Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

October 21, 2009 08:58 ET

Castle Gold Q3-2009 Operating Performance-El Castillo Gold Production Increases 65 Percent Compared to Q3-2008

TORONTO, ONTARIO--(Marketwire - Oct. 21, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) is pleased to provide an update on the ramp-up in mining and gold production at its 100 percent owned El Castillo Gold Mine in Durango State, Mexico.

Operating highlights for the third quarter ended September 30, 2009 compared to Q3-2008 and Q2-2009, include:

  • New quarterly gold production record of 7,655 ounces of gold, a 65 percent increase from the year earlier third quarter period of 6.421 ounces and a 19 percent increase from the previous quarter (Q2-2009) of 6,421 ounces of gold produced.
  • New quarterly record for total tonnes mined of 2,594,800 tonnes of combined ore and waste, a 109 percent increase from the year earlier third quarter period of 1,239,500 and a 39 percent increase from the previous quarter of 1,862,300 tonnes mined.
  • New quarterly record for total ore placed on leach pads 1,051,300 tonnes of combined run-of-mine and high grade ore, a 116 percent increase from the year earlier third quarter period of 486,500 and a 36 percent increase from the previous quarter of 775,100 tonnes mined.
  • New quarterly record for total estimated gold placed on leach pads of 14,100 ounces, an 81 percent increase from the year earlier third quarter period of 7,800 and a 21 percent increase from the previous quarter level of 11,700 ounces of gold. The Company expects to recover 60% of the gold from the total ounces placed on the pad.
  • A monthly production record for total tonnes mined, having occurred in September 2009 of 931,000 tonnes a 16% increase over the intended expanded mining rate of 800,000 tonnes per month objective that was to be achieved with the arrival of the new equipment fleet for El Castillo.
  • Engineering, purchase and construction of a portable screening plant and related infrastructure to improve operating efficiencies of the crushing plant for high grade material was advanced during the quarter. The screening plant is expected to be fully operational in Q1-2010 coincident with higher volumes of gold ore being mined as the amount of waste to be mined declines (waste to ore ratio declines), under the current mining plan.

Thomas Atkins, President and CEO of Castle Gold commented on the third quarter operating results stating: "Castle's Vice President Operations Federico Alvarez and his team in Mexico together with Vice President Project Development Darren Koningen deserve the credit for the successful ramp-up of operations at Castillo to date. With the arrival of the balance of the new equipment fleet during the third quarter, production has rapidly exceeded expectations. Gold production for the third quarter was a new record for the mine despite temporarily mining lower grades, as part of the mine plan, and challenges to maintaining gold solution grades on the leach pads during the rainy season. During the quarter we continued to aggressively remove waste to facilitate higher rates of ore mining commencing the second half of 2010. The waste to ore ratio during the third quarter was 1.4 to 1.0. The life-of-mine average ratio of 0.6 - 0.55 to 1.0 is expected to be achieved in the second half of 2010 under the current mining plan and equipment currently dedicated to the removal of waste will, as a result of the reduced waste to ore ratio, be freed-up to mine more ore. This will have a direct impact on gold production. Management continue to pursue further operating performance improvements in the coming months as we upgrade the screening and crushing plant and look to increase resources and reserves through additional drilling to the south of the currently known El Castillo open put gold reserves."

Operating Performance - El Castillo Gold Mine, Durango State, Mexico (100% interest)

During the three month period ended September 30, 2009 mining rates at the El Castillo gold mine averaged 865,000 tonnes per month, more than double the rate of production from the year earlier period and almost 40 percent above rates achieved in Q2-2009 as mining operations benefited from the arrival of the remaining components of the new, larger and more efficient contractor supplied and operated equipment fleet. During the quarter a total of 2,594,800 tonnes of material was mined from the open pit of which 1,051,300 tonnes of ore, having an average grade of 0.42 grams per tonne gold was placed on the leach pad. The grade of gold mined during the third quarter 2009 was 16 percent lower than that mined in the previous year period. Despite the temporary lower grade, gold production during the third quarter 2009 was 7,655 ounces, or 65 percent higher than the year earlier period.

Operating StatisticsThree Months
Ended
Sept. 30, 2009
(100%)
Three Months
 Ended
Sept. 30, 2008
(100%)
 Three Months Ended
June 30, 2009
(100%)
 
Total tonnes mined  2,594,800 1,239,500 1,862,300 
Tonnes waste 1,543,500753,000 1,087,100 
Waste : Ore Ratio 1.471.55 1.40 
Tonnes ore-direct to leach pad  782,900 343,900 573,200 
Tonnes crushed and placed  268,300 142,700 201,900 
Tonnes ore placed on leach pad  1,051,300 486,500 775,100 
Gold grade (grams/tonne) 0.420.50 0.47 
Gold produced – commercial production (ounces)  7,6554,626 6,421 

During the third quarter the balance of the new equipment arrived on site. This now includes:

  • 10 CAT 740 trucks with a capacity of 40 tonnes.
  • 3 CAT 988H front-end-loaders with a capacity 8.5 cubic yards.
  • 1 CAT 416 excavator for lime loading on the trucks prior to ore being dumped on the pads.
  • 3 Atlas Copco, ECM 590 RC blast hole drill rigs.

Some components of the original fleet of smaller capacity trucks remain on site. These trucks would be the approximate equivalent of an additional two CAT 740, 40 tonne trucks. The contractor, in September was requested to operate at volumes of production that can be achieved with the current equipment fleet. It is evident from September's production volumes (931,000 tonnes per month) that with the current equipment and labour force, production can significantly exceed the originally designed capacity of this equipment of 800,000 tonnes per month. As the components of the original fleet reach the end of their productive lives, the two new CAT 740 trucks are expected to arrive and be operational. As a result monthly mine production is expected to approximate 900,000 tonnes per month, the limits of the current mine permits, into early 2010 when new expanded production permits are expected to be in place.

El Castillo - Additional Expansion Potential

The Company is confident of its ability to increase resources and reserves in the area to the south of the currently designed open pit at Castillo as evidenced by results from its Phase I resource expansion drilling program (refer to press releases dated May 21 and June 9, 2009) wherein 17 of 19 drill holes intersected mineralization in excess of the current resource cut-off grade being used to calculate resources and reserves. The best of these drill holes, drill hole CA – 216 intersected 109.7 metres grading 0.7 grams per tonne gold. The Company is near completing the re-calculation of gold resources at El Castillo as a result of the Phase I drilling and taking into account geological controls for populations of run-of-mine grade and high-grade gold material. Result from this work will be used to plan a Phase II drill program which if successful in adding additional gold reserves, such reserve additions have the potential to facilitate a further ramp-up of production capacity to in excess of 70,000 ounces per year of annual gold production.

The timing of the commencement of the Phase II drill program is yet to be defined. However, Phase II drilling is conditionally approved by the Board of Directors, pending review of the results of the new resource calculation and the details on number, location and cost of drilling to potentially further expand resources in the target area and to bring such resources into the Proven and Probable reserve categories.

At present, limits to capacity throughout exist as a result of planning (pad design, timing of new pad construction), permitting and additional contractor equipment to accommodate mining up to 1,200,000 tonnes per month, an approximate 50 percent increase from current levels. Planning and permitting applications are advancing to facilitate these higher rates of production and are expected to be completed no later than Q2-2010. Additional mining equipment to achieve increased production levels is believed to exist within an approximate three month lead time. Once planning, permitting and the expanded reserves approach completion, orders for supplemental mine equipment are expected to be placed enabling the Company to ramp-up production to meet enhanced production objectives of in excess of 70,000 ounces per year.

El Castillo – Screening Plant

The Board of Directors, on September 24, 2009, formally approved an approximate US$1.3 million total investment in the engineering, purchase and construction of a portable screening plant to screen out the fine fraction (material less than ¾ inch) of the high-grade ore that would otherwise pass through the contractor operated screen-crusher plant prior to being stacked on the heap leach pads (refer to press release dated April 2, 2009).

The opportunity to enhance the performance of the screen-crush plant arose from observations that a large percentage of the high-grade material that is currently being crushed, given the manner in which this material fractures on blasting, breaks to a size fraction below the targeted size for optimal recoveries of gold of such high-grade material – less than ¾ inch in size. The current contracted screen-crusher plant equipment configuration does not permit the screening of this fine fraction of high-grade material thereby reducing the capacity of the existing crushing operations, resulting in reduced recoveries of gold. The installation of this screen deck will enable the portion of blasted, fine, high-grade material to simply be screened-out from the coarser high-grade material allowing the crushing circuit capacity to be significantly increased.

In the April 2009 release it was determined that on the basis of savings in crushing costs relative to the current contractor terms, higher volumes of production and recovery of additional ounces of gold relative to the capacity of the current contractor equipment, per unit operating costs are expected to be reduced by approximately 50 percent for savings of US$34 per ounce of gold produced. The internal rate of return on the investment of US$1.0 million is calculated at 172 percent with a quick approximate 10 month return on invested capital. Assuming the US$34 per ounce operating cost savings, enhanced gold recoveries and a US$800 per ounce gold price, annual cost savings are estimated at US$1.7 million. Based on the current mine life of 10 years at in excess of 50,000 ounces of gold per annum and assuming a life-of-mine average gold price of US$750 per ounce and a 5% discount rate this US$1.0 million investment produces a net present value of US$10 million based on current reserves.

The screening plant is expected to be operational in Q1-2010 coincident with higher volumes of ore being mined at El Castillo as the amount of waste to be mined declines (waste to ore ratio declines) under the current mining plan.

About Castle Gold

Castle Gold Corporation is a growth oriented gold producer with projects focused in the America's. The Company owns a 100% interest in the El Castillo gold mine in Mexico and a 50% interest in the El Sastre gold mine in Guatemala. Castle Gold is also advancing exploration and development work at its La Fortuna gold-silver-copper project in Mexico and at its El Sastre and El Arenal project in Guatemala.

 TSX-V Trading Symbol: CSG
 Total Shares Outstanding:75.5MM
 Fully Diluted: 83.0MM
 52-Week Trading Range: C$0.15 - $0.80

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Contact Information

  • Castle Gold Corporation
    Thomas Atkins
    President and CEO
    416 214 4809 or Toll Free: 1 866 646 3274
    416 366-7421 (FAX)
    or
    Castle Gold Corporation
    Rory Quinn
    Manager Investor and Public Relations
    416 214 4809 or Toll Free: 1 866 646 3274
    416 366-7421 (FAX)
    info@castlegoldcorp.com
    www.castlegoldcorp.com