Castle Gold Corporation

Castle Gold Corporation

April 20, 2009 15:01 ET

Castle Gold Announces Start of Operations for New Equipment Fleet at El Castillo Mine

TORONTO, ONTARIO--(Marketwire - April 20, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) is pleased to announce that following the signing of a new contract with CAMSA, the mining contractor at the Company's 100% owned El Castillo gold mine in Durango State, Mexico, portions of the new equipment fleet are now at site and entering operations. The addition of this new equipment should boost total monthly mine production (waste and ore material) to 600,000 tonnes per month effective immediately. This rate represents a 28 percent increase over the average monthly amount of material mined at El Castillo in the fourth quarter 2008.

The new contract provides for the mobilization of a fleet of larger mining equipment thereby enabling the continuing ramp-up of production to an ultimate target in excess of 50,000 ounces of gold annually at reduced unit costs relative to the current contract. Under the terms of the new agreement, unit costs of the mined material are reduced by 10% relative to the previous terms. At the expanded mining rate of 800,000 tonnes per month, this offers savings of approximately US$25 per ounce of gold produced as previously announced in a press release dated March 26, 2009.

Thomas Atkins, President and CEO of Castle Gold commented on the ramp-up of production stating: "The operating team at El Castillo is working quickly with CAMSA, the contractor to achieve the desired higher production levels. It's encouraging to see this cooperation between the operating management and CAMSA. We look forward to additional equipment arriving in June and the balance arriving in September. The combination of this equipment will enable mining at El Castillo during the fourth quarter of 2009 at the rate of 800,000 tonnes per month, a 70 percent increase relative to the amount of material mined during the fourth quarter of 2008. The impact of these higher volumes of material being mined is expected to be reflected in higher volumes of gold production 2-3 months following the throughput volumes being achieved, in accordance with the gold leach cycles."

The new contract with CAMSA is for a five year period, or up to 47 million tonnes mined, but is severable at declining penalty payments related to the depreciated life of the equipment. The contract is transferable to Castle Gold at terms equal to the contractor's costs of leasing and residual equipment value plus demobilization with the Company then undertaking the future operation of the mining activities and equipment.

The equipment that has recently arrived at the mine site since the signing of the new contract in late March 2009, includes:

- 4 Caterpillar CAT 740, 40 ton capacity articulated trucks;

- 1 Caterpillar CAT 988H, 8.5 yard capacity front-end-loader;

- 2 Atlas Copco ECM 590 RC, blast-hole drills for 3 1/2 inch diameter blast-holes;

- 1 Caterpillar CAT 416, back-hoe excavator; and

- 1 hydraulic hammer for secondary rock breaking.

This new machinery joins the existing fleet of operating equipment, much of which will be phased-out with the arrival of additional equipment over the coming months. At present it is expected that the combination of new and original equipment will permit the mining of up to 600,000 tonnes of waste and ore material per month effective immediately. At this rate annual production should approach 30,000 ounces of gold. It is expected that subsequent to the arrival of additional equipment over the months of June through September the mining of an average 800,000 tonnes of waste and ore material per month in the fourth quarter 2009 will be achievable. At this rate and with the reduction of the stripping (waste:ore) ratio in early 2010 towards the life-of-mine ratio of 0.6:1.0, gold production increases towards the 50,000 ounce per year level are expected in 2010 and beyond.

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: 82.0MM

52-Week Trading Range: C$0.15 - $0.65

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
    Castle Gold Corporation
    Rory Quinn
    Manager Investor and Public Relations
    416-214-4809 or Toll Free: 1-866-646-3274
    416-366-7421 (FAX)