GBS Gold International Inc.

GBS Gold International Inc.

March 19, 2007 09:02 ET

GBS Gold International Inc.: Agreement to Acquire the Tom's Gully Gold Mine

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 19, 2007) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has entered into an agreement with Renison Consolidated Mines NL ("Renison") of Australia to acquire the Tom's Gully underground gold mine ("Tom's Gully") in the Northern Territory of Australia.

In its revised quarterly report filed with the Australian Stock Exchange on January 22, 2007, Renison reported that as of December 31, 2006, Tom's Gully had an indicated resource of 1,420,000 tonnes at 8.1g/t for 369,800oz of gold and an inferred resource of 595,000 tonnes at 7.4g/t for 141,600oz of gold. The resource estimate was calculated in accordance with the Australian JORC Code and the Company has not completed a reconciliation of the resource estimate to National Instrument 43-101 ("NI 43-101") standards. Whilst there can be no assurance that the resources can be converted to NI 43-101 standards, the Company is commissioning a NI 43-101 report on the resources.

The transaction is conditional upon satisfaction of the Company's due diligence, regulatory approvals and the delivery of a satisfactory NI 43-101 technical report prior to closing, scheduled for late April. The purchase price comprises the following installments (amounts shown in Australian Dollars, the A$/C$ exchange rate as at March 16, 2007 was A$1 equals C$0.9331/C$1 equals A$1.0717):

- A$10 million in GBS Gold common shares payable on closing, being 3,046,315 shares;

- A$15 million payable 12 months after closing in cash or GBS Gold common shares at the prevailing market price, at GBS Gold's election;

- A$20 million payable 18 months after closing in cash or GBS Gold common shares at the prevailing market price, at GBS Gold's election; and

- Upon cumulative production of over 300,000oz of gold from the closing date, a 2% royalty on subsequent production. GBS Gold may purchase the royalty for A$7 million payable in cash or GBS common shares at the prevailing market price, at GBS Gold's election.

"On March 14, 2007, GBS Gold secured a $40 million Canadian Dollar bought deal finance facility, with an agent's option to purchase up to an additional 15% on the same terms and conditions to cover over-allotments, which is scheduled to close on March 26, 2007. The finance facility has permitted GBS Gold to pursue the acquisition of Tom's Gully, the strategic interest in Northern Mining Explorations Ltd. and to fast track the development of the Cosmo Deeps and Maud Creek projects. GBS Gold's planned acquisition of Tom's Gully and the strategic interest in Northern Mining's 30% interest in the Tulawaka gold mine in Tanzania are relatively low cost acquisitions of producing gold assets with excellent exploration potential for future growth. By adding these properties to the development of Cosmo Deeps and Maud Creek and our current production, GBS Gold is implementing a strategy of staged growth towards becoming an intermediate sized gold producer" said Gilbert Playford, GBS Gold's Chairman and Chief Executive Officer.

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Tom's Gully is located in the Northern Territory of Australia, approximately 100km north of the Company's Union Reefs processing plant. The assets to be acquired include the Tom's Gully gold mine, a 0.25Mtpa processing plant, all related infrastructure and surrounding exploration tenements. The Tom's Gully plant was commissioned in the third quarter of 2006. On March 2, 2007, Renison announced that mining and processing activities at Tom's Gully were suspended due to an intense monsoonal rain depression, and the operation remains on care and maintenance. As part of the acquisition, Renison must return the mine to its operational condition in the agreed saleable state as it was prior to the rain-induced suspension of activities.

GBS Gold believes that it can realize significant operational and financial synergies from this acquisition by:

- applying the same production philosophy to Tom's Gully as applied to all underground operations of GBS Gold in that the mine and not the processing plant will dictate the production rate, thereby achieving the highest grade possible. To date the production rate at Tom's Gully has been dictated by the need to fill the Tom's Gully plant at resultant lower grades;

- improving gold recoveries by processing the Tom's Gully ore or concentrate at the Union Reefs processing plant. The savings on the treatment costs and the plant efficiencies at the Union Reefs plant are expected to offset the envisaged transport costs;

- through treatment of potentially higher Tom's Gully grade ores, thereby increasing the overall grade milled at Union Reefs as well as making the use of the Union Reefs plant more efficient;

- operating synergies by sharing mining personnel and associated equipment with its Brocks Creek underground mine and incorporating the administration of Tom's Gully into its Union Reefs Operations Centre;

- in the future, using the GEOCOAT® circuit intended to be constructed at Union Reefs for processing of Maud Creek and other sources of refractory ores. The owner of the GEOCOAT® technology, US-based firm GeoBiotics LLC, has tested the semi-refractory ores from Tom's Gully with the GEOCOAT® process and results to date have shown improved recoveries of gold. The processing plant at Tom's Gully already has the ability to produce a gold concentrate that could be transported directly to the Union Reefs plant for treatment through the GEOCOAT® facility once it is established; and

- acquiring and/or treating other sources of refractory and semi-refractory ores located at and near to Tom's Gully once the GEOCOAT® process has been established at Union Reefs.

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 300,000 ounces in 2009. 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 technical disclosure in this news release regarding Tom's Gully was approved by Scott Hall, an employee of Renison and a qualified person under NI 43-101. The technical disclosure in this news release regarding GBS Gold's properties was approved by John Vinar, an employee of GBS Gold and a qualified person under NI 43-101.

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, 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, 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