May 9, 2011 (Baystreet.ca) --
Vancouver, British Columbia, March 11, 2011. Further to its news release of January 20,
2001, Majestic Gold Corp. (TSX.V:MJS, Frankfurt:P5E) is pleased to announce that the
Preliminary Assessment report (“PA” or “Preliminary Assessment”) prepared by Wardrop,
a Tetra Tech Company, (“Wardrop”) for the Songjiagou Gold Project located in Shandong
Province, People’s Republic of China is now posted on SEDAR.
Key elements of the report are as follows:
Economic Parameters
• 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 lifeof-
mine
• Life-of-Mine strip ratio 1.87 : 1 (waste to mineral inventory)
• Mine-Life of 22 years
• US$973/oz for the base case gold price for this study.
Recommendations
EXPLORATION
Wardrop recommends two phases of exploration designed to upgrade and expand the
existing resource.
• Phase I will focus on increasing the level of confidence in the shallower portion of
the exiting resource. The all-inclusive cost of this phase is estimated to be $1
million.
• Phase II is the extension of the Phase I program. The objectives of this program are
(a) to increase confidence in the deeper mineralization, and (b) to identify additional
resources both at depth and along strike. The all-inclusive cost of the second
program is estimated to be $3.5 million.
ENGINEERING
Wardrop recommends further engineering studies, including:
Mining
• Studies to formulate concrete decisions on village relocations
• Studies to obtain higher resolution topographic data
• A trade-off study to optimize the production rate
• Detailed geotechnical study to determine overall pit slopes, inter-ramp slope angles,
bench face angles, bench heights and catch bench widths
• Detailed hydrology and hydrological studies to determine design of dewatering
systems
• Evaluation of proposed waste dump based on geochemical characterization of waste
rock, geotechnical, hydrological, and hydrogeological information.
• Detailed drilling and blasting studies to determine penetration rates, effective drill
patterns, powder factors, and explosive mix for the different rock types
• Further engineering study to optimize the size of backhoes and haul truck fleets
• Mining loss and ore dilution studies
Metallurgy and Process
• Conduct a detailed testing program to study metallurgical performance, including:
• Flotation tests: optimization of primary grind size and reagents, the effect of
various regrinding arrangements on gold recovery and concentrate grade
- Gravity concentration tests to recover nugget gold
• Mineralization hardness determination
• Gold extraction by cyanidation to confirm the smelting terms
• Product plan optimization to maximize smelting return
• Install on-line automatic control systems for optimizing the floatation plant
efficiency
• Upgrade current assay laboratory instrumentations and establish a metallurgical lab
Tailings Storage Facility
• The under construction TSF will service approximately 4 to 5 years at the rate of
7,400 t/d. Further studies for the tailings disposal for the remaining life-of-mine
should be conducted.
Environmental Impact Assessment
• Conduct a comprehensive environmental impact assessment for the project based on
the proposed process rate
• Further studies on the fresh water supply, particularly during the dry seasons, as the
project is located in a relatively dry area
Majestic is planning to commence Phase I of the recommended exploration program as
soon as practical. Wardrop’s recommendations for the engineering programs will be
included in the Chinese geology and engineering studies currently underway while
concurrently pursuing the mining licenses required for the process rate of 7,400 t/d.
“We are pleased with Wardrop’s findings and recommendations and are excited to be
moving our company towards becoming a significant gold producer,” stated Rod Husband,
President of Majestic Gold Corp.
The complete report is available at www.sedar.com and on Majestic’s web site.
Mike Hibbitts, P.Geo VP Development and Exploration, and a Director of Majestic, has
read and approved the information in this news release.
The Company is pleased to provide the following update on operations:
Financial Information
For the first quarter ending December 31, 2010, the Company had current assets of
$6,148,255 ($4,920,964 Cash) and a working capital position of $3,764,085 compared with
current assets of $3,512,728 ($1,791,845 Cash) and working capital deficiency of $975,436
as at year ended September 30, 2010.
Gold revenue from the Songjiagou Mine for the three months ended December 31, 2010
was $1,899,832 on the sale of 1,403.48 ounces.
Expenses for the three months ended December 31, 2010 were $2,803,782, resulting in a
net loss of $1,451,165 for the period. The increase in expenses was primarily due to the
following:
• Operation costs of $1,302,714 for the three months ended December 31, 2010
related to contract mining costs at the Songjiagou Mine.
• General and administrative expenses were $1,493,909 for the three months ended
December 31, 2010, which included $762,995 (MMK Financial $419,795 and
Russlan Fajsiev $343,200) in fees paid in association with the warrant exercise of
share purchase warrants totaling 95,540,140 for proceeds of $9,554,014. The fees
were paid for services which included the introduction to original warrant holders of
persons prepared to acquire and exercise outstanding warrants, negotiating the
financial terms of the purchase of such warrants by such persons from the original
warrant holders, and coordinating those sales and the subsequent exercise of the
warrants.
On April 8, 2008, the Company issued an unsecured note payable of $2,000,000 to RAB as
part of obtaining funding for the purpose of making the Company’s final capital
contribution to Yantai Zhongjia Mining Inc., the Chinese joint venture company that holds
the rights to the Songjiagou Mineral Property. During the three months ended December
31, 2010, the loan was fully repaid from the proceeds from the exercise of warrants.
Addendum to Dahedong Joint Venture Agreement
The Company has secured an addendum (the "Addendum") to the February 11, 2010
Agreement between its Chinese subsidiary (“JVCo”) and Dahedong Smelter Mill for the
acquisition of an additional interest in the Songjiagou Mine from Dahedong Smelter Mill
and related matters. The Addendum, which was signed with effect from February 11, 2010,
outlines specific changes to the original Agreement as follows:
1. Pursuant to the Profit Sharing Agreement made as of September 1, 2010, it was agreed
the Company would advance further funds to JVCo by way of capital contributions to
fund the expansion of operations including construction of the New Mill;
2. Dahedong agreed that:
a. Dahedong will construct one New Mill and related facilities with an output of
approximately 6,000 tonnes per day at a budgeted cost of C$50,000,000;
b. Dahedong shall complete the procedures for the acquisition and lease of land to be
occupied by the New Mill, obtain necessary approvals, complete filing procedures,
and coordinate the supply of utilities such as water and electric power for the New
Mill;
c. Dahedong shall be responsible for 25% of the costs incurred in the construction of
the New Mill including permitting, leasing and licensing costs, and JVCo shall be
responsible for 75% of construction costs;
d. Ownership of the New Mill shall be vested in JVCo;
e. Dahedong will be responsible to pay all construction costs in the first instance;
f. JVCo will reimburse Dahedong for 100% of JVCo's share of construction costs out
of JVCo's share of Net Profits before any Net Profits are paid or distributed by
JVCo to the Company;
g. JVCo's share of construction costs will be paid only from JVCo's share of Net
Profits so that no cost, expense or other liability will accrue to or be payable by
JVCo otherwise than out of Net Profits;
h. JVCo will pay to Dahedong a financing fee equal to 10% of JVCo's share of
construction costs out of JVCo's share of Net Profits after JVCo's share of
construction costs have been paid in full and before any Net Profits are paid or
distributed by JVCo to the Company;
i. Title to the New Mill shall not be transferred to JVCo until JVCo has reimbursed
Dahedong for JVCo's share of construction costs out of JVCo's share of Net Profits;
j. JVCO shall have the right, but not the obligation, to pay or reimburse Dahedong for
all or any portion of JVCo's share of construction costs from other sources of
funding which may be available to JVCo from time to time.
This amendment will allow the project development to continue uninterrupted while
Majestic seeks the required financing.
“This amendment demonstrates our partners commitment to both the project and to
Majestic,” stated Rod Husband, President of Majestic. “We look forward to rapidly
developing our project and increasing production levels.”
The Company is also pleased to announce that it has retained the services of Vicarage
Capital Limited of London, England to advise it on M&A issues with the objective of
negotiating a merger with a larger company with greater financial resources or entering into
a joint venture or other form of strategic alliance to advance its Songjiagou project, and to
assist it in negotiations in those regards. The Company has agreed to pay Vicarage a total
of $150,000 over the one-year term of the contract.
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.