction), 95 km NW of Votarintim’s Niquelandia nickel laterite mine and approximately 60 kms NE of Yamana’s Pilar Au project (in feasibility). Grid power to the site was established during the previous open pit mining operation and the Serra da Mesa hydro-electric dam lies 35 km to the east.  A new railroad is being constructed with 1.6km of the project.

The Lavras do Sul project is in the advanced exploration stage with over 15,000m of drilling with encouraging gold mineralization being discovered and defined, also in an area of excellent infrastructure.  The Company also has a portfolio of earlier stage projects. All properties under Amarillo’s management are located in areas of good infrastructure and robust community support.

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

 

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.

FORWARD LOOKING STATEMENTS:-

This news release contains Forward Looking Statements regarding our intentions and plans. 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. Readers should review risk factors applicable to junior mining exploration companies generally to understand the variety of risks that can affect the Company.