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Message: Majestic Gold Corp.: Wardrop Delivers Positive Preliminary Assessment for
Songjiagou Gold Project
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VANCOUVER, BRITISH COLUMBIA, Jan. 20, 2011 (Marketwire) --

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Majestic Gold Corp. (TSX VENTURE:MJS)(FRANKFURT:P5E) is pleased to announce that Wardrop, A Tetra Tech Company, ("Wardrop") has completed and delivered a positive Preliminary Assessment ("PA" or "Preliminary Assessment") for the Songjiagou Gold Project located in Shandong Province, People's Republic of China.

Highlights are as follows:



-- Net Present Value of US $525 million using a 10% discount rate

-- Internal Rate of Return of 78.6%

-- Payback in 1.4 years

-- Total gold production of 2.324 million ounces (average 105,645 oz/yr)
for life-of-mine

-- Life-of-Mine strip ratio 1.87 : 1 (waste to ore)

-- Mine-Life of 22 years.



"The Preliminary Assessment provided by Wardrop has exceeded our expectations and will form the basis for our continued development of the Songjiagou project," stated Rod Husband, President and CEO of Majestic Gold Corp.

A summary of the main sections of the Preliminary Assessment are as follows:

Resource

In 2006, Wardrop prepared a National Instrument 43-101 (NI 43-101) compliant, resource estimate of the Songjiagou deposit. On the basis of additional data collected during 2006, Wardrop prepared an updated estimate in late 2007.

In April 2010 Wardrop completed an update of the 2007 resource estimate to take into account assay results from surface core drilling and trenching that were carried out during 2007, as well as depletion from surface mining since the time of the last estimate. Depletion attributable to underground mining during the same interval was negligible.

The April 2010 updated resource estimate was made using an un-rotated block model, which is to say the blocks in the model were oriented orthogonally east-west and north south. In October 2010, Majestic requested that the estimate be redone using a block model rotated parallel to the trend of the deposit as well as a lower cutoff (0.3 g/t versus 0.4 g/t gold).

The lower threshold grade (0.3 versus 0.4 g/t) is attributable to a lower cost for contract mining and milling that Majestic negotiated during the period between the two estimates.

The rotated orientation is consistent with previous estimates and also aligns the block model with cross-sections that are cut perpendicular to the strike of the deposit. The change in block model orientation as well as the decrease in cutoff grade resulted in an overall enhancement of both estimated tonnes and grade. This report incorporates those changes. There has been no change in the underlying data between the April 2010 estimate and the current estimate.

The resource used in preparation of the Preliminary Assessment is tabulated as follows:



----------------------------------------------------------------------------
Au (ii)Au Ounces Ounces
(i)Resource Cut-off Uncap Cap Au Au
Category (g/t) Tonnes g/t g/t Uncap Cap
----------------------------------------------------------------------------
Indicated 0.30 33,739,586 1.384 1.147 1,501,298 1,244,211
----------------------------------------------------------------------------
Inferred 0.30 38,812,054 1.500 1.467 1,871,755 1,830,576
----------------------------------------------------------------------------

(i) 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. All figures have been rounded to reflect the relative accuracy of
the estimates.
(ii) gold grades were capped at 40.0 g/t



Open pit optimization was carried out using Whittle(TM) 4.3 which uses a series of Lerchs Grossman (LG) pit shells at different prices of gold to optimize the size of the pit while maximizing net present value (NVP) of the deposit. The resulting LG shells generated the highest discounted cash flow from the ore body at varying prices of gold. The LG shell used for optimization does not apply practical mining considerations and constraints.

The strategic planning using the generated LG pit resulted in the following potential mineable resources, which forms the basis of the preliminary Assessment:



----------------------------------------------------------------------------
(i)Potentially Mineable Resources
Classification Tonnes Grade, Au(g/t)
----------------------------------------------------------------------------
Indicated 29,875,527 1.207
----------------------------------------------------------------------------
Inferred 22,806,473 1.936
----------------------------------------------------------------------------

(i)Potentially Mineable Resources include the inferred mineral resources and
are not mineral reserves.



Preliminary Production Schedule

The life-of-mine strip ratio is 1.87 to 1 (waste to ore). Total ounces contained in the resource are 3,074,787; of this 2,324,000 ounces are potentially recoverable as bullion during the mine operations at an average annual production of approximately 106,000 ounces per year.

The following table summarizes the information from the Preliminary Economic Assessment Production Schedule.



----------------------------------------------------------------------------
Preliminary Production Summary
Unit Years 1-8 LOM
------------------------------------------------------------
Process Feed
Gold g/t 2.12 1.52

Material Mined
Mill Feed kt 18,494 52,682
Waste kt 47,746 100,377
Ore Mined kt 18,494 52,682

Strip Ratio 2.33 1.87

Total Production
Gold koz 1,152 2,324
Average Production
Gold koz 144 106
----------------------------------------------------------------------------



The following table details the planned Production Schedule for the Life-of-Mine:



Preliminary Production Schedule
(i)Tonnes Tonnes Stock- Tonnes Mill
Mined Moved pile Tonnes ROM feed
Including Total to Stock- to Waste Ore Strip Gold Gold
Stockpile Mined pile Mill Mined Milled Ratio Grade Rec.
Kt kt kt kt kt kt # g/t koz
Year 1 1,400 4,472 - 3,072 1,400 2.19 0.742 31
Year 2 2,442 7,644 237 - 4,965 2,442 1.85 3.431 256
Year 3 2,442 7,173 332 - 4,399 2,442 1.59 2.881 215
Year 4 2,442 10,500 344 - 7,714 2,442 2.77 1.868 139
Year 5 2,442 9,574 284 - 6,848 2,442 2.51 2.201 164
Year 6 2,442 10,354 304 - 7,608 2,442 2.77 1.696 126
Year 7 2,442 9,343 262 - 6,639 2,442 2.46 1.760 131
Year 8 2,442 9,150 207 - 6,501 2,442 2.45 1.803 134
Year 9 2,442 9,302 212 - 6,648 2,442 2.50 1.635 122
Year 10 2,442 7,640 222 - 4,976 2,442 1.87 1.316 97
Year 11 2,442 7,115 211 - 4,462 2,442 1.68 1.270 94
Year 12 2,442 6,671 202 - 4,027 2,442 1.52 1.450 107
Year 13 2,442 6,274 182 - 3,650 2,442 1.39 1.554 116
Year 14 2,442 6,006 185 - 3,379 2,442 1.29 1.539 115
Year 15 2,442 6,493 264 - 3,787 2,442 1.40 1.422 105
Year 16 2,442 6,772 319 - 4,011 2,442 1.45 1.162 86
Year 17 2,442 5,918 251 - 3,225 2,442 1.20 1.256 93
Year 18 2,442 5,871 316 - 3,113 2,442 1.13 1.226 90
Year 19 2,405 8,354 455 37 5,494 2,442 1.92 1.270 94
Year 20 754 3,289 82 1,688 2,453 2,442 2.93 0.486 34
Year 21 1,662 5,417 585 780 3,170 2,442 1.41 0.720 52
Year 22 363 604 5 2,079 236 2,442 0.64 0.478 33
TOTAL/
AVG 53,559 153,936 5,461 4,584 100,377 52,682 1.87 1.523 2,434
----------------------------------------------------------------------------
(i)Tonnes Mined Including Stockpile is Potentially Mineable Resources
category. 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.



Capital Costs

Total capital costs are estimated at $129.2 million including initial capital, initial working capital and sustaining capital. The majority of sustaining capital is required in years 4 and 5 and consists mainly of capital required to expand tailings storage facilities. A more detailed breakdown of the capital costs is provided in the following table.



----------------------------------------------------------
Capital Costs
000's US$
Pre-production (pre-strip) 0
Initial Capital 64,377
Initial Working Capital 7,120
Sustaining Capital 64,787
Total Capital Costs 129,163
----------------------------------------------------------



Operation Costs

Life-of-mine ("LOM") operating costs are estimated at US$11.67 per tonne milled, including mining, process and transportation costs based on the current contract terms. The details of these costs are tabulated as follows:



---------------------------------------------
Operating Costs
US$/tonne milled
Mining, Process and Transport 10.72
G&A and Quality Control 0.95
TOTAL OPERATING COSTS 11.67
---------------------------------------------



Operating Cash Flows

Operating cash flows based on pit optimization parameters employed by Wardrop indicate that in years 1-8 the mine will approximately produce a total of 1,152,000 ounces of gold (144,000 ounces annually) and generate US$841 million (US$105 million annually) in operating cash flow compared with life-of mine production of 2.32 million ounces of gold in concentrate (106,000 ounces annually) and operating cash flow of US$1.516 billion (US$68.9 million annually).

The projected cash flows are tabulated below:



--------------------------------------------------
Operating Cash Flow
000's US$
Years 1-8
Total 841,334
Average 105,167
LOM
Total 1,515,927
Average 68,906
--------------------------------------------------



Economic Returns

Wardrop evaluated the economic viability of the Songjiagou project using pre-tax discounted cash flow analysis based on the engineering work and cost estimates discussed in the Preliminary Assessment. Over the life of the mine, Songjiagou is estimated to produce on average 106,000 ounces gold in concentrate per year. Total gold produced for LOM will be 2.324 million ounces; with a gold price of $973 per ounce and total operating cash flow of US$1,516 million, the total cash cost is US$745 million or US$321 per ounce of gold. The pre-tax Net Present Value is US$525 million and the IRR is 78.6%.

The following table illustrates the project NPV's using various discount rates besides the 10% base case.



---------------------------------------------------------------------------
Economic Returns

Project NPV Unit Pre-Tax
--------------------------------------------------
14.0% discount rate million US$ 381
12.0% discount rate million US$ 446
10.0% discount rate million US$ 525
8.0% discount rate million US$ 624

Project IRR 78.6%

Payback Years 1.4
Mine Life Years 22
---------------------------------------------------------------------------



Sensitivity Analysis

Sensitivity analysis was conducted for gold price, exchange rate, gold feed grade, operating costs and initial capital costs over a +/- 30% range. The results are shown in following table and graph.



----------------------------------------------------------------------------
Sensitivity Analysis (in US$
millions)
NPV @ 10% discount rate
Variable -30% -20% -10% 0% 10% 20% 30%
--------------------------------------------------------
Gold Price 276 359 442 525 608 691 774
Exchange Rate 553 544 534 525 516 507 497
Gold Feed Grade 277 360 442 525 608 691 774
Operating Cost 586 566 545 525 505 485 464
Initial Capital Cost 542 536 531 525 520 514 508
----------------------------------------------------------------------------



As the table shows and the following graph illustrates, the main factors impacting the NPV are gold price and gold feed grade, while exchange rate, operating costs and initial capital costs have a much smaller effect on NPVs.

To view the graph titled "Pre-tax NPV @ 10% Sensitivity Analysis", please visit: http://media3.marketwire.com/docs/mjs-graph.pdf.

Based on the estimates in the Preliminary Economic Assessment, Majestic plans to move ahead with continued development of the project, including more detailed engineering studies and applications for mining permits.

The Preliminary Economic Assessment was prepared by Wardrop consultants, all of whom are independent of Majestic and are Qualified Persons as defined by section 1.4 of National Instrument 43-101. The QP's have reviewed and approved the information in this news release. The consultants (QPs) with their responsibilities are as follows:

Wardrop, under the direction of Greg Mosher, P.Geo., for all matters relating to geology and mineral resource estimate.

Wardrop, under the direction of Nory Narciso, P.Eng., for all matters relating to mine planning, mine design and report coordination.

Wardrop, under the direction of John Huang, P.Eng., for all matters relating to mineral processing, metallurgical testing, infrastructure, tailings management facility, environmental impact considerations, license and permit, operating and capital cost estimates and smelting terms.

Wardrop, under the direction of Miloje Vicentijevic, P.Eng., M.Eng. for all matters relating to economic analysis.

Mike Hibbitts, P.Geo VP Development and Exploration, and a Director of Majestic, has read and approved the information in this news release.

On Behalf of the Board of Directors

MAJESTIC GOLD CORP.

Rod Husband, P.Geo, President

This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.

Neither 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.

Majestic Gold Corp.

(604) 681-4653 or 1-866-282-8398

[email protected]
www.majesticgold.net

Source: Marketwire Canada (January 20, 2011 - 9:28 PM EST)
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