Amarillo Gold Commences Pre-Feasibility Update at Mara Rosa Project

Amarillo Gold Corp. (TSX-V: AGC) (“Amarillo”) is pleased to announce that it has commenced an update of the 2011 Pre-Feasibility Study (PFS) on the Posse deposit at its Mara Rosa Project in central Brazil.

The PFS update will be done NI 43-101 in accordance to NI 43-101 guidelines and based on the recent resource estimate (News Release July 21, 2016). SRK Consulting (“SRK”) has been selected to carry out the study, using their Belo Horizonte based team. ONIX Engineering & Consulting also base in the Belo Horizonte area have been retained to provide cost estimations on the equipment and plant.

Since the PFS on Posse by Coffey Mining (News Release Nov 28, 2011) a number of criteria have changed which the Company considers warrant an updated economic model. In addition to renewing external inputs SRK will include a recalculation of the reserve figure given that the resource update increased the combined measured and indicated ounces and the Pit shape will differ due to changes of the pit slope based on the 2013 geotechnical study and other factors. Optimization studies will also be carried out, using various equipment types, scheduling and stockpiling scenarios.

Table one summarizes some of the key factors that need to be considered for the new study and how they compare to 2011. Some will be positive like the USD:BRL exchange rate and steeper footwall slopes in the planned pit, other factors such as the need to line the tailings dam and higher energy prices will increase costs, whereas the gold price has remained fairly neutral. We await the results of this study to see how all these factors effect the overall economic model.

Table 1: 2011 PFS criteria compared with the current update in progress (1):

Category 2011 PFS by Coffey 2017 PFS (provisional)
Exchange Rate USD:BRL 1.9 3.2(2)
Pit Slope (inter-ramp slope) 67 deg HW 40 deg FW 65 deg HW 48 Deg FW (3)
Resource M & I combined 0.5g/t cut-off 1,174,900 ozs Au

5.46MT @ 2.04 g/t Au Measured, 15.39MT @ 1.65 g/t Au Indicated

1,210,100 ozs Au(4)

8.887MT @ 1.98 g/t Au Measured, 13.149MT @1.53 g/t Au Indicated

Reserve 945,000 ozs Au New reserve to be determined as per result of this study
Stockpiling Not evaluated To be evaluated
Mining fleet 110 tonne trucks imported and 45 tonne domestic 45 tonne only to be investigated for lower CAPEX higher OPEX
Mining cost $1.40 per tonne owner operated Costs expected to increase (5)
Engineering Clay lined tailings dam Membrane lined tailings dam(6
Energy $US 0.05 per kWh $US 0.08 per kWh
Gold Price $1100/ounce pit, $1200 ounce Economic Model Gold prices are similar today to that of 2011 PFS study

Notes for table 1.

  1. NB The 2017 PFS study numbers are subject to change as the study progresses.
  2. Current exchange rate
  3. New ramp inter-slope angles based on the geotechnical study announced May 16 2013
  4. New resource statement released September 27th 2016 by Keith Waterhouse QP prepared in accordance to NI 43-101 compared to the Resource announced in the 2011 PFS by the same QP.
  5. Guidance based on other open pit mining operations, mining cost in Brazil and other recent 43-101 PFS and Feasibility studies from Brazil
  6. The authorities have requested the tailings facility should be lined as part of the Preliminary License, (LP) this will increase the capital expenditures compared to 2011

SRK have indicated that the base case gold price to be used in the updated economic model will remain at US$1,200 per ounce, this will allow easy comparison between the studies, likewise a spread of gold prices will be given in a sensitivity analysis similar to the 2011 PFS. The same mill throughput of 2.5 million tonnes a year will also be used.

With regard to mining costs a 2nd scenario where a contract fleet would be used rather than an owners fleet has also been requested as part of the new study.

After release of the PFS update, expected in the first quarter of 2017, SRK will be retained to evaluate further measures to reduce CAPEX such as using a smaller plant throughput or staged builds, after which time Amarillo will seek tenders to engineering consulting firms to complete as feasibility study.

This release has been in reviewed and accepted for its technical content by the Qualified Person for the Company, Frank Baker, a metallurgist with over 40 years experience, and a member of the AusIMM and IOM3.

About Amarillo Gold Corp.

Amarillo Gold Corp. is focused on acquisition, discovery, and definition of gold resources in Brazil. It is the Company’s policy to strive to do this in a sustainable, safe way using best practices whilst benefiting our shareholders and the communities we work in. 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 8.887MT @ 1.98 g/t Au Measured, 13.149MT @1.53 g/t Au Indicated and 7.119MT @ 1.26 g/t Au Inferred. (A NI 43-101 resource as independently determined by Australian Exploration Field Services Pty. Keith Whitehouse QP July 2016).  The Mara Rosa Gold Project has received a positive economic assessment from a Pre-Feasibility study and Amarillo has obtained the LP, the first stage of a three stage permitting process. The Posse Deposit was successfully mined by Western Mining Corporation (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 Votorantim’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 of more than 19 prospects centered on historic gold workings, with encouraging gold mineralization discovered and defined by more than 16,000 meters 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 a 0.3 g/t cut-off grade in a NI 43-101 resource as independently determined by Atticus Consulting in 2010, Anthony Amberg, QP. 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.


Per: “Buddy Doyle”
Buddy Doyle, President

Buddy Doyle

+ 1-604-689-1799 (Canada)
+1-604-760-0325 (Cell)
+55-31-3261-5974 (Brazil)
Or Scott Eldridge

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This news release contains Forward Looking Statements regarding our intentions and plans. Forward looking statements in this news release include the numbers estimated for 2017 and the time line for completion. Various factors may prevent or delay our plans, including but not limited to, the ability to raise funds, 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. Permission from the Government and community is also required to proceed with future mining production. We may not be able to fulfill our obligations under the proposed gold loan and we may be unable to raise sufficient financing to carry out our plans. Readers should review risk factors applicable to junior mining exploration companies generally to understand the variety of risks that can affect the Company. The Company undertakes no obligation to update publicly or otherwise revise any forward-looking statements whether as a result of new information or future events or otherwise, except as may be required by law.