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Castle Gold Corporation: Castle Gold Reports Second Quarter 2009 Operating and Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 26, 2009) - CASTLE GOLD CORPORATION (Castle Gold, the Company) (TSX VENTURE:CSG) today reported its financial and operating results for the second quarter 2009 period ended June 30, 2009. The Consolidated Financial Statements and related Notes along with the Management's Discussion and Analysis have been filed with SEDAR ([ www.sedar.com ]) and can be viewed on the Company's website at [ www.castlegoldcorp.com ].

Highlights for the Second Quarter 2009

- New quarterly production records at the El Castillo mine included 1,862,000 tonnes of total material mined from the open pit, 6,421 ounces of gold recovered in the production plant and 6,426 ounces of gold sold. For the quarter the Company's annualized gold production totalled 31,548 ounces of gold from its El Castillo mine and share of production from the El Sastre mine, a 47% increase compared to total production of 21,400 ounces for the same year earlier period,

- Metal revenues for the second quarter of 2009 totalled $7,542,379 compared to $847,250 in the prior year period.

- Operating costs increased to $4,112,613 as compared to $181,089 in the same prior year period primarily related to the inclusion of the Company's El Castillo mine that attained commercial production July 1, 2008.

- The Company reported net earnings for the three month period ended June 30, 2009 of $318,378 or $0.00 per share compared to a loss of ($316,377) or $0.00 per share for the three month period ended June 30, 2008. The primary reason for the change in earnings relative to the first quarter 2009 period was a $815,284 difference in foreign exchange loss due to fluctuations in the US:Canadian exchange rate during the periods.

- New equipment for the El Castillo mine production ramp-up, intended to facilitate expanded mining rates from approximately 500,000 tonnes per month to 800,000 tonnes per month later in 2009, arrived at site.

- Results from the first phase of a reverse circulation drill program to test the potential to expand oxide gold mineralization to the south and the east of the El Castillo pit, outside of the known Castillo mine reserves, were announced during the quarter.

- The first phase of reconnaissance exploration work on the Company's La Fortuna concessions identified a number of zones of potential mineralization surrounding the known La Fortuna deposit with plans underway to prepare the next phase of the exploration program for the project.

Thomas Atkins, President and CEO of Castle Gold commented on the first quarter results stating: "We were pleased to see the new equipment arrive on site and be in operation during the second quarter. This equipment enables a ramp-up in production towards our goal of 800,000 tonnes of material mined per month. With this production level we should begin to see increased production of gold in the coming months as more ore is mined and stacked on the heaps and gold is recovered according to the recovery rates and timing. Gold production will continue to climb towards the Company's objective of 50,000 ounces of gold per annum into 2010 as the waste to ore ratio is reduced in the coming months which enables the mining of more ore with the available fleet. We expect per ounce cash production costs to also decline with the increase in ore production later this year and into 2010 allowing the Company to generate more cash from operations. We hope to be announcing the new resources at El Castillo in the coming weeks, a result of the Phase 1 drill program. Once we've studied the new resource additions we intend to plan a Phase 2 drill program as the next step to bring this material into the mine plan."

Financial Results - Second Quarter 2009

During the quarter ended June 30, 2009, consolidated metal revenues were $7,542,379 on the sale of 8,187 ounces of gold consisting of revenues of $5,877,743 on 6,426 ounces of gold from the El Castillo mine and $1,664,636 (100%-$3,329,272) on 1,761 ounces of gold (100%-3,522) from the Company's 50% interest in the El Sastre mine. This compares to metal revenues of $847,250 for the period April 1 to June 30, 2008 for 50% of the sales from the El Sastre gold mine on the sale of 963 ounces of gold. The increase in revenues and gold sales during the three month period ended June 30, 2009 as compared to the same prior year period is a result of the recording of revenues from the El Castillo mine and approximately an 80% increase in the ounces of gold sold from the El Sastre gold mine.

Consolidated production costs at both the El Sastre and El Castillo gold mines for the three month period ended June 30, 2009 were $4,112,613 as compared to $181,089 in the same prior year period representing an overall cost of sales for the period of $502 per ounce of gold sold compared to $188 per ounce of gold sold for the same prior year period. Depreciation, depletion and amortization were $745,079 for the three month period ended June 30, 2009 as compared to $40,692 for the three month period ended June 30, 2008. The increase in operating costs and depreciation, depletion and amortization are primarily related to the inclusion of these items from the Company's El Castillo mine that attained commercial production status effective July 1, 2008.

Changes in non-operating items for the three month period ended June 30, 2009 compared to the same prior year period , included: (1) an increase in general and administrative costs to $1,146,954 as compared to $893,660 in the prior year period; (2) a ($558,850) loss in foreign exchange as compared to a loss of ($84,452) in the prior year period, primarily a function of the appreciation of the Canadian dollar relative to the U.S. dollar and the impact on the Company's Canadian dollar denominated debt during the period; (3) interest expense of ($180,940) as compared to $Nil in the prior year period due to the capitalization of the interest in the prior year period and (4) ($294,251) in income tax expense as compared to ($18,869) in the prior year period and future tax expense of $140,000 as compared to a recovery of $204,000 in the prior year period., primarily a function of the inclusion of the result for the El Castillo mine in the current year period and the increase in gold sales from the El Sastre mine.

Included in general and administrative expenses of $1,146,954 for the three month period ended June 30, 2009 are: (1) legal, professional and consulting fees and expenses of $261,839 as compared to $284,576 in the prior year period with the current year period inclusive of onetime professional and legal expenses associated with the Strategic Alternative Review process and Annual General Meeting; (2) stock based compensation of $155,272 as compared to $53,027 in the prior year period; (3) investor relations expenses of $ 172,412 as compared to $Nil in the prior year period related to the expanded investor relations campaign during the period; (4) $182,000 in director fees and expenses as compared to $Nil in the prior year period reflecting the change in the corporate structure in mid 2008 and Strategic Alternative Review process; (5) the inclusion of $57,332 in expenses associated with the inclusion of the El Castillo operation as compared to $Nil in the prior year period due to the pre-commercial status of the; and (6) the recording of $Nil in general and administrative expenses for the Company's 50% interest in the Rocas el Tambor mine compared to $172,000 in the prior year period.

The Company reported earnings for the three month period ended June 30, 2009 of $318,378 or $0.00 per share compared to a loss of ($316,377) or $0.00 per share for the three month period ended June 30, 2008.

Operating Performance - El Castillo Mine, Durango State, Mexico (100% interest)

During the three month period ended June 30, 2009 mining rates at the El Castillo gold mine averaged 620,700 tonnes per month, a 33% increase from the fourth quarter of 2008, as the company continued to ramp-up its mining operations. During the quarter a total of 1,862,200 tonnes of material were mined from the open pit of which 775,100 tonnes of ore, having an average grade of 0.47 grams per tonne gold was placed on the leach pad. During the quarter, the Company placed an estimated 11,700 ounces of gold in ore on the leach pads of which the Company estimates 7,000 ounces of gold are recoverable for a calculated recovery rate of 60%. Gold production during the quarter was 6,421 ounces and gold sales were 6,426 ounces at an average realized price of $915 per ounce of gold for gross proceeds of $5,877,743. Gold production figures shown reflect the gold recovered in the gold processing facilities while gold sales refer to the gold contained in the final refined dore as of the date of the final sale transaction.

 Three Months Three Months
 Ended Ended
 June 30, 2009 June 30, 2008 (1)
Operating Statistics (100%) (100%)

Total tonnes mined 1,862,200 889,000

Tonnes waste 1,087,100 419,000

Tonnes ore-direct to leach pad 573,200 317,000

Tonnes crushed and placed 201,900 153,000

Tonnes ore placed on leach pad 775,100 470,000

Gold grade (grams/tonne) 0.47 0.52

Gold produced - commercial production 
 (ounces) 6,421 4,692

Gold sales (ounces) 6,426 3,697

Average realized gold price per 
 ounce (US$) $915 -

Cost of sales per ounce sold (US$) $569 -

Adjusted cost of sales per ounce 
 sold (US$) $457 -

(1) Represents the results for the operations prior to achieving commercial
 production status as of July 1, 2008.

During the second quarter 2009, El Castillo production costs were $569 per ounce of gold sold. The adjusted cost of production was $457 per ounce of gold sold, the difference a function of the higher than average removal of waste relative to ore that occurred in the quarter at 1.40 to 1 and what this cost would have otherwise been had El Castillo been mined at the life-of-mine waste to ore ratio of 0.6 to 1. It is expected that these higher than average costs will continue throughout 2009, following which the strip ratio begins to decline towards the life-of-mine average by the second half of 2010. It is expected that in the third quarter 2009 tonnage mined will average near 800,000 tonnes per month and that the waste to ore ratio will average 1.40 to 1.50 as waste is removed to facilitate higher production of ore at the expanded 800,000 tonnes per month production level. The average grade of ore mined is expected to be slightly lower than that of the currently reported quarter according the mine plan.

Operating Performance - El Sastre Mine, Guatemala (50% interest)

During the three month period ended June 30, 2009, a total of 91,000 tonnes of material were mined at the El Sastre gold mine of which 66,000 tonnes was placed on the leach pad at an average grade of 1.49 grams per tonne gold. Of this amount, 44,000 tonnes was run of mine ore (not crushed) having an average grade of 1.60 grams per tonne gold and a total of 22,000 tonnes was crushed ore having an average grade of 1.26 grams per tonne gold. Gold production at the El Sastre mine during the quarter was 2,930 ounces of gold of which 1,466 ounces of gold are attributable to Castle Gold's 50% interest. Gold sales for the quarter totalled 3,522 ounces of gold of which 1,761 ounces of gold are attributable to Castle Gold's 50% interest. Gold sales revenues recorded for the three month period ended June 30, 2009 were $3,329,272 (50% - $ 1,664,636) for an average realized price of $945 per ounce of gold. Any figures reported for gold sales refer to the gold contained in the final refined dore as of the date of the final sale transaction. Due to timing delays associated with final gold refining, compared to the measured amount of gold in the loaded carbon, any gold produced that has not been fully refined is recorded as inventory until such time as a sale transaction has taken place.

 Three Months Three Months
 Ended Ended
 June 30, 2009 June 30, 2008
Operating Statistics (50%) (50%)

Total tonnes mined 45,500 96,500

Tonnes waste 22,500 64,500

Tonnes ore-direct to leach pad 22,000 26,000

Tonnes crushed and placed 11,000 6,000

Tonnes ore placed on leach pad 33,000 32,000

Gold grade (grams/tonne) 1.49 1.83

Gold produced (ounces) 1,466 658

Gold sales (ounces) 1,761 963

Average realized gold price per 
 ounce (US$) $945 $879

Cost of sales per ounce sold (US$) $261 $188

During the first quarter 2009, El Sastre production costs were $234 per ounce of gold sold. Subsequent to 2008 year-end, the Company completed an updated mine survey. Primary mining activities at the El Sastre mine began to wind down late in the second quarter of 2009 and are expected to cease in the third quarter 2009. Crushing operations on existing coarse ore stockpiles are expected to continue until late in 2009 (although at a reduced production rate). Site leaching operations are then projected to continue into 2010 whereupon gold ore stacked on the leach pads will continue to produce gold, although gold production rates will begin to decline as new ore production ceases.

About Castle Gold

Castle Gold Corporation is a growth oriented gold producer with projects focused in the Americas. 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 and at its El Sastre and El Arenal project in Guatemala.

TSX-V Trading Symbol: CSG 
Total Shares Outstanding: 75.5MM 
Fully Diluted: 83.0MM 
52-Week Trading Range: C$0.15 - $0.80

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