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Amarillo Gold Begins Pre-Feasibility Study Update at Mara Rosa Project in Central Brazil

Jan 10 2017

Amarillo Gold Corp. ("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 27^th 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 2^nd 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.

Source: http://www.amarillogold.com/