| January 23, 2009 |
| Castle Gold Reports Increase in Fourth Quarter 2008 Production to 6,928 Ounces Gold, Provides Update on Operating Performance Expectations for 2009 |
TORONTO, ONTARIO--(Marketwire - Jan. 23, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) is pleased to report on its fourth quarter 2008 operating performance from its 100% owned El Castillo Gold Mine located in Durango, Mexico and its 50% owned El Sastre Gold Mine located in Guatemala. Production for the fourth quarter 2008 totalled 6,928 ounces, including 5,386 ounces of gold from El Castillo and 1,542 ounces of gold from El Sastre (Castle Gold's 50% share).
Gold production from El Castillo during the fourth quarter increased 16% to 5,386 ounces, compared to the third quarter 2008 period (4,629 ounces of gold reported in Q3-2008) as the Company continues to ramp-up gold production levels according to plan. During the month of December 2008 El Castillo produced 2,034 ounces of gold, or an annualized rate of 24,400 ounces of gold. The Company also achieved a new monthly record with 523,205 tonnes of material mined. Average grade of ore material mined during the fourth quarter was 0.53 grams per tonne gold. The waste to ore ratio ("strip ratio") for the quarter averaged 1.47 to 1.0, including a waste to ore ratio of 1.7 to 1.0 during December.
Gold production from El Sastre during the fourth quarter decreased 19% to 1,542 ounces (Castle Gold's 50% share), compared to the third quarter 2008 period (1,913 ounces of gold reported in Q3-2008) due to generally lower tonnages mined and a small increase in the waste to ore ratio. Grade mined during the fourth quarter was higher at 2.84 grams per tonne compared to an average grade of 2.55 grams per tonne in the third quarter 2008 which partially offset the lower tonnages mined.
Thomas Atkins, President and CEO of Castle Gold commented on the fourth quarter operating performance stating: "The El Castillo operating team performed well during the quarter with production rebounding in the latter half of the period as the rainy season ended. This permitted a return to more normal production levels. For the quarter, El Castillo achieved record levels of material mined and gold production. Quarterly gold production numbers were that much more significant given that the operation continued to mine high levels of waste. The stripping ratio, the ratio of waste to ore, is expected to average approximately 1.2 to 1.0 during 2009, a 20% reduction from levels mined in the third and fourth quarter of 2008. Beyond 2009, waste to ore ratios will decline to approximate life-of-mine ratios of 0.6 to 1.0. The reduction in the strip ratio enables the mining of higher quantities of gold ore with the same equipment, resulting in greater gold production and reduced costs per ounce of gold produced. We also expect that as the strip ratio declines we should begin to gain exposure to some higher grade portions of the mine. Additional ore at higher grades has the potential to further boost the economics of the mine in the coming quarters."
Outlook for 2009
El Castillo
Expanded Production
During the fourth quarter 2008, the Company has been pursuing quotes from contractors on competitive terms for the utilization of larger and higher capacity mining equipment. Larger and more efficient equipment is key to the ramp-up in production to in excess of 50,000 ounces gold per annum. To this end the Company has been in contact with 13 contractors soliciting competitive quotes for the mining of the objective quantity of material. Of these 13 contractors the Company has received bids from 11 contactors for this work. Over the coming weeks the Company expects to narrow the selection of these bids down to a single contractor offering a combination of the most cost competitive terms and best service.
The larger equipment will be employed in the ramp-up of production from a current rate of approximately 520,000 tonnes mined monthly to in excess of 800,000 tonnes mined monthly. At the planned mining rate of 800,000 tonnes per month, and taking into account the reduction of the waste to ore ratio from the average of approximately 1.6 to 1.0 during 2008 to 1.2 to 1.0 in 2009, the Company expects to see an increase in gold production to in excess of 50,000 ounces per year in the second half of 2009. Beyond 2009 the waste to ore ratio will decline to approximately 0.6 to 1.0 under the current phase of planned mine expansion.
In addition to the pursuit of a new mining contract, the Company is also pursuing the purchase of used equipment to supplement contractor equipment. This equipment has the potential of supplementing the new equipment provided by the contractor, possibly enabling the enhancement of production beyond currently designed levels and could also act as spare equipment in the event of unscheduled maintenance of contractor equipment. The operation of such equipment by Company employees has the potential to further reduce per tonne mining costs beyond efficiencies currently being sought in the new mining contract. Once terms have been negotiated under the new contract, timing of equipment, mobilization and the timing of the ramp-up of production will be more clearly understood. It is expected that the impact of mining higher volumes of material should begin to be reflected in higher volumes of gold production in the third and fourth quarters 2009 and beyond.
Resource Expansion Drilling
The Company is preparing for the commencement of its first drill program at El Castillo to explore the potential to enhance the gold resources. During the fourth quarter 2008 a combination of in-pit geological and structural mapping, historic, widely-spaced drill data and the evaluation of historical geochemical survey results has identified compelling targets for an initial, first phase 14-hole reverse circulation drill program to explore resource extension opportunities to the south, southeast and east of the current pit. This program is expected to commence in the coming weeks and is expected to require approximately one month to complete. Assay results are expected to take approximately six weeks from completion of the drill program. As the timing of commencement of this program becomes more evident, the Company intends to issue a press release detailing the location and objectives of the program.
Sulphide Resources
The Company is studying the quantity and recovery of sulphide resources that exist below the limits of the current open pit resources at El Castillo, resources and reserves which only take into account oxidized material. A resource study is underway and is expected to identify gold resources at varying gold cut-off grades. A historic resource completed under non-43-101 standards identified approximately 300,000 ounces of sulphide resources. The Company has also completed the selection of quantities of available drill core from the sulphide zone for metallurgical testing. This metallurgical program is expected to determine the means and extent to which gold may be recovered from this sulphide material. The new resource study is expected to be completed prior to the end of the first quarter 2009. Results from the metallurgical test program on the sulphide material are expected early in the second quarter 2009.
La Fortuna Property
At the Company's La Fortuna gold-silver-copper advanced-stage exploration project the Company is mobilizing personnel and setting-up a camp to initiate its concession-wide mapping and sampling program and its geochemical program and geophysical program aimed at calibrating these exploration tools over known mineralized gold-silver-copper bearing structures and testing extensions to these structures beyond the currently known 309,000 ounce gold resource identified in the recent NI 43-101 study (refer to press release dated November 12, 2008). Following this work the Company hopes to initiate an exploration drill program testing attractive areas to host extensions to known mineralization at the La Fortuna mine site and depending on results, additional attractive prospects for gold mineralization on the Company's approximate 10,000 hectare land position. Within the 10,000 hectare land position a number of historical workings are know to exist that host potentially economic intersections of gold mineralization. Based on the results of this surface work, the first phase drill program could begin in the second half 2009.
About Castle Gold
Castle Gold Corporation is a growth oriented gold producer with projects focused in the America's. The Company owns a 100% interest in the El Castillo gold mine in Mexico and a 50% interest in the El Sastre gold mine in Guatemala. Castle Gold is also advancing exploration and development work at its La Fortuna gold-silver-copper project in Mexico.
Total Shares Outstanding: 75.3MM
Fully Diluted: 88.9MM
52-Week Trading Range: C$0.15 - $0.64
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