GBS Gold International Inc.
TSX : GBS

GBS Gold International Inc.

May 13, 2008 17:00 ET

GBS Gold Releases First Quarter 2008 Results

TORONTO, ONTARIO--(Marketwire - May 13, 2008) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has today released its production and financial results for the first quarter of 2008 (the "Quarter"). Key highlights include ($ represents Canadian dollars, A$ represents Australian dollars and US$ represents United States dollars):



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April March December September June
2008 2008 2007 2007 2007
Month Quarter Quarter Quarter Quarter(i)
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Ore tonnes milled 197,300 433,100 316,300 317,400 450,200
Head grade milled
(g/t gold) 2.1 g/t 2.0 g/t 2.6 g/t 2.7 g/t 2.1 g/t
Metallurgical recovery 93.7% 96.2% 95.8% 93.8% 94.4%
Gold produced 12,529 oz 26,236 oz 25,590 oz 25,444 oz 29,058 oz
Gold sold 10,935 oz 27,244 oz 26,021 oz 23,787 oz 25,764 oz
Sales price:
- A$/oz A$978/oz A$1018/oz A$887/oz A$795/oz A$774/oz
- US$/oz US$910/oz US$921/oz US$790/oz US$673/oz US$673/oz
Cash operating cost(1):
- A$/oz A$662/oz A$845/oz A$650/oz A$783/oz A$828/oz
- US$/oz US$615/oz US$764/oz US$578/oz US$663/oz US$688/oz
Average exchange
rate (A$/US$) 0.930 0.905 0.890 0.847 0.831
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(i) Commercial production commenced on April 1, 2007.


Gold production increased to 26,236 ounces for the Quarter from the milling of 433,000 tonnes of ore at an average head grade of 2.0g/t and processing recovery of 96.2%. The higher throughput represents a 37% increase from the previous quarter reflecting the commissioning of the second ball mill in the Union Reefs plant. Now that the tropical wet season is finished, operating performance is improving significantly. Gold production increased to 12,529 ounces for April at a preliminary cash operating cost(1) of US$615/oz. The results to date support the Company's 2008 production guidance of 130,000 ounces at an average cash operating cost(1) of US$630-660/oz at prevailing exchange rates.

Mr. Gil Playford, Chairman of GBS Gold, commented, "The significant improvement in April for gold production and costs over the seasonally-affected first quarter is indicative of our performance expectation for the balance of the year. The results to date in the second quarter evidence the ability of the business and our employees to achieve the Company's production objectives. The recent strengthening of our Board and senior management team through the appointment of Mr. Peter Breese, CEO designate from August 1, 2008, will guide GBS Gold to becoming a 250,000 ounce per year gold producer in the next three years."

Teleconference Call: Wednesday May 14, 2008 at 9:00am Toronto Time

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

Operating Costs and Cash Flow

Cash operating costs increased in the Quarter as a result of tropical wet season influences, in particular rain-induced mining disruptions, reduced manpower and equipment availability, and the processing of low-grade stockpiles. Cash operating costs have reduced substantially with the onset of the dry season and increases in monthly gold output.

Cash flow from operations for the quarter was $0.5 million with further improvements expected in the second quarter. Cash at March 31, 2008 was $11.7 million. Cash and gold bullion currently total approximately $14 million. In addition, GBS Gold also holds share investments with a current market value of approximately $10.5 million.

Financial Result

For the Quarter, GBS Gold reported a loss from mine operations of $2.1 million. After recognizing corporate, interest and other expenses, the reported net loss was $7.5 million. The net loss included non-cash charges totaling $10.1 million relating primarily to depreciation and amortization, imputed interest, stock-based compensation and marked-to-market movements in investments and gold option contracts.

Debt Refinancing

Following the end of the Quarter, the Company entered into a bought deal financing arrangement to fully refinance its existing $46 million promissory note debt through the issue of 46,000 units, each unit consisting of one $1,000 three-year secured promissory note and 175 two-year share purchase warrants. The transaction is scheduled to close on or about May 20, 2008.

The Company has also announced the re-pricing of the 6,210,000 warrants which were issued as part of the original $46 million promissory note financing in March 2007. The exercise price of these warrants has been reset to $1.47 per share effective May 6, 2008 for a period of 30 days ending on June 4, 2008. If the warrants are not exercised during this period, the exercise price will revert to the original exercise price of $3.75 per share for the remaining life of the warrants, expiring September 30, 2008

Resource Update and Drilling

Following encouraging drilling results reported in the Quarter for the Fountain Head open pit deposit, an upgraded resource estimate has been released for the Tally Ho lode system within that deposit (refer to GBS Gold's news release dated May 13, 2008). The Tally Ho resource estimate has increased in both the indicated and inferred classifications due to significant increases in average resource gold grades. As a result, the mine life and gold output of the Fountain Head open pit is expected to increase. Additional drilling is planned this quarter to further test the Tally Ho lode system.

Encouraging drilling results were also achieved at the Brocks Creek underground mine where drilling from underground headings has indicated depth extensions to both the Main and Central Lodes of the orebody. In particular, the Central Lode of the orebody is increasing at depth in strike length, average grade and true width.

Resource modelling is continuing on the Chinese "Big Pit" area incorporating recently completed drilling, with a resource update expected later in the second quarter.

The Company's total mineral resources now comprise indicated resources of 22.5 million tonnes ("Mt") at an average grade of 3.4g/t for 2.5 million ounces ("Moz") of gold, plus inferred resources of 20.3Mt at 2.5g/t for 1.6Moz of gold. The Company's initial reserve statement comprises total probable reserves of 3.1Mt at 6.0g/t for 601,000 ounces, with metallurgical recoveries estimated between 85-95%. The Company has previously filed independent technical reports detailing its mineral resource and reserve estimates.

Cosmo Deeps Project

During the Quarter, the Company also 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 testwork 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 cost(1) 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 and build to feasibility levels in 2011. Drilling is planned in 2008 to infill portions of the existing resource model with the objective of increasing the resource grade, and deeper drilling is planned beyond the current resource model boundaries of both the eastern and western lode systems to expand the total resource.

Tom's Gully Mine

The Company commenced development of the Tom's Gully operation during the Quarter with current activities focused on the initial underground mine development, refurbishment of the processing plant and establishment of site personnel and other infrastructure. The operation is expected to commence in the third quarter of this year. 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(1) 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.

Conference Call and Webcast

A conference call will be held on Wednesday, May 14, 2008 at 9:00am Toronto time for a presentation of the financial results and an open-forum question and answer session. Individuals may listen 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 2.5Moz 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 operation in 2008 and its Cosmo Deeps operation in 2010 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 3,500km(2) 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".

(1) Cash Operating Cost is a non-GAAP measure. See Non-GAAP Measures in the Company's Management's Discussion and Analysis for the quarter ended March 31, 2008.

For more information about GBS Gold, please visit our website at www.gbsgold.com or email us at gbs@gbsgold.ca.

The technical disclosures in this news release were approved by Alf Gillman (F.AusIMM, CP Geol), an employee of GBS Gold and a qualified person in accordance with National Instrument 43-101. The Company's mineral resources comprise indicated resources of 22.5 million tonnes at 3.4g/t for 2.5 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 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 the Tom's Gully and Cosmo Deeps projects, and a life-of-mine study on the 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. 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.

GBS Gold manages its drilling and assaying activities in accordance with industry standard quality assurance/quality control (QA/QC) procedures. Samples are collected by GBS Gold personnel and prepared in accordance with specified procedures at the relevant assay laboratories. The primary assay laboratory is North Australian Laboratories in Pine Creek, Northern Territory. Laboratory site reviews are undertaken. Assay QA/QC involves the use of assay standards (sourced from reputable suppliers and cross-checked through umpire laboratories), field duplicates, blanks and barren quartz flushes. A third party "umpire" laboratory is used to cross-check and validate approximately 5% of the assay results. Sample coarse rejects are retained and approximately 5% of samples are re-submitted for further assay verification. All sample pulps, half-core and rock-chip samples are retained at site.

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.
    Ted Mayers, Executive Vice President, Business Development
    (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