GBS Gold International Inc.

GBS Gold International Inc.

August 13, 2007 08:36 ET

GBS Gold International Inc.: Second Quarter 2007 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 13, 2007) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") reports its financial results for the second quarter of 2007 ("Q2") (all amounts in Canadian dollars unless otherwise stated):

- Commencement of commercial production at the Union Reefs Operations Centre in the Northern Territory of Australia effective April 1, 2007. Results for Q2 were:

June Quarter
Gold produced 29,058 oz

Gold sold 25,764 oz

Sales price US$673/oz

Cash operating cost:
- A$/oz A$828/oz
- US$/oz US$688/oz

- Monthly production steadily increased from 8,859oz in April, to 9,163oz in May and to 11,036oz in June. All ore was processed through one of the two installed ball milling circuits. Production for the second half of 2007 is expected to be 65,000-70,000oz at an average cash operating cost of A$600-650/oz (approximately US$510-550/oz at A$1.00/US$0.85).

- Operating loss before depreciation and amortization of $1.1 million. Cash operating costs were US$688/oz (A$828/oz) reflecting the build up of production through Q2, start-up costs and increases in the A$/US$ exchange rate. The reduction in cash operating costs over Q2 is reflected in the month of June where they were US$601/oz. GBS Gold's Chairman and CEO, Gil Playford, commented: "We are encouraged by the production results and are taking steps to continue the cost reductions into the second half of the year. The results achieved provide the platform needed to support our internal growth projects and we remain on track to reach our targeted production rate of 300,000ozpa in 2009."

- Reported net loss of $9.2 million after recognizing non-cash charges for depreciation and amortization, stock-based compensation, unrealized loss on the fair value of derivatives and corporate and interest charges.

- Substantial progress on the GEOCOAT® refractory ore treatment process and the Cosmo Deeps and Maud Creek projects.

- Cash at June 30, 2007 of $33.1 million. Cash as at August 8, 2007 is approximately $36 million.

- Increase in Measured and Indicated Resources to 2.6Moz and Inferred Resources to 1.6Moz.

- Signing of a final purchase agreement for the acquisition of the Tom's Gully gold property assets, with completion having occurred on July 25, 2007.

- Investment of $9.6 million in shares and warrants of MDN Inc., owner of a 30% interest in the Tulawaka gold mine in Tanzania, and surrounding exploration landholdings.

Teleconference Call: Tuesday August 14, 2007 at 9.00am EST

Toronto +1-416-340-2216, North America 1-866-898-9626, Europe 00-800-8989-6323 and Australia 0011-800-8989-6323 and ask for GBS Gold

Website: The webcast can be accessed on the GBS Gold website at


The Company commenced commercial production of gold at the Union Reefs Operations Centre effective April 1, 2007. Production results for Q2 and the month of June were:

June June
Quarter Month
Ore tonnes milled:
- Open pit 384,700 145,900
- Underground 36,500 12,500
- Low-grade stockpiles 29,000 -
- Total (tonnes) 450,200 158,400
Head grade milled 2.13 g/t 2.31 g/t
Metallurgical recovery 94.4% 93.7%
Gold produced 29,058 oz 11,036 oz
Gold sold 25,764 oz 11,921 oz
Cash Operating Cost (A$/oz) A$828/oz A$715/oz
Cash Operating Cost (US$/oz) US$688/oz US$601/oz

Monthly production steadily increased during Q2 from 8,859oz in April, to 9,163oz in May and to 11,036oz in June. All ore was processed through one of the two installed ball milling circuits at the Union Reefs plant, with the unutilized 1 million tonne per annum ball mill providing spare capacity for production growth.

Cash operating costs were US$688/oz during Q2 as a result of the ramp up of production, start-up costs and the strengthening A$/US$ exchange rate. The exchange rate at the end of Q2 (A$1.00/US$0.85) was approximately 13% above the average exchange rate for 2006 (A$1.00/US$0.75). Cash operating costs improved throughout and decreased to US$601/oz in June. In the second half of 2007, the Company expects to produce 65,000-70,000oz at an average cash operating cost of A$600-650/oz (approximately US$510-550/oz at A$1.00/US$0.85).

GBS Gold is taking several steps to further optimize its operations, including:

- improving the average grade by reducing quantities of low-grade open pit ore and stockpile material, increasing quantities of the higher grade Fountain Head open pit ore, and by increasing quantities of the high grade underground ore;

- forming an alliance with an experienced underground mining management team to lower costs, improve efficiencies and increase planned tonnages from the Brocks Creek underground mine and potentially manage the Company's other underground mining projects such as Tom's Gully, Cosmo Deeps and Maud Creek. The alliance has already achieved noticeable improvements in the operations at Brocks Creek; and

- acquiring the Tom's Gully gold deposit, which lies within the Union Reefs Operations Centre, as an additional higher grade ore source to be processed at the Union Reefs gold plant.

Internal Growth Plans

During Q2, GBS Gold furthered the planning and detailed studies on the GEOCOAT®, Tom's Gully, Cosmo Deeps and Maud Creek growth projects with a view to bringing these projects into production as quickly and as efficiently as possible:

- GEOCOAT® Refractory Ore Treatment Process - Detailed engineering design work for the licensed GEOCOAT® bio-oxidation process is nearly complete, and metallurgical testwork has confirmed the anticipated results. Final costings are now being collated for formal Board approval and commencement of construction activities at the Union Reefs plant.

- Tom's Gully - On May 24, 2007, GBS Gold signed the final purchase agreement to acquire the Tom's Gully gold property assets. The purchase was successfully completed on July 25, 2007. The Tom's Gully mine is located approximately 100km north of the Company's Union Reefs processing plant. The assets acquired include the Tom's Gully underground gold mine, a 250,000 tonne per annum processing plant, mine infrastructure and approximately 1,000sqkm of exploration tenements. The mine contains a mineral resource calculated in accordance with National Instrument 43-101 comprising Indicated Resources of 1,413,000 tonnes at 8.1g/t for 368,000 ounces of gold and Inferred Resources of 563,000 tonnes at 7.6g/t for 137,000 ounces of gold. GBS Gold plans to mine and truck the Tom's Gully ore to the Union Reefs plant for processing. The Company is targeting gold production from the mine of 25,000oz per year commencing 2008, and is also continuing investigations for the treatment of the refractory components of the Tom's Gully ore with the GEOCOAT® process which provides the potential of producing up to 40,000oz per year.

- Cosmo Deeps - The mining and dewatering plans have been identified for the Cosmo Deeps project. Confirmatory testing on the use of industrial evaporators in the open pit dewatering program will commence shortly. Production from the Cosmo Deeps underground mine is expected in 2009.

- Maud Creek - Permitting applications have been submitted and formal approvals for the Maud Creek underground mine are expected at the end of the first quarter of 2008. Upon approval being obtained, development of the underground decline access can commence. The refractory ore will be treated through the GEOCOAT® process at the Union Reefs plant.

The critical path for each of the above projects has been identified and is represented in the chart below, leading to the Company's goal of producing at an annualized rate of 300,000ozpa in 2009.

To view the chart accompanying this press release please click on the following link:

Resources, Drilling & Exploration

During Q2, the Company increased its resource base through increases for the Chinese South Extension, North Point and Princess Louise open pit deposits and, subsequent to the end of Q2, completion of the Tom's Gully acquisition.

At the Chinese South Extension deposit, the resource estimate now comprises Indicated Resources of 1,632,000 tonnes at 1.8g/t for 95,800oz of gold plus Inferred Resources of 975,000 tonnes at 1.9g/t for 59,200oz of gold. The increase in this resource means that the resource estimate for the Chinese "big pit" zone (comprising the Chinese South Extension and Mottrams deposits) now totals Indicated Resources of 2,942,000 tonnes at 1.6 g/t for 152,800oz of contained gold, plus Inferred Resources of 1,658,000 tonnes at 1.6g/t for 83,200oz of contained gold. In addition, the Chinese Howley deposits within this zone host resources reported by former owners in accordance with the Australasian Code for Reporting of Identified Mineral Resources and Ore Reserves (December 2004) which are being reviewed under NI 43-101 standards.

During Q2, resource definition drilling was undertaken for additional zones of mineralization within the Fountain Head open pit area, and for depth extensions to the deposit. Drilling commenced in the Chinese "big pit" zone, with the focus on seeking extensions to the Mottrams and Chinese Howley zones. Interpretation of recent intersections is being undertaken as the programs continue. The results have warranted further drilling in the current and next quarters. The Company has also commenced drilling at the Nicolsons gold mine project in Western Australia, with a view to establishing a
National Instrument 43-101 resource estimate.

The Company's total resource base now comprises Measured and Indicated Resources of 24.7 million tonnes at 3.3g/t for 2.6Moz of gold, and Inferred Resources of 21.2 million tonnes at 2.4g/t for 1.6Moz of gold. The total resource position will be updated on or before December 31, 2007.

The Company has a regional exploration team of 12 personnel. During Q2, priority exploration targets were identified and various field and drilling programs commenced. Work focused on regional soil sampling and exploration for southern extensions to the Cosmo Deeps deposit where encouraging early stage drilling results were achieved. Aircore drilling has also commenced on other target areas, and a program has been approved for the Moline tenement package.


The Union Reefs Operations Centre is located within a prospective region which hosts operating and historic uranium and base metal mines. The Company has been approached by various interested parties and has commenced negotiations with a number of specialized uranium exploration groups. The objective of these negotiations is to enable the Company to obtain value for exploration assets which are non-core and which require specialized exploration input.


On April 5, 2007, GBS Gold paid $9.6 million to MDN Inc. ("MDN") by way of a private placement for the purchase of 8 million units of MDN ("MDN Units") at $1.20 per MDN Unit. Each MDN Unit consists of one MDN common share, which are listed for trading on the TSX under the symbol MDN, and one warrant expiring on October 5, 2008 for the purchase of one MDN common share at $1.60. MDN holds a 30% interest in the in the Tulawaka gold mine in Tanzania with Barrick Gold Corporation as the 70% operating partner. MDN also controls 20 Prospecting Licences within a 50km radius of the Tulawaka gold mine on which it has already made a number of gold discoveries. MDN plans to drill over 25,000 metres during the next 12 months into its various Tanzanian exploration targets around Tulawaka.

Financial Results for Q2

The Company reported a net loss for Q2 of $9.2 million, or $0.09 per share, versus a net loss in the prior corresponding period (quarter ended June 30, 2006) of $1.0 million, or $0.01 per share. The increase in the net loss compared with the prior corresponding period reflects Q2 as the first period of commercial production where production levels are still rising towards targeted rates, and operating expenses include various items associated with the start-up which will be reduced in future periods.

During Q2 the Company sold 25,764oz of gold for total revenues of $18.5 million. Including the gross proceeds from the sale of bought gold put option contracts, the average sales price during Q2 was US$673/oz. The bought gold put option contracts were all sold during Q2. The Company has recently purchased additional bought put options giving it the right, but not the obligation, to sell 59,000oz of gold at A$750/oz over the remainder of the year.

Operating expenditure before depreciation and amortization was $19.6 million for Q2 reflecting mining, processing and administrative costs, net of the build-up of inventory ($1.3 million) and silver sales credits ($0.1 million). Including depreciation and amortization charges, total cost of gold sold was $25.0 million.

Capital expenditure on property, plant and equipment totaled $2.4 million for Q2 ($0.6 million for the prior corresponding period) relating to mine camp refurbishment, road construction, buildings and infrastructure and general equipment purchases. Capital expenditure on exploration and development activities was $4.2 million during Q2, and was $5.2 million in the prior corresponding period leading up to the start of initial operations.

As at June 30, 2007, the Company held $33.1 million in cash. Following operational expenditure and completion of the Tom's Gully acquisition, cash as at August 8, 2007 is approximately $36 million.

Conference Call and Webcast

Shareholders and other interested parties are invited to a conference call on Tuesday August 14, 2007 at 9:00am EST for a presentation of the financial results and an open-forum question and answer session. Individuals can participate by dialing one of the following numbers: Toronto +1-416-340-2216, North America 1-866-898-9626, Europe 00-800-8989-6323 and Australia 0011-800-8989-6323 (and ask for GBS Gold) or via webcast on the GBS Gold website at

About GBS Gold International Inc.

GBS Gold is an emerging gold producer with 2.6Moz of Measured and Indicated Resources and 1.6Moz 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. 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. 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 3,500km2 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 GBS Gold's properties was approved by John Vinar, an employee of GBS Gold and a qualified person under NI 43-101. The Company's mineral resources comprise measured resources of 84,800 tonnes at 20.6g/t for 56,100 ounces of contained gold, indicated resources of 24.6 million tonnes at 3.2g/t for 2.6 million ounces of contained gold and inferred resources of 21.2 million tonnes at 2.4g/t for 1.6 million ounces of contained gold. 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, the technical report entitled "Form 43-101 Technical Report on the Tom's Gully Project" dated June 13, 2007 and filed on June 14, 2007 (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 and May 10, 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