St Andrew Goldfields Ltd.
TSX : SAS

St Andrew Goldfields Ltd.

July 10, 2008 13:07 ET

St Andrew Announces Positive Production Decision for the Holloway-Holt Project

OAKVILLE, ONTARIO--(Marketwire - July 10, 2008) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

St Andrew Goldfields Ltd. (TSX:SAS) ("St Andrew" or the "Company") is pleased to announce that following the completion of an independent technical report ("Scott Wilson RPA Report") for the Holloway-Holt project (the "Project") located near Timmins, Ontario, Canada, its Board of Directors has made a positive production decision to recommence mining and milling activities at the Holloway-Holt Mines, conditional on arranging the required financing.

The technical report was prepared by Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson RPA"), Toronto, Ontario, Canada. Scott Wilson RPA has prepared the report in compliance with National Instrument 43-101 ("NI 43-101"). The complete Scott Wilson RPA Report for the Project is available on St Andrew's website and on SEDAR at www.sedar.com.

Highlights of the report include:

- Undiscounted cash flow of approximately Cdn$118 million using an average gold price of US$775 per ounce and exchange rate of Cdn$1 equals US$0.87 over the 6.5 year life of the operation.

- Pre-production capital cost estimate of approximately Cdn$23 million including a 20% contingency.

- Internal Rate of Return ("IRR") of over 92% and pre-production capital payback of 2.3 years (including the six month pre-production period).

- Gold production of over 88,000 ounces annually over the 6.5 year life of the operation.

- Average cash costs of US$461 per ounce and average total production cost of US$594 (includes cash cost, capital and royalties) per ounce over the life of the Project.

- The measured and indicated mineral resources at the Holloway-Holt Project, including the mineral reserves, are estimated to be 4.2 million tonnes at a grade of 6.8 g/t Au and containing 919,000 ounces of gold.

- Contained within the measured and indicated mineral resources, the proven and probable mineral reserves are estimated to be 3.4 million tonnes at a grade of 5.7 g/t Au and containing 629,000 ounces of gold.

- The inferred mineral resources are estimated to be 1.5 million tonnes at a grade of 7.3 g/t Au and containing 356,000 ounces of gold.

"We are pleased with the results of this report and now look forward to arranging the financing and putting the Holloway-Holt Mine into production. In light of our current balance sheet with little debt, other non-core assets available for sale and anticipated cash flows, such financing will likely be debt. As the Project has a proven record of successful gold mining operations accomplished by previous operators, has all required permits, has existing infrastructures maintained in good condition and the Company has an advanced level of knowledge, we believe that a positive production decision on the Project is fully warranted at this time without the need for a feasibility study", stated Jacques Perron, President & CEO of St Andrew.

Scott Wilson RPA made the same conclusion stating:

"Scott Wilson RPA is of the opinion that the work in this report was completed to a standard consistent with a prefeasibility study, or preliminary feasibility study. The preparation of a full feasibility study is not considered to be necessary based on the level of information available and the fact that the project involves the restart of existing mines where all of the facilities have been maintained and where diamond drilling and mine development over the course of the current shutdown has advanced the level of geological knowledge and increased the amount of development in place for the exploitation of mineral reserves."

Mr. Perron added: "The Project requires limited expenditures in order to be returned to production. Much of the infrastructure is in place with underground access existing in the immediate proximity of each future mining area, an operational 3,000 tonnes per day mill is in place, as well as the necessary surface facilities and a tailings management facility. The Project is located in a well serviced mining region with extensive mining related expertise and the mine site is easily accessible by road from local major mining towns. These factors should reduce the level of risk of the Project. As well, in light of St Andrew's existing tax losses and development pools, the income generated by the Project is not expected to be taxable."

There remains a significant amount of indicated and inferred mineral resources not included in the mineral reserves since drilling was suspended at the end of the first quarter of 2008. As such, Management believes that there is good potential with further drilling to convert additional resources into reserves. In addition, there is excellent exploration potential within the mine area and elsewhere on the Company's land package along the Porcupine Destor Fault Zone where a number of mineralized zones have been previously discovered.

The Company believes there are a number of opportunities to further improve the economics of the Project, including the following which are currently being investigated by Management:

- Custom milling opportunities: Approximately 50% of the milling capacity of the Company's mill will be utilized for the Holloway-Holt ore processing, thereby leaving sufficient capacity for custom milling which is currently being discussed with other interested groups which are active in the district.

- Pre-production capital cost: The Company believes that there is the potential to reduce the pre-production expenditures with efficient management due to the short duration of the pre-production period and the limited extent of the work to be completed.

- Production ramp-up and production rate: During the next several months, the Company will prepare a detailed mine plan for the pre-production period and first years of production. The Company believes that there are opportunities to improve the production sequence and rate due to the advanced level of development in some of the mining areas.

- Internal growth: The Company continues to believe that its East Timmins Camp exploration properties, and in particular its advanced exploration projects, could in the future provide additional mill feed that would positively impact the Project.


Mineral Resources and Reserves (per Scott Wilson RPA Report)



MINERAL RESOURCES AT THE HOLLOWAY-HOLT PROJECT, JUNE 1, 2008

----------------------------------------------------------------------------
Contained
Classification Tonnes ('000 t) Gold Grade (g/t) Gold ('000 oz)
----------------------------------------------------------------------------
Measured 2,173 6.8 479
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Indicated 1,995 6.8 440
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Measured + Indicated 4,168 6.8 919
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Inferred 1,513 7.3 356
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Notes.
1) CIM definitions were followed for Mineral Resources.
2) Mineral Resources were estimated at a marginal cutoff grade of 3.0 g/t Au
and a block cutoff of 4.5 g/t Au.
3) A minimum mining width of 2.0 m to 3.0 m was used.
4) Columns may not add exactly due to rounding.
5) Mineral Resources are inclusive of the Mineral Reserves.
6) Mineral resources which are not mineral reserves do not have demonstrated
economic viability.



MINERAL RESERVES AT THE HOLLOWAY-HOLT PROJECT, JUNE 1, 2008

----------------------------------------------------------------------------
Classification Tonnes ('000 t) Gold Grade (g/t) Contained Gold ('000 oz)
----------------------------------------------------------------------------
Proven 395 6.6 84
----------------------------------------------------------------------------
Probable 3,022 5.6 546
----------------------------------------------------------------------------
Prov. + Prob. 3,420 5.7 629
----------------------------------------------------------------------------

Notes:
1) CIM definitions were followed for Mineral Reserves.
2) Mineral Reserves are estimated using an average long-term gold price of
US$775 per ounce and an exchange rate of Cdn$1.00 equals US$0.87.
3) A minimum mining width of two metres was used.
4) Rows and columns may not add exactly due to rounding.
5) Mineral Reserves are included within the Mineral Resources.


Project Economics

Considering the Project on a stand-alone basis, the undiscounted cash flow totals approximately Cdn$118 million over the mine life, and simple payback occurs at approximately 2.3 years (including the six month preproduction period).

NPV at a 5% discount rate is Cdn$89.7 million and IRR is 92%.



-------------------------------------------------
Gold Price NPV @ 0% NPV @ 5%
US$/Oz ('000 Cdn$) ('000 Cdn$)
-------------------------------------------------
618 (- 20%) 27.0 16.0
-------------------------------------------------
696 (- 10%) 74.0 54.1
-------------------------------------------------
773 (Base case) 117.7 89.7
-------------------------------------------------
850 (+ 10%) 163.0 126.8
-------------------------------------------------
927 (+20%) 198.8 156.0
-------------------------------------------------


The Total Cash Cost is US$461 per ounce of gold. The preproduction capital cost is US$35 per ounce and the ongoing Life of Mine capital is US$56 per ounce, plus a royalty cost of US$42 per ounce for a Total Production Cost of US$594 per ounce of gold.



-------------------------------------------------
Cdn$/tonne
-------------------------------------------------
Mining 51.54
-------------------------------------------------
Milling & Environment 24.92
-------------------------------------------------
Site Admin., Eng. & Geo. 12.74
-------------------------------------------------
Total 89.20
-------------------------------------------------


The Life of Mine capital is estimated to be Cdn$60.5 million including a 20% contingency. The preproduction capital cost, included in the total capital estimate, is Cdn$23.3 million.



----------------------------------------------------------------------------
Pre-Production Ongoing Total
('000 Cdn$) ('000 Cdn$) ('000 Cdn$)
----------------------------------------------------------------------------
Holloway Mine 2,627 130 2,757
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Holt Mine 6,041 26,421 32,462
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Holt Mill 1,710 1,875 3,585
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Holt Mill extras 232 0 232
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Surface 717 129 846
----------------------------------------------------------------------------
Administration 8,070 - 8,070
----------------------------------------------------------------------------
Sustaining Capital - 2,500 2,500
----------------------------------------------------------------------------
Contingency 3,878 6,211 10,090
----------------------------------------------------------------------------
Total 23,276 37,267 60,543
----------------------------------------------------------------------------


Timing and production profile

With the recent conversion of Cdn$42 million of debt into equity, and the plan to eliminate the majority of its trade payables owed to a mining contractor by using the proceeds to be received on completion of the sale of its Stock Mill, the Company believes that it will have established a sound financial footing on which to arrange sufficient financing to move the Project ahead. The Company is currently reviewing the size of the financing required for the start up period of the Project.

Once the financing is in place, it will take approximately 6 months to complete the required preproduction activities and attain commercial production. During the second half of the preproduction period, ore development and stope preparation activities will start to generate broken ore. Management estimates that production will then ramp up with the objective of producing approximately 90,000 ounces of gold in the first 15 months of milling (3 months of preproduction and the initial 12 months of production), after which the mine is expected to produce an average of almost 90,000 ounces per year for the remaining 5.5 years of production.

QUALIFIED PERSONS

R. Dennis Bergen, P.Eng., Associate Mining Engineer with Scott Wilson RPA, is the Qualified Person responsible for supervising the preparation of the Scott Wilson RPA Report including the cost estimates and financial analysis, and Wayne Valiant, P.Geo., Principal Geologist, with Scott Wilson RPA, is the Qualified Person responsible for the review of the mineral resource estimates, and they have reviewed and approved this news release.

ABOUT ST ANDREW

St Andrew is a gold mining and exploration company with operations in Timmins, Ontario and Alaska. St Andrew controls a very large land position in the Timmins Mining Camp, an extensive land position at Eskay Creek in northern British Columbia and land positions around Nixon Fork Gold Mine in the Kuskokwim-Tintina Mining Camp in Alaska. St Andrew also holds an approximate 17.5% equity interest in Apollo Gold Corporation which has operations in Montana, Mexico and owns the Black Fox Deposit located in the vicinity of St Andrew's Timmins operations.

For further information about St Andrew Goldfields Ltd., please contact Investor Relations toll free at 1-800-463-5139 or email investor@standrewgoldfields.com or contact Tel: (905) 815-9855 Fax: (905) 815-9437.

FORWARD LOOKING STATEMENTS

The information in this release may contain forward-looking information under applicable securities laws. This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied by the forward-looking information. Factors that may cause actual results to vary material include, but are not limited to, inaccurate assumptions concerning the exploration for and development of mineral deposits, political instability, currency fluctuations, unanticipated operational or technical difficulties, changes in laws or regulations, the risks of obtaining necessary licenses and permits, changes in general economic conditions or conditions in the financial markets and the inability to raise additional financing. Readers should refer to the Company's Annual Information Form filed at www.sedar.com for a further discussion of such risks, uncertainties and factors. Readers are cautioned not to place undue reliance on this forward-looking information. St Andrew does not assume the obligation to revise or update this forward-looking information after the date of this release or to revise such information to reflect the occurrence of future unanticipated events, except as may be required under applicable securities laws.

Contact Information

  • St Andrew Goldfields Ltd.
    Don Shaxon
    Investor Relations Manager
    (905) 815-9855 or Toll Free: 1-800-463-5139
    Email: dshaxon@standrewgoldfields.com
    or
    St Andrew Goldfields Ltd.
    Jacques Perron
    President and CEO
    (905) 815-9855 or Toll Free: 1-800-463-5139
    Email: jperron@standrewgoldfields.com
    or
    St Andrew Goldfields Ltd.
    Ben Au
    CFO and VP Finance & Administration
    (905) 815-9855 or Toll Free: 1-800-463-5139
    (905) 815-9437 (FAX)
    Email: bau@standrewgoldfields.com