Armada Gold Corporation - Baley Feasibility Study Positive.

TORONTO--(BUSINESS WIRE)--Aug. 17, 1998--Armada Gold Corporation (TSE:AAU.) (Alberta Stock Exchange:AAU.) Derek Fisher, President of Armada Gold Corporation announced today that an independent feasibility study, undertaken by Kvaerner Metals Davy Ltd. of Toronto, for a start-up development of the Taseevskoe gold deposit at Baley in southeastern Russia, has concluded with positive results. The study demonstrated the viability of an initial, high-grade, open pit operation with the ore being processed at a rate of 500,000 tonnes per annum and at a head grade of 7.09/g/t gold with a low estimated cash operating cost of US$113/oz. Gold production averages 98,000 oz per year for 6.3 years.

This study was undertaken as a Supplementary Study to the Bankable Feasibility Study completed by Kvaerner in October 1997 which examined a 1.75 million tonne per annum processing scenario.

This proved difficult to finance under current financial market conditions and gold price.

"Kvaerner have been innovative in their thinking for this new study in that they have recommended the refurbishment of existing site facilities and equipment, notably the crusher and the SAG mill, and the installation of the process plant in the existing mill building. As well, the Taseevskoe I orebody is accessed using the Russian pit with minimal pre-stripping. The current tailings dam will also be utilized." Mr. Fisher said. "The other major change results from additional metallurgy undertaken by Kvaerner which indicates that with fine grinding the higher grade 7.09 g/t ore can be processed in a conventional cyanide circuit (CIL). This work shows an anticipated recovery of 86 percent of the gold."

The open pit design for this Start-Up project contains ore reserves as follows: -0-

                                   TONNES      GRADE g/t Au
PROVEN                          2,687,000        7.59 g/t
PROBABLE                          445,000        4.04 g/t
TOTAL                           3,132,000        7.09 g/t
CUTOFF GRADE                  1.87 g/t Au

This resource estimate is in accordance with the requirements and guidelines of the Canadian Section 2A Definitions of Mineralization and Ore and with the Australasian Code for Reporting of Identified Mineral Resource and Ore.

After mining of the Start-Up pit the reserve that was the subject of the 1997 Bankable Feasibility Study will reduce to 23.25 million tonnes at a grade of 2.87 g/t Au.

Kvaerner's estimate of the capital cost for this initial project is US43.5 million made up of mining fleet (US$10.23 million) plant and infrastructure (US$29.36 million) and pre-strip (US$3.91 million). The options of leasing the mining fleet, or of contracting mining, will be investigated. Either would result in a significant reduction in project capital cost but would increase the cash production cost. The study also shows that the project can be rapidly developed with a short construction period of fifteen months.

The preliminary economic indicators for the Start-Up Project (pre-tax, non-leveraged) are as follows: -0-

      Gold Price       IRR         NVP (at 10 percent discount)
        US$300     31.9 percent           US$35,560,000
        US$320     36.9 percent           US$44,094,000

Fisher further commented, "We believe the Kvaerner study has demonstrated that the Start-Up Project has very robust financials, even in the current gold price climate." He added "that this scenario largely maintains the integrity of the Main Project, enabling it to rapidly proceed when gold prices recover. It is also a viable lower risk 'soft entry' into operating in Russia, providing valuable project development and mine operating experience."

Armada Gold Corporation, through its Russian subsidiary Balgold Limited, is entitled to a nominal 100 percent interest in the Baley Gold Project. This interest will dilute on finalization of its tax negotiations with the Russian Government and other possible partners.

The common shares of Armanda Gold are listed on The Toronto Stock Exchange and The Alberta Stock Exchange under the symbol AAU. U.S. S.E.C. Exemption: 12g3-2(b) 82-3965.

    CONTACT: Armada Gold Corporation
              Ross Orr, 416/777-00001
              or toll-free 1-800-517-1119
                         or
              Armada Gold Corporation
              Chris Cory, 416/777-0001
              or toll-free 1-800-517-1119