TORONTO, ONTARIO — (Marketwire) — 07/14/11 — African Gold Group, Inc., („AGG“ or the „Company“) (TSX VENTURE: AGG) is pleased to announce the results of a positive NI 43-101 compliant Preliminary Economic Assessment (the „PEA“ or the „Study“) that evaluates the potential of an open pit, bulk mining model, utilizing a gravity recovery process plant, at the Company-s Kobada (Mali) gold project. The consulting group Bumigeme Inc., located in Montreal, Quebec, was commissioned by AGG to complete the study. This news release has been revised to clarify the resource disclosure and to include the required 43-101 „Cautionary Statements“ in compliance with regulatory requirements.
The Study incorporates and includes drill data up to the end of December, 2010. There is no drill data from the 2011 campaign included in the Study. More specifically, the Study does not incorporate drill data for the northern extension holes that extend Zone 1 up to 2 kilometers north of the Zone 1 deposit, it does not incorporate the 2011 southern holes or the newly discovered Foroko North deposit, nor the newly discovered Termite Zone, the latter two are separate and distinct structures from Zone 1.
Project Economics – Base Case
The PEA estimates an after-tax Net Present Value (NPV) of US$216.9 million from commencement of construction and an after-tax Internal Rate Of Return (IRR) of 90.57% using a base case of US$1,100 per ounce of gold and a discount rate of 5%.
The Kobada project base case is for processing 20,000 tonnes per day for a total of 7,000,000 tonnes per year in a gravity process plant that is projected to recover 87.9% of the gold contained in 41,750,000 tonnes of lateritic material assaying 0.64 g/t Au, for average annual production of 126,600 ounces of gold for the first five years of operation. The average annual operating cost is calculated to be US$8.27/t for the first five years of operation with a CAPEX of US$122,500,000. The project produces gold at the direct cost of US$470.90 per ounce. During years 4 and 5 of operations the CAPEX will be increased by US$2.9 million for the addition of a ball mill that will be required to process the sulphide resource. The average operating cost at year 6 will increase to US$8.73/t. Gold recovery and production in year 6 is projected to be 80.80% and 112,200 ozs Au, respectively.
Key highlights from the Study are as follows:
Base Case Economics – US$1,100 oz Au, 5% Discount Rate
Summary of Capital Costs (CAPEX)
Summary of Operating Costs (OPEX)
IRR vs Operating Cost Variation
The projects sensitivity to variation in cost components is demonstrated as follows:
IRR vs Gold Price Sensitivity
The project is sensitive to changes in the market prices for gold as demonstrated in the following sensitivity analysis. US$1,100/oz Au represents the Base Case of the Study:
Overall Pit Inventory, After Dilution (Metric Tonnes and Average Grade)
Based on the mineralization geometry, the geology and the size of mining equipment, it is anticipated that there will be approximately 5% dilution. The grade of the diluting material is estimated at 0.1 g/t.
Rate of Production
The mine production rate was estimated from general experience and from general reference books.
Inferred Resources Estimate From Surface To 160 Meters Vertical Depth
The resources estimate reported in this Study are calculated from surface to a vertical depth of 160 m as compared to AGG-s 2008 initial resources estimate that was calculated to a vertical depth of 260 m. As previously stated, this amendment reflects AGG-s primary focus on the oxidized horizon of the deposit. Therefore, most of the volume of the sulphide resource that was included in the May, 2008 Initial Resources Estimate is not included in this Study.
The horizontal polygon block method was used for this Study and a total of eight (8) horizontal plans were generated from drill data with polygon vertical influence set to a distance of 20 m between plans. The grade of 0.1 g/t Au is used to define the mineralized envelope of the deposit. The specific gravity used is 1.9 g/m(3), which represents a 30/70 compromise between quartz at 2.5 (used by WGM) and saprolite at 1.6 (AGG internal test report from trenches). The geological interpretation was projected to the bottom plan. This means that the average block size and grade for the 380 level represents the block from 380 m to 400 m. The same will apply for the pit design.
Pit Parameters
The parameters of the proposed pit are dictated mainly by the wall geometry and the production rate. The wall geometry depends on the geotechnical behaviour of the rock. A geotechnical study will be undertaken as part of a Feasibility Study, which is currently underway. The assumptions used in this report are based on the geology. The planned pit will have a depth of 160 m, in a saprolitic formation which does not require blasting. Weathering can affect the wall angles.
From the available information, it is suggested, prior to the results of a geotechnical study, to consider the following configuration:
„The economics associated with our Kobada gold project are outstanding. I have in excess of 30 years of working experience in West Africa and have participated in the development of numerous lateritic deposits, of which seven (7) are now in production. My experience has taught me that increasing: 1/ sampling density; 2/ sample support or weight; 3/ aliquot or the amount of material actually analyzed, are strongly beneficial to increasing in situ gold content. The historical records indicate that Kobada was originally analyzed using 15 g to 30 g fire assay (FA) for gold content analysis. AGG acquired Kobada in 2006 and commenced its sample analysis program using 50 g fire assay (FA50). AGG submitted a total of 4,280 samples to dual analysis in the 2006 and 2007 core drilling program. Screen fire assay (SFA) of 1,000 g aliquot reported 11% higher gold content when compared to the same sample analyzed using FA50. In 2009, I managed a RC drill program that was fully funded by an arm-s length company. This company was sufficiently intrigued to investigate my hypothesis that Kobada gold could be recovered using a gravimetric recovery plant alone. RC drilling generated a larger sample support versus historical core and rotary air blast drilling. I recommended analyzing using a significantly larger 2,000 g aliquot by Leachwell analysis versus the historical 15 g, 30 g and 50 g FA and 1,000 g SFA. My RC drill program using Leachwell analysis increased the gold grade by 31%. As part of the overall program, I recommended metallurgical testing be conducted on a 287 kg RC cutting composite made up from 127 samples derived from 8 distinct RC drill holes. The metallurgical tests included desliming, followed by both gravity and, separately, cyanidation of the deslimed portion. The deslimed portion had a gravity recoverable gold grade of 4.28 g/t Au from a 10 kg aliquot while duplicate 50 g FA aliquots of the same portion gave 1.07 g/t Au. Based on my experience, I state with confidence that Kobada will become a producing mine in the near future and I predict it will be a highly profitable, low cost, gravimetric operation,“ states AGG Director, Pierre Lalande, P.Geo.
Qualified Person
The Preliminary Economic Assessment was prepared by Bumigeme Inc. under the supervision of Florent Baril, P. Eng. who is a „qualified person“ under the standards set forth in NI 43-101. Mr. Pierre Lalande, P.Geo, AGG Director is the Company-s designated Qualified Persons for the purposes of the Study. All parties have reviewed and approved their respective content of this press release.
Publication of the Study
The Study was originally prepared in French and is currently being translated into English. AGG intends to make the Study available on SEDAR upon receipt of the final English version.
African Gold Group, Inc., based in Toronto, Canada, is engaged in the identification, acquisition and exploration of prospective gold projects that are situated along significant gold trends within West Africa. To date, the Company controls a total of eleven gold concessions that are consolidated in four distinct stand alone exploration projects. Three of these projects are located in Ghana and one project (Kobada) is located in Mali, West Africa.
Mineral resources that are not mineral reserves do not have demonstrated economic viability. 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.
Additional Information is available on the Company-s website at and on and through the Company-s offices at: Sun Life Financial Tower, Suite 2518, 150 King St. West, Toronto, Canada M5H 1J9.
On Behalf of the Board:
Michael A. J. Nikiforuk, President, Director
The 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.
Contacts: African Gold Group, Inc. Michael A. J. Nikiforuk (416) 644-8892 ext 101
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