GBS Gold International Inc.
TSX : GBS

GBS Gold International Inc.

March 27, 2008 06:30 ET

GBS Gold's Cosmo Deeps Project Feasibility Study and Mineral Reserve Estimate

TORONTO, ONTARIO--(Marketwire - March 27, 2008) - GBS Gold International Inc. (TSX:GBS) ("GBS Gold" or the "Company") has today released the feasibility results and initial mineral reserve estimate for the Cosmo Deeps underground gold mining project within its Union Reefs Operations Centre in the Northern Territory of Australia. Key project highlights include (A$ represents Australian Dollars and US$ represents United States Dollars):

- Production is expected to commence in the first half of 2010 and to build to an average rate of 75,000-100,000 ounces per year for an initial reserve life of approximately 4.5 years. The ore is free-milling and will be hauled and processed through the existing 2.5 million-tonne-per-annum Union Reefs processing plant.

- Initial project capital is estimated at approximately US$30 million comprising removal of the water and historic tailings from the existing open pit, underground development and initial mining activities from the base of the pit, and site establishment.

- Average life-of-mine cash operating costs are estimated to be in the range US$400-450/oz (A$450-500/oz).

- At the gold price of US$675/oz (A$750/oz at an exchange rate of A$1.00:US$0.90) used to calculate the reserve estimate, the project has an internal rate of return of 42%. At the current spot gold price of approximately A$1000/oz, the project has an internal rate of return of approximately 90% and estimated payback period of less than two years.

- Feasibility work on the Cosmo Deeps underground gold mining project has been completed supporting an initial probable reserve of 2.2 million tonnes at 5.0 grams per tonne for 350,000 ounces of contained gold. Metallurgical testwork indicates that 95% processing recoveries are expected through the existing Union Reefs plant.

- 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.

Commenting on the announcement, Gil Playford, GBS Gold's Chairman and CEO, said: "The results of the Cosmo Deeps feasibility study are very strategic for GBS Gold as this low capital and highly profitable mine will deliver quantities of higher grade ore and enable the Company to meet its medium term production goal of 250,000 ounces per year."

Cosmo Deeps Gold Project

The Cosmo Deeps gold deposit is located adjacent to the main highway approximately 150km south of the city of Darwin in Australia's Northern Territory, and approximately 60km northwest of GBS's Union Reefs processing plant.

To view the Cosmo Deeps gold deposit, please visit the following link: http://media3.marketwire.com/docs/cosmodeeps.jpg.

The deposit comprises a series of parallel mineralized lodes extending beneath the previously-mined Cosmo Howley open pit which produced approximately 500,000 ounces over the period 1986-1993. The mineralized lodes are located on the eastern and western flanks of a large northwest-plunging dolerite anticline.

Following GBS's consolidation of the ownership of the project in 2006, infill and extensional resource definition drilling work has been completed which led to increases in the resource estimate and the commencement of feasibility assessment work in 2007.

Mineral Resource and Initial Reserve

The Cosmo Deeps mineral resource has been estimated in accordance with National Instrument 43-101 ("NI 43-101") as follows:



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Cosmo Deeps Resource Estimate
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Indicated Inferred
Tonnes Grade Ounces Tonnes Grade Ounces
(g/t) (g/t)
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Eastern Lodes:

- Primary 2,048,000 6.0 398,000 1,254,000 3.9 159,000
- Secondary 1,232,000 3.8 152,000 2,654,000 3.8 324,000
-----------------------------------------------------
Total Eastern Lodes 3,280,000 5.2 550,000 3,908,000 3.8 483,000
Western Lodes 964,000 3.9 120,000 595,000 4.5 87,000
-----------------------------------------------------
Total 4,244,000 4.9 670,000 4,503,000 3.9 570,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Reported at a 2g/t lower cut-off grade.


Following GBS's consolidation of the ownership of the project in early 2006, infill and extensional resource definition drilling work has been completed which culminated in the release of an updated resource estimate for the project in late 2006. In 2007, GBS engaged external consultants, Snowden Mining Industry Consultants Pty Ltd to review the resource estimate and HG Mine Design Pty Ltd to complete a feasibility study and reserve estimate for the project. A technical report on the resource and initial reserve estimates as presented in this news release will be filed within the next month.

The initial mineral reserve for the Cosmo Deeps project has been estimated as follows:



------------------------------------------------------------
Reserve Ore Tonnes Grade Contained Gold
Category (Diluted) (oz)
(grams/tonne)
------------------------------------------------------------
Probable Reserve 2,200,000 5.0 350,000
------------------------------------------------------------


The key assumptions underlying the initial mineral reserve are summarized below.

Given the potential for expansions to the known orebody, GBS Gold considers that there is good potential for future increases to resources, reserves and mine life.

Deposit Geology

The resource estimate incorporates an extensive mining and drillhole database, has been calculated using conventional geological modelling and geostatistical estimation methods, and incorporates density testwork and a QA/QC review and validation of the drillhole database. The estimate has been calculated using a lower cut-off grade of 2g/t and geostatistically-determined top-cut grades in the range 10-40g/t depending on the particular lode structures modelled. Sensitivity of the resource estimate to top-cut grades is reasonably low given the relatively consistent grade distribution.

The following diagram illustrates the various mineralized lodes in the resource model wireframes, showing some of the resource definition drilling undertaken to date.

To view the diagram, please visit the following link: http://media3.marketwire.com/docs/wiretaps.jpg.

The Cosmo Deeps resource model encompasses the Cosmo Deeps Eastern Lodes down to a vertical depth of approximately 655 metres below surface and the Western Lodes down to a vertical depth of approximately 350 metres below surface. The strike length of each of the parallel Eastern Lodes is approximately 300 metres, and of the Western Lodes is approximately 260 metres. The deposit is not closed off and there is good potential to extend the deposit at depth and along strike to the north.

Feasibility Study

GBS Gold has completed a feasibility study on the Cosmo Deeps project. Based on the results of this study, the Company is planning to step up its dewatering program of the existing open pit. This program is expected to take approximately 18 months, with mine development activities targeted to commence in late 2009. Production is expected to commence in the first half of 2010 and build to an average rate of 75,000-100,000 ounces per year for an initial reserve life of approximately 4.5 years.

Key assumptions and highlights of the Cosmo Deeps feasibility study and reserve estimate are as follows:



----------------------------------------------------------------------------
Gold price: A$750/oz (US$675/oz at an exchange rate of
A$1.00/US$0.90)
----------------------------------------------------------------------------
Average annual ore production: 500,000-600,000 tonnes per annum
----------------------------------------------------------------------------
Metallurgical recovery: 95%
----------------------------------------------------------------------------
Annual production: 75,000-100,000 ounces per annum
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Initial project capital cost: Approximately US$30 million including
initial mine development activities
----------------------------------------------------------------------------
Unit costs:
Mining A$60/tonne (including sustaining and
development capital)
Haulage/processing/
administration A$24/tonne
----------------------------------------------------------------------------
Cash operating cost: US$400-450/oz
(A$450-500/oz at an exchange rate of
A$1.00:US$0.90)
----------------------------------------------------------------------------
Breakeven grade: 3.7 g/t gold at a gold price of A$750/oz
(US$675/oz)
----------------------------------------------------------------------------
Internal rate of return (IRR): 42% at A$750/oz (US$675/oz) and
approximately 90% at the current spot
gold price of A$1000/oz (US$920/oz)
----------------------------------------------------------------------------
Payback period: Less than 2 years at the current spot gold
price of A$1000/oz
----------------------------------------------------------------------------
Mine life of initial mineral
reserves: Approximately 4.5 years
----------------------------------------------------------------------------


Development and Operating Plan

The development strategy for the Cosmo Deeps project involves dewatering the existing open pit from which a decline will be developed into the upper levels of the orebody within the Eastern Lode system. Ore will be mined by underground methods and hauled to the existing Union Reefs plant for processing. Metallurgical testwork indicates that processing recoveries of approximately 95% are expected.

The existing Cosmo Howley open pit is 150 metres deep and currently holds approximately 6 million cubic metres of acidic water. It is necessary that the water be removed to allow the safe development of the Cosmo Deeps underground mine. In addition, up to 3 million tonnes of processing tailings have historically been captured in the open pit. It may also be necessary to remove these tailings before the commencement of mining. Estimates of initial project capital incorporates a full dewatering and tailings removal program.

Mined ore will be stockpiled at the Cosmo run-of-mine pad and transported approximately 70km by roadtrains for processing at GBS's Union Reefs plant. Metallurgical testwork indicates that processing recoveries of 95% can be expected through the existing Union Reefs plant.

The proposed development timeframe is as follows:



----------------------------------------------------------------------------
2008 - Infill resource definition drilling.
- Final permitting.
Purchase of industrial water evaporators and commencement of
evaporation program while pumping activities continue.
- Confirmation of detailed underground mine design.
----------------------------------------------------------------------------
2009 - Continuation of dewatering program and removal/dredging of tailings.
- Establishment of site infrastructure.
- Q3 2009 - commencement of portal and underground decline.
----------------------------------------------------------------------------
2010 - Q1 & Q2 - initial ore production and milling.
- Approx Q2 2010 - commencement of commercial production.
----------------------------------------------------------------------------


Mine development and operating plans have been designed to produce ore as soon as possible while limiting the number of pillars required to be left in economic ore. To maximize resource recovery, two mining methods have been selected for the Cosmo Deeps orebody. The primary stoping method is a "down-hole stope and fill" approach and a secondary method, "uphole bench stoping", will be used for isolated and smaller stopes. Stope and fill mining is sequenced from the bottom up, with horizontal sill pillars designed at appropriate intervals down the orebody to provide stability and permit earlier ore production. The sill pillars provide support for stoping below already open stopes. The locations of the sill pillars are flexible to allow for variations in ore grade and for changes in scheduling due to the rate of decline development or ore extraction. Uphole bench stoping is a top-down mining method which produces stope ore as each level of ore development is completed, leaving permanent island pillars in lower grade zones within the stopes.

GBS Gold has received initial site permits for the planned dewatering program and is pursuing the remaining necessary permits. No major issues are currently anticipated to obtain the required operating authorizations.

Capital Expenditure

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 of approximately A$1000/oz is less than two years.



----------------------------------------------------------------------------
Capital Estimate Item Timing Estimate
(US$M)
----------------------------------------------------------------------------
15 Removal of water and tailings from
existing open pit 2008 - 2009

5 Development of decline and underground
headings from base of existing open pit Late 2009

3 Site infrastructure Late 2009

7 Pre-production costs Early 2010
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30
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----------------


The Company is investigating various financing strategies at its disposal for this very attractive project.

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 develop its free-milling growth projects at Tom's Gully and Cosmo Deeps in 2008-10 to increase production to an annualized rate of up to 250,000 ounces and to construct a flotation plant and bio-oxidation heap leach facility using the GEOCOAT® process at the Union Reefs plant to process 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 Cosmo Deeps resource estimate were approved by Jeames McKibben and Christine Standing of Snowden Mining Industry Consultants Pty Ltd, and the technical disclosures in this news release regarding the Cosmo Deeps feasibility study and reserve estimate were approved by Heath Gerritsen of HG Mine Design 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 for 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