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21.01.2011
Majestic Gold Corp.: Wardrop Delivers Positive Preliminary Assessment for Songjiagou Gold Project
Majestic Gold Corp.: 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:

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


Open pit optimization was carried out using Whittle™ 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:

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


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 this 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 following table summarizes the information from the Preliminary Economic Assessment Production Schedule.

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


The following table details the planned Production Schedule for the Life-of-Mine:

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


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.

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


Operation Costs

Life-of-mine (“LOM”) operating costs are estimated at US$11.67 per tonne milled, including mining, process and transportation costs based on the current contract terms. The details of these costs are tabulated as follows:

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


Operating Cash Flows

Operating cash flows based on pit optimization parameters employed by Wardrop indicate that in years 1-8 the mine will approximately produce a total of 1,152,000 ounces of gold (144,000 ounces annually) and generate US$841 million (US$105 million 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 US$1.516 billion (US$68.9 million annually).

The projected cash flows are tabulated below:

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


Economic Returns

Wardrop evaluated the economic viability of the Songjiagou project using pre-tax 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 106,000 ounces gold in concentrate per year. Total gold produced for LOM will be 2.324 million ounces; with a gold price of $973 per ounce and total operating cash flow of US$1,516 million, the total cash cost is US$745 million or US$321 per ounce of gold. The pre-tax Net Present Value is US$525 million and the IRR is 78.6%.

The following table illustrates the project NPV’s using various discount rates besides the 10% base case.

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


Sensitivity Analysis

Sensitivity analysis was conducted for gold price, exchange rate, gold feed grade, operating costs and initial capital costs over a +/- 30% range. The results are shown in following table and graph.

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf

As the table shows and the following graph illustrates, 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.

To view the entire news including tables and figures, please follow the link:
http://www.irw-press.com/dokumente/Majestic_PEA_Jan202011.pdf


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 QP’s have reviewed and approved the information in this news release. The consultants (QPs) with their responsibilities are as follows:

Wardrop, under the direction of Greg Mosher, P.Geo., for all matters relating to geology and mineral resource estimate.

Wardrop, under the direction of Nory Narciso, P.Eng., for all matters relating to mine planning, mine design and report coordination.

Wardrop, under the direction of John Huang, P.Eng., for all matters relating to mineral processing, metallurgical testing, infrastructure, tailings management facility, environmental impact considerations, license and permit, operating and capital cost estimates and smelting terms.

Wardrop, under the direction of Miloje Vicentijevic, P.Eng., M.Eng. for all matters relating to economic analysis.

Mike Hibbitts, P.Geo VP Development and Exploration, and a Director of Majestic, has read and approved the information in this news release.


On Behalf of the Board of Directors
MAJESTIC GOLD CORP.

Signed "Rod Husband"

Rod Husband, P.Geo
President

Contact:
Investor Relations: (604) 681-4653 or 1-866-282-8398
Email: info@majesticgold.net or visit our Website: www.majesticgold.net

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.

This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.



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