Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

September 07, 2007 12:29 ET

Castle Gold Records Strong Second Quarter Results; Cash Costs Fall to $180 Per Ounce

TORONTO, ONTARIO--(Marketwire - Sept. 7, 2007) - Castle Gold Corporation (formerly Aurogin Resources Ltd.) ("Castle Gold" or the "Company") (TSX VENTURE:CSG) today announced its unaudited financial results for the three and six months ended June 30, 2007. The consolidated interim financial statements along with management's discussion and analysis are available on SEDAR at www.sedar.com and on the Company's website at www.aurogin.com. (All currency references are to U.S. dollars, unless otherwise noted.)

Castle Gold was formed on August 28, 2007 following the amalgamation of Aurogin Resources Ltd. ("Aurogin") and Morgain Minerals Inc. ("Morgain"). Aurogin was deemed to be the acquirer for accounting purposes. As a result, these interim results for the three and six month periods ended June 30, 2007 reflect the results of operations and cash flows of Aurogin only and its financial position as at that date.

Second Quarter Highlights

- Net earnings for the second quarter were $349,400 or $0.01 per share which also resulted in year to date net earnings.

- Cost of sales per ounce fell to $180 in the second quarter on sales of 3,561 ounces compared with cost of sales per ounce of $290 in the first quarter on sales of 1,241 ounces.

- Revenue was $2,378,898 in the second quarter on an average realized price per ounce sold of $668.

- Cash flow from operations in the second quarter was $1,124,054 resulting in a cash and cash equivalent balance at June 30, 2007 of $1,215,315.

- Beginning in May 2007, the El Sastre gold mine reached and exceeded the planned mining rate of 25,000 tonnes of ore per month placed on the leach pad.

- On August 28, 2007, Aurogin and Morgain completed the amalgamation of the two companies to form Castle Gold Corporation.

CEO commentary

Christopher Babcock, President and CEO of Castle Gold, made the following comments in relation to the 2007 second quarter results:

"We are extremely pleased with the second quarter results posted by the Aurogin operations. In only the second quarter of full operation, cost of sales at the El Sastre gold mine in Guatemala, have fallen to $180 per ounce, contributing to significant operating cash flow and allowing Castle Gold to post bottom line earnings."

"These results confirm our belief that El Sastre would be a low cost producing gold mine delivering superior returns in a strong gold market. Also of significance was the fact that the mine achieved and exceeded its planned mining rate during the quarter. This speaks very positively towards the Company's operating ability."

"These strong results give us a tremendous starting point upon which to build a significant gold producer. In the very near future, with the commencement of commercial production at the Company's El Castillo gold mine in Mexico, we will be even better positioned to take advantage of a gold market that appears set to test the $700 mark again."

"It is an extremely exciting time for both management and our shareholders to be involved with Castle Gold."



Summary of financial and operating results (a)

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-------------------------------------------------
Three months Six months
ended ended
June 30, June 30,
-------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Gold ounces - produced 2,444 - 5,452 -
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Gold ounces - sold 3,561 - 4,802 -
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Average realized gold
price ($/ounce) $668 - $667 -
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Total cash costs per
ounce sold ($/ounce) (b) $180 - $209 -
---------------------------------------------------------------------------
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Metal sales $ 2,378,898 $ - $ 3,203,473 $ -
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Cost of sales (c) $ 642,100 $ - $ 1,002,400 $ -
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Accretion, depreciation,
depletion and
amortization $ 278,297 $ - $ 415,820 $ -
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Mine operating earnings $ 1,458,501 $ - $ 1,785,253 $ -
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Net earnings (loss) for
the period $ 349,400 $(39,839) $ 243,631 $ (132,553)
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Earnings (loss) per
share (basic and diluted) $ 0.01 $ (0.00) $ 0.00 $ (0.00)
---------------------------------------------------------------------------
Cash flow provided by
(used in) operating
activities $ 1,124,054 $ 47,607 $ 931,745 $ (28,966)
---------------------------------------------------------------------------
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(a) As a result of having to fully consolidate the results from the
Company's 50% owned El Sastre gold mine, the amounts above represent
100% of the gold ounces produced and sold, metal sales, cost of sales
and accretion, depreciation, depletion and amortization.
(b) Cost of sales per ounce is calculated by dividing cost of sales as per
the consolidated financial statements with gold ounces sold.
(c) Cost of sales excludes, accretion, depreciation, depletion and
amortization


Revenue from metal sales increased 188% in the second quarter over the first quarter from $824,575 to $2,378,898 primarily as a result of a 187% increase in the number of ounces sold and a slight increase in the average realized gold price from $665 to $668. The average spot price in the second quarter of 2007 was $667 per ounce and $658 per ounce for the first six months of 2007.

Second quarter 2007 production was 2,444 ounces compared to 3,008 in the first quarter of 2007. While mining rates increased to planned levels, unforeseen delays in returning stripped carbon to Guatemala from the United States simply pushed the timing of certain gold recoveries into the third quarter of 2007.

Cost of sales was $180 per ounce for the second quarter of 2007, which represents a 38% decrease from the first quarter of 2007. The reduction reflected higher gold recoveries associated with higher mining rates compared to start up levels.

Net earnings for the second quarter of 2007 were $349,400 compared to a net loss of $39,839 for the corresponding period in 2006. Mine operating earnings from El Sastre more than offset exploration and general and administrative expenditures.

General and administrative expenditures during the second quarter of 2007 were $237,085 compared to $61,832 in the second quarter of 2006. The smaller impact on earnings in 2006 resulted from the fact that certain general and administrative costs were capitalized during the construction phase of the El Sastre mine.

Exploration expenditures during the second quarter of 2007 were $99,977 relating primarily to exploration drilling performed at El Arenal and elsewhere on the El Sastre exploitation licence, compared to a recovery of $15,720 in the second quarter of 2006.

Cash flow from operating activities for the second quarter of 2007 was $1,124,054, compared to $47,607 in the second quarter of 2006. The increase reflects the strong quarterly results from the El Sastre mine.



Results of Mining Operations

El Sastre Main Zone gold mine (50% ownership)
Amounts presented in the table below are at 100%

---------------------------------------------------------------------------
-------------------------------------------------
Three months Six months
ended ended
June 30, June 30,
-------------------------------------------------
2007 2006 2007 2006
---------------------------------------------------------------------------
Operating Statistics
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Tonnes mined 219,687 - 380,283 -
Waste 150,720 - 274,614 -
Ore 68,967 - 105,669 -
Ore crushed and placed 15,313 - 15,313 -
Tonnes ore place on leach
pad 84,280 - 120,982 -
Grade (grams/tonne) 2.85 - 3.11 -
Gold ounces - produced 2,444 - 5,452 -
Gold ounces - sold 3,561 - 4,802 -
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Financial Data
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Metal sales $ 2,378,898 $ - $ 3,203,473 $ -
Cost of sales 642,100 - 1,002,400 -
Depreciation, depletion
and amortization 273,556 - 406,578 -
Accretion 2,365 - 4,730 -
------------ -------- ------------- -----------
1,460,877 - 1,789,765 -
Exploration 82,864 - 88,897 -
Other expense (2,603) - (2,151) -
------------ -------- ------------- -----------
Earnings before income
taxes 1,380,616 - 1,703,019 -
Income taxes 118,945 - 160,174 -
------------ -------- ------------- -----------
Net segment earnings $ 1,261,671 $ - $ 1,542,845 $ -
------------ -------- ------------- -----------
------------ -------------
Capital expenditures $ 66,674 $ - $ 217,313 $ -
------------ -------- ------------- -----------
------------ -------------
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CAUTION REGARDING FORWARD LOOKING STATEMENTS:

The information referred to above contains "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the future price of metals, timing of exploration activities, mine life, economic viability and estimated internal rate of return, estimation of mineral resources, the results of drilling, estimated future capital and operating costs, future stripping ratios, projected mineral recovery rates and plans for developing, the projects. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "can", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the companies to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the exploration and potential development of the projects, risks related to international operations, the actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of metals. Although the companies have attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The companies do not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws.

Current issued and outstanding share capital: 70,195,647

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this news release.

Contact Information

  • Castle Gold Corporation
    Court Babcock
    Investor Relations
    (604) 643-1727
    or
    Coal Harbour Communications Inc.
    Dale Paruk
    (604) 662-4505 or Toll-free 1-877-642-6200