GBS Gold International Inc.
TSX : GBS

GBS Gold International Inc.

March 14, 2007 14:06 ET

GBS Gold International Inc.: $40 Million Acquisition and Project Development Facility Secured

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 14, 2007) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has today secured a bought deal financing facility arranged by Haywood Securities Inc. for $40,000,000 (all amounts expressed in Canadian dollars).

The proceeds of the offering will be used to fund acquisitions, pre-feasibility activities and development of the Cosmo Deeps and Maud Creek underground gold projects, and for general working capital purposes. The development of these two projects, coupled with recent exploration success at the Brocks Creek underground mine and the Fountain Head open pit (refer news release dated March 12, 2007), positions GBS Gold to achieve a targeted production rate of 300,000oz of gold per year in 2009 at its Union Reefs Operations Centre in the Northern Territory of Australia.

Terms of the Finance Facility

The finance facility consists of 40,000 units to be placed by Haywood Securities Inc. ("Haywood") for total proceeds of $40 million. Each unit will consist of one $1,000 promissory note and 135 warrants where each warrant is exercisable for the purchase of one GBS Gold common share at $3.75 on or before 18 months from the closing date. The notes are for a term of two years with interest at an annual rate of 12% to be paid semi-annually. GBS Gold can prepay the loan at anytime after 12 months without penalty. On closing, the lenders will receive a pledge of security over substantially all of the assets of the Company with the exception of certain permitted security interests. Haywood will receive an agent's fee of 4% payable in cash or GBS Gold shares, at the Company's election, on closing. Haywood will also have an option, exercisable for a period of 15 days following the closing date, to purchase up to an additional 6,000 units on the same terms and conditions to cover over-allotments. The transaction is scheduled to close on March 26, 2007, and is subject to the receipt of all necessary approvals including the approval of the Toronto Stock Exchange and the securities regulatory authorities.

Cosmo Deeps underground project

The Cosmo Deeps underground project is located adjacent to the main highway approximately 150km south of the city of Darwin in Australia's Northern Territory, and approximately 60km north of the Company's Union Reefs processing plant.

To view attached figure please click on the following link: http://www.ccnmatthews.com/docs/gbs0314a.jpg

The Cosmo Deeps underground project has an Indicated Resource of 4,638,000 tonnes at 4.6g/t for 690,000oz of contained gold and an Inferred Resource of 5,211,000 tonnes for 3.6g/t for 600,000oz of contained gold (refer news release dated November 27, 2006) with the potential to produce 100,000oz of gold per year as an underground mining operation. The deposit comprises a series of parallel mineralized lodes extending beneath the previously-mined Cosmo Howley open pit (production of approximately 0.5 million ounces over 1986-1993) on the eastern and western flanks of a large northwest-plunging dolerite anticline (refer diagrams below).

To view Graphic image of the eastern and western lodes of the Cosmo Deeps deposit please click on the following link: http://www.ccnmatthews.com/docs/gbs0314b.jpg

The Company plans to use part of the proceeds of the finance facility for pre-feasibility activities, permitting of the project and to accelerate the partial de-watering of the Cosmo Howley open pit. Assuming a positive pre-feasibility study and timely completion of the permitting process, GBS Gold expects to develop the underground decline in 2007-08, with ore mining activities targeted to commence in the second half of 2008.

"The potential acceleration of the Cosmo Deeps underground project should allow GBS Gold to achieve a targeted production rate of 200,000oz per year on free-milling ores in 2009. We are encouraged by the robust nature of this deposit and believe that it should be a 100,000oz per annum ore source for the Union Reefs Operations Centre. The challenge at Cosmo Deeps has always been about how to most efficiently dewater the existing open pit but after considerable research, we now believe that the partial dewatering of the open pit and the incorporation of a sufficiently sized crown pillar to support the underground mine will produce the greatest return for our shareholders. Cosmo Deeps remains open at depth and, based on the drilling results of 2006, we believe that the resources in the deposit, in particular the Western Lodes, will continue to grow with further drilling," stated Gil Playford, GBS Gold Chairman and Chief Executive Officer.

Maud Creek underground refractory gold project

The Maud Creek underground refractory gold project is also located within the Union Reefs Operations Centre in Australia's Northern Territory approximately 125km south of the Union Reefs processing plant and 20km east of the regional centre of Katherine.

Maud Creek has an Indicated Resource of 9,288,000 tonnes at 3.1g/t for 935,000oz of contained gold and an Inferred Resource of 1,072,000 tonnes at 2.4g/t for 82,000oz of contained gold (refer news release dated January 26, 2006). GBS Gold is expecting to use the GEOCOAT® process to achieve production of 100,000oz of gold per year from 2009. On September 21, 2006, the Company entered into a Licence Agreement with GeoBiotics, LLC for the use of the GEOCOAT® refractory ore treatment process (refer news release dated September 21, 2006). GBS Gold has completed extensive metallurgical testwork of the GEOCOAT® process on its Maud Creek ores, and the Company's decision to enter into the Licence Agreement was based on the successful results of this testwork and the expected capital and operating cost savings compared with a conventional tank-hosted bio-oxidation facility. The Company has also been able to secure the employment of a metallurgical engineer with extensive GEOCOAT® operating experience.

The Company plans to use part of the proceeds of the finance facility to further pre-feasibility activities, permitting of the project and the design of a flotation plant and GEOCOAT® circuit at the Union Reefs processing plant. Assuming a positive pre-feasibility study and timely completion of the permitting process, GBS Gold expects to commence construction of the flotation plant, GEOCOAT® circuit and an underground decline into the Maud Creek orebody in 2008, with mining activities expected to commence in late 2008 or early 2009.

"Like the Cosmo Deeps project, Maud Creek presents the opportunity to add 100,000oz per year of gold production to the Union Reefs Operations Centre, which due to its higher average grade should lower unit cash costs. We commenced the permitting process earlier this year by submitting the Notice of Intent for the development of the Maud Creek project. Following the success of our 2006 drilling program on free-milling ores and the better than expected performance of the Union Reefs processing plant, adding the Cosmo Deeps and Maud Creek projects to the Brocks Creek underground mine and our open pits should allow GBS Gold to produce at a targeted rate of 300,000 oz per year in 2009" stated Mr. Playford.

About GBS Gold International Inc.

GBS Gold is an emerging gold producer with 2.1Moz of Measured and Indicated Resources and 1.5Moz of Inferred Resources of gold at its Union Reefs Operations Centre located in historically productive goldfields in the Northern Territory of Australia. GBS Gold produces gold through its modern dual-mill 2.5Mtpa Union Reefs processing plant and plans to ramp up production from free milling ores during 2007 to a targeted annualized rate of 150,000 ounces. The Company expects to construct a flotation plant and bio-oxidation heap leach facility using the GEOCOAT® technology at the Union Reefs Plant to process refractory ores and increase gold production from all sources to a targeted annualized rate of 250,000 ounces in 2008-09. Management has extensive experience in bringing mineral projects into production, operating open pit and underground gold mines and has assembled a team with valuable mining experience in the Northern Territory of Australia. The Union Reefs plant is adjacent to the main Stuart Highway and the trans-continental Adelaide-Darwin railway line, and is on the Northern Territory power grid. Within 125km trucking distance of the Union Reefs plant, GBS Gold has consolidated over 2,500km2 of prospective tenements and gold deposits and also holds gold exploration properties in Western Australia and Canada. GBS Gold trades on the Toronto Stock Exchange under the symbol "GBS".

On behalf of the Board of Directors

Gilbert Playford, Chairman and CEO

The securities being offered have not been and will not be registered under the United States Securities Act of 1933, as amended, or the securities laws of any state, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons without registration unless an exemption from registration is available. This news release does not constitute an offer for sale of securities in the United States.

The resource estimates are reported at a range of cut-off grades as set out in the technical report entitled "Independent Technical Review of the Burnside, Union Reefs, Pine Creek and Maud Creek Gold Projects, Northern Territory, Australia", dated effective October, 2005 and filed on January 5, 2006, an addendum technical report entitled "Addendum to the Technical Review of the Burnside Gold Project, Union Reefs Gold Project, Pine Creek Gold Project and Maud Creek Gold Project, Northern Territory, Australia - Resource Update, Maud Creek Gold Project" dated February 2006 and filed on February 8, 2006 (collectively, the "Technical Reports"), and news releases filed on January 20, July 10, September 14, October 26, November 27 and December 13, 2006 and January 9, 2007, all of which may be viewed on the SEDAR website, www.sedar.com. The Company has not completed a feasibility study and there is no certainty that the project will be economically successful. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Certain disclosures in this release, including management's assessment of GBS Gold's plans and projects, constitute forward-looking statements that are subject to numerous risks, uncertainties and other factors relating to GBS Gold's operation as a mineral development company that may cause future results to differ materially from those expressed or implied in such forward-looking statements. The following are important factors that could cause the Company's actual results to differ materially from those expressed or implied by such forward looking statements: fluctuations in gold prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; general market conditions; the uncertainty of future profitability; and the uncertainty of access to additional capital. Full descriptions of these risks can be found in the Company's Annual Information Form available on the SEDAR website, www.sedar.com. Readers are cautioned not to place undue reliance on forward-looking statements. GBS Gold expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

The TSX does not accept responsibility for the adequacy or accuracy of the information contained herein.

Contact Information

  • GBS Gold International Inc.
    Samuel Yik
    Vice President, Corporate Finance and Investor Relations
    (778) 328-9801
    Email: gbs@gbsgold.ca
    Website: www.gbsgold.com