Magellan Minerals Ltd.: Positive Preliminary Economic Assessment Returned for the Coringa Project, Brazil

Thursday, May 06, 2010

Magellan Minerals Ltd. (TSX VENTURE:MNM) ("Magellan") has received the Preliminary Economic Assessment ("PEA") for the Coringa gold project from Global Resource Engineering Ltd ("GRE"). The PEA is based on the resource defined in the October 2009, National Instrument ("NI") 43-101 compliant technical report.

The PEA indicates a robust Internal Rate of Return ("IRR") of 34% and a Net Present Value ("NPV") of US$41M (assuming a 5% discount rate and a gold price of US$950/troy oz. (oz). The project payback period is 3.7 years.

The PEA study used a cut-off grade of 3g/t gold and a Measured and Indicated resource of 830,460t @ 9.64g/t gold (257,388 oz) and an Inferred resource of 239,620t @ 11.86g/t (91,334 oz).

Key Parameters and Results of the Preliminary Economic Model include:

Project Life:             7.6 years

Ounces Recovered:         240,837oz

Operating Cash Cost:      US$418/oz

Av. Annual Oz Recovered:  36,490oz

Initial Capex:            US$26.4M

LOM Capex:                US$50.0M

IRR                       34%

Payback period            3.7 years

0% NPV:                   US$56.7M

5% NPV:                   US$41.3M

Ore t/d:                  400tpd

Process Recovery:         93.8% (LOM average).

Contingency:              15% on operating costs and 20% on capital costs.

The overhand cut and fill mining method was selected for the PEA study due to the ability to provide a high degree of grade control and the lower pre-production development requirements. The method also allows the backfilling of stopes early in the mine life with a tailings slurry, reducing external tailings facility storage requirements.

A conventional Carbon in Leach (CIL) milling circuit is the most attractive method for treating the Coringa ores. Metallurgical test work performed as part of the PEA on composite samples from the Serra and Meio blocks demonstrated that the ore is free milling producing laboratory gold recoveries of 99.0% and 97.7% respectively using this approach.

In terms of sensitivities, the project is very robust and is still economic under any one of the following scenarios: either a gold price of US$750/oz, a capital cost increase of 50%, or an operating cost increase of 50%. The project NPV rises to US$56.7M assuming a 0% discount rate, and US$82.5M assuming a gold price of $1200 per oz.

The PEA also notes that "the vein system is open both at depth and along strike. It is highly probable that the main vein system comprised of the 4 resource blocks is more or less continuous between blocks. It is probable that this vein system also continues along strike beyond the extents of the 4 resource blocks. There is also good potential to encounter additional parallel vein structures within the exploration area held by Magellan (Chapleau) as demonstrated by the Serra resource block".

Kevin Gunesch, Principal Mining Engineer with GRE and one of the main authors of the PEA, has advised Magellan that "the results for the Coringa PEA study are excellent and that the 34% IRR compares very favorably with other gold projects at a similar stage of development, especially in view of the significant contingencies included within the Coringa study".

Magellan's President and CEO, Alan Carter stated, "The results of the PEA highlight the robust economics of the Coringa Project which has the potential to generate significant cash flow and earnings for Magellan shareholders. Furthermore our ongoing exploration efforts and current drilling program are expected to continue to expand the known resource".

The PEA includes a recommendation to advance the project through a feasibility study. Magellan is currently engaged in a 2500m diamond drill program designed to further expand the existing resource. Initial drill results are expected during May-June 2010. A decision regarding the commencement of a feasibility study will be taken during the second quarter of 2010.

Full details of the Coringa PEA in the form of a National Instrument 43-101 technical report will be filed on SEDAR within 45 days.

Qualified Person

The Coringa preliminary economic assessment was prepared under the supervision of Mr. Kevin J. Gunesch a registered Professional Engineer in the state of Alabama (27448) and Principal Mining Engineer of Global Resource Engineering Ltd. (GRE). Christopher K. Chapman a registered Professional Engineer in the State of Colorado (40679) and Principal Mining and Civil Engineer of GRE. Terre A. Lane associate of GRE, AusIMM registered, and Principal Mining Engineer for Gustavson Associates and Richard D. Moritz Principal Mining Engineer for Gustavson Associates, MMSA registered and associate of GRE participated in the Coringa preliminary economic assessment report preparation.

Mr. Gunesch is an "independent" and "qualified person" as such terms are defined in NI 43-101. Mr. Gunesch has reviewed and approved the comments of this press release.

Ian Gendall (Pr. Sci. Nat.), Magellan's Chief Operating Officer and a "qualified person" within the definition of that term in NI 43-101, has reviewed the technical information contained in this news release.

Source: Marketwire