Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

November 27, 2008 07:30 ET

Castle Gold Reports Third Quarter Financial and Operating Results

TORONTO, ONTARIO--(Marketwire - Nov. 27, 2008) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) today reported its third quarter 2008 financial results and operational highlights for the three month and nine month periods ended September 30, 2008. The Consolidated Financial Statements and related Notes along with the Management's Discussion and Analysis have been filed with SEDAR (www.sedar.com) and can be viewed on the Company's website at: www.castlegoldcorp.com.

The Company will host a conference call to discuss the period's financial and operating results. The conference call has been scheduled for Thursday, November 27, 2008 at 10:30 a.m. EST, the dial in numbers are:

Local: 416 641-6139; and

Toll free (North America): 1 866 225-2055.

A replay will also be available at dial-in number: 416 695-5800 or toll free: 1 800 408-3053, pass code: 31956. The Company will also post the conference call on its website.

Highlights for the Third Quarter of 2008

- Effective July 1, 2008 commercial production was achieved at the Company's 100% owned El Castillo mine, Mexico.

- Gold production for the quarter totalled 6,542 ounces; 7,281 ounces of gold were sold during the quarter.

- Earnings for the quarter totalled $769,645, or $0.01 per share and the Company generated $1,980,290 in cash flow provided by operations during the quarter.

- An updated NI 43-101 resource and reserve report on the El Castillo mine demonstrated an increase in gold resources and reserves and recommended increasing annual production rates to in excess of 50,000 ounces of gold per annum and implementing activities to improve operating efficiencies.

- A six-hole twin, diamond drill hole program replicated historic drill results at the Company's La Fortuna project, paving the way to a fourth quarter announcement of a NI 43-101 resource study on the project.

- Advisory Committees of the Board of Directors for Mergers and Acquisitions and Finance were created during the quarter to work with management in these areas to the benefit of shareholders. A total of 800,000 options were issued to the directors of the Company as compensation for their roles on these committees. The recognition of the amortization of the fair value of these options was recorded in the current quarter.

Thomas Atkins, President and CEO of Castle Gold commented on the third quarter results stating: "The Company made good progress at the El Castillo and El Sastre mines during the quarter which resulted in positive earnings, cash flow and a stronger balance sheet. The operating teams performed particularly well during the period having been confronted by additional challenges posed by higher than normal precipitation. The Company moved higher volumes of material at El Castillo, constructed a new leach pad and expanded plant capacity to efficiently address higher volumes of liquid from the pads during the quarter. These activities will permit the mine to expand production capacity towards our objective of sustainable annualized gold production of 25,000 to 30,000 ounces of gold from Castillo in early 2009. At higher production rates and as we work through the initial higher strip ratio, we should begin to see reductions in operating costs going forward and higher margins per ounce of gold produced. The operating team at El Castillo are really coming together and are working on a number of activities which are enabling the mine to genuinely perform. With these efforts we look forward to further production increases and efficiencies in 2009 and beyond."

Financial Results

The Company reported consolidated metal revenues for the three month period ended September 30, 2008 of $6,329,649 on the sale of 7,281 ounces of gold consisting of revenues of $5,037,769 on 5,759 ounces from the operations at the El Castillo mine and $1,291,880 (100% - $2,583,760) on 1,522 ounces (100% - 3,044) from the Company's 50% interest in the El Sastre mine. This compares to metal revenues for the same three month period in the prior year of $1,159,044 (100% - $2,318,088) on metal sales from the Company's 50% owned El Sastre gold mine on the sale of 1,625 ounces of gold (100% -3,251). The increase in revenues and gold sales during the third quarter 2008 as compared to the same prior year period is a result of the recording of revenues from the El Castillo mine and the higher average selling price per ounce of gold offset by a 6% reduction in volume of gold sold from the El Sastre mine. Performance during the quarter is particularly impressive given that the third quarter is the rainy season in Mexico and Guatemala and that in spite of the challenges imposed by near record levels of rainfall, the operations produced good volumes of gold at attractive operating costs.

The Company reported earnings for the three month period ended September 30, 2008 of $769,645 or $0.01 share compared to a loss of ($200,314) or ($0.00) for the three month period ended September 30, 2007. Cash flow from operations during the period was $1,980,290 and the Company's cash balance increased to $2,188,947 as at September 30, 2008.

Operating expenses during the quarter were considerably higher than operating expenses for the year earlier similar third quarter period. General and administrative costs were $1,140,780 for the three month period ended September 30, 2008 compared to $271,936 during the three month period ended September 30, 2007. The increases in operating expenses, including general and administrative expenses, relative to the third quarter 2007 primarily reflect the costs associated with the operations of Aurogin, prior to the amalgamation of Aurogin and Morgain Minerals Inc. ("Morgain") on August 28, 2007 to create Castle Gold and therefore does not take into account higher costs associated with the increase in personnel, travel and general office costs as Castle Gold's operations grew with the ramp-up of the El Castillo gold mine in Mexico to commercial production in the quarter (previously held by Morgain) together with costs associated with the El Sastre mine in Guatemala (held by Aurogin). The increase in general and administrative expenses during the third quarter 2008, compared to the third quarter 2007 were related to the costs associated with the new Castle Gold entity, but also included restructuring expenses, the inclusion of costs from the El Castillo mine and the recognition of stock based compensation of $272,558 during the quarter as compared to $nil in the prior year period.

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

During the third quarter 2008 the El Castillo gold mine operated at ore mining rates of 162,000 tonnes per month with 1,245,000 tonnes of material being mined from the open pit of which 486,000 tonnes was ore, having an average cyanide soluble grade of 0.50 g/t gold having been placed on the leach pad. The ore placed was comprised of 344,000 tonnes of run-of-mine ore having an average cyanide soluble grade of 0.34 g/t Au and 142,000 tonnes of crushed ore having an average cyanide soluble grade of 0.91g/t Au. During the quarter, the Company placed an estimated 7,812 ounces of gold in ore on the leach pads of which the Company estimates 4,687 ounces of gold are recoverable for a calculated recovery rate of 60 percent.



Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2008
Operating Statistics (100%) (100%)

Tonnes mined 1,245,000 3,002,000
Tonnes waste 753,000 1,581,000
Tonnes ore-direct to leach pad 344,000 1,012,000
Tonnes crushed and placed 142,000 403,000
Tonnes ore placed on leach pad 486,000 1,415,000
Gold grade (grams/tonne) 0.50 0.51
Gold produced - commercial production (ozs) 4,629 4,629
Gold sales - pre-production (ozs) - 5,251
Gold sales - commercial production (ozs) 5,729 5,729
Average realized gold price per ounce (US$) $875 $875
Cost of sales per ounce sold (US$) $685 $685
Adjusted cost of sales per ounce sold (US$) $585 $585


Gold production for the three months ended September 30, 2008 was 4,629 ounces at a cost of sales per ounce of gold sold of US$685 and adjusted cost of sales per ounce of gold sold of US$585. Gold sales for the three months ended September 30, 2008 were 5,729 ounces at an average realized price of $875 per ounce for gross proceeds of $5,037,769. Gold production figures shown reflect the gold contained in the carbon removed from the gold processing facilities at site. Gold sales in the third quarter included 1,033 ounces that were produced in the second quarter but were in inventory at the end of the second quarter. Any figures reported for gold sales refer to the gold contained in the final refined dore as of the date of the final sale transaction. Due to timing delays associated with final gold refining, any gold produced that has not been fully refined is recorded as inventory until such time as a sale transaction has taken place.

The 1,245,000 tonnes of material mined in Q3 versus 889,000 tonnes mined in Q2 represents a 40% increase in total material mined. At the El Castillo mine the strip ratio (tonnes waste per tonne of ore) during the third quarter of 2008 was 1.55 as compared to the predicted LOM (life of mine) average of 0.6 (current 43-101 reserve report by ACA Howe - August 1, 2008). Consequently, in excess of 460,000 tonnes of additional waste material was mined in the quarter versus what would have been expected should LOM averages have been achieved. At a cost of approximately $1.25/t (mining and explosives) this material represents an added cost to operations of $575,000 in excess of what would have occurred under LOM operating conditions. The costs associated with mining this excess waste material are reflected in the current cost of gold sales (increased costs versus long term averages) of US$685/oz of gold produced. The adjusted cost of sales after correcting for LOM stripping equals US$585/oz gold produced. It is expected that these higher than average costs will continue into 2009 following which the strip ratio begins to decline towards the LOM average.

Production costs at the El Castillo gold mine were also impacted in the quarter by costs associated with the unprocessed gold inventory from the pre-production period (prior to July 1, 2008). This gold inventory at the El Castillo gold mine totalled 6,286 ounces valued at $728 per ounce. This compares to costs of sales per ounce at the El Castillo gold mine during the third quarter 2008 of $685 per ounce or an adjusted costs of $585 per ounce, a difference of $43 and $143 per ounce, respectively, or the equivalent of approximately $50 and $150 per ounce cash cost, respectively during the quarter.

Anomalously high levels of precipitation during the third quarter 2008 resulted in the temporary dilution of gold leach solutions at the site. The company moved quickly to expand the capacity of the gold processing plant during the quarter in order to handle the increased volumes of low grade solution. Consequently, although there were significant reductions in gold production in July and August, some of this lost production was recovered in September with the remainder expected to be recovered in the fourth quarter. Subsequent to the end of the third quarter, rainfall levels returned to seasonal levels.

Operating Performance - El Sastre Mine, Guatemala (50% interest)

Metal revenues for the El Sastre mine for the three month period ended Sept 30, 2008 were $1,291,900 on the sale of 1,522 ounces of gold (Castle Gold's 50% interest) at a cost of sales per ounce of gold sold of US$192. This compares to metal revenues for the same prior year three month period of $1,159,000 on metal sales of 1,663 ounces of gold. Gold production rates during the third quarter 2008 represent a return to more normal levels following the problems in the second quarter related to the completion of a second leach pad at the site. Gold recovery from this new leach pad achieved commercial rates during the third quarter. In addition, ore grades also returned to more long-term average values during the same period as new areas of the mine were put into production.



Three Months Nine Months
Ended Ended
September 30, September 30,
2008 2008
Operating Statistics (50%) (50%)
Tonnes mined 83,500 271,000
Tonnes Waste 42,500 173,500
Tonnes ore-direct to leach pad 29,500 69,000
Tonnes ore-crushed and placed 11,500 28,500
Tonnes ore-placed on leach pad 41,000 97,500
Gold grade (grams/tonne) 2.55 2.07
Gold produced (ounces) 1,913 3,851
Gold sales (ounces) 1,522 4,272
Average realized gold price per ounce (US$) $849 $878
Cost of sales per ounce sold (US$) $192 $209
Adjusted cost of sales per ounce sold (US$) $192 $209


Any figures reported for gold sales refer to the gold contained in the final refined dore as of the date of the final sale transaction. Due to timing delays associated with final gold refining, any gold produced that has not been fully refined is recorded as inventory until such time as a sale transaction has taken place.

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.

Total Shares Outstanding: 75.3MM

Fully Diluted: 88.9MM

52-Week Trading Range: C$0.15 - $0.75

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.

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)
    Email: info@castlegoldcorp.com
    Website: www.castlegoldcorp.com