GBS Gold International Inc.
TSX : GBS

GBS Gold International Inc.

March 27, 2008 17:44 ET

GBS Gold Releases 2007 Financial Results and Provides 2008 Production Guidance

TORONTO, ONTARIO--(Marketwire - March 27, 2008) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has today released its financial results for the year ended December 31, 2007 and provided production guidance for 2008. Key highlights include ($ represents Canadian dollars, A$ represents Australian dollars and US$ represents United States dollars):



----------------------------------------------------------------------------
Total
Mar 2007 Jun 2007 Sep 2007 Dec 2007 Year
Quarter(1) Quarter Quarter Quarter 2007
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Gold produced - 29,058 oz 25,444 oz 25,590 oz 80,092 oz

Gold sold - 25,764 oz 23,787 oz 26,021 oz 75,572 oz

Sales price:
- A$/oz - A$774/oz A$795/oz A$887/oz A$820/oz
- US$/oz - US$673/oz US$673/oz US$790/oz US$713/oz

Cash operating
cost:
- A$/oz - A$828/oz A$783/oz A$650/oz A$757/oz
- US$/oz - US$688/oz US$663/oz US$578/oz US$645/oz
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(1) Commercial production commenced on April 1, 2007.


- Gold production of 91,186 ounces for the year, of which 80,092 ounces were produced after the commencement of commercial production on April 1, 2007. Cash operating costs improved from quarter to quarter and were A$650/oz (US$578/oz) in the final quarter of the year. The average cash operating cost for commercial production in the last three quarters of the year was A$757/oz (US$645/oz).

- Steady production growth is expected during 2008 with annual output forecast to be 130,000 ounces at an average cash operating cost in the range of US$630-660/oz, approximately the same as the average US dollar cost in 2007. This 2008 cost takes into account an expected weaker US$/A$ exchange rate when compared to 2007 as well as escalating energy, labor and equipment costs in the mining industry, and the inclusion of first quarter 2008 wet season higher cash costs. Production for the first quarter of 2008 is expected to be approximately 25,000 ounces compared with start-up production for the first quarter of 2007 of 11,094 ounces. Costs in the first quarter of 2008 are forecast to be higher than the expected average rate for 2008, reflecting the tropical wet season and related manpower and operating issues. Cash costs are expected to decrease over the remainder of 2008 as the dry season begins, production commences at the Tom's Gully operation and open pit ore grades improve.

- At year-end, the Company's mineral resource base comprised indicated resources of 22.8 million tonnes ("Mt") at an average grade of 3.3 grams per tonne ("g/t") for 2.4 million ounces ("Moz") of gold, plus inferred resources of 20.3Mt at 2.5g/t for 1.6Moz of gold.

Teleconference Call: Friday March 28 at 9.00am EDT/Toronto Time

Please call the following numbers and ask for GBS Gold: Toronto: +1-416-340-2216; North America: 1-866-898-9626; Europe: 00-800-8989-6323; Australia: 0011-800-8989-6323; Website: The webcast can be accessed on the GBS Gold website at www.gbsgold.com

- For the year ended December 31, 2007, GBS Gold reported a loss from mine operations of $12.05 million. After recognizing corporate, interest and other expenses, the reported net loss was $36.15 million. The net loss included a year-end non-cash write-down of $6.46 million on certain of the Company's mining and exploration properties and other non-cash charges totaling $26.76 million relating to depreciation and amortization, imputed interest, marked-to-market movements on investments and gold option contracts, stock-based compensation and financing fees.

- Cash at December 31, 2007 was $16.84 million, held in operating and term deposit accounts with recognized Canadian and Australian banking institutions. At year-end, GBS Gold also held gold bullion with a market value of $3.48 million and share investments with a market value of approximately $10.47 million. Cash and gold sales receivables currently total approximately $20 million.

- Feasibility results for the Cosmo Deeps underground mining project have today been released (see separate news release) supporting an initial probable reserve of 2.2Mt at an average mined grade of 5.0g/t for 350,000 ounces of contained gold. Initial project capital is estimated at approximately US$30 million and the mine is expected to produce from the first half of 2010 building to a rate of 75,000-100,000 ounces per year at an average cash operating cost1 in the range US$400-450/oz (A$450-500/oz).

Production Results

During the year, ore was sourced from the Rising Tide and Fountain Head open pits, and from the high-grade Brocks Creek underground mine and nearby historic stockpiles. The Union Reefs processing plant operated efficiently with all ore processed through the larger of the two installed ball milling circuits. The second ball mill was commissioned at the end of the year and now provides processing flexibility for production growth in 2008.

Steady production growth is expected during 2008 with gold production forecast to be 130,000 ounces at an average cash operating cost in the range of US$630-660/oz (A$685-720/oz at an exchange rate of A$1.00/US$0.92). This forecast reflects the continued mining of the Brocks Creek underground mine and existing open pits, and the start-up of new open pits and the Tom's Gully underground operation in mid-2008. The longer mine lives from the expected larger resources at Fountain Head and the Chinese Big Pit area, along with scheduled production from Tom's Gully, are expected to contribute to a lower cost profile in 2009.

The Company's mineral resource base increased during the year, with the year-end position comprising indicated resources of 22.8Mt at an average grade of 3.3g/t for 2.4Moz of gold (previously 19.7Mt at 3.3g/t for 2.1Moz), plus inferred resources of 20.3Mt at 2.5g/t for 1.6Moz of gold (previously 20.8Mt and 2.3g/t for 1.6Moz). The year-end resource position does not reflect the resource increases expected to arise from the drilling undertaken during the second half of the year at the Fountain Head and Chinese Big Pit areas. Resource updates on these project areas are expected in the second quarter.

Cosmo Deeps Project

The Company has today released the feasibility results for the initial stages of the Cosmo Deeps underground gold mining operation supporting an initial probable reserve of 2.2Mt at an average mined grade of 5.0g/t for 350,000 ounces of contained gold and initial mine life of 4.5 years. Metallurgical test work indicates that processing recoveries of 95% are expected through the Company's existing Union Reefs plant. The Cosmo Deeps underground mine is expected to produce at a rate of 75,000-100,000 ounces per year at an average cash operating cost1 in the range US$400-450/oz (A$450-500/oz at an exchange rate of A$1.00/US$0.90). Development of the underground mine workings is targeted to commence in late 2009 from the base of the existing open pit following the removal of water and historic tailings from the pit. Production is expected to commence in the first half of 2010.

The reserve has been calculated using a gold price of US$675/oz (A$750/oz at an exchange rate of A$1.00/US$0.90). At this gold price, the project has an internal rate of return of 42% and, at the current spot gold price of around A$1000/oz, the project has an internal rate of return of approximately 90%. Initial project capital is estimated at approximately US$30 million comprising dewatering activities, underground development and initial mining activities, and site establishment. The estimated payback period at the current spot gold price is less than two years.

The mineral reserve estimate has been drawn from the indicated resource base of the project of 4.2 million tonnes at 4.9g/t (containing 670,000 ounces), in addition to which the deposit includes inferred resources of 4.5 million tonnes at 3.9g/t (containing 570,000 ounces). Given the deposit is open at depth and along strike, further drilling is expected to increase the resource, reserve and mine life.

Tom's Gully Mine

The Company completed the acquisition of the Tom's Gully mine on July 25, 2007 and in December last year announced the development of the operation to start up in mid-2008. Production is expected to build over the balance of the year to a rate of 35,000-40,000 ounces per year at an average life-of-mine cash operating cost of A$520-550/oz. Costs are expected to be higher as production builds in the initial quarters and to reduce to life-of-mine levels during 2009.

The mineral resource estimate for the Tom's Gully deposit comprises indicated resources of 1.3Mt at 8.4g/t for 346,000 ounces of gold and inferred resources of 0.6Mt at 7.4g/t for 140,000 ounces of gold. Feasibility work on the project completed in late 2007 resulted in the declaration of an initial probable reserve of 0.74Mt at 7.1g/t per tonne for 170,000 ounces of contained gold, with metallurgical recoveries of 85% expected for the project.

Financial Results

From the commencement of commercial production on April 1, 2007 to the end of the year, GBS Gold sold 75,572 ounces of gold at an average sales price of A$827/oz (US$707/oz at the average daily exchange rate for the period of A$1.00/US$0.8550). The spot price has since improved significantly to approximately A$1000/oz (US$920/oz).

For the year ended December 31, 2007, GBS Gold reported a loss from mine operations of $12.05 million. After recognizing corporate, interest and other expenses, the reported net loss was $36.15 million. The net loss included a year-end non-cash write down of $6.46 million on certain of the Company's mining and exploration properties and other non-cash charges totaling $26.76 million relating to depreciation and amortization, imputed interest, marked-to-market movements on investments and gold option contracts, stock-based compensation and financing fees.

Cash utilized in operating activities was $3.42 million during the year, with monthly operating cash flows becoming positive towards the end of the year as operations continued to improve.

Cash at December 31, 2007 was $16.84 million, held in operating and term deposit accounts with recognized Canadian and Australian banking institutions. At year-end, GBS Gold also held gold bullion with a market value of $3.48 million and share investments with a market value of approximately $10.47 million. Cash and gold sales receivables currently total approximately $20 million.

Conference Call and Webcast

Shareholders and other interested parties are invited to a conference call on Friday March 28, 2008 at 9:00am EDT/Toronto time 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 www.gbsgold.com.

About GBS Gold International Inc.

GBS Gold is an emerging gold producer with 2.4Moz of 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 commence production at its Tom's Gully and Cosmo Deeps free-milling projects in 2008-10 to increase production to an annualized rate of up to 250,000 ounces and to construct a GEOCOAT® circuit, a heaped bio-oxidation process, at the Union Reefs plant to treat refractory ores and further increase gold production from the Union Reefs Operations Centre to 300,000 ounces per year. 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".

The technical disclosures in this news release regarding the Tom's Gully resource estimate were approved by Paul Payne of Resource Evaluations Pty Ltd and regarding the Tom's Gully Cosmo Deeps feasibility studies and reserve estimates were approved by Heath Gerritsen of HG Mine Design Pty Ltd. Technical disclosures regarding GBS Gold's other properties and resources were approved by Jeames McKibben and Christine Standing of Snowden Mining Industry Consultants Pty Ltd. Each of these individuals is a qualified person under National Instrument 43-101.

The Company's mineral resources comprise indicated resources of 22.8 million tonnes at 3.3g/t for 2.4 million ounces of contained gold and inferred resources of 20.3 million tonnes at 2.5g/t for 1.6 million ounces of contained gold. The Company will shortly file a technical report for the updated resource estimate for its non-Tom's Gully properties and the feasibility study and reserve estimate for its Cosmo Deeps project. The Company has filed two technical reports on the Tom's Gully project being a technical report entitled "Form 43-101 Technical Report on the Tom's Gully Project" 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" dated December 2007 and filed on January 31, 2008. The Company has completed a feasibility study on the Tom's Gully Project and declared a probable mineral reserve estimate of 740,000 tonnes at 7.1g/t for 170,000 ounces of contained gold (refer the news release dated December 18, 2007). Other than the feasibility studies completed on the Tom's Gully and Cosmo Deeps projects, the Company has not completed a feasibility study and there is no certainty that its projects will be economically successful. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Any potential updates to GBS Gold's mineral resources discussed in this news release are conceptual in nature and subject to further drilling, analytical and test work and/or data verification. All estimates of updates to mineral resources are based on the drilling results and resource modeling described herein.

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

  • In Toronto, Canada:
    GBS Gold International Inc.
    Marie Inkster, Vice President, Finance
    (416) 777-1508
    or
    In Perth, Australia:
    GBS Gold International Inc.
    Peter Kerr, Chief Financial Officer
    +61 8 9492 2500
    Email: gbs@gbsgold.ca
    Website: www.gbsgold.com