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Wardrop Delivers Positive Preliminary Assessment for Songjiagou Gold Project
Vancouver,British Columbia, January 20, 2011. Majestic Gold Corp. (TSX.V: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:
| *Resource Categroy |
Cut-off (g/t) |
Tonnes |
Au Uncap g/t |
**Au Cap g/t |
Ounces Au Uncap |
Ounces Au 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 |
| |
*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
**gold
grades
were
capped
at
40.0
g/t
Open
pit
optimization
was
carried
out
using
WhittleTM
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:
|
| *Potentially Mineable Resources Classification |
Tonnes |
Grade, Au(g/t) |
| Indicated |
29,875,527 |
1.207 |
| Inferred |
22,806,473 |
1.936 |
| |
*Potentially minable 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 these, 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 attached preliminary production summary 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
Waste
Ore Mined |
kt
kt
kt |
18,494
47,746
18,494 |
52,682
100,377
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 |
 |
Tonnes mined including stockpile are in the potentially minable 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 $129.2 million including initial capital, initial working capital and sustaining capital. The majority of sustaining capital is required in years 4 and 5 and consists mainly
of capital required to expand tailings storage facilities. A more detailed breakdown of the capital costs is provided in the following table.
| Capital Costs |
|
Pre-production (pre-strip)
Initial Capital
Initial Working Capital
Sustaining Capital |
000's US$
0
64,377
7,120
64,787, |
| Total Capital Costs |
122,163 |
|
Operation costs
Life-of-mine operating costs are estimated at $11.67 (U.S.) per tonne milled, including mining, process and transportation costs based on the current contract terms. The details of these costs are in the attached operating costs table.
| Operating Costs |
|
| US$/tonne milled |
Mining, Process and Transport
G&A and Quality Control |
10.72
0.95 |
| Total Operating Costs |
11.67 |
|
Operating cash flows
Operating cash flows based on pit optimization limits employed by Wardrop indicate that, in years one to eight, the mine will approximately produce a total of 1,152,000 ounces of gold (144,000 ounces annually) and generate $841-million (U.S.) ($105-million (U.S.) 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 $1,516-million (U.S.) ($68.9-million (U.S.) annually).
The projected cash flows are tabulated below.
| Operating Cash Flow |
|
Years 1-8
Total
Average
LOM
Total
Average |
841,344
105,167
1,515,927
68,906 |
|
Economic returns
Wardrop evaluated the economic viability of the Songjiagou project using pretax 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 of 106,000 ounces gold in concentrate per year. Total gold produced for LOM will be 2,324,000 ounces; with a gold price of $973 per ounce and total operating cash flow of $1,516,000, the total cash cost is $745-million (U.S.) or $321 (U.S.) per ounce of gold. The pretax net present value is $525-million (U.S.), and the internal rate of return is 78.6 per cent.
The attached economic returns table illustrates the project NPVs using various discount rates besides the 10-per-cent base case.
| Economic Returns |
|
Project NPV
14.0% discount rate
12.0% discount rate
10.0% discount rate
8.0% discount rate
Project IRR
Payback
Mine Life |
Unit
million US$
million US$
million US$
million US$
Years
Years |
Pre-Tax
381
446
525
624
78.6%
1.4
22 |
|
Sensitivity analysis
Sensitivity analysis was conducted for gold price, exchange rate, gold feed grade, operating costs and initial capital costs over a plus/minus 30-per-cent range. The results are shown in the attached sensitivity analysis table.
| Sensitiviy Analysis (in US$ millions) |
|
| |
NPV @ 10% discount rate |
Variable
Gold Price
Exchange Rate
Gold Feed Grade
Operating Cost
Initial Capital Cost |
-30%
276
553
277
586
542 |
-20%
359
544
360
566
536 |
-10%
442
534
442
545
531 |
0%
525
525
525
525
525 |
10%
608
516
608
505
520 |
20%
691
507
691
485
514 |
30%
774
497
774
464
508 |
|
As the table shows, 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.
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 QPs have reviewed and approved the information in this news release. The consultants with their responsibilities are as follows:
- Wardrop, under the direction of Greg Mosher, PGeo, for all matters relating to geology and mineral resource estimate;
- Wardrop, under the direction of Nory Narciso, PEng, for all matters relating to mine planning, mine design and report co-ordination;
- Wardrop, under the direction of John Huang, PEng, for all matters relating to mineral processing, metallurgical testing, infrastructure, tailings management facility, environmental impact considerations, licence and permit, operating and capital cost estimates, and smelting terms;
- Wardrop, under the direction of Miloje Vicentijevic, PEng, MEng, for all matters relating to economic analysis.
Click here to view Complete 43-101 Report
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