GBS Gold International Inc.

GBS Gold International Inc.

November 28, 2008 11:05 ET

GBS Gold Files Q308 Financial Statements

PERTH, AUSTRALIA--(Marketwire - Nov. 28, 2008) - GBS Gold International Inc. (NEX:GBS.H) ("GBS Gold" or the "Company") has today filed its financial statements and management's discussion & analysis for the quarter ended September 30, 2008 (the "Quarter") ($ represents Canadian dollars, A$ represents Australian dollars US$ represents United States dollars).

Summary of the September 2008 Quarter

- The Company suffered a rapid degradation of its financial position following a number of production issues and was unsuccessful in securing financing in the current global financial market environment.

- Voluntary administrators were appointed to the Australian subsidiaries on September 15, 2008 in accordance with Australian law pending a restructure, recapitalization or sale of the business and assets.

- Production of 27,394 ounces at a cash operating cost of US$974/oz and production of a further 1,856 ounces as part of pre-production build-up activities at the Tom's Gully operation, for total production of 29,250 ounces.

- Suspension of mining and processing activities after the Quarter, with all sites now on care and maintenance status.

- Loss from mine operations of $9.2 million. After recognizing corporate costs and significant impairment adjustments required as a result of the appointment of administrators to the Australian subsidiaries, the reported net loss is $139.2 million.

- Subsequent to the end of the Quarter, GBS Gold's listing was transferred from the Toronto Stock Exchange to the NEX board of the TSX Venture Exchange.

The Appointment of Administrators to the Australian Subsidiaries

GBS Gold's cash position rapidly eroded during the Quarter to less than $5 million, and to a net working capital deficiency. The Company suffered a number of production issues which reduced gold production and led to the cashflow losses:

- Following the stope collapse in the Brocks Creek underground mine in June, development of the underground workings continued deeper into lower levels of this mine where ore tonnes and gold grades were below those experienced in the higher levels of the mine. The Company has estimated that the disruptions caused by the stope failure and the reduced ounces in the lower levels of the mine resulted in cash losses of between $6-8 million in the Quarter.

- Mining of the Chinese South Extension open pit mine required the removal of greater quantities of waste rock material than originally anticipated, resulting in higher up-front mining costs and reduced ore quantities available for processing through the Union Reefs plant.

- In the course of ramping up ore production to in excess of 200,000 tonnes per month through the Union Reefs plant, the Company incurred additional production and capital development costs while experiencing cost increases in Australia, particularly in fuel, processing consumables, drilling services and labour.

- The Tom's Gully operation was forecast to be cashflow positive in September but as a result of production delays and lower ore grades, operating cashflow losses at Tom's Gully in the Quarter were approximately $5 million.

Due to the need for further geological information before continuing operations at Brocks Creek, short term gold production was not expected to provide sufficient operating cashflows to increase the Company's cash balance and, accordingly, through this period the Company sought to obtain additional financing. However, in the current difficult global financial markets, financing discussions were unsuccessful. In accordance with Australian solvency law, administrators were required to be appointed to the Australian subsidiaries once it became apparent that the Company could not continue to support the Australian subsidiaries.

Effect of the Appointment of the Administrators

Defaults Under key Contractual Agreements

The appointment of administrators to the Australian subsidiaries constituted an event of default under a number of GBS Gold's agreements, in particular:

- Secured promissory note facility ($46 million). As a result, the amounts due under the promissory note facility became immediately repayable, including accrued and default interest. A forbearance agreement was entered into which currently expires on November 28, 2008. An extension is under review.

- Tom's Gully Purchase Agreement. Renison Consolidated Mines NL has alleged that certain outstanding obligations relating to the purchase of the Tom's Gully mine totaling A$24 million are now fully due and payable, with default interest accruing daily. A forbearance agreement was entered into which currently expires on December 2, 2008. An extension is being sought.

- Environmental Performance Bond Facility with an Australian bank. The relevant Australian subsidiaries are obligated to provide approximately A$6 million to fully cash back the outstanding guarantees. Until such cash- backing is provided, default interest accrues.

- The Licensing Agreement for the Company's use of the GEOCOAT® bio-oxidation process was automatically terminated.

Asset Impairment Review

The appointment of administrators to the Company's Australian subsidiaries triggered an impairment review with regard to the Company's carrying amounts of mineral properties and property, plant and equipment. The impairment review resulted in the conclusion that the majority of the Company's producing and non-producing mineral properties were impaired. A write down of $101.5 million was recorded on the Company's mining and exploration assets, comprising $4.0 million on deferred stripping costs, $34.8 million on the Company's mineral properties which were in production as at the end of the Quarter, and $62.6 million on the Company's exploration and development properties. In addition, the impairment review resulted in the write down of the carrying amounts of property, plant and equipment by $20.8 million.

Result of Operations

The Company incurred a loss from mine operations at the Union Reefs Operations Centre during the Quarter of $9.2 million.

After recognizing impairment adjustments and other corporate costs, the Company recorded a net loss for the Quarter of $139.2 million versus a net loss of $10.8 million in the prior corresponding quarter ended September 30, 2007. The net loss for the Quarter included non-cash charges totaling $101.5 million relating to the asset impairment adjustments. The net loss for the Quarter represents $1.04 per share, compared with a net loss of $0.10 per share in the prior corresponding period.

The Company produced 29,250 ounces of gold during the Quarter, of which 27,394 ounces were produced at the Union Reefs operations and 1,856 ounces were produced as part of pre-production activities at the Tom's Gully operation.

Cash operating costs were US$974/oz for the Quarter, higher than previous periods as a result of reduced production from the Brocks Creek underground mine, the milling of large quantities of low-grade material from the Pine Creek stockpiles and the recognition of the full cost of all open pit waste stripping.

The key operational statistics for the Quarter and prior periods are tabulated below.

To view the key operational statistics for the Quarter, please visit the following link:

Operations have been suspended following the end of the Quarter, and the Union Reefs and Tom's Gully sites are now on care and maintenance pending the outcome of the administration process. In October, gold production at Union Reefs was approximately 2,150 ounces.


The outlook for the Company is uncertain and dependent upon the outcome of the administration process in Australia, in particular on potential restructure, recapitalization and/or acquisition proposals. The deadline for submission of indicative offers has been set for December 5, 2008 and the second meeting of creditors of the Australian subsidiaries to consider any forthcoming restructure, recapitalization or acquisition proposals is currently scheduled to take place on or before December 23, 2008. The Company's secured creditors are currently working with the administrators but reserve the right to exercise their security rights at any time.

About GBS Gold International Inc.

GBS Gold has 2.7 million ounces of Indicated Resources and 1.7 million ounces of Inferred Resources within 125 km radius of its 2.5Mtpa Union Reefs processing plant located in the Northern Territory of Australia, including the Cosmo Deeps project. The Company's Australian subsidiaries appointed Messrs Andrew Saker, Darren Weaver and Martin Jones of accounting firm Ferrier Hodgson as joint and several voluntary administrators on September 15, 2008. This appointment has placed control of the Australian subsidiaries, including their businesses and assets, with the administrators. Claims of creditors have been stayed with the principal aim of allowing the subsidiaries to be restructured, recapitalized or sold. The Company's shares are traded on the NEX board of the TSX Venture Exchange under the symbol GBS.H.

For more information about GBS Gold International Inc., please visit our website at or email us at

For further information regarding the Australian subsidiaries, the conduct
of the Australian business or to discuss the administration process, the
Administrators may be contacted at the following:

Mr. Andrew Saker
Partner, Ferrier Hodgson
Joint and Several Administrator
Level 26, 108 St George's Terrace
Perth, Western Australia, 6000, AUSTRALIA
Tel: +61 (0)8 9214 1444
Fax: +61 (0)8 9214 1400

The Company's mineral resources comprise indicated resources of 26.8 million tonnes at 3.1g/t for 2.7 million ounces of contained gold and inferred resources of 21.5 million tonnes at 2.4g/t for 1.7 million ounces of contained gold as set out in its technical reports (refer below) and news releases dated May 13 and July 2, 2008. The Company has filed on May 8, 2008 a technical report entitled "GBS Gold International: Burnside, Union Reefs, Maud Creek and Moline Projects, Northern Territory, Australia" dated February 2008 and authored by Jeames McKibben and Christine Standing of Snowden Mining Industry Consultants Pty Ltd and Heath Gerritsen of HG Mine Design Pty Ltd. The Company has also filed two technical reports on its Tom's Gully project being a technical report entitled "Form 43-101 Technical Report on the Tom's Gully Project" authored by Paul Payne of Resource Evaluations Pty Ltd dated and filed on January 14, 2008 and a technical report entitled "Technical Report on the Mineral Reserves of the Tom's Gully Gold Mine" authored by Heath Gerritsen of HG Mine Design Pty Ltd dated December 2007 and filed on January 31, 2008.

The Company has completed feasibility studies on its Tom's Gully and Cosmo Deeps projects, and a life-of-mine study on its operating Brocks Creek underground mine, all of which have declared mineral reserves in accordance with the above technical reports. Where the Company has not completed a feasibility or life of mine study on a particular project, there is no certainty that such project will be economically successful. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

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

Contact Information

  • GBS Gold International Inc.
    Gil Playford
    Chairman and CEO
    (931) 358-2170
    GBS Australia Pty Ltd (administrator appointed)
    Peter Kerr
    Chief Financial Officer
    +61 (0)8 9492 2500