GBS Gold International Inc.

GBS Gold International Inc.

December 18, 2007 11:00 ET

GBS Gold Approves Tom's Gully Start-Up and Declares Initial Mineral Reserve

TORONTO, ONTARIO--(Marketwire - Dec. 18, 2007) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") is set to commence gold production at its Tom's Gully Project in the Northern Territory of Australia next year after receiving Board approval for the start of underground mining activities and plant commissioning works required to bring the project on-line.

Tom's Gully will become GBS Gold's second operation, 100km north of its existing Union Reefs operations, further consolidating its growing regional production profile in the Northern Territory and supporting its objective of increasing gold production to a targeted level of 300,000 ounces per year.

Key project highlights include (A$ represents Australian Dollars and US$ represents United States Dollars):

- Feasibility work on the Tom's Gully project has been completed supporting an initial probablereserve of 740,000 tonnes at 7.1 grams per tonne for 170,000 ounces of contained gold. The mineral reserve estimate excludes certain parts of the existing indicated resource and, given the Tom's Gully deposit is also open at depth and along strike, GBS Gold considers that there is potential for future increases to reserves and mine life.

- Targeted commencement of the underground operation in mid-2008. Production is expected to build over two quarters to an average rate of 35,000-40,000 ounces per year, for an initial reserve life of approximately 3.5 years.

- Forecast average cash operating costs in the range of A$520-550 per ounce (approximately US$450-475 per ounce at the current A$/US$ exchange rate of A$1.00:US$0.86). The current spot gold price is approximately A$930 per ounce (US$804 per ounce).

- Initial project capital estimated at approximately A$8 million comprising process plant modifications and recommissioning activities, underground development works and other capital requirements. The estimated payback period is approximately 1.5 years. Total sustaining capital over the reserve life is estimated at approximately A$8 million.

- GBS Gold is investigating various financing strategies to supplement its existing working capital resources for immediate commencement of the development program.

Commenting on the announcement, Gil Playford, GBS Gold's Chairman and CEO, said: "The detailed feasibility work undertaken on the Tom's Gully project has confirmed our expectations for the operation to be a high-grade and strong cashflow generator for the Company, with robust economics based on the initial reserve estimate. Tom's Gully is the first of a number of growth projects which are planned to come on-line over the next few years, lifting the Company's targeted production at the Union Reefs Operations Centre to over 300,000 ounces per year."

Tom's Gully Gold Project

The Tom's Gully Project is located in the Northern Territory of Australia approximately 100km north of the Company's existing Union Reefs processing plant. GBS Gold acquired the project in the third quarter of 2007 and, since that time, has undertaken further detailed feasibility assessment and preparatory site work, leading to the decision to start operations.

The project comprises approximately 1,000 square kilometres of mining and exploration properties, the Tom's Gully gold deposit, existing underground workings, a 250,000 tonne per annum carbon-in-leach (CIL) processing plant and related on-surface and underground infrastructure.

Mineral Resource and Deposit Geology

The Tom's Gully mineral resource has been estimated in accordance with National Instrument 43-101 ("NI 43-101") as follows:

Resource Tonnes Grade Contained Gold
Category (grams/tonne) (oz)
Indicated 1,276,000 8.4 346,000
Inferred 592,000 7.4 140,000
1,868,000 8.1 486,000
Reported at a 5 grams/tonne x metres cut-off

This resource estimate is an update to the previous estimate and is considered to better reflect the grade distribution within the deposit boundaries. A revised technical report for this resource estimate will be filed shortly.

The Tom's Gully gold deposit is hosted in siltstone and occurs as a quartz reef in association with sulphide minerals, primarily arsenopyrite and pyrite. The reef varies in thickness from 1 to 4 metres, striking approximately east-west and dipping at around 30 degrees near surface and then flattening to almost horizontal at a depth of approximately 280 metres below surface. The reef is 800 metres long at surface and extends down-dip for at least 1.5km. The deposit has been subdivided into Block 1 and Block 2 for mining purposes, with only Block 1 having been part-mined in the past.

The deposit is not closed off and there is potential to extend the deposit to the east and west, and in particular down-dip to the south.

Feasibility Study and Initial Reserve

GBS Gold has completed a feasibility study on the Tom's Gully project. Based on the results of this study, the Company has approved the commencement of underground mining and processing operations in mid-2008. Production is expected to ramp up over two quarters to an average rate of 35,000-40,000 ounces per year for an initial reserve life of approximately 3.5 years.

An initial mineral reserve for the Tom's Gully project has been calculated in accordance with NI 43-101. This reserve is based on the indicated resource estimate for only Block 2 of the Tom's Gully deposit. Accordingly, given the potential for mining of additional material from Block 1 and also that the deposit is open at depth and along strike, GBS Gold considers that there is good potential for future increases to reserves and mine life.

The initial mineral reserve for the Tom's Gully project has been estimated
as follows:

Reserve Ore Tonnes Grade Contained Gold
Category (Diluted) (oz)
Probable Reserve 740,000 7.1 170,000

Key assumptions and highlights of the Tom's Gully feasibility study and
reserve estimate are as follows:

Gold price: A$750/oz (the current gold spot price
is A$930/oz)
Plant throughput: 240,000 tonnes per annum
Metallurgical recovery: 85%
Average annual production: 35,000-40,000 ounces per annum
Initial project capital cost: A$8 million
Sustaining capital: Approximately A$8 million over the
reserve life
Unit costs:
Mining A$71/tonne (plus A$14/tonne sustaining
Processing/administration A$31/tonne
Cash operating cost: A$520-550/oz
(US$450-475/oz at the current exchange
rate of A$1.00:US$0.86)
Breakeven grade: 5.9 grams/tonne gold
Payback period (at A$750/oz): Approximately 1.5 years
Mine life of initial ore reserves: Approximately 3.5 years

GBS Gold will shortly file an independent NI 43-101 technical report on the Tom's Gully reserve estimate.

Development and Operating Plan

Since acquisition, GBS Gold has completed detailed assessments of the planned development of the mine and processing operations. While the original development plan was based on the Tom's Gully ore being mined and then hauled to the Union Reefs plant for processing, further detailed review of historical performance and metallurgical testwork indicated that with certain modifications to the existing Tom's Gully plant, processing recoveries could be improved above historical levels. In particular, processing recoveries are dependent upon the grind size of the ore concentrate particles. Testwork has confirmed that with some minor plant modifications, including the installation of a small ultra fine grind mill, processing recoveries of 85% can be achieved. The operating plan therefore involves the ore being processed through the adjacent Tom's Gully plant.

The mine design is based on extending the existing underground workings into the main Block 2 of the Tom's Gully orebody. The part-mined Block 1 component of the orebody has not been considered in the feasibility study or mineral reserve estimate. This zone, along with the portions of Block 2 not currently included in the reserve estimate, is therefore considered to offer upside potential as it is expected that GBS Gold will be able to mine some of this material.

The mining method for Block 2 is a modified "room and pillar" method. Ore will be accessed by primary and access decline headings, with lateral ore drives developed across the full width of the orebody (up to 200 metres in length). In order to minimize mining dilution, ore drives are planned to be mined using a two-phase process (known as "resue" mining) whereby waste in the lower section of the drive face is blasted and mined first, followed by a second blasting and mining cycle to separately remove the largely undiluted ore. Between each ore drive, the stopes will be drilled and blasted with pillars appropriately placed to provide ground stability. The ore from each stope will be extracted using standard remote-controlled mining equipment, and will be trucked to surface for processing through the Tom's Gully plant.

GBS Gold has received the majority of the required permits for the operation, and expects shortly to receive full authorisation for the proposed development and operating activities.

Capital Expenditure

Initial project capital is estimated at approximately A$8 million comprising process plant modifications and recommissioning activities, underground development works and other capital requirements. The estimated payback period is approximately 1.5 years. Total sustaining capital over the reserve life is estimated at approximately A$8 million, relating primarily to ongoing underground development activities.

GBS Gold has sufficient internal cash resources to commence the initial development requirements. In addition, the Company is investigating various financing strategies to supplement its working capital resources for the planned development program.

About GBS Gold International Inc.

GBS Gold is an emerging gold producer with 2.6Moz of Indicated Resources and 1.6Moz of Inferred Resources of gold at its Union Reefs Operations Centre located in historically productive goldfields in the Northern Territory of Australia. GBS Gold produces gold through its modern dual-mill 2.5Mtpa Union Reefs processing plant. The Company expects to commence production at its Tom's Gully and Cosmo Deeps free-milling projects in 2008-09 and then construct a flotation plant and biooxidation heap leach facility using the GEOCOAT® technology at the Union Reefs plant to process refractory ores and increase gold production from all sources to a targeted annualized rate of 300,000 ounces in 2009-2010. The Union Reefs plant is adjacent to the main Stuart Highway and the trans-continental Adelaide-Darwin railway line, and is on the Northern Territory power grid. Within 125km trucking distance of the Union Reefs plant, GBS Gold has consolidated over 3,500km2 of prospective tenements and gold deposits and also holds gold exploration properties in Western Australia and Canada. GBS Gold trades on the Toronto Stock Exchange under the symbol "GBS".

The technical disclosures in this news release regarding the Tom's Gully resource estimate were approved by Paul Payne of Resource Evaluations Pty Ltd and regarding the Tom's Gully feasibility study and reserve estimate were approved by Heath Gerritsen of HG Mine Design Pty Ltd. Technical disclosures regarding GBS Gold's other properties and resources were approved by Peter Harris, a consultant to GBS Gold. Each of Messrs Payne, Gerritsen and Harris is a qualified person under National Instrument 43-101.

The Company's mineral resources comprise measured resources of 84,800 tonnes at 20.6g/t for 56,100 ounces of contained gold, indicated resources of 24.6 million tonnes at 3.2g/t for 2.6 million ounces of contained gold and inferred resources of 21.2 million tonnes at 2.4g/t for 1.6 million ounces of contained gold. The resource estimates are reported at a range of cut-off grades as set out in the technical report entitled "Independent Technical Review of the Burnside, Union Reefs, Pine Creek and Maud Creek Gold Projects, Northern Territory, Australia", dated effective October, 2005 and filed on January 5, 2006, an addendum technical report entitled "Addendum to the Technical Review of the Burnside Gold Project, Union Reefs Gold Project, Pine Creek Gold Project and Maud Creek Gold Project, Northern Territory, Australia - Resource Update, Maud Creek Gold Project" dated February 2006 and filed on February 8, 2006, the technical report entitled "Form 43-101 Technical Report on the Tom's Gully Project" dated June 13, 2007 and filed on June 14, 2007 (collectively, the "Technical Reports"), and news releases filed on January 20, July 10, September 14, October 26, November 27 and December 13, 2006 and January 9 and May 10, 2007, all of which may be viewed on the SEDAR website, Other than the feasibility study completed on the Tom's Gully project, the Company has not completed a feasibility study and there is no certainty that its projects will be economically successful. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Any potential updates to GBS Gold's mineral resources discussed in this news release are conceptual in nature and subject to further drilling, analytical and test work and/or data verification. All estimates of updates to mineral resources are based on the drilling results and resource modeling described herein.

Certain disclosures in this release, including management's assessment of GBS Gold's plans and projects, constitute forward-looking statements that are subject to numerous risks, uncertainties and other factors relating to GBS Gold's operation as a mineral development company that may cause future results to differ materially from those expressed or implied in such forward-looking statements. The following are important factors that could cause the Company's actual results to differ materially from those expressed or implied by such forward looking statements: fluctuations in gold prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; general market conditions; the uncertainty of future profitability; and the uncertainty of access to additional capital. Full descriptions of these risks can be found in the Company's Annual Information Form available on the SEDAR website, Readers are cautioned not to place undue reliance on forward-looking statements. GBS Gold expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

The TSX does not accept responsibility for the adequacy or accuracy of the information contained herein.

Contact Information

  • In Toronto, Canada:
    GBS Gold International Inc.
    Marie Inkster, Vice President, Finance
    (416) 777-1508
    In Perth, Australia:
    GBS Gold International Inc.
    Peter Kerr, Chief Financial Officer
    +61 8 9492 2500