Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

May 13, 2008 00:30 ET

Castle Gold Reports Dramatic Increase in Gold Production, Total Revenues and a Loss of $0.03 Per Share

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 13, 2008) - Castle Gold Corporation ("Castle Gold" or the "Company") (TSX VENTURE:CSG) today announced its audited financial results for the period ended December 31, 2007. Castle Gold Corporation ("the Company") was formed on August 27, 2007, through the amalgamation of Aurogin Resources Ltd. and Morgain Minerals Inc. Aurogin Resources was deemed to be the acquirer for accounting purposes. All financial results and revenues from gold sales are expressed in United States dollars.

Highlights of 2007

- Achieved annual revenues of $7,831,966, a significant increase over 2006 revenues of $500,080.

- Produced an operating profit of $4,877,731 versus $222,840 for 2006. The increase reflects continued strong results from the El Sastre gold mine.

- Generated cash flow from operations of $1,594,199 versus ($243,588) for 2006.

- Net Loss of $1,520,053 or $0.03 per share. This included a $635,377 foreign exchange loss, a one time charge of $1,076,986 related to the write down of the Bridge and Lupita properties and stock based compensation of $638,833, all non cash items. The net loss for 2006 was $779,699 or $0.03 per share.

- Gold production at El Sastre in 2007 was 13,819 ounces versus 971 ounces in 2006.

- Gold ounces sold in 2007 representing production at the El Sastre gold mine were 11,007 versus 807 in 2006.

- The average realized gold price per ounce in 2007 was $711 versus $619 in 2006.

- Cash cost of sales per ounce in 2007 was $180 versus $231 in 2006.

- Cash margin per ounce in 2007 (revenue per ounce - cash operating cost per ounce) was $531 versus $389 for 2006.

- Cash and cash equivalents on hand at December 31, 2007 were $1,162,491 versus $652,214 for 2006.

- Current assets as of December 31, 2007 were $3,984,338 versus $1,351,865 for 2006.

- Mineral properties, plant and equipment as of December 31, 2007 were valued at $39,340,141 versus $4,401,760 for 2006.

- The above does not include gold production or revenues at El Castillo as the mine is in the pre-commercial phase.

CEO Commentary

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

"We are very pleased to see strong gross revenue and operating cash flow growth for the Company. The strong operating margins allowed the Company to internally fund development of additional projects to the benefit of Castle Gold shareholders. The Company completed the final stages of pre-production development at the El Castillo gold mine. We plan to initiate commercial production at the EL Castillo gold mine once annualized gold production achieves 15,000 ounces. We look forward to additional development opportunities to the benefit of the shareholders. The dispute with the joint venture partner concerning the Bridge Property and the Lupita Property is an unfortunate development. The Company will pursue a resolution to the matter which we hope will be favorable to the shareholders. As the Company cannot predict the outcome of the dispute resolution process we felt it was prudent to write down the value of the investment in the properties in the 2007 financial results. This did produce a significant charge against earnings per share, however, it is a non cash item and had no impact on cash flow from operations."

"We are confident the outlook for Castle Gold is positive. When the El Castillo gold mine enters commercial operations this year, revenues from gold sales will be included in the company's financial results. In addition, a revised reserve and resource estimate and mine plan for the El Castillo gold mine will lead to increased gold production, which, along with possible development opportunities at the La Fortuna property, positions Castle Gold for growth going forward."

Selected Annual Financial and Operating Information



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Selected Annual Financial Information (b)
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Six-Month
Period
Year Ended Ended Year Ended
December December June 30,
31, 2007 31, 2006 2006
--------------------------------------------------------------------------
Gold ounces - produced (c) 13,819 971 -
--------------------------------------------------------------------------
Gold ounces - sold (c) 11,007 807 -
--------------------------------------------------------------------------
Metal sales (c) $ 7,831,966 $ 500,080 -
--------------------------------------------------------------------------
Cost of sales (a) $ 1,977,835 $ 186,549 -
--------------------------------------------------------------------------
Accretion, depreciation, depletion
and amortization $976,400 $90,691 -
--------------------------------------------------------------------------
Mine operating earnings $ 4,877,731 $ 222,840 -
--------------------------------------------------------------------------
Net (loss) earnings ($1,520,053) ($779,669) ($311,841)
--------------------------------------------------------------------------
Basic and diluted earnings (loss)
per share (0.03) ($0.03) ($0.02)
--------------------------------------------------------------------------
Cash flow provided by (used in)
operating activities $ 1,594,199 ($243,588) (137,560)
--------------------------------------------------------------------------
Average realized gold price per
ounce $ 711 $ 619 -
--------------------------------------------------------------------------
Cost of sales per ounce sold $ 180 $ 231 -
--------------------------------------------------------------------------
Cash $ 1,162,491 $ 652,241 $1,402,363
--------------------------------------------------------------------------
Working capital $ 1,775,414 $ 740,578 $1,155,329
--------------------------------------------------------------------------
Total assets $43,329,923 $ 5,757,200 $3,196,296
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(a) Cost of sales excludes accretion, depreciation, depletion and
amortization.
(b) 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 depreciation, depletion and amortization.
(c) During the year ended December 31, 2007, the Company sold 2,037 ounces
at $787 per ounce from its El Castillo gold mine in Mexico. The
resulting revenue has been netted against the carrying value of El
Castillo in mineral properties. This will continue until the El
Castillo mine reaches commercial production.


The net loss for 2007 was $1,520,053 or $0.03 compared to a net loss of $779,699 or $0.02 for 2006. On the acquisition of Morgain Minerals Inc., the Company assumed long-term debt denominated in Canadian dollars of CDN$7,243,587. Fluctuations in the Canadian and US dollar exchange rate (the currency the company reports in) will generate a foreign exchange gain or loss. Strength in the Canadian dollar over the course of 2007 caused an unrealized foreign exchange loss on this debt of $635,377. In addition, the dispute with the joint venture partner concerning the Bridge Property and the Lupita Property led the Company to write down the properties as the outcome of Arbitration is unknown at this time. The write down of $1,076,986 is the sum of all cash expenditures and share issuance costs for the two properties and is a non cash charge against earnings. If not for this item, the earnings for the year would have been substantially better.

Results of Mining Operations



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

--------------------------------------------------------------------------
Six-Month
Period
Year Ended Ended Year Ended
December December June 30,
31, 2007 31, 2006 2006
--------------------------------------------------------------------------
Operating Statistics
--------------------------------------------------------------------------
Tonnes mined 76,196 70,577 -
Tonnes Waste 504,277 37,950 -
Tonnes ore-direct to leach pad 208,688 32,627 -
Tonnes crushed and placed 53,231 0 -
Tonnes ore placed on leach pad 261,918 32,627 -
Grade (grams/tonne) 2.58 2.77 -
Gold ounces - produced 13,819 971 -
Gold ounces - sold 11,007 807 -
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Financial Data
--------------------------------------------------------------------------
Metalsales $ 7,831,966 $ 500,080 -
Cost of sales 1,977,835 186,549 -
Depreciation, depletion and accretion 862,190 89,858 -
----------- ----------- -----------
4,991,940 223,673 -
Exploration 240,799 55,765 -
Other (income) expense 10,548 1,025 -
----------- ----------- -----------
Earnings before income taxes 4,740,593 166,883 -
Income taxes 441,336 - -
----------- ----------- -----------
Net segment earnings $ 4,299,257 $ 166,833 -
----------- ----------- -----------
----------- ----------- -----------


Revenues from metal sales increased to $7,831,966, a significant increase over 2006 revenues of $500,080. Gold production in 2007 was 13,819 ounces versus 971 ounces in 2006. The average realized gold price increased to $711 for 2007 from $619 in 2006. The average spot price for 2007 was $695.39.

Gold production in 2007 was 13,819 ounces representing production at the El Sastre gold mine compared to 971 ounces in 2006. The El Castillo gold mine produced a further 2,190 ounces in 2007 of which 2,037 were sold at an average price of $787. These sales were recorded during the mines development phase and revenues derived were offset against operating costs at the mine.

Currently the El Castillo gold mine is in pre-production. Revenues generated by gold sales at the El Castillo gold mine are offset against operating costs, the balance of operating costs are then capitalized. When the El Castillo project is declared, commercial revenues from operations will be consolidated in the Company's income statement. Castle Gold expects to declare the El Castillo gold mine commercial once it has obtained an annualized gold production rate of 15,000 ounces.

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.castlegoldcorp.com (all currency references are to U.S. dollars, unless otherwise noted).

Castle Gold Corporation is a growth focused gold producer currently expanding gold production within the Americas. Castle Gold 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 on its La Fortuna gold project in Mexico and at its El Sastre, Bridge and Lupita Projects in Guatemala.

ON BEHALF OF THE BOARD OF DIRECTORS,

Christopher Babcock, President and Chief Executive Officer

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.

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

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