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Amarillo Gold on track to become a mid-tier gold producer in Brazil

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  • Canadian junior resource company on the verge of production at its Posse Gold Project in Brazil
  • Exploration upside at the Lavras do Sul gold project with more than 22 prospects
  • Cash balance of C$40.7 million to advance development of both projects

What Amarillo Gold does:

Amarillo Gold Corp (CVE:AGC) (OTCQB:AGCBF) (FRA:72A) is on the verge of becoming Brazil’s next gold producer with its shovel-ready Posse Gold Project in Goiás State.

Posse is on the company’s Mara Rosa Property with some bold-faced neighbors: the project is located about 35 kilometers (km) away from Lundin’s Chapada mine and about 100km from Anglo Gold’s Serra Grande (Crixás) mine, as well as the Pilar operation that was recently divested by Equinox Gold.

A 2020 definitive feasibility study outlined a resource of 32 million tonnes at 1.1 grams per ton gold for a total of 1.2 million ounces in the high-confidence measured and indicated category.  The project is anticipated to produce 102,000 gold ounces per year in its first four years and have an average annual gold production of 84,000 ounces based on an initial 10-year mine life.

With a construction permit in hand, Amarillo’s key aim is to secure financing to build the operation. The company estimates it will take roughly two years to build the 100,000 ounces per year gold project.

Mara Rosa also shows the potential for discovering additional near-surface deposits that will extend Posse’s mine life beyond its initial 10 years.

Posse is just one of two projects that the company has in its portfolio. The exploration stage Lavras do Sul Project in Rio Grande do Sul State has more than 22 prospects centered on historic gold workings.

Heading into a pivotal period for Posse, Amarillo’s strategy is to make the necessary expenditures to stay on schedule for Posse while minimizing its financial exposure until it obtains full construction financing.

How is it doing:

It’s been an incredibly busy period for Amarillo as it gears up to start building the 100,000-ounces-per-year operation at Posse.

The firm is closing in on several engineering milestones as it looks to secure financing options.

Most of the land for the project area has been acquired and the remainder is expected to be acquired in the coming months. On the technical side, 37% of the overall project detailed engineering, including 91% of the early works detailed engineering, is completed, with design engineering in progress for water dam, waste piles, and low-grade ore stockpile.

Amarillo also purchased its crusher as well as technical information for the grinding circuit. Since signing an agreement for the power line, Amarillo has acquired approximately 70% of the necessary land for the power line to run. Engineering is complete, the archeology has been reviewed, and the license to install for the power line is outstanding.

Technical analysis and engineering for the main substation are also complete and installation is expected shortly.

Outside of engineering, drills are turning on both Mara Rosa and Lavras do Sul right now with some promising results.

Amarillo recently launched an 8,500-metre drill program targeting four areas near to identify potentially economic gold deposits that could add its existing resources and reserves and enhance its production profile.

At Lavras do Sul, Amarillo’s focus remains on resuming exploration activity to unlock the potential of this highly prospective property so it can open a second development front. Amarillo also began an exploration program at the site after quarter’s end.

The firm’s cash levels at the end of May were $40.7 million, most of which is invested in short-term savings and investment accounts awaiting deployment for constructing Posse, exploration, and general corporate purposes.

Inflection points:

  • Securing financing to start construction at Posse
  • More exploration results from Posse to show where it can expand the resource
  • Drill a second target and aim for 1 million ounces at Lavras do Sul
  • Start of production expected within two years once financing is locked in

What the boss says:

In a recent interview with Proactive, CEO Mike Mutchler detailed the company’s plan to make the jump to production.

“Mara Rosa is estimated at $145 million capital expenditures to build, and two years to bring it into production,” Mutchler said. “At today’s gold prices we’ll be throwing off roughly $100 million a year from Posse. We’ll use that to continue exploration and for development in the south.”

He added: “Our goal is to become a mid-tier gold producer in Brazil…There’s a lot of opportunities in Brazil and a lot of mineralization. We believe Brazil is a very good place to operate.”

Contact Angela at [email protected]

Follow her on Twitter @AHarmantas

Story by ProactiveInvestors


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