- Published: 02 April 2009
- Written by Editor
Castle Gold to Advance Crushing Plant Enhancement at El Castillo Gold Mine Offering US$34 Per Ounce Reduction in Cash Costs, Engages Investor Relations Firm
CASTLE GOLD CORPORATION (Castle Gold, the Company)(TSX VENTURE: CSG) is pleased to announce that it has completed an internal study on an enhancement to its crushing plant at the Company's 100% owned El Castillo gold mine in Durango State, Mexico. The investment is for a total of US$1.0 million for the purchase and installation of a portable screening deck. The new equipment is designed to screen out the fine fraction (less than 3/4 inch) of the high-grade ore (presently greater than 0.6 grams per tonne) so that it can bypass the existing crushing equipment and be stacked directly on the heap leach pads.
Thomas Atkins, President and CEO of Castle Gold commented on this investment opportunity stating: "This is a terrific example of the collaborative efforts of our operating team at El Castillo and our engineering team in Toronto to exploit efficiency enhancements at El Castillo this early in the mine's life. This relatively small US$1.0 million total investment offers an impressive 170% rate of return and ten month payback based on operating cost reductions of US$34 per ounce. These costs are in addition to the previously announced savings resulting from the use of more efficient, larger scale mining equipment. It's our objective to have the screening plant operational in order to coincide as closely as possible with the ramp-up of mine production towards 50,000 ounces per annum. Precise timing details for engineering, purchase, transport and construction are being evaluated now that we have the contractor's schedule for mobilization of larger, more efficient mining fleet to move our objective volumes to meet our expanded production goals."
The opportunity to enhance the performance of the screening and crushing plant arose from observations that a large percentage of the high-grade material that is currently being sent to the crushing plant is already present at a size below that targeted for optimal recoveries - less than 3/4 inch in size. The currently contracted screening and crushing operations do not have sufficient capacity to completely separate this size fraction prior to the downstream crushing equipment at the higher mine volumes envisaged under the expanded production scenario, currently being advanced. The US$1.0 million investment for the purchase and installation of the new screening equipment by the Company is in addition to the coarse ore scalper that has already been purchased and moved to site at a cost of US$263,000 and includes engineering and a 20 percent contingency.
The Company selected portable screening equipment due to the relative speed and reduced cost of installation and the additional flexibility of being able to relocate this equipment at a future date as the open pit evolves from its current, early mine-life configuration. The Company expects to operate the new equipment either with a small group of its own personnel or via the contractor. It is expected that the purchase, installation and operation of the system will coincide with the ramp-up of mine production to in excess of 800,000 tonnes per month which corresponds to a production rate of 50,000 ounces per annum as mining strip (waste to ore) ratios decline towards their life-of-mine values. (as recently announced in a press release dated March 26, 2009).
On the basis of savings in crushing costs relative to the current contractor terms, higher volumes of production and the recovery of additional ounces of gold relative to the capacity of the current system, per unit operating costs are expected to be reduced by approximately 50 percent for savings of US$34 per ounce of gold produced. The internal rate of return on the investment of US$1.0 million is calculated at 170 percent with an approximate 10 month return on invested capital. Based on the US$34 per ounce operating cost savings, enhanced gold recoveries and a US$800 per ounce gold price, annual cost savings are estimated at US$1.7 million. Over the current mine life of 10 years and assuming a 5% discount rate and a life-of-mine average gold price of US$750 per ounce, this US$1.0 million investment produces a net present value of US$10 million.
A copy of the internal study for the screening equipment investment will be filed on the Company's web site under the 'Projects', 'Technical Reports' Section in the near future.
This press release has been reviewed by Mr. Darren Koningen, P. Eng., Castle Gold's Vice President Project Development. Mr. Koningen is a Qualified Persons under National Instrument 43-101.
Investor Relations Firm
In additional news, Castle Gold has engaged Alpha Investors Ltd. ("Alpha") to assist the Company in its investor relations efforts and outreach program to potential investors. Alpha represents an exclusive network of Investment Advisors across Canada that demand superior returns for their clients.
Alpha will initially be issued 200,000 stock options to purchase common shares of the Company at C$0.60 per common share, carrying a term of five years. The stock options will vest over four quarters commencing at the end of each quarter following the initial engagement, with the first vesting period beginning on April 1, 2009. Alpha may be entitled to cash payments of up to C$20,000 and additional stock option issuances of up to 200,000 stock options (at the then current share price), depending on Alpha's achievement of certain future performance targets. The engagement of Alpha may be terminated by either party with 30 days' written notice, following which any stock option issuances by the Company will cease to continue and all stock options issued must be exercised within 30 days of termination of services to be provided by Alpha.
The Company is pleased to be working with Alpha in this enhanced program to communicate the attractive investment potential of Castle Gold.
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.
TSX-V Trading Symbol: CSG
Total Shares Outstanding: 75.3MM
Fully Diluted: 82.0MM
52-Week Trading Range: C$0.15 - $0.63
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Castle Gold Corporation
President and CEO
416-214-4809 or Toll Free: 1-866-646-3274
Castle Gold Corporation
Manager Investor and Public Relations
416-214-4809 or Toll Free: 1-866-646-3274
SOURCE: Castle Gold Corporation