GBS Gold International Inc.

GBS Gold International Inc.

September 15, 2008 09:24 ET

GBS Gold International Inc.: Appointment of Voluntary Administrators to Australian Subsidiaries

TORONTO, ONTARIO--(Marketwire - Sept. 15, 2008) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") reports that its indirect wholly-owned subsidiary, GBS Gold Australia Pty Ltd ("GBS Australia"), has today appointed Mr. Andrew Saker, Mr. Darren Weaver and Mr. Martin Jones of Ferrier Hodgson as joint and several Voluntary Administrators of GBS Australia and its Australian subsidiary entities.

The appointment of the Administrators is required under Australian law following the recent degradation of GBS Australia's financial position and places control of the Australian subsidiaries in the hands of the Administrators. Claims of creditors are delayed with the principal aim of allowing the Australian subsidiaries to be restructured and recapitalized with a view to being able to continue their business.

The appointment has arisen due to the Company being unable within the time required to secure appropriate financing for recapitalizing its Australian subsidiaries. The appointment constitutes an event of default under the Company's debt financing arrangements, including the existing C$46 million secured promissory note facility and secured Australian banking facilities. The security arrangements give the secured parties certain rights and decisions with respect to the Company's assets. The amounts due under the promissory note facility have become repayable and discussions have commenced with the noteholders. The Administrators are making immediate contact with the Company's noteholders, banks and other creditors and, in consultation with the Board and management of GBS Gold, will review the Company's operations and investigate production, restructuring and recapitalization plans.

Attached to this news release is a letter from the Administrators setting out the process in Australia and the approach for seeking and agreeing to potential restructuring outcomes. If the Australian subsidiaries cannot ultimately be restructured or continue as a going concern, they may then be subject to liquidation proceedings.

The appointment of the Administrators is required as a result of production issues and weaker operating cashflows leading to a reduction in the Company's cash resources. In particular, GBS Gold's Australian subsidiaries have recently suffered from lower production and cashflow losses as a result of the following:

- A stope failure experienced in the Brocks Creek underground mine in June and recent experiences within lower levels of this orebody. Following the stope failure, development of the underground workings continued into lower levels of this mine where it is now evident that ore tonnes and gold grades in these mining levels are below those experienced in the higher levels of the mine. As a result, the economics of the mine have deteriorated and additional drilling is required to confirm the geological interpretation that ore tonnes and grades will improve towards previous levels as mining progresses deeper.

- Mining of the Chinese South Extension open pit mine has recently required, and is expected to continue to require, removal of greater quantities of waste rock material than originally anticipated, resulting in reduced ore quantities available for the Union Reefs plant. Ore from other available open pit sources is not expected to cover this shortfall.

- In the course of ramping up production to in excess of 200,000 tonnes per month through the Union Reefs plant, the Company incurred additional production and capital costs while experiencing significant cost increases in Australia, particularly in fuel, processing consumables and labour.

- Production delays and lower ore grades than planned at the Tom's Gully operation have led to increased start-up costs. Based on recent mining and processing activities, ore grades from the underground mine in the short term are expected to be less than budgeted until the higher grade veins of the orebody are accessed.

- The Company's inability to secure appropriate financing in the current market conditions.

The Company is currently working closely with the Administrators to assess the effect upon the future business and direction of the Company and its Australian subsidiaries, and will provide further advice to shareholders in due course.

For further information regarding the Australian subsidiaries, the conduct
of the Australian business or to discuss the administration process, the
Administrators may be contacted at the following:

Mr. Andrew Saker
Partner, Ferrier Hodgson
Joint and Several Administrator
Level 26, 108 St George's Terrace
Perth, Western Australia, 6000
Tel: +61 (0)8 9214 1444
Fax: +61 (0)8 9214 1400

About GBS Gold International Inc.

GBS Gold is a junior gold producer with 2.7 million ounces of Indicated Resources and 1.7 million ounces of Inferred Resources of gold at its Union Reefs Operations Centre located in the Northern Territory of Australia. GBS Gold produces gold through its 2.5Mtpa Union Reefs processing plant. The Company has recently commenced gold production at its Tom's Gully operation and plans to develop its Cosmo Deeps underground mine in 2009-10. GBS Gold has consolidated over 3,500km2 of prospective tenements and gold deposits and also holds gold exploration properties in Western Australia. The Company trades on the Toronto Stock Exchange under the symbol "GBS".

The Company's mineral resources comprise indicated resources of 26.8 million tonnes at 3.1g/t for 2.7 million ounces of contained gold and inferred resources of 21.5 million tonnes at 2.4g/t for 1.7 million ounces of contained gold as set out in its technical reports (refer below) and news releases dated May 13 and July 2, 2008. The Company has filed on May 8, 2008 a technical report entitled "GBS Gold International: Burnside, Union Reefs, Maud Creek and Moline Projects, Northern Territory, Australia" dated February 2008 and authored by Jeames McKibben and Christine Standing of Snowden Mining Industry Consultants Pty Ltd and Heath Gerritsen of HG Mine Design Pty Ltd. The Company has also filed two technical reports on its Tom's Gully project being a technical report entitled "Form 43-101 Technical Report on the Tom's Gully Project" authored by Paul Payne of Resource Evaluations Pty Ltd dated and filed on January 14, 2008 and a technical report entitled "Technical Report on the Mineral Reserves of the Tom's Gully Gold Mine" authored by Heath Gerritsen of HG Mine Design Pty Ltd dated December 2007 and filed on January 31, 2008.

The Company has completed feasibility studies on its Tom's Gully and Cosmo Deeps projects, and a life-of-mine study on its operating Brocks Creek underground mine, all of which have declared mineral reserves in accordance with the above technical reports. Where the Company has not completed a feasibility or life of mine study on a particular project, there is no certainty that such 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.


W Rushton

15 September 2008


GBS GOLD AUSTRALIA PTY LTD (Administrators Appointed)
ACN 115 384 319 ("GBS")
and Subsidiaries as set out in the Schedule
(Collectively referred to as "The GBS Group")
Appointment of Voluntary Administrators


The Boards of Directors of the GBS Group appointed Andrew Saker, Darren Weaver and Martin Jones (collectively known as "the Administrators") as Joint and Several Administrators of the GBS Group pursuant to the provisions of Section 436A of the Corporations Act 2001 ("the Act") on 15 September 2008.

Our role as Joint and Several Administrators of the Group is to take control of the Group's businesses, properties and affairs with a view to facilitating the execution of a Deed of Company Arrangement ("DOCA") to reorganise the Group's affairs. We are assessing the GBS Group's financial position. The creditors of the companies will be given the opportunity to decide each company's future at meetings of creditors to be convened at a future date.

The Administrators are continuing to conduct the businesses of the GBS Group on the basis of "business as usual" whilst a review of the GBS Group's operations is completed and restructuring alternatives explored.

The Administrators have not been appointed to GBS Inc, which remains under the control and authority of its Board of Directors. The Administrators will continue to work with the Boards of Directors of GBS Inc and the GBS Group during the course of the Administration. The Administrators will provide updates to the Board of Directors of GBS Inc which can then be made available to the shareholders of GBS Inc.

In order that shareholders may better appreciate the mechanics of a Voluntary Administration process and our duties and responsibilities as Voluntary Administrators we set out below, in general terms, the effect of the appointment on the affairs of a company.

1. Reason for Appointment

Each company in the GBS Group is placed into Voluntary Administration pursuant to a resolution by directors that the company is insolvent or likely to become insolvent in the near future. The directors wish to effect the appointment of independent Administrators to control the affairs of the company to provide a moratorium on creditors' claims for a short period in order that a proposal for resolution of each company's financial position may be effected. Within twenty five (25) business days of the appointment of the Administrators, creditors of the company are given the opportunity to decide the future of the company being either one of the following:

(a) Acceptance of a proposed DOCA;

(b) Placing the company in liquidation; or

(c) The Administrators retiring and control of the company returning to the directors.

There is also an opportunity for creditors to extend this moratorium period for a further forty-five (45) business days to facilitate the consideration of a DOCA.

2. Effect of Appointment on Creditors

The appointment of the Administrators substantially affects creditors' rights against the company as follows:

(a) A creditor with a charge over the whole or substantially the whole of each company's property must enforce the charge within 13 business days of the appointment or be prevented from enforcing the charge during the remainder of the administration;

(b) Claims of unsecured creditors and chargees with a charge over part of the property of the company are stayed for the duration of the moratorium period;

(c) The enforcement of guarantees given by directors or relatives of directors to creditors of the company is stayed during the administration; and

(d) The Administrators have the power to retain and use property owned by third parties but used by the company during the administration in the ordinary course of business provided he pays for the use of those goods such as leased assets, leased premises and the like.

The moratorium of creditors is provided under the Act in order that the Administrators and the directors may formulate a proposal for each company's future in an environment where the business may be continued.

3. Effect of Appointment on Shareholders of GBS Inc

There will be no immediate effect of our appointment on the Shareholders of GBS Inc. The Voluntary Administrators will liaise with the Boards of Directors of GBS Inc and the GBS Group in the development of a DOCA. The creditors of the GBS Group will be entitled to vote on the DOCA proposal, if one is forthcoming.

If no DOCA is proposed to creditors of the GBS Group, and the GBS Group proceeds into liquidation, the Board of GBS Inc will be informed, so that the Board of Directors of GBS Inc may inform the Shareholders of GBS Inc.

4. Timing in the Administration

The Voluntary Administration process is largely a time driven sequence of events leading to a resolution of each company's affairs either by way of a restructuring of its affairs in order for the business to continue or a winding up. The steps are summarised below:

(a) Voluntary Administrators have been appointed by the Companies.

(b) Within eight business days of the appointment of the Voluntary Administration a meeting of creditors is held to confirm the Administrators' appointment and if necessary to appoint a Committee of Creditors.

(c) Within seven days of the appointment, the Administrators must make a decision as to the incurring of debts such as leasing of property and equipment and so on.

(d) Within 13 business days of the appointment the creditor who has security over the whole or substantially the whole of each company's assets may exercise his powers to take possession of the assets of the company. If not exercised within 13 business days, the secured creditor may not enforce his security until the end of the Voluntary Administration.

(e) Within 20 business days of the appointment, the Administrators must convene a second meeting of creditors to be held within 25 business days after the appointment. To convene the meeting the Administrators must prepare a report to creditors which details any proposal for a DOCA and the result of the investigations into the affairs of the company and as a consequence of those investigations, any claim the Administrators believe a liquidator of the company may pursue.

(f) At the second meeting of creditors the creditors are given the opportunity to decide the fate of the company by way of resolution being either acceptance of a DOCA, placing the company in liquidation or returning the control of the company to the directors.

(g) The second meeting of creditors may also be adjourned for a period of up to forty-five (45) business days which is often sought in order that the Administrators may complete their investigations and assessment of a proposed DOCA.

(h) If the DOCA is accepted by creditors the Deed must be executed within 21 days of acceptance by the creditors. Upon execution, the Voluntary Administrators become Administrators of the company subject to a Deed of Company Arrangement.

(i) If the creditors resolve to place the company into liquidation the company is deemed to have gone into a creditors' voluntary liquidation and the Voluntary Administrators automatically become liquidators.

5. Development of a Deed of Company Arrangement Proposal

The Administrators will work with the respective Boards of Directors of the companies to formulate and propose the DOCA. Examples of some of the types of DOCA's are as follows:

(a) The freezing or reduction of creditors' claims releasing liquidity to the company to permit it to conduct its business, to complete work in progress or in order to conclude negotiations for the sale of its business;

(b) Continued trading resulting in expected generation of profits enabling a repayment to existing creditors and continued custom for those existing creditors;

(c) Merger or re-organisation resulting in the creation of a new company; or

(d) Take over the company or its business by a purchaser capable of introducing expertise, capital or some other benefit.

6. Ongoing Reporting of Key Developments

Information on key developments during the Administration period will be available from our website.

7. Fees and Costs of Administrators

Our fees and costs will be charged on the basis of hours spent by the Administrators and their staff on the administration at the hourly rate set from time to time by Ferrier Hodgson. The fees and costs are payable following approval from creditors.

Should you have any queries in relation to this matter, please do not hesitate to contact Wayne Rushton or Derek Keir of this office, whose contact details are as follows:

Wayne Rushton
Telephone: +61 8 9214 1408

Derek Keir
Telephone: +61 8 9214 1438

Yours faithfully

DARREN WEAVER, Joint and Several Administrator
GBS Gold Australia Pty Ltd
and subsidiaries as set out in the schedule


Company ACN
GBS Gold Australia (Tom's Gully) Pty Ltd 124 581 862
Northern Gold Pty Ltd 009 620 937
Camelot Northern Territory Pty Ltd 062 734 178
Territory Goldfields Pty Ltd 066 581 075
Burnside Operations Pty Ltd 097 922 444
Buffalo Creek Mines Pty Ltd 097 907 625
GBS Gold Holdings Pty Ltd 126 471 136
Terra Gold Mining Pty Ltd 071 444 061
Terra Metals Pty Ltd 092 922 097
GBS Gold Australia (Land Holdings) Pty Ltd 119 998 793
Excor Resources Pty Ltd 095 987 518
E-Auction Australasia Pty Ltd 078 168 886

Ferrier Hodgson is an affiliation of independent partnerships
Liability limited by a scheme approved under the Professional Standards Legislation

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

Contact Information

  • In Toronto, Canada:
    GBS Gold International Inc.
    Gil Playford, Chairman and CEO
    (416) 777-1508
    In Perth, Australia:
    GBS Gold International Inc.
    Peter Kerr, Chief Financial Officer
    +61 (0)8 9492 2500