Castle Gold Corporation
TSX VENTURE : CSG

Castle Gold Corporation

May 28, 2009 15:19 ET

Castle Gold Reports Record Quarterly Gold Production and $0.01 Per Share Profit in First Quarter 2009 Operating and Financial Results

TORONTO, ONTARIO--(Marketwire - May 28, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) today reported its financial and operating results for the first quarter 2009 period ended March 31, 2009. 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.

Highlights for the First Quarter 2009

- The Company reported net earnings for the three month period ended March 31, 2009 of $676,733 or $0.01 per share compared to earnings of $764,662 or $0.01 per share for the three month period ended March 31, 2008. Metal revenues for the first quarter of 2009 totalled $5,914,273 on the sale of 6,513 ounces of gold, compared to $1,610,271 on the sale of 1,787 ounces of gold in the prior year period, operating costs increased to $3,048,893 as compared to $417,331 in the same prior year period.

- A new quarterly gold production record totalled 7,628 ounces and included 1,510,000 tonnes of total material mined from the El Castillo open pit, 12,000 ounces of gold contained in ore placed on the leach pads and 5,968 ounces of gold recovered in the production plant.

- A Shareholder Rights Plan was implemented by the board of directors to be voted upon by shareholders at the upcoming Annual General Meeting.

- Results from a study of the mineral resources contained within the Transition and Sulphide zones of gold mineralization that exist below the oxide reserves at the El Castillo mine contained a mineral resource of 27.9 million tonnes at an average grade of 0.7 grams per tonne gold for a total of 624,712 ounces contained gold in the Inferred resource category.

- The first phase of a reverse circulation drill program to test the potential to expand oxide gold mineralization to the south and the east of the El Castillo pit began during the quarter.

- A new mining contract was signed with CAMSA, the current mining contractor at the El Castillo gold mine that provides for the use of a fleet of larger mining equipment enabling the ramp-up of production and a reduction in unit production costs by US$25 per ounce of gold.

- An internal study on the crushing plant at the El Castillo gold mine demonstrated a US$34 per ounce operating cost savings and a 170% internal rate of return from an investment of US$1.0 million for the purchase and installation of a screening deck to screen the fine fraction of high-grade ore.

Thomas Atkins, President and CEO of Castle Gold commented on the first quarter results stating: "Another good quarter for the Company and for the El Castillo mine. Mining rates and gold production at El Castillo continued to increase during the quarter compared to the previous quarter, despite the challenges of aged equipment being phased-out in March in anticipation of the new mining contract and the new equipment that would arrive soon after signing of this contract. Cash operating costs continue to decline to the point where at El Castillo cash operating costs were $502 per ounce of gold produced during the quarter, which, after adjusting for the current higher than average waste to ore ratio, were US$394 per ounce of gold produced. The operations team at El Castillo made good progress in advancing the Company's business plan for the asset, focussed on reducing operating costs and demonstrating the potential to increase gold resources at El Castillo. The purchase and installation of a screening deck at the crushing plant shows a compelling 170 percent internal rate of return and engineering for the installation of this equipment is underway. The team also made progress in advancing gold resource growth potential both in the oxide material to the south and south-east of the Castillo pit through its reverse circulation program and potential gold resources within the Transition-Sulphide zone. We remain confident of the ability to continue to advance some compelling value creating opportunities at El Castillo in the months and quarters ahead."

Financial Results - First Quarter 2009

During the quarter ended March 31 2009, metal revenues consisted of $5,914,273 on the sale of 6,513 ounces of gold at an average price of $908 per ounce of gold. Revenues consisted of $5,194,023 on sales of 5,698 ounces of gold at an average price of $911 per ounce of gold from the El Castillo mine and revenues of $720,250 (100% - $1,440,500) on sales of 814 ounces of gold (100% - 1,628 ounces) at an average price of $884 per ounce of gold from the Company's 50% interest in the El Sastre mine. This compares to metal revenues during the quarter ended March 31, 2008 of $1,610,271 on the sale of 1,787 ounces of gold at an average price of $901 per ounce of gold representing the Company's 50% of the sales from the El Sastre gold mine. The increase in revenues and gold sales during the three month period ended March 31, 2009 as compared to the same prior year period is a result of the recording of revenues from the El Castillo mine. 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.

Consolidated production costs at both the El Sastre and El Castillo gold mines for the three month period ended March 31, 2009 were $3,048,893 as compared to $417,331 in the same prior year period representing an overall cost of sales for the period of $468 per ounce of gold sold compared to $234 per ounce of gold sold for the same prior year period. Depreciation, depletion and amortization were $778,676 for the three month period ended March 31, 2009 as compared to $174,822 for the three month period ended March 31, 2008. 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 that attained commercial production status effective July 1, 2008.

Changes in non-operating items for the three month period ended March 31, 2009 compared to the same prior year period, included: (1) an increase in general and administrative costs of $1,021,042 as compared to $349,033 in the prior year period; (2) a $256,434 gain in foreign exchange as compared to a gain of $304,095 in the prior year period, primarily a function of the change in exchange rates during the period; and (3) ($220,560) in income tax expense and ($205,000) in future income tax expense as compared to ($21,731) and $Nil, respectively in the prior year period; primarily a function of the inclusion of the result for the El Castillo mine in the current year period.

The increase in general and administrative expenses were primarily the result of: (1) $208,122 in stock based compensation (2) $216,000 in legal expenses and fees related to expenses associated with the Company's review of strategic alternatives, (3) $100,000 in additional investor relations expenses (4) $90,000 in director fees and expenses, and; (5) the inclusion of $83,000 in expenses associated with the inclusion of the El Castillo operation.

The Company reported earnings for the three month period ended March 31, 2009 of $676,733 or $0.01 per share compared to earnings of $764,662 or $0.01 per share for the three month period ended March 31, 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.

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

During the first quarter ended March 31, 2009 the El Castillo gold mine operated at ore mining rates of approximately 503,000 tonnes per month for a total of 1,509,900 tonnes of material mined from the open pit, of which 651,000 tonnes was ore placed on the leach pad having an average cyanide soluble grade of 0.57 grams per tonne (g/t) gold. During the quarter, the Company placed an estimated 12,000 ounces of gold in ore on the leach pads of which the Company estimates 7,200 ounces of gold were recovered during the quarter for a calculated recovery rate of 60 percent with 5,698 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 5,698 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 Three Months
Ended Ended
March 31, 2009 March 31, 2008(1)
Operating Statistics (100%) (100%)

Total tonnes mined 1,509,900 873,000

Tonnes waste 848,400 414,000

Tonnes ore-direct to leach pad 452,900 352,000

Tonnes crushed and placed 198,500 107,000

Tonnes ore placed on leach pad 651,000 459,000

Gold grade (grams/tonne) 0.57 0.42

Gold produced - commercial production (ounces) 5,968 2,632

Gold sales (ounces) 5,698 1,555

Average realized gold price per ounce (US$) $ 911 -

Cost of sales per ounce sold (US$) $ 502 -

Adjusted cost of sales per ounce sold (US$) $ 394 -

(1) Represents the results for the operations prior to achieving
commercial production status as of July 1, 2008.


During the first quarter 2009, El Castillo production costs were $502 per ounce of gold sold. The adjusted cost of production was $394 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 at 1.32 to 1 and what this cost would have otherwise been had El Castillo been mined at the life-of-mine waste to ore ratio of 0.6 to 1. It is expected that these higher than average costs will continue throughout 2009, following which the strip ratio begins to decline towards the life-of-mine average by the second half of 2010.

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

During the first quarter ended March 31, 2009 the El Sastre gold mine operated (100% interest) at ore mining rates of approximately 56,000 tonnes per month for a total of 168,400 tonnes of material mined from the open pit, of which 91,400 tonnes was ore placed on the leach pad having an average cyanide soluble grade of 1.87 g/t gold. During the quarter, the mine placed an estimated 2,700 ounces of gold in ore on the leach pads of which the Company estimates approximately 2,000 ounces of gold were recovered during the quarter for a calculated recovery rate of 75 percent with 1,628 ounces of gold actually sold. Similar to El Castillo, 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 Three Months
Ended Ended
March 31, 2009 March 31, 2008
Operating Statistics (50%) (50%)

Total tonnes mined 84,200 91,000

Tonnes waste 38,500 66,500

Tonnes ore-direct to leach pad 29,000 13,500

Tonnes crushed and placed 16,700 11,000

Tonnes ore placed on leach pad 45,700 24,500

Gold grade (grams/tonne) 1.87 1.87

Gold produced (ounces) 1,660 1,280

Gold sales (ounces) 814 1,787

Average realized gold price per ounce (US$) $ 884 $ 901

Cost of sales per ounce sold (US$) $ 234 $ 234


During the first quarter 2009, El Sastre production costs were $234 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 are expected to continue 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.

Conference Call

The Company does not intend to host a conference call to discuss the financial and operating results for the first quarter 2009 period at this time given it recently held a year-end results conference call in which an overview of first quarter 2009 operating results were discussed. The Company intends to provide an overview of first quarter results and an outlook for 2009 at its Annual General Meeting to be held at the Toronto Board of Trade, 1 First Canadian Place, Toronto, Ontario M5X1C1, Ketchum/Osgoode Rooms on Friday, June 19, 2009 at 1:30 p.m. (Toronto time). It is anticipated that a conference call facility with question and answer capabilities will be made available for those unable to attend the Annual General Meeting in person
.
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: 82.8MM

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.

Contact Information

  • Castle Gold Corporation
    Thomas Atkins
    President and CEO
    416 214 4809 or Toll Free: 1 866 646 3274
    or
    Castle Gold Corporation
    Rory Quinn
    Manager Investor and Public Relations
    416 214 4809 or Toll Free: 1 866 646 3274
    416 366-7421 (FAX)
    info@castlegoldcorp.com
    www.castlegoldcorp.com