July 13, 2011 at 09:00 AM EDT
African Gold Group, Inc. Positive Preliminary Economic Assessment Generates $216.9 Million NPV and 90% IRR

TORONTO, ONTARIO--(Marketwire - July 13, 2011) - 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.

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 of ore 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 of ore. 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:

/T/

-- The Study demonstrates that the Kobada gold project is economically

optimized by adopting bulk mining versus selective mining. The direct

implications of bulk mining are demonstrated in a substantial increase

in ore tonnage and recoverable gold but with an associated decrease in

the average gold grade.

-- AGG Director and Qualified Persons, Mr. Pierre Lalande, P.Geo., has

recommended that 100% of all material excavated between the hanging wall

and footwall of the mineralized zone be processed in the gravimetric

plant as lateritic deposits containing coarse free gold result in a

strong "nugget effect". It is this characteristic, due to weathering,

that makes Kobada amenable to utilizing gravity for gold recovery. Mr.

Lalande contends that the increase in sampling density of drilling

during grade control of mined deposits in West Africa often turns much

"in ore waste" of feasibility study estimates into incremental ore.

-- The geological and in-pit resources that are detailed in this study are

only projected to a vertical depth of 160 meters versus the projected

depth of 260 meters in AGG's 43-101 compliant Initial Resources Estimate

that was published in May of 2008. 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.

Base Case Economics - US$1,100 oz Au, 5% Discount Rate

--------------------------------------------------------------------------

IRR Pay Back Net Present

EQUITY (%) Period Value $(M)

--------------------------------------------------------------------------

50% 90.6 14 months $216.9

--------------------------------------------------------------------------

Summary of Capital Costs (CAPEX)

----------------------------------------------------------------------------

Description C$

----------------------------------------------------------------------------

Mining 34,404,000

----------------------------------------------------------------------------

Concentrators 30,554,760

----------------------------------------------------------------------------

Infrastructures and services 29,016,650

----------------------------------------------------------------------------

Personnel accommodations 2,100,000

----------------------------------------------------------------------------

Sub-Total 96,075,410

----------------------------------------------------------------------------

----------------------------------------------------------------------------

EPCM (12.5%) 12,009,426

----------------------------------------------------------------------------

Miscellaneous (15%) 14,411,312

----------------------------------------------------------------------------

Sub-Total 26,420,738

----------------------------------------------------------------------------

----------------------------------------------------------------------------

Total CAPEX 122,496,148

----------------------------------------------------------------------------

Summary of Operating Costs (OPEX)

----------------------------------------------------------------------------

Description C$/Year

----------------------------------------------------------------------------

Mining 15,122,267

----------------------------------------------------------------------------

Concentrators 31,411,184

----------------------------------------------------------------------------

Administration and services 2,591,319

----------------------------------------------------------------------------

Personnel accommodations 1,236,000

----------------------------------------------------------------------------

Sub-total 50,360,770

----------------------------------------------------------------------------

----------------------------------------------------------------------------

Miscellaneous (15%) 7,554,116

----------------------------------------------------------------------------

----------------------------------------------------------------------------

Total OPEX 57,914,886

----------------------------------------------------------------------------

----------------------------------------------------------------------------

Operating Cost/t 8.27

----------------------------------------------------------------------------

/T/

IRR vs Operating Cost Variation

The projects sensitivity to variation in cost components is demonstrated as follows:

/T/

----------------------------------------------------------------------------

Operation Cost Pay Back Net Present IRR IRR Variation

Variation (%) Period (month) Value (M) (%) (%)

----------------------------------------------------------------------------

-25 11 $286.7 114.9 +26.8

----------------------------------------------------------------------------

-15 12 $258.8 105.2 +16.1

----------------------------------------------------------------------------

Base 14 $216.9 90.6 -

----------------------------------------------------------------------------

+15 16 $175.0 75.7 -16.4

----------------------------------------------------------------------------

+25 18 $147.1 65.6 -27.6

----------------------------------------------------------------------------

/T/

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:

/T/

----------------------------------------------------------------------------

Gold Price Pay Back Net Present IRR

Variation $US Period (month) Value (M) (%)

----------------------------------------------------------------------------

$900 23 $103.2 48.8

----------------------------------------------------------------------------

$1,000 17 $160.1 70.1

----------------------------------------------------------------------------

$1,100 14 $216.9 90.6

----------------------------------------------------------------------------

$1,200 11 $273.7 110.7

----------------------------------------------------------------------------

$1,450 8 $415.8 160.1

----------------------------------------------------------------------------

/T/

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.

/T/

----------------------------------------------------------------------------

Ore tonnage before dilution (kt) 39,763

----------------------------------------------------------------------------

Grade before dilution (g/t) 0.67

----------------------------------------------------------------------------

Waste tonnage before dilution (kt) 71,195

----------------------------------------------------------------------------

Stripping ratio before dilution 1.79

----------------------------------------------------------------------------

Dilution 5%

----------------------------------------------------------------------------

Diluting tonnage coming from waste (kt) 1,988

----------------------------------------------------------------------------

Diluting grade (g/t) 0.10

----------------------------------------------------------------------------

Ore tonnage after dilution (kt) 41,751

----------------------------------------------------------------------------

Average grade after dilution (g/t) 0.64

----------------------------------------------------------------------------

Waste tonnage after dilution (kt) 69,207

----------------------------------------------------------------------------

Stripping ratio after dilution 1.66

----------------------------------------------------------------------------

/T/

Rate of Production

The mine production rate was estimated from general experience and from general reference books.

/T/

----------------------------------------------------------------------------

Ore (t) 41,750,896

----------------------------------------------------------------------------

Waste (t) 69,206,672

----------------------------------------------------------------------------

Total (t) 110,957,568

----------------------------------------------------------------------------

Expected Mine Life (years) 6

----------------------------------------------------------------------------

Expected Daily production (Ore) (t) 20,000

----------------------------------------------------------------------------

Stripping ratio 1.66

----------------------------------------------------------------------------

Expected Daily production (Waste) (t) 33,152

----------------------------------------------------------------------------

Expected Daily production (Ore and Waste) (t) 53,152

----------------------------------------------------------------------------

/T/

Geological 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.

/T/

----------------------------------------------------------------------------

Levels Cut (g/t) Tonnage Grade (g/t) Ounces Au Categories

----------------------------------------------------------------------------

240-400 0.1 71,211,336 0.48 1,093,000 Resources

----------------------------------------------------------------------------

240-400 0.3 36,133,759 0.77 893,000 Resources

----------------------------------------------------------------------------

240-400 0.5 19,167,747 1.12 689,000 Resources

----------------------------------------------------------------------------

/T/

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:

/T/

-- bench height: 10 m

-- ramp width: 18 m

-- ramp grade: 10%

-- berm width: 5 m

-- berm frequency: every 20 m;

-- minimum working space required: 50 m;

-- bench face angle: 71 degrees.

-- Overall pit angle: Overall pit angle taking into account berms and one

ramp access is approximately 36 degrees.

/T/

"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 and aliquot 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.

Additional Information is available on the Company's website at www.africangoldgroup.com and on www.sedar.com 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 has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
Stock Market XML and JSON Data API provided by FinancialContent Services, Inc.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Privacy Policy and Terms and Conditions.
Press Release Service provided by PRConnect.
Stock quotes supplied by Six Financial
Postage Rates Bots go here