Majestic Gold Corp. Reports Delivery of Updated Preliminary Economic Assessment for Song Jiagou Gold Project

Majestic Gold Corp. (TSXV:MJS) announced that SRK Consulting China Ltd., completed and delivered a positive Preliminary Economic Assessment for the Song Jiagou Gold Project located in Shandong Province, People’s Republic of China.

As quoted in the press release:

Scenario 1

In Scenario 1, only the Indicated mineral resource was used for the pit optimization and the relocation of the two villages near the mine was assumed not to be necessary. This scenario utilized the existing mill capacity and assumed additional capital expenditures of US$31.9 million for engineering, road construction, processing facilities upgrades, tailings, land leases and community relations.

The ultimate pit’s maximum length along the east-west axis is about 660 m, and the maximum width along the north-south axis is about 600 m. The highest elevation of benches is 140 m and the lowest is -125 m. The vertical depth of the open pit is about 270 m. At a bench height of 10 m, there will be a total of 27 benches within the pit.

Despite the limitations imposed by the current mining license, as of 31 January 2013, at a cut-off grade of 0.3g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:

Resource Category	Tonnes (kt)	Grade (g/t)	Gold (Kg)	Gold (ounces)
Indicated	17,200	1.35	23,200	746,600
Inferred*	10,128	1.25	Nil	Nil
* The Inferred resources report to waste in scenario 1.

Scenario 1 involves the movement of 57,899 kt of waste (including the 10,128 kt of Inferred resources) and has a strip ratio of 3.37.

The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The salable metal is estimated as 20,441 kg, or about 657 thousand ounces (“koz”).

According to the preliminary production schedule, Scenario 1 will have a life of mine (“LOM”) of seven years of stable production at a mill throughput of 7,400 tpd.

The pre-tax NPV at various discount rates are tabulated below

Discount Rate	NPV (RMB x 1,000,000)	NPV ($US x 1,000,000)
10%	2,998	477
7%	3,163	503
12%	2,899	461

Scenario 2

In Scenario 2, all of the mineral resources have been considered for the pit optimization, while the relocation of the two villages near the mine was not considered. This scenario involves expanding the mill capacity to 10,000 tpd and assumes additional capital expenditures of US$83.4 million for engineering, road construction, processing facilities upgrades, tailings, land leases and community relations.

The ultimate pit’s maximum length along the east-west axis is about 730 m, and the maximum width along the north-south axis is about 640 m. The highest elevation of benches is 140 m and the lowest is -145 m. The vertical depth of the open pit is about 290 m. At a bench height of 10 m, there will be a total of 29 benches within the pit.

As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:

Resource Category	Tonnes (kt)	Grade (g/t)	Gold (Kg)	Gold (ounces)
Indicated	19,076	1.32	25,200	809,600
Inferred	13,598	1.37	18,600	599,000

Scenario 2 involves the movement of 65,394 kt of waste and has a strip ratio of 2.00.

The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold smelting recovery is 93%. The salable metal is estimated as 38,584 kg, or about 1,241 koz.

According to the preliminary production schedule, the LOM of Scenario 2 will be 11 years with a capacity of 10,000 tpd, including ten years of stable production and one year of ramp up.

The pre-tax NPV at various discount rates are tabulated below:

Discount Rate	NPV (RMB x 1,000,000)	NPV ($US x 1,000,000)
10%	4,882	777
7%	5,394	858
12%	4,584	730

Scenario 3

In Scenario 3, all of the mineral resources have been considered for the pit optimization, and the relocation of the two villages near the mine was also considered. This scenario involves expanding the mill capacity to 12,000 tpd and assumes additional capital expenditures of US$124.4 million for engineering, road construction, processing facilities upgrades, tailings, land leases and relocation and community relations.

The ultimate pit’s maximum length along the east-west axis is about 830 m, and the maximum width along the north-south axis is about 850 m. The highest elevation of benches is 140 m and the lowest is -190 m. The vertical depth of the open pit is about 330 m. At a bench height of 10 m, there will be a total of 33 benches within the pit.

As of 31 January 2013, at a cut-off grade of 0.30 g/t Au, the Song Jiagou Project contains the following remaining resources within the pit:

Resource Category	Tonnes (kt)	Grade (g/t)	Gold (Kg)	Gold (ounces)
Indicated	26,284	1.35	35,500	1,140,800
Inferred	22,927	1.40	32,000	1,032,000

Scenario 3 involves the movement of 147,507 kt of waste and has a strip ratio of 3.00.

The mining recovery is 95% and the dilution is 5%. The grade of the dilution material is 0.12 g/t. The processing recovery depends on the feed grade. If the average feed grade is greater than 1.00 g/t Au, 95% of the Au can be recovered. The gold reclamation ratio of the concentrate is 93%. The salable metal is estimated as 59,632 kg, or about 1,917 koz.

According to the preliminary production schedule, Scenario 3 will have a LOM of 13 years with a capacity of 12,000 tpd, including twelve years of stable production and one year of ramp up.

The pre-tax NPV at various discount rates are tabulated below:

Discount Rate	NPV (RMB x 1,000,000)	NPV ($US x 1,000,000)
10%	6,637	1,056
7%	7,482	1,191
12%	6,164	981

Mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature and is based, in part, on 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. There is no certainty that the preliminary assessment will be realized. All figures are rounded to reflect the relative accuracy of the estimate.

The Company cautions that the cash flow models and resulting NPVs were done on a pre-tax basis. After tax NPVs would be adjusted downward after considering depreciation and other allowable expenses and deduction of Chinese corporate taxes (currently estimated at 25%).

Sensitivity analysis shows that the changes of gold price will affect the NPV of the project most significantly; the following table summarizes the changes of NPVs at 10% discount rate against the change of gold prices.

NPVs Vs. Changes of Gold Price for Song Jiagou Project (US$ Million)
	-20%	-10%	Base Case	10%	20%
Scenario	US$1084/oz	US$1220/oz	US$1355/oz	US$1490/oz	US$1626/oz
1	334	406	477	549	620
2	544	661	777	893	1,009
3	729	893	1,056	1,220	1,384

Based on the estimates in the PEA, Majestic plans to move ahead with the continued development of the project, including more detailed engineering studies as well as applications for expanded mining licenses.

Click here to read the Majestic Gold Corp. (TSXV:MJS) press release