GBS Gold International Inc.

GBS Gold International Inc.

August 12, 2008 16:05 ET

GBS Gold Releases Second Quarter 2008 Results

TORONTO, ONTARIO--(Marketwire - Aug. 12, 2008) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has today released its results for the second quarter of 2008 (the "Quarter"). Key highlights include ($ represents Canadian dollars, A$ represents Australian dollars and US$ represents United States dollars):

June March December September June
2008 2008 2007 2007 2007
Quarter Quarter Quarter Quarter Quarter
Ore tonnes milled 622,100 433,100 316,300 317,400 450,200
Head grade milled 1.9g/t 2.0g/t 2.6g/t 2.7g/t 2.1g/t
recovery 93.1% 96.2% 95.8% 93.8% 94.4%
Gold produced 35,259 oz 26,236 oz 25,590 oz 25,444 oz 29,058 oz
Gold sold 32,641 oz 27,244 oz 26,021 oz 23,787 oz 25,764 oz
Sales price:
- A$/oz A$951/oz A$1018/oz A$887/oz A$795/oz A$774/oz
- US$/oz US$898/oz US$921/oz US$790/oz US$673/oz US$673/oz
Cash operating
- A$/oz A$762/oz A$845/oz A$650/oz A$783/oz A$828/oz
- US$/oz US$719/oz US$764/oz US$578/oz US$663/oz US$688/oz
Avge A$/US$ exchange
rate: 0.944 0.905 0.890 0.847 0.831

The Company produced 35,259 ounces of gold during the Quarter, representing a 34% increase over the March 2008 quarter and a 21% increase over the June 2007 quarter. Production was from the milling of 622,100 tonnes of ore at an average head grade of 1.9 g/t and processing recovery of 93.1% . The higher throughput of tonnes milled represents a 44% increase from the previous quarter reflecting improved utilization of the Union Reefs plant.

Cash operating costs(1) reduced 6% from the previous quarter to US$719/oz despite a 4% increase in the average quarterly A$/US$ exchange rate between the periods. In the first two months of the Quarter, cash operating costs averaged US$659/oz (A$700/oz) but the overall Quarterly performance was adversely affected by reduced production and increased costs in the month of June as a result of production disruptions within the Brocks Creek underground mine. Unit costs were also affected by the production strategy of milling increased quantities of low-grade stockpiles for greater plant throughput and operating cashflows.

Development activities continued at the Tom's Gully mine site and commissioning of the processing plant was started in late July. The underground decline development has been accelerated within the main Block 2 orebody to open up additional stoping faces and provide future mining flexibility. Commencement of commercial production is targeted for the fourth quarter as production builds to a targeted rate of 35,000-40,000 ounces per year in 2009.

Subsequent to the end of the Quarter, the Company announced the formation of a strategic alliance with RBS Sempra Commodities whereby RBS Sempra Commodities invested C$8.1 million in GBS Gold shares at $1.70 per share and acquired warrants exercisable into GBS Gold shares at $2.00 per share and expiring on December 31, 2010. The alliance is focused upon GBS Gold's non-core base metals assets and RBS Sempra Commodities holds a 10 year exclusive right to market or purchase the base metals production from any GBS Gold base metals project at competitive market prices.

Teleconference Call: Wednesday, August 13, 2008 at 9:00am Toronto Time

Toronto: +1-416-340-2216; North America: 1-866-898-9626; Europe: 00-800-8989-6323; Australia: 0011-800-8989-6323 and ask for GBS Gold Website: The webcast can be accessed on the GBS Gold website at

Operating Cash Flow

For the Quarter, GBS Gold sold 32,641 ounces of gold at an average sales price of US$898/oz (A$951/oz). The balance of the Quarter's production was sold in early July.

Cash flow generated from operating activities was $5.8 million for the Quarter versus $0.5 million in the March 2008 quarter and negative $7.1 million in the June 2007 quarter. The Company continues to face substantial cost inflation affecting all Australian gold producers, particularly in fuel, consumables and labour.

Cash at June 30, 2008 was $17.7 million plus $1.7 million held in cash deposits for the Company's environmental bonding obligations. At the end of the Quarter, GBS Gold also held gold bullion with a market value of $4.7 million, gold plant inventories with a market value of $2.1 million and share investments with a market value of approximately $3.4 million.

Financial Results

GBS Gold reported a loss from mine operations of $1.7 million for the Quarter. After recognizing corporate and interest costs, the reported net loss was $5.9 million. The net loss included net non-cash charges of $8.6 million relating to depreciation and amortization, imputed interest, financing costs, marked-to-market movements of investments and gold option contracts, and stock-based compensation.


The Company announced the appointment of Mr. Peter Breese as Chief Executive Officer, effective August 1, 2008. Mr. Breese was previously Chief Executive Officer of Norilsk Nickel's international nickel business following the acquisition of LionOre Mining International Ltd. in July 2007, where he was Chief Operating Officer. Mr. Gil Playford remains as Chairman of the Company. A number of new operational and project development appointments have also been made.


The new management team has commenced a detailed review of the operations, growth projects and financing requirements. Updated mine plans are currently being developed for the Brocks Creek underground mine and the Chinese "big pit" area open pit operations. The Company's previously-stated production guidance for 2008 is 130,000 ounces. Guidance will be updated as appropriate upon completion of the review.


As announced during the Quarter, the Company successfully refinanced its existing $46 million promissory note debt through the issue of 46,000 units, each unit consisting of one $1,000 three-year secured promissory note and 175 two-year share purchase warrants. Proceeds of $9.1 million were received from the exercise of 6,210,000 warrants which were issued as part of the original $46 million promissory note financing.

Towards the end of the Quarter, the Company sold its non-core shareholding interest in MDN Inc. realizing cash proceeds of $7.6 million before expenses.

Resource Update and Drilling

Resource definition drilling continued in the Brocks Creek underground mine and in the Chinese "big pit" and Fountain Head open pit areas. At Brocks Creek, drilling into levels below the current development indicates that the Central Lode of the orebody is increasing in grade and thickness as the Main Lode decreases in size. At Fountain Head, drilling into the Tally Ho lodes defined new mineralization below the existing open pit design.

The Company upgraded the resource estimate for the Chinese "big pit" area to comprise indicated resources of 7.2 million tonnes ("Mt") at 1.7 grams per tonne ("g/t") for 387,000 ounces of contained gold, plus inferred resources of 2.9Mt at 1.6g/t for 151,000 ounces of contained gold. The new consolidated resource estimate represents an increase of 234,000 ounces or 153% to the indicated resource classification and an increase of 68,000 ounces or 81% to the inferred classification. The new resource model is now undergoing further open pit optimization analysis for mine planning purposes.

The Company's total mineral resource base currently comprises indicated resources of 26.8Mt at 3.1g/t for 2.7 million ounces ("Moz") of contained gold, plus inferred resources of 21.5Mt at 2.4g/t for 1.7Moz of contained gold.

Conference Call and Webcast

A conference call will be held on Wednesday, August 13, 2008 at 9:00am Toronto time for a presentation of the financial results and an open-forum question and answer session. Individuals may listen by dialing one of the following numbers: Toronto +1-416-340-2216, North America 1-866-898-9626, Europe 00-800-8989-6323 and Australia 0011-800-8989-6323 (and ask for GBS Gold) or via webcast on the GBS Gold website at

About GBS Gold International Inc.

GBS Gold is a junior gold producer with 2.7 million ounces of Indicated Resources and 1.7 million ounces of Inferred Resources of gold at its Union Reefs Operations Centre located in the Northern Territory of Australia. GBS Gold produces gold through its 2.5Mtpa Union Reefs processing plant. The Company expects to commence production at its Tom's Gully operation in 2008 and at its Cosmo Deeps operation in 2010 to increase production to an annualized rate of 250,000 ounces. 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 3,500km(2) of prospective tenements and gold deposits and also holds gold exploration properties in Western Australia. GBS Gold trades on the Toronto Stock Exchange under the symbol "GBS".

(1) Cash Operating Cost is a non-GAAP measure. See Non-GAAP Measures in the Management's Discussion and Analysis for the quarter ended June 30, 2008.

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

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

Contact Information

  • In Toronto, Canada:
    GBS Gold International Inc.
    Gil Playford
    (416) 777-1508
    In Toronto, Canada:
    GBS Gold International Inc.
    Peter Breese
    CEO and President
    (416) 777-1508
    In Perth, Australia:
    GBS Gold International Inc.
    Peter Kerr, Chief Financial Officer
    +61 8 9492 2500