Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

April 30, 2009 18:05 ET

Castle Gold Reports Fourth Quarter and Year-End 2008 Operating and Financial Results

TORONTO, ONTARIO--(Marketwire - April 30, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) today reported its financial and operating results for the fourth quarter and year-ended 2008 period ended December 31, 2008. The Consolidated Financial Statements and related Notes along with the Management's Discussion and Analysis have been filed with SEDAR (www.sedar.com) and can be viewed on the Company's website at www.castlegoldcorp.com.

Castle Gold would also like to announce a 2008 Financial Report conference call scheduled for May 1, 2009 10:30 a.m. EST. Participant dial in numbers are:

Local: 416-695-6616; and

Toll free (North America): 1 800-769-8320.

A replay will also be available at dial-in number: 416 695-5800 or toll free: 1 800 408-3053, pass code: 4658837. The Company will also post the conference call on its website.

Highlights for the Fourth Quarter and Year-end 2008

- Effective July 1, 2008 commercial production was achieved at the El Castillo mine, Mexico.

- For the 12 month period ended December 31. 2008 reported metal revenues increased 80% from $7.8 million in 2007 (company's 50% share of El Sastre mine) to $14.0 million in 2008 on a 199% increase in gold sales from 5,503 ounces in 2007 to 16,455 ounces in 2008. During the same 12 month period, the Company's share of production increased 121% from 6,909 ounces in 2007 to 15,293 ounces in 2008.

- Net earnings increased from a loss of $1.5 million (($0.03) per share) in 2007 to a profit of $1.8 million ($0.02 per share) in 2008.

- Production for the fourth quarter 2008 totalled 6,928 ounces of gold, a 6% increase compared to 6,542 in the third quarter 2008 and a 164% increase compared to 2,625 ounces of gold produced as the Company's share of production from the fourth quarter 2007 when gold production came only from the Company's 50% share of the El Sastre mine. Production at the El Castillo gold mine increased 16% to 5,386 ounces of gold in the fourth quarter compared to 4,629 ounces of gold in the third quarter 2008. This was offset by a 19% decline in production to 1,542 ounces of gold from the El Sastre gold mine in the fourth quarter 2008 (Castle Gold's 50% share) compared to the fourth quarter 2007.

- During the fourth quarter 2008, production costs totalled $447 per ounce of gold sold, a 23% reduction compared to $582 per ounce in the third quarter 2008 and a 272% increase compared to the fourth quarter 2007 when the Company's only commercial operation was its 50% share of the El Sastre gold mine. Adjusted production costs for the fourth quarter 2008 (taking into account the adjustment in costs associate with the current higher than average strip ratio compared to the life-of-mine average ratio at El Castillo) was $379 per ounce, a 54% reduction compared to $571 per ounce reported in the third quarter 2008.

- An updated NI 43-101 reserve report on the El Castillo mine demonstrated an increase in gold reserves and recommended increasing annual production rates and implementing activities to improve operating efficiencies. The Company began to advance activities towards this production increase in late 2008 and into 2009.

- A six-hole twin, diamond drill hole program replicated historic drill results at the Company's La Fortuna project, paving the way to a fourth quarter announcement of a 308,000 ounce Measured and Indicated NI 43-101 compliant resource.

Thomas Atkins, President and CEO of Castle Gold commented on the fourth quarter and year-end 2008 results stating: "The Company continues to make good progress at the El Castillo mine during the second half of the year as it increased mining rates and reduced operating costs. El Castillo posted a 16% increase in gold production during the fourth quarter and a 23% reduction in operating costs relative to the third quarter of 2008. Cost reductions were a combination of efficiency improvements as the volume of production increased, and the result of the recovery of some additional gold on the heaps that was delayed from being recovered in due to an anomalously heavy seasonal rainfall during the third quarter of 2008. The recent achievements of various milestones to increase production at El Castillo continue to demonstrate progress in achieving the Company's goals of higher production and further enhancements in efficiencies as we advance our planned expansion to annual production of in excess of 50,000 ounces per year. The operating management team continues to demonstrate success in areas of improved performance that has the potential to create improved cash flow and earnings as the year advances and we enter 2010."

Financial Results - Fourth Quarter 2008

During the quarter ended December 31 2008, metal revenues consisted of $5,230,896 on sales of 6,424 ounces of gold at an average price of $814 per ounce of gold. Revenues consisted of $3,877,692 on sales of 4,671 ounces of gold from the El Castillo mine and $1,353,204 (100% - $2,706,408) on sales of 1,753 ounces of gold (100% - 3,506 ounces) of gold from the Company's 50% interest in the El Sastre mine. This compares to fourth quarter 2007 sales revenues of $2,310,405 on sales of 2,954 ounces of gold (100%) at an average realized price of $782 per ounce of gold. Figures reported for gold sales refer to the gold contained in the final refined dore as of the date of the final sale transaction. Due to timing delays associated with final gold refining, any gold produced that has not been fully refined is recorded as inventory until such time as a sale transaction has taken place. The large increase in gold sales during the present quarter is a result of the company's El Castillo mine achieving commercial production status as of July 1, 2008. In addition, revenues were positively impacted by an increase in the average gold sales price for the same periods from 2007 to 2008.

During the quarter ended December 31 2008, the Company's consolidated production costs and royalties at both the El Sastre and El Castillo gold mines were $2,868,799 representing an overall cost of sales for the quarter of $447 per ounce of gold sold compared to a cost of $120 cost per ounce of gold sold for the quarter ended December 31, 2007. The increase in operating costs is related to the inclusion of the production data from the commissioning of the El Castillo mine. Production costs during the fourth quarter 2008 at the El Sastre mine averaged $251 per ounce and costs at the El Castillo mine were $520 per ounce of gold.

At the El Castillo mine, the strip ratio (tonnes of waste mined per tonne of ore mined) during the fourth quarter of 2008 was 1.47 to 1.0 as compared to the predicted life-of-mine (LOM) average of 0.6 to 1.0 (current 43-101 reserve report by ACA Howe - August 1, 2008). Consequently, in excess of 496,000 tonnes of additional waste material was mined in the quarter versus what would have been expected should LOM averages have been achieved. At a cost of approximately $1.32 per tonne (mining and explosives) this material represents an added cost to operations of $655,000 in excess of what would have occurred under LOM operating conditions. On a unit of production basis, based on quarterly gold sales of 5,386 ounces, the difference in the cost to produce an ounce of gold, taking into account the higher strip ratio during the fourth quarter compared to the LOM average strip ratio, would result in additional cost to operations of $655,000 divided by the total ounces of gold produced during the fourth quarter of 5,386 ounces of gold, or $141 per ounce of gold sold. The costs associated with mining this excess waste material are reflected in the current cost of gold sales (increased costs versus long term averages). It is expected that these higher than average costs will continue throughout 2009, although somewhat moderated as the strip ratio is reduced to an average of 1.2 to 1.3 per unit of ore, following which the strip ratio begins to decline towards the LOM average by the second half of 2010.

During the quarter ended December 31, 2008 the Company's 50% share of El Sastre gold mine operating earnings were $709,919 (100% - $1,419,838) and $441,092 from the El Castillo mine. After deducting general and administrative, exploration and income tax expenses, recording of future tax recoveries, recording an unrealized foreign exchange gain and recording a write down in the fair value of marketable securities, the Company had net earnings for the quarter of $628,006. This compares to a net loss of ($1,563,370) for the quarter ended December 31, 2007.

Financial Results - Annual to December 31, 2008

During the twelve months ended December 31, 2008 metal revenues consisted of $8,915,461 on sales of 10,430 ounces of gold from the El Castillo mine and revenues of $5,102,605 (100% - $10,205,210) on sales of 6,025 (100% - 12,050) ounces of gold from the Company's 50% interest in the El Sastre mine at an average sale price of $852 per ounce gold. This compares to the twelve months ended December 31, 2007, where sales from 100% of the El Sastre mine operations totalled 11,007 ounces of gold for metal revenues of $7,831,966 at an average price of $711 per ounce of gold sold. The period over period increase in gold sales is a result of the inclusion of gold sales from the Company's El Castillo mine after it achieved commercial production status effective July 1, 2008 and the positive impact from the increase in the average gold sales price offset by the Company's recording of its 50% interest in the El Sastre mine from 100% in 2007.

Consolidated production costs and royalties at both the El Sastre and El Castillo gold mines for the twelve months ended December 31, 2008 were $7,702,600 as compared $1,977,835 in 2007 representing an overall cost of sales for the period of $468 per ounce of gold sold compared to $180 per ounce of gold sold for the same 2007 period. Depreciation, depletion and amortization were $1,833,393 for the twelve month period ended December 31, 2008 as compared to $976,400 for the period ended December 31, 2007. The increase in operating costs and depreciation, depletion and amortization are primarily related to the inclusion of these items from the Company's El Castillo mine in the second half of 2008 once it attained commercial production status.

Changes in non-operating items for the twelve month period ended December 31, 2008 compared to the same period ended 2007, included: (1) an increase in general and administrative costs to $3,911,153 in 2008 compared to $1,754,790 in 2007; (2) a change in non-controlling interest to nil in 2008 compared to $2,054,951 in 2007 representing the share of net earnings from the El Sastre gold mine attributable to the 50% interest not owned by the joint venture partner; (3) a $1,480,638 gain in foreign exchange in 2008 compared to a loss of $635,357 in 2007, primarily a function of the change in exchange rates during the period; and (4) $1,255,000 in future income tax recovery in 2008 compared to nil in 2007, primarily a function of the change in exchange rates during the period.

The increase in the general and administrative expenses from 2007 to 2008 are primarily the result of: (1) the inclusion of $612,431 in expenses associated with the inclusion of the El Castillo operation following the business combination between Aurogin and Morgain Minerals Inc. ("Morgain") on August 28, 2007 to create Castle Gold; (2) $386,500 in legal expenses related to the 2008 corporate re-structuring, the resolution of the June 2008 Cease Trade Order and expenses associated with the late 2008 commencement of the review of strategic alternatives; (3) $520,000 in additional costs for personnel, including one time severance expenses related to the 2008 corporate re-structuring; and (4) $370,000 in director fees and expenses.

Operating Performance - El Castillo Mine, Durango State, Mexico (100% interest)

During the fourth quarter ended December 31, 2008 the El Castillo gold mine operated at ore mining rates of approximately 471,000 tonnes per month for a total of 1,412,416 tonnes of material mined from the open pit, of which 572,623 was ore placed on the leach pad having an average cyanide soluble grade of 0.53 grams per tonne (g/t) gold. During the quarter, the Company placed an estimated 9,761 ounces of gold in ore on the leach pads of which the Company estimates 5,635 ounces of gold were recovered during the quarter for a calculated recovery rate of 58 percent with 5,386 ounces of gold actually sold. The difference in actual production and calculated production is for gold that continues to remain in loaded carbon and will be recovered in subsequent periods. Gold sales during the period totalled 4,671 ounces. The difference in the quantity of gold produced and gold sold is a function of delays between the amounts of gold produced at the mine and the actual gold sale transaction.



Three Months Twelve Months
Ended Ended
December 31, 2008 December 31, 2008
Operating Statistics (100%) (100%)

Total tonnes mined 1,412,416 4,410,000

Tonnes waste 839,794 2,420,000

Tonnes ore-direct to leach pad 403,582 1,420,000

Tonnes crushed and placed 169,041 570,000

Tonnes ore placed on leach pad 572,623 1,990,000

Gold grade (grams/tonne) 0.53 0.50

Gold produced - commercial
production (ounces) 5,386 10,015

Gold sales (ounces) 4,671 10,430

Average realized gold price
per ounce (US$) $ 830 $ 855

Cost of sales per ounce sold
(US$) $ 520 $ 611

Adjusted cost of sales per
ounce sold (US$) $ 379 $ 493


The El Castillo gold mine operated at planned ore mining rates during the fourth quarter of 2008. Anomalously high levels of precipitation during the third quarter 2008 was expected to result in the temporary dilution of gold leach solutions, with amounts of gold that had not been recovered in the third quarter being available for recovery in the fourth quarter. It is common for up to a 60 to 90 day delay in the recovery of gold placed on the pads from the date such ore is placed on the pads due to the leach cycle and height of leach pads. This recovery period was exacerbated due to the large amounts of rainwater absorbed within the heaps.

During the fourth quarter 2008, El Castillo production costs were $520 per ounce of gold sold. The adjusted cost of production was $398 per ounce of gold sold, the difference a function of the higher than average removal of waste relative to ore that occurred in the quarter and what this cost would have otherwise been had El Castillo been mined at the life-of-mine waste to ore ratio. It is expected that these higher than average costs will continue throughout 2009, although somewhat moderated as the strip ratio is reduced to an average of 1.2 to 1.3 per unit of ore compared to 1.47 in the fourth quarter 2008, following which the strip ratio begins to decline towards the LOM average by the second half of 2010.

Operating Performance - El Sastre Mine, Guatemala (50% interest)

During the fourth quarter ended December 31, 2008 the El Sastre gold mine operated at ore mining rates of approximately 53,000 tonnes per month for a total of 159,993 tonnes of material mined from the open pit, of which 69,105 was ore placed on the leach pad having an average cyanide soluble grade of 2.84 g/t gold. During the quarter, the mine placed an estimated 6,315 ounces of gold in ore on the leach pads of which it is estimated 3,084 ounces of gold were recovered during the quarter. Gold sales during the period totalled 3,506 ounces. The difference in the quantity of gold produced and gold sold is a function of delays between the amounts of gold produced at the mine during any quarter and the actual gold sale transaction.



Three Months Twelve Months
Ended Ended
December 31, 2008 December 31, 2008
Operating Statistics (100%) (100%)

Total tonnes mined 159,993 702,000

Tonnes waste 90,888 438,000

Tonnes ore-direct to leach pad 50,377 189,000

Tonnes crushed and placed 18,728 75,000

Tonnes ore placed on leach pad 69,105 264,000

Gold grade (grams/tonne) 2.84 2.28

Gold produced (ounces) 3,084 10,555

Gold sales (ounces) 3,506 12,050

Average realized gold price
per ounce (US$) $ 722 $ 847

Cost of sales per ounce sold
(US$) $ 251 $ 221


During the fourth quarter 2008, El Sastre production costs were $251 per ounce of gold sold. Subsequent to 2008 year-end, the Company completed an updated mine survey. At present, it is expected the primary mining activities at the El Sastre project will begin to wind down late in the second quarter of 2009. Subsequent to the discontinuation of mining operations, crushing operations on existing coarse ore stockpiles until late in 2009 (although at a reduced production rate). Site leaching operations are then projected to continue into 2010 whereupon gold ore stacked on the pads will continue to produce gold, although gold production rates will begin to decline as new ore production ceases.

First Quarter 2009 - Operating Update - El Castillo and El Sastre Mines

Operating statistics for the first quarter 2009, ended March 31, 2009 are summarized in the table below for both the El Castillo mine (100% Castle Gold) and El Sastre mine (50% Castle Gold interest).

At the El Castillo mine, production continued to ramp-up with an additional 14%, for a total of 651,427 tonnes of material mined during the quarter compared to 572,000 tonnes mined in the fourth quarter of 2008 at a grade of 0.57 g/t compared to 0.53 g/t in the fourth quarter 2008 for gold production of 5,798 ounces in the first quarter 2009, an 8% increase from the fourth quarter 2008. The Company continues to ramp-up production towards its goal of 800,000 tonnes per month mining rate in the second half of 2009 with commensurate increase in gold production in-line with the reduction of the waste to ore ratio during the course of 2009 and into 2010 and leach cycle timing. The Company expects annualized production to climb to in excess of 50,000 ounces towards the end of 2009 - early 2010 at reduced per ounce cash costs commensurate with improved economies of scale.

At the El Sastre mine, production advanced at generally historical levels, however there was some reduction in the average grade of material placed on the heaps as compared to previous quarters. As previously stated, it is expected the primary mining activities at the El Sastre project will begin to wind down late in the second quarter of 2009, with crushing operations on existing coarse ore stockpiles continuing until late in 2009. Leaching operations are projected to continue into 2010 with gold production rates declining as new ore production ceases.



El Castillo El Sastre
Gold Mine Gold Mine
Operating Statistics - Q1 - 2009 (100%) (100%)

Total tonnes mined 1,509,876 168,354

Tonnes waste 858,449 76,915

Tonnes ore-direct to leach pad 452,883 58,073

Tonnes crushed and placed 198,544 33,366

Tonnes ore placed on leach pad 651,427 91,439

Gold grade (grams/tonne) 0.57 1.87

Gold produced (ounces) 5,798 3,320


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 and at its El Sastre and El Arenal project in Guatemala.

Total Shares Outstanding: 75.3MM

Fully Diluted: 82.3MM

52-Week Trading Range: C$0.15 - $0.71

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

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