43-101 2008 Technical Report On The La Fortuna Project, Durango ...

TECHNICAL REPORT 

ON THE 

EL CASTILLO GOLD PROJECT, 

DURANGO, MEXICO 

FOR 

CASTLE GOLD CORPORATION. 

A.C.A. Howe International Limited 

Toronto, Ontario 

Daniel C. Leroux, B.Sc., P.Geo 

Gordon Watts, P.Eng. 

W.D. Roy, M.A.Sc., P.Eng. 

Report #920 

Effective Date: July 31, 2008

Effective Date: July 31, 2008 

Report Number: 920 

Client Reference: 

CASTLE GOLD CORPORATION. 

TECHNICAL REPORT ON THE EL CASTILLO GOLD 

PROJECT, DURANGO, MEXICO 

Authors: 

Daniel C. Leroux, B.Sc., P.Geo 

Vice President and Senior Geologist___________________________ 

Gordon Watts, P.Eng. 

Associate Consulting Mining Engineer_________________________ 

W.D. Roy, P.Eng. 

Associate Consulting Mining Engineer_______________________

SUMMARY 

Introduction 

At the request of Mr. Darren Koningen, Vice President Operations for Castle Gold Corporation (“Castle 

Gold”), A.C.A. Howe International Ltd, (“Howe”) has been retained to prepare an updated Technical 

Report (“the Report”) which evaluates the mineral reserves and resources of the El Castillo Property 

located in Durango, Mexico (“the Property”) as a result of changes in gold prices, further exploration, the 

impact of the project going into production, and proposed increased production rates (subsequent to the 

2003 Howe report #850). This report incorporates the results of an updated NI 43-101 compliant mineral 

resource/ reserve estimate based on additional geoscientific and pre-production development work that has 

been completed at the El Castillo Project by Castle Gold. 

The new technical report is prepared according to the standards dictated by National Instrument 43-101 

and Form 43-101F (Standards of Disclosure for Mineral Projects). Howe previously prepared two Pre- 

Feasibility Reports (Howe reports #845 and #850, dated September 2002 and January 2003 respectively) 

for the El Castillo project (“the Previous Howe Reports”) that was then known as the El Cairo project. In 

addition, and updated technical report was completed by Howe in 2006 (Howe report #897). Howe 

understands that Castle Gold will use this new report for reporting purposes. 

Property Location and History 

The El Castillo Project was a grass roots discovery that resulted from a regional exploration program 

initiated by Battle Mountain Gold in 1995 to explore for sub-one gram Au per tonne bulk tonnage targets. 

Stream sediment geochemical surveys conducted by Battle Mountain outlined a significant gold 

geochemical anomaly in the El Castillo area which led to a successful program of drilling that resulted in 

delineation of the El Castillo gold resource by Battle Mountain. Castle Gold acquired the Property in 

2002. 

The Property is located in the State of Durango, Mexico approximately 100 km north of the city of 

Durango. Access to the property is good with total driving time from Durango City varying between 1.5 

and 2.0 hours depending on traffic. The Property consists of four contiguous mining concessions totaling 

approximately 216.05 hectares (“Ha”). Castle Gold owns all four of these concessions outright. There is 

a 2.0% Net Smelter Royalty on one of the concessions but that concession is located to the east of the 

known mineralized area and is not presently known to contain mineralization. Castle Gold also controls 

835 Ha of surface rights in the El Castillo area which is substantially larger than the area covered by 

Castle Gold’s mineral rights. 

Geology 

The Property lies within the Altiplano Subprovince of the Sierra Madre Occidental, a regionally extensive 

Eocene to Miocene volcanic field which extends southeast from the U.S-Mexico border into Central 

Mexico. The Sierra Madre Occidental is recognized as a gold-copper metallogenic province with 

potential for porphyry copper-gold mineralization and epithermal gold mineralization related to areas of 

Tertiary volcanic and subvolcanic intrusive activity. Gold mineralization on the Property is hosted by 

thinly-bedded volcaniclastic rocks of the Lower Volcanic Series and adjacent dacitic sills or dikes. The 

mineralized zones have locally been oxidized to depths greater than 200 m below surface but an average 

depth is more in the order of 150 m. Mineralization occurs in a series of northwest-trending lenses up to 

150 m in length and 40 m in width. 

i

2008 Howe Resource Reserve Estimate 

Revised mineral resources in the Measured + Indicated categories total 94 million tonnes with an average 

gold grade of 0.39g/tonne (1.18 million ounces). Inferred Resources total 4.5 million tonnes with an 

average gold grade of 0.38g/tonne (55,000 ounces). A cut-off grade of 0.15g/tonne Au was used to 

determine which blocks were to be included in the mineral resource. Refer to the following table. 

The 0.15 g/tonne Au cut-off was deemed to have economic potential for the purposes of open pit 

economic modeling. This cut-off is the same as the 0.15 g/tonne Au constraining interpretation cut-off in 

that it considers the possible overall operational cut-off grade. The 0.15 g/t Au cut-off was used to 

indicate which mineralization had the expectation of being economically viable at the internal operational 

cut-off. 

. 

ii

Castillo Remaining Mineral Resource Estimate as of October 2007 

Measured Indicated Meas + Ind Inferred 

Cut-off Tonnes Avg Tonnes Avg Tonnes Avg Tonnes Avg 

Grade Above Grade Above Grade Above Grade Above Grade 

(g/t) Cut-off (g/t) Ounces Cut-off (g/t) Ounces Cut-off (g/t) Ounces Cut-off (g/t) Ounces 

0.00 102,000,000 0.31 1,011,840 97,000,000 0.13 403,520 199,000,000 0.22 1,415,360 18,000,000 0.13 74,880 

0.05 93,000,000 0.33 982,080 67,000,000 0.18 385,920 160,000,000 0.27 1,368,000 10,000,000 0.23 73,600 

0.10 80,000,000 0.37 947,200 45,000,000 0.23 331,200 125,000,000 0.32 1,278,400 6,200,000 0.31 61,504 

0.15 65,400,000 0.43 899,904 28,900,000 0.30 277,440 94,300,000 0.39 1,177,344 4,500,000 0.38 54,720 

0.20 52,300,000 0.50 836,800 18,300,000 0.37 216,672 70,600,000 0.46 1,053,472 3,100,000 0.48 47,616 

0.25 41,900,000 0.57 764,256 11,800,000 0.45 169,920 53,700,000 0.54 934,176 2,300,000 0.58 42,688 

0.30 33,600,000 0.64 688,128 8,400,000 0.53 142,464 42,000,000 0.62 830,592 1,900,000 0.63 38,304 

0.35 27,100,000 0.71 615,712 6,100,000 0.61 119,072 33,200,000 0.69 734,784 1,800,000 0.65 37,440 

0.40 22,200,000 0.79 561,216 4,700,000 0.68 102,272 26,900,000 0.77 663,488 1,500,000 0.71 34,080 

0.45 18,300,000 0.87 509,472 3,900,000 0.74 92,352 22,200,000 0.85 601,824 1,300,000 0.74 30,784 

0.50 15,200,000 0.95 462,080 3,200,000 0.79 80,896 18,400,000 0.92 542,976 1,000,000 0.83 26,560 

0.60 11,000,000 1.11 390,720 2,300,000 0.89 65,504 13,300,000 1.07 456,224 840,000 0.88 23,654 

0.70 8,180,000 1.26 329,818 1,650,000 0.98 51,744 9,830,000 1.21 381,562 640,000 0.95 19,456 

0.80 6,270,000 1.42 284,909 1,150,000 1.09 40,112 7,420,000 1.37 325,021 580,000 0.97 18,003 

0.90 4,980,000 1.56 248,602 630,000 1.29 26,006 5,610,000 1.53 274,608 560,000 0.98 17,562 

1.00 4,040,000 1.71 221,069 490,000 1.39 21,795 4,530,000 1.67 242,864 220,000 1.07 7,533 

* Blocks under 0.15 g/tonne are not considered to be "Resources" and are included for information purposes only. 

Notes: 

• Base case is 0.15g/tonne Au; 

• Metal price used US$625/oz Au; 

• Assumed metal recovery based on previous metallurgical studies is 68% 

• Not all tonnage will be recovered in mining, nor will all metal be recovered in milling and processing 

iii

Howe 2008 Reserve Estimate 

Following the completion of the revised resource estimation, Howe completed a revised mineral reserve 

estimate for the El Castillo gold deposit. 

The overall procedure that was used to revise the mineral reserve estimate follows that used previously in 

the preceding 2006 Howe report (Report #897). Material changes including the use of revised unit costs 

and predicted gold price in the open pit mine planning process, and revision of the project’s capital and 

operating costs. The gold price is based primarily on the previous three years gold price, while the 

operating costs are based on Castle Gold’s current operating experience. Projected capital costs are not 

large as El Castillo is now in production, and while an expansion to a production rate of 5 million tonnes 

of ore per year is forecast, most of the capital costs will be borne by outside contractors. 

The revised Measured and Indicated Mineral Resources for the El Castillo gold deposit are inclusive of 

those Mineral Resources modified to produce the revised Mineral Reserves. Inferred Mineral Resources 

are not included in the revised Mineral Reserves. Readers are reminded that mineral resources that are not 

mineral reserves do not have demonstrated economic viability. 

The revised mineral reserves have yet to be mined and remain in place as of October 2007. 

This study only addresses the excavation of the revised Measured and Indicated Mineral Resources. In 

accordance with NI 43-101, Inferred Resources are included as waste when they occur within the open pit 

limits. The Howe 2008 geological block model described above was used for the pit optimization process 

with the Lerchs-Grossman optimization function within Microlynx mine planning software was used to 

determine the optimum pit shells for the following cost, revenue and mining parameters. 

Proven and Probable Mineral Reserves at the base case of $625 ($US per troy ounce – 3 year average) 

gold price totaled 46.8 million tonnes with an average gold grade of 0.50g/tonne Au (750,000 ounces). 

Inferred mineral resources occurring within the optimum pit outline totaled 100,000 tonnes with an 

average gold grade of 0.32g/tonne Au (1,000 ounces). This material would have to be mined and would 

be processed if the block grade was above the operating cut-off grade. However, this material is not 

considered to be a mineral reserve. 

Mineral reserves for this study were reported using a 0.15g/tonne Au operating cut-off grade. During the 

pit design process when one is determining whether a block will be mined and processed, an operational 

cut-off grade is used. This is the grade at which revenue exceeds mining and processing costs. For the 

base case, $625 gold price scenario, the operational cut-off grade was 0.22 grams Au per tonne. 

Once the pit limit has been decided, it follows that everything within the pit must be mined. In other 

words, mining costs are sunk and the decision shifts to whether a mined block will be sent to the mill or to 

the waste pile. The processing cut-off grade is the grade at which revenue exceeds only the processing 

costs. For the base case, $625 gold price scenario, the processing cut-off grade was 0.15 grams per tonne. 

Blocks within the optimum pit with grades less than 0.15g/tonne Au would have to be mined, but would 

be considered as waste. 

The following tables are the undiluted reserves results of the pit optimization based on various gold prices 

from US$550, US$625 and US$700 per ounce While Howe has selected $625 as the “best estimate”” 

long term gold price, it was considered necessary to follow industry practice and produce pits $75 above 

and below the base price to make sure that there were no impediments to lower or higher production pits 

should the forecast price scenario change. 

iv

Undiluted Reserves at $550 per Ounce Gold 

Overburden Tonnes 12,100,000 

Oxide Below 0.15 g/tonne* 11,100,000 

Subtotal, Waste Rock 23,200,000 

In-Pit Proven and Probable Reserves 

In-Pit Inferred Resources 

Cut-off Tonnes Average Cut-off Tonnes Average 

Grade Above Grade Grade Above Grade 

(g/tonne) Cut-off (g/tonne) Ounces (g/tonne) Cut-off (g/tonne) Ounces 

0.15 40,000,000 0.53 680,000 0.15 35,000 0.32 400 










0.15 46,800,000 0.50 752,000 0.15 101,000 0.32 1,000 




Subtotal, Waste Rock 43,300,000 






0.15 58,400,000 0.46 870,000 0.15 131,000 0.30 1,300 

* This material must be mined but does not meet the processing cut-off. 

Mineral Processing and Metallurgical Testing 

Several metallurgical tests on mineralized oxidized material from the Property have been completed, both 

by Castle Gold and by independent groups between 2004 and 2006. The tests were designed to determine 

the leaching characteristics of the oxidized material and consisted of: 

• Bottle roll leach tests in 2004 and later column leach tests in 2006 by Kappes, Cassiday and 

Associates (“KCA”); 

• Two onsite bulk heap leach tests conducted by Castle Gold in 2005, followed by a residual 

analysis of the heaps conducted by Metcon Research (“Metcon”) in 2006. 

The data from the various tests have been reviewed and vetted by, D. Koningen, P.Eng, acting in the 

capacity of Castle Gold’s internal Qualified Person in matters of process engineering and metallurgy. Mr. 

Koningen is also a Director of Castle Gold. Presently Castle Gold is in the process of completing 

v

additional column and bottle roll tests designed to optimize leach performance and at the time of writing 

the results of these tests are pending. 

From the metallurgical testing completed to date the following conclusions are made: 

1. Ultimate gold recoveries from ROM ore material placed directly on the leach pad (no crushing) 

are in the 50-55% range; 

2. Crushing of material to

epresent an incremental increase in the project NCF of US$51.0 million when compared to the previous 

2006 Howe evaluation (A.C.A. Howe report 897). Since the mine is already in production and most of the 

investment capital has been sunk, the El Castillo project generates an infinite Internal Rate of Return. 

Likewise, the Payback Period is zero as Net Cash Flow is positive from Year One on. The breakeven 

(after tax) gold price is approximately US$370/oz Au. The breakeven price includes recovery of all future 

capital investments and operating costs. 

The El Castillo Project contracts out a large amount of its operating costs including drilling, blasting, 

mining, truck haulage and crushing. Thus, the project will require very little capital to increase production 

to 5.0 million tonnes of ore per year. The breakeven gold price of $370 per ounce should be sufficiently 

low to protect El Castillo from a substantial drop in the price of gold. Thus Howe concludes the El 

Castillo Project is economically viable (criteria #1 that establishes that this is ore) and robust (under 

conservative operating scenarios). 

Conclusions 

• The Property contains a low-sulphidation epithermal gold system. 

• Castle Gold has carried out many of the recommendations given in the 2002 and 2003 Howe reports; 

principally column and bottle roll metallurgical testing, bulk leach testing, and core drilling for 

comparison with, and verification of, the Battle Mountain RC drilling assays. 

• The metallurgical testwork completed to date indicates that gold recoveries of between 68 and 72% are 

achievable by crushing 23-40% of the mine material to

Recommendations – Mining/Metallurgical 

• Castle Gold should continue to contract most of the mining/trucking operations to independent 

contractors. 

• Castle Gold should complete geotechnical evaluations to determine if a steeper pit wall angle can be 

utilized for mine design purposes (in order to reduce mine strip ratios). 

• Castle Gold should purchase and install a weight station in order to better control the amounts hauled 

and the costs incurred by mine contractors. 

• Castle Gold should continue to focus on opportunities to optimize the overall project economics by 

implementing various cost reduction and efficiency enhancing initiatives. These activities should 

include: 

• Completion of plans to install a screening plant ahead of the crushing system in order to 

minimize the amount of material passing through the crushers (a contract operation) 

• Performing leach tests on numerous ore samples to better understand the variations in recoveries 

by rock/mineral types and optimal reagent additions; 

• Completing engineering evaluations of various project expansion scenarios in order to determine 

best combinations of capital costs and overall project cash flows; 

• Examining opportunities to “right size” present mining operations equipment fleet for maximum 

throughput and minimum operating costs; 

• Evaluating the possibility for use of ore transport conveyors versus trucking activities; 

• Assessing alternate future leach pad locations with respect to minimizing ore haulage distances. 

viii

TABLE OF CONTENTS 

1.0 INTRODUCTION .............................................................................................................................4 

1.1 General.........................................................................................................................................4 

1.2 Scope and Conduct ......................................................................................................................4 

1.3 Sources of Information ................................................................................................................5 

1.4 Disclaimer....................................................................................................................................5 

1.5 Units and Currency ......................................................................................................................6 

2.0 PROPERTY DESCRIPTION, LOCATION, ACCESSIBILITY, CLIMATE, 

PHYSIOGRAPHY, LOCAL RESOURCES AND INFRASTRUCTURE.............................................7 

2.1 PROPERTY DESCRIPTION AND LOCATION .......................................................................7 

2.1.1 Location................................................................................................................................... 7 

2.1.2 Land Tenure ............................................................................................................................ 7 

2.1.3 Mexican Mining Law ............................................................................................................ 11 

2.2 ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, LOCAL RESOURCES AND 

INFRASTRUCTURE............................................................................................................12 

2.2.1 Accessibility .......................................................................................................................... 12 

2.2.2 Climate .................................................................................................................................. 12 

2.2.3 Physiography and Vegetation................................................................................................ 12 

2.2.4 Local Resources and Infrastructure....................................................................................... 12 

3.0 HISTORY.........................................................................................................................................15 

4.0 GEOLOGICAL SETTING.............................................................................................................16 

4.1 REGIONAL GEOLOGY...........................................................................................................16 

4.2 PROPERTY GEOLOGY...........................................................................................................17 

5.0 DEPOSIT TYPE..............................................................................................................................20 

6.0 MINERALIZATION.......................................................................................................................22 

7.0 EXPLORATION .............................................................................................................................25 

8.0 DRILLING.......................................................................................................................................26 

9.0 SAMPLING METHOD AND APPROACH .................................................................................27 

10.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY.......................................................28 

10.1 SAMPLE PREPARATION AND ANALYTICAL PROCEDURES ON CORE SAMPLES...28 

11.0 DATA VERIFICATION.................................................................................................................29 

11.1 INTRODUCTION .....................................................................................................................29 

11.2 ANALYTICAL DATA CORROBORATION AND QUALITY ASSURANCE AND 

QUALITY CONTROL PROGRAM.....................................................................................29 

11.2.1 Laboratories Used By Castle Gold for the Twin Drilling Program................................... 29 

11.2.2 PQ Hole Twinning Quality Assurance and Quality Control Program .............................. 29 

11.2.3 Howe 2002 Data Verification Sampling ........................................................................... 30 

12.0 ADJACENT PROPERTIES...........................................................................................................32 

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING ...........................................33 

13.1 INTRODUCTION .....................................................................................................................33 

13.2 2004 KCA BOTTLE ROLL TESTS..........................................................................................33 

13.3 2005 CASTLE GOLD TEST HEAPS .......................................................................................34 

13.3.1 2006 Metcon Residual Analysis of the Heaps................................................................... 36 

13.4 2006 KCA COLUMN TESTS ...................................................................................................37 

13.5 CONCLUSIONS........................................................................................................................39 

14.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES.......................................40 

14.1 Historical Mineral Resource Reserve Estimates........................................................................40 

14.2 2008 Howe Resource and Reserve Estimate..............................................................................40 

14.2.1 Methods............................................................................................................................. 41 

1

14.2.2 Cut-off Grade .................................................................................................................... 41 

14.2.3 Results............................................................................................................................... 41 

14.2.4 Pit Optimization Parameters.............................................................................................. 43 

14.2.5 Results............................................................................................................................... 43 

14.2.6 Mine Plan and Schedule.................................................................................................... 46 

14.2.7 Comparison Between Howe 2003 and Howe 2008 Reserve Estimates ............................ 46 

15.0 OTHER RELEVANT DATA AND INFORMATION.................................................................48 

15.1 ENVIRONMENTAL CONSIDERATIONS .............................................................................48 

15.2 Environmental Permitting..........................................................................................................48 

15.2.1 Resolution on Environmental Impact ..................................................................................... 48 

15.2.2 Change of Land Use ............................................................................................................... 49 

15.3 Closure and Rehabilitation Plans ...............................................................................................49 

16.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT 

PROPERTIES AND PRODUCTION PROPERTIES ...........................................................................50 

16.1 EARLIER PROPOSED MINING PLANS................................................................................50 

16.1.1 Open Pit Parameters.......................................................................................................... 50 

16.2 FINANCIAL EVALUATION ...................................................................................................50 

16.2.1 Capital and Operating Cost Estimates............................................................................... 51 

16.2.2 Economic Evaluation ........................................................................................................ 60 

17.0 INTERPRETATIONS AND CONCLUSIONS.............................................................................63 

17.1 CONCLUSIONS........................................................................................................................63 

17.2 RECOMMENDATIONS...........................................................................................................63 

18.0 SOURCES OF INFORMATION.....................................................................................................65 

19.0 CERTIFICATES OF AUTHORS...................................................................................................67 

FIGURES 

Figure 1. El Castillo Project location map.....................................................................................................8 

Figure 2. Map showing mining concessions and surface leases....................................................................9 

Figure 3. Generalized geologic map of the El Castillo Property.................................................................18 

Figure 4. Cross-section through the El Castillo area...................................................................................19 

Figure 5. Diagram of the geologic environment for epithermal deposits....................................................20 

Figure 6. Coarse blank standard control chart.............................................................................................31 

Figure 7. Cumulative gold recovery versus leaching time (source: KCA; taken from Koningen, 2006). ..38 

PLATES 

Plate 1. Photograph of the El Castillo area, showing topography, vegetation and current open-pit bench 

development as of December 2007 (looking south)......................................................................14 

Plate 2. Mineralized thinly-bedded volcaniclastic rocks.............................................................................22 

Plate 3. Mineralized fractures in dacite porphyry. ......................................................................................23 

Plate 4. Chalcedonic silica cutting altered volcaniclastic rocks. .................................................................24 

Plate 5. Test pit #1.......................................................................................................................................34 

Plate 6. View of the El Castillo site facilities..............................................................................................39 

TABLES 

Table 1. Castle Gold concession titles for the El Castillo Property. .............................................................7 

Table 2. Surface rights under contract to Castle Gold.................................................................................10 

Table 3. Mining taxes in Mexico as of January 1, 2006.............................................................................11 

2

Table 4. Driving distances from Durango to the Property. ........................................................................12 

Table 5. Maximum precipitation in a 24 hour period (mm) for Primo de Verdad.....................................13 

Table 6. General stratigraphy of the El Castillo area. ................................................................................16 

Table 7. Repeat assays performed internally by ALS-Chemex...................................................................30 

Table 8. Data verification sample results from Howe’s 2002 site visit.......................................................31 

Table 9. Castle Gold test heap leach results and observations. ...................................................................35 

Table 10. Metcon gold-size fraction distribution of Heap 1 leached ore residue........................................36 

Table 11. Metcon gold-size fraction distribution of Heap 2 head ore and leached ore residue. .................36 

Table 12. Remaining Mineral Resources as of October 2007....................................................................42 

Table 13. Comparison of Howe 2003 and Howe 2008 Reserve Estimates................................................47 

Table 14. Ore – Waste Distribution and Average Gold Price – El Castillo ...............................................51 

Table 15. Operating Cost Summary (US$). ...............................................................................................53 

Table 16. Sensitivity Analysis....................................................................................................................56 

Table 17. Sensitivity Analysis – Graphical Representation ........................................................................57 

Table 18. Project Net Cash Flow at Selected Gold Prices .........................................................................57 

Table 19. Financial scenario at $625/oz Au ................................................................................................59 

Table 20. NPV differences at a 10% discount rate.....................................................................................60 

Table 21. Gold Price Chart (1995-2008).....................................................................................................60 

Table 22. Impact of Mine Schedule Optimization based on a 10% Discount Rate....................................61 

Table 23. US$ - Mexican Peso Exchange Rate Chart (1990-2008) ...........................................................62 

APPENDICES 

APPENDIX A US$625/oz Au Optimum Pit Shell Level Plans 

3

1.0 INTRODUCTION 

1.1 General 

At the request of Mr. Darren Koningen, (“Castle Gold”), A.C.A. Howe International Ltd, (“Howe”) has 

been retained to prepare a Technical Report (“the Report”) specific to the standards dictated by National 

Instrument 43-101 and Form 43-101F (Standards of Disclosure for Mineral Projects) with respect to the El 

Castillo Property located in Durango, Mexico (“the Property”). Howe previously prepared a Pre- 

Feasibility Report (Howe reports #845 and #850, dated September 2002 and January 2003 respectively) 

for the El Castillo project that was then known as the El Cairo project. Castle Gold management renamed 

the project after a local prominent landmark. This updated report incorporates the results of an updated NI 

43-101 compliant mineral resource/ reserve estimate based on additional geoscientific and pre-production 

development work that has been completed at the El Castillo Project subsequent to the 2003 Howe report 

(#850) by Castle Gold. Howe understands that Castle Gold will use this report for reporting purposes. 

Castle Gold was incorporated federally on August 28, 2007 in the province of Ontario pursuant to an 

amalgamation agreement between Morgain Minerals Inc. (“Morgain”) and Aurogin Resources Ltd. 

(“Aurogin”) dated July 18, 2007. Upon completion of the amalgamation, Castle Gold acquired all of the 

assets and liabilities of Morgain and Aurogin respectively. The Company's principal place of business is 

80 Richmond Street, Suite 508, Toronto, Ontario M5H 2A4, Canada. Castle Gold’s El Castillo Project is 

held by its wholly-owned subsidiary, Minera Real del Oro, S.A. de C.V. The Mexican subsidiary was 

incorporated on August 30, 1995 and is located at Negrete 1311-C, Col. Los Angeles, Durango, Durango 

Mexico, CP 34070. In addition to the Property, Castle Gold also holds interests in the La Fortuna project, 

located in northern Durango Mexico, and the El Sastre Main Zone gold mine in Guatemala. 

Howe is an international geological and mining consulting firm that was incorporated in the province of 

Ontario in 1966 and has continuously operated under a “Certificate of Authorization” to practice as 

Professional Engineers (Ontario) since 1970 and as Professional Geoscientists (Ontario) since 2006. 

Howe provides a wide range of geological and mining consulting services to the international mining 

industry, including geological evaluation and valuation reports on mineral properties. The firm’s services 

are provided through offices in Toronto, Canada and London, U.K. 

1.2 Scope and Conduct 

The Report was prepared by Mr. Daniel C. Leroux, B.Sc., P.Geo, Mr. Gordon Watts, P.Eng and Mr. W.D. 

Roy, M.A.Sc., P.Eng. Mr. Leroux has a Bachelors of Science degree in Geology and is a registered 

professional geoscientist with the Association of Professional Geoscientists of Ontario (#0742) and the 

Association of Professional Engineers and Geoscientists of Saskatchewan (#10475). Mr. Leroux has a 

total of 18 years of direct experience with gold projects located in Canada, Africa, Central and South 

America, including managerial responsibilities for all various exploration stage gold projects from 

conceptual grassroots exploration projects to resource estimation and / or feasibility studies on advanced 

gold projects. Additional experience includes the completion of various National Policy 2A and NI 43- 

101 technical reports for gold projects worldwide. 

Mr. Watts is a P. Eng. with a Bachelor of Applied Science in Mining from the University of Toronto. Mr. 

Watts has over 36 years experience in mining exploration, mine operation, mine engineering, project 

evaluation, feasibility studies and financial evaluation. 

Mr. Roy has over 10 years of experience in the operations, engineering, and management of underground 

and open pit operations in Africa, South America and Canada. Mr. Roy has extensive experience in mine 

design, budgeting and cost control, due diligence, preparation of feasibility studies and technical 

qualifying reports. 

4

Castle Gold has accepted that the qualifications, expertise, experience, competence and professional 

reputation of Howe’s Principals and Associates are deemed appropriate and relevant for the preparation of 

the Report. Castle Gold has also accepted that Howe’s Principals and Associates are members of 

professional bodies that are appropriate and relevant for the preparation of this Report. 

Universal Trans-Mercator grid coordinates (“UTM”) are based on the NAD 27 datum. The Property is 

located in UTM zone 13. 

1.3 Sources of Information 

In preparing the Report, Howe reviewed available maps and cross-sections, company documentation and 

other public and private information as listed in the “Sources of Information” section at the end of this 

report. Howe has assumed that all of the information and technical documents reviewed and listed in the 

“Sources of Information” are accurate and complete in all material aspects. Howe has not been asked to 

verify mineral title, compliance with Mexican laws and regulations or the underlying inter-company 

agreements and title transfers. Though Howe has carefully reviewed the available information, Howe has 

not concluded any extensive independent investigation of the data. 

The volume of information available on the Property consists primarily of reports prepared by previous 

consultants and data prepared by previous property owner Battle Mountain Mining Company. Much of 

the historical and background information in the Report is from reports titled “Prefeasibility Report, El 

Cairo Gold Project, State of Durango, Mexico”, “Revised Prefeasibility Report, Higher Grade Scenario, El 

Cairo Gold Project, State of Durango, Mexico” , “Technical Report on the 2003 Diamond Drilling 

Program, El Cairo Gold Project, Durango State, Mexico” and “Prefeasibility Report El Castillo Project, 

Durango, Mexico” all prepared by Howe in 2002, 2003, 2004 and 2006 respectively, and; “Review of the 

El Cairo Project, Durango, Mexico”, “El Cairo Resource Estimate and Pit Optimization Study, Durango, 

Mexico” and “Updated El Cairo Resource Estimate and Pit Optimization Study, Durango, Mexico” all 

prepared by Resource Modeling Incorporated. All of these reports were prepared on behalf of Castle 

Gold’s predecessor Morgain. 

Mr. Leroux and Mr. Watts visited the El Castillo Gold Project on December 1, 2007. During this time 

they visited the current mining operations, reviewed the data available on-site and held discussions with 

Castle Gold management. Mr. Leroux and Mr. Watts were accompanied by Mr. Miguel Cardona – Chief 

Geologist and Mr. Pedro Delgado Ortiz Mine Manager for Castle Gold. In addition, Howe carried out 

discussions with Castle Gold’s management, in particular, Mr. Darren Koningen Vice-President - 

Operations. Howe’s extensive experience in the exploration and mining of gold deposits in Canada, 

Africa, and South America and prior investigations of other gold deposits throughout the world, was also 

drawn upon. 

The Report is based on information known to Howe as of March 1, 2008. 

1.4 Disclaimer 

Castle Gold and its subsidiaries have warranted that full disclosure of all material information in its 

possession or control has been made to Howe. Castle Gold has agreed that neither it nor its associated 

companies will make any claim against Howe to recover any loss or damage suffered as a result of 

Howe’s reliance upon the information provided by Castle Gold or its proposed subsidiaries for use in the 

preparation of this Report. Castle Gold has also indemnified Howe against any claim arising out of the 

assignment to prepare this Report, except where the claim arises as a result of any proved willful 

misconduct or negligence on the part of Howe. This indemnity is also applied to any consequential 

extension of work through queries, questions, public hearings or additional work arising from Howe’s 

performance or engagement. 

5

Neither Howe nor the author of this Report (nor family members or associates) have any business 

relationship with Castle Gold or any associated company, nor with any company mentioned in this Report, 

which is likely to materially influence their impartiality or create a perception that the credibility of this 

Report could be compromised or biased in any way. The views expressed herein are genuinely held and 

deemed independent of Castle Gold. 

Moreover, neither Howe nor the authors of this Report (nor family members or associates) have any 

financial interest in the outcome of any transaction involving the Property other than the payment of 

normal professional fees for the work undertaken in the preparation of this Report (which is based upon 

hourly charge-out rates and reimbursement of expenses). The payment of such fees is not dependent upon 

the content or conclusions of either this Report or consequences of any proposed transaction. 

Castle Gold has reviewed draft copies of the Report for factual errors. Hence, the statement and opinions 

expressed in this document are given in good faith and in the belief that such statements and opinions are 

not false and misleading at the date of this Report. 

Howe’s opinion is provided solely for the purposes outlined in Section 1.1 of this Report and Howe 

consents to the use of the Report for this purpose. Howe reserves the right to, but will not be obligated to, 

revise this Report and conclusions thereto if additional information becomes known to Howe subsequent 

to the date of this report. 

1.5 Units and Currency 

All units of measurement used in this report are metric unless otherwise stated. Tonnages are reported as 

metric tonnes (“t”) and base metal values (copper, lead and zinc are reported in weight percent (“%”) or 

parts per million (“ppm”). Precious metals values (silver and gold) are recorded as grams per metric tonne 

(“g/t”). Other references to geochemical analysis are in ppm or parts per billion (“ppb”) as reported by the 

originating laboratories. Currency is expressed in US dollars unless stated otherwise. The exchange rate 

for the conversion of Mexican Pesos to US dollars is US$1 = 11 Pesos. 

6

2.0 PROPERTY DESCRIPTION, LOCATION, ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, 

LOCAL RESOURCES AND INFRASTRUCTURE 

2.1 PROPERTY DESCRIPTION AND LOCATION 

2.1.1 Location 

The Property is located in the State of Durango, Mexico approximately 100 km north of the city of Durango 

at the approximate UTM coordinates of 2,751,115N and 547,460 (24 o 52’27” latitude and 104 o 31’48” 

longitude) (Figure 1). The elevation of the area containing the bulk of the known mineralization ranges 

from 1,720 m to 1,800 m above mean sea level. 

2.1.2 Land Tenure 

The Property consists of four contiguous mining concessions totaling approximately 216.05 hectares (“Ha”) 

(Table 1 and Figure 2). The concessions are located in the municipality of San Juan del Rios in central 

Durango. 

Table 1. Castle Gold concession titles for the El Castillo Property. 

NAME OF TITLE AREA DATE OF EXPIRATION 

CONCESSION NUMBER (Ha) TITLE DATE 

OWNER 

El Cairo 220073 25.0000 5 June 2003 4 June 2053 Minera Real Del Oro S.A. de C.V. 

Justicia 220074 20.9000 5 June 2003 4 June 2053 Minera Real Del Oro S.A. de C.V. 

El Cairo 220075 95.1487 5 June 2003 4 June 2053 Minera Real Del Oro S.A. de C.V. 

El Oro 220076 75.0000 5 June 2003 4 June 2053 Minera Real Del Oro S.A. de C.V. 

TOTAL 216.0487 

2.1.2.1 Mineral Rights 

Castle Gold owns all four of these concessions outright. The smaller of the two El Cairo concessions (title 

number 220073) was acquired from the Mexican government in a lottery for the cost of entry in the lottery, 

which is minimal. 

The larger El Cairo concession (title number 220075) was acquired on 12 June 2004 from Explominerals 

S.A. de C.V. for a one-time payment of US$ 20,000, 500,000 shares in Castle Gold and a 2.0% Net Smelter 

Royalty. This concession is located to the east of the known mineralized area and is not presently known to 

contain mineralization. 

The El Oro and Justicia concessions were acquired on 5 November 2004 from five individuals: Eduardo 

Núñez Medina, Pedro Fraga Medina, Roberto Sitten Ayala, Rafael Fernando Gutiérrez Badilla and Luis 

Antonio Martínez Macias. Payments totaling US$255,150 were made to these individuals in 2002 and 

2003. A payment of US$201,750 was made upon signing followed by three payments of US$330,026.40 

on 30 March 2005, US$330,026.40 on 30 September 2005 and US$527,947.20 on 30 March 2006. Castle 

Gold reports that all payments have been made and that they now own all concessions outright, subject to 

the 2% NSR on the larger El Cairo concession (title number 220075). 

2.1.2.2 Surface Rights 

Castle Gold also controls 835 Ha of surface rights in the El Castillo area (Table 2) (Figure 2). This is 

substantially larger than the area covered by Castle Gold’s mineral rights and overlaps onto mineral rights 

controlled by Compñía Minera La Parreña S.A. de C.V., a subsidiary of Industrias Peñoles. At the present 

time, Castle Gold is planning to install mine infrastructure (at least one leach pad) on ground for which they 

control the surface rights but not the mineral rights. 

7

Figure 1. El Castillo Project location map. 

8

Figure 2. Map showing mining concessions and surface leases. 

9

Castle Gold is within their rights to do this since they control the surface but potential conflicts could arise 

at a later date if the owner of the mineral rights elects to conduct exploration in the area occupied by the 

leach pad. 

Table 2. Surface rights under contract to Castle Gold. 

SURFACE OWNER 

AREA UNDER 

LEASE 

(Ha) 

EFFECTIVE 

PERIOD 

DATE 

EFFECTIVE 

EXPIRATION 

DATE 

Ejido Atotonilco 108 15 Years 20 June 2005 19 June 2020 

Ejido Otillo Moñtano 200 15 Years 10 March 2005 9 March 2020 

Gerónimo Gandara Gandara 377 1 15 Years 23 March 2005 22 March 2020 

José Guadalupe Gallegos 150 15 Years 10 March 2005 9 March 2020 

TOTAL 835 

2.1.2.2.1 Ejido Atotonilco 

Castle Gold has leased 108 Ha from the Ejido Atotonilco on 20 June 2005 for a period of 15 years. Under 

the terms of the agreement, Castle Gold must pay a total of MX$500,000 (US$44,695). MX$250,000 

were paid on 14 June 2005 and MX$250,000 were paid on 20 June 2005. 

2.1.2.2.2 Ejido Otillo Moñtano 

Castle Gold leased 200 Ha from the Ejido Otillo Moñtano on 10 March 2005 for a period of 15 years. 

Under the terms of the agreement, Castle Gold paid a total ofMX$1,500,000 (US$134,085). MX$750,000 

were paid on 10 March 2005 and MX$750,000 was scheduled to be paid on 10 March 2006 but that 

payment has been deferred until Castle Gold receives title from the ejido. 

2.1.2.2.3 Gerónimo Gandara Gandara 

Castle Gold leased 377 Ha 1 from Señor Gandara on 23 February 2005 for a period of 15 years for annual 

payments of MX$1,300,000 (US$116,207). An initial payment of MX$4,000,000 (US$357,560) was 

made upon signing. This payment consists of advance payment for three years (MX$1,300,000 per year 

plus an additional MX$100,000 (US$8,939) applicable to the fourth, or 2008, payment). On 1 March 

2006 a payment of MX$500,000 was made as partial advance payment of the fourth year payment (2008) 

with the balance of MX$700,000 (adjusted for inflation) due on 1 March 2008. From 2009 through 2019, 

Castle Gold is required to make payments of MX$1,300,000 (adjusted for inflation) on 1 March of each 

year. In addition to these payments, Castle Gold paid MX$330,000 as part of a verbal agreement with Sr. 

Gandara for surface access prior to signing the present agreement. Total lease amount for the Gandara 

lease is approximately MX$19,830,000 (US$1,772,604). Castle Gold has the right to terminate the 

agreement at any time. 

2.1.2.2.4 José Guadalupe Gallegos 

Castle Gold leased 150 Ha from Señor Gallegos on 10 March 2005 for a period of 15 years for annual 

payments of MX$90,000. Castle Gold made four years advance payment in the form of MX$180,000 

(US$16,090) upon signing and MX$180,000 on 16 march 2005 as four years advance. Beginning in 

2008, Castle Gold must pay MX$90,000 (adjusted for inflation) per year until the term of the lease expires 

in 2019. Total lease amount for the Gallegos lease is approximately MX$13,500,000 (US$1,206,765). 

Castle Gold has the right to terminate the agreement at any time. 

1 The original lease agreement shows the Gerónimo Gandara Gandara lease to be 599 Ha in area. Howe was informed by Castle 

Gold’s predecessor company, Morgain that the area is, in fact, 377 Ha, and that all involved parties have a tacitly agreed to this 

(Chris Babcock per. comm.). The lease agreement between Morgain and Señor Gandara however has not been corrected to show 

this. 

10

2.1.2.3 Property Taxes 

The property taxes for the Property for 2007 are MX$3,932 or US$352. This amount will increase to 

MX$3,932 or US$352 in 2008. Because of the small size of the concessions that comprise the El Castillo 

Project, there is no associated work commitment. 

2.1.3 Mexican Mining Law 

Mineral exploration and mining in Mexico is regulated by the Mining Law of 1992, which establishes that 

all minerals found in Mexican territory are owned by the Mexican nation, and that private parties may 

exploit such minerals (except oil and nuclear fuel minerals) through mining licenses, or concessions, 

granted by the Federal Government 

On April 29, 2005 the Mexican Congress published several amendments to the Mining Law of 1992. 

According to these amendments, the exploration and exploitation concessions were replaced by a single 

concession type, the mining concession, which gives the holder both exploration and exploitation rights, 

subject to the payment of relevant taxes. Old exploration and exploitation concessions were automatically 

transformed into mining concessions with a single term of 50 years from the date the concession was first 

registered at the Public Registry of Mines. Accordingly, exploration concessions that were originally 

issued for a term of 6 years now have a term of 50 years from the date the exploration concession was 

originally registered. Under the new amendments, the concession holder has all the rights previously 

granted for an exploitation concession under the old law. 

Concessions may be granted to (or acquired by, since they are freely transferable) Mexican individuals, 

local communities with collective ownership of the land known as ejidos and companies incorporated 

pursuant to Mexican law, with no foreign ownership restrictions for such companies. While the 

Constitution makes it possible for foreign individuals to hold mining concessions, the Mining Law does 

not allow it. This means that foreigners wishing to engage in mining in Mexico must establish a Mexican 

corporation for that purpose, or enter into joint ventures with Mexican individuals or corporations. 

Maintenance obligations which arise from a mining concession, and which must be kept current to avoid 

its cancellation are the performance of assessment work, the payment of mining taxes (Table 3) and the 

compliance with environmental laws. The Regulations of the Mining Law establish minimum amount of 

assessment work that must be performed during the exploration in the case of exploration concessions or 

exploration and/or exploitation work, in the case of exploitation concessions 

(http://www.smvv.com.mx/art3.htm). Because of the recent changes in the mining law, new payment 

schedules for assessment work are being developed and are not available for inclusion in this report. 

Table 3. Mining taxes in Mexico as of January 1, 2006. 

Years 

Payment per Hectare 

(Mx$) 

Payment per Hectare* 

(US$) 

1 - 2 4.42 0.40 

3 - 4 6.61 0.60 

5 - 6 13.68 1.24 

7 - 8 27.51 2.50 

9 – 10 55.01 4.99 

After 10 96.83 8.79 

*Based on an exchange rate of 1 Mexican peso = 0.09088 US dollars on 

March 1, 2008. 

11

2.2 ACCESSIBILITY, CLIMATE, PHYSIOGRAPHY, LOCAL RESOURCES AND 

INFRASTRUCTURE 

2.2.1 Accessibility 

Access to the property is good with total driving time from Durango City varying between 1.5 and 2.0 

hours depending on traffic. Driving distance to the Property is 117 km (measured from the center of 

Durango). The first 111 km are paved and the final six km consist of well-maintained gravel road. 

Driving distances are shown in Table 4. 

Table 4. Driving distances from Durango to the Property. 

Distance Road Surface 

Durango to the Coneto Comonfort road 

(National Highway 45) 

100 km Paved 

Intersection of National Highway 45 and 

Coneto Comonfort road to Property access 

11 km Paved 

Well-maintained gravel access road 6 km Gravel 

2.2.2 Climate 

El Castillo is situated in a zone classified as semi-dry and receives an average annual rainfall of 550.5 

mm. The climate is temperate with an average annual temperature of 18º and maximum temperatures 

reach 35º C and minimum temperatures 2º C (CNEMSG, 1988). The region averages 17 frost events per 

year beginning in October and extending to April. Dominant wind direction is from northwest to 

southeast and the rainy season is from June through to August, minimal rainfall occurs from September to 

May. 

Table 5 provides rainfall information that will be useful during planning of the El Castillo heap leach 

facilities. Maximum rainfall (in millimeters) during a 24-hour period is broken down on a monthly basis 

for the period 1948-2000 for the climatological station at San Juan del Rio is only 15 km east of the El 

Cairo property at similar elevation and in a similar geographic setting. 

2.2.3 Physiography and Vegetation 

The area is characterized by large alluvial terraces dissected by small streams resulting in up to 300 m of 

relief in the area. The elevations near the village of Atotonilco the central valley is approximately 1,700 

m above mean sea level (“amsl”) while the top of the mesa in the vicinity of the El Castillo where the 

proposed pit and plant would be located is at an elevation of 1,800 m amsl. 

Vegetation consists of small trees, bushes and cacti (Plate 1). 

2.2.4 Local Resources and Infrastructure 

Power and water are available in the area. Castle Gold reports that a 400 Kva power line is present in 

Coneto Comonfort, some 16 km distant and a limited supply of water is available from a reservoir located 

2.5 km from the project site. The remainder of the water required for a mining operation will have to 

come from wells to be drilled in nearby valleys. Limited cellular phone service is available on the 

Property. 

The area covered by Castle Gold’s mineral rights is small. However, as discussed in Section 0, Castle 

Gold controls a large area of surface rights and this area is adequate for the development of mining 

facilities. 

12

Table 5. Maximum precipitation in a 24 hour period (mm) for Primo de Verdad. 

Year Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. MAX 

1948 0.0 0.0 0.0 1.5 10.0 29.5 16.0 18.5 47.0 35.0 7.0 0.0 47.0 

1949 1.5 5.0 0.0 0.0 5.0 24.0 24.0 18.5 2.0 14.0 0.0 15.0 24.0 

1950 0.0 0.0 0.0 0.0 0.0 2.0 22.0 47.0 24.0 0.0 0.0 0.0 47.0 

1951 0.0 0.0 8.5 0.0 0.0 48.0 50.0 54.0 30.0 20.0 0.0 6.0 54.0 

1952 0.0 0.0 0.0 10.0 0.0 54.0 50.5 16.0 0.0 5.2 0.0 5.0 54.0 

1953 0.0 20.0 3.0 0.0 17.0 7.0 9.0 22.0 15.0 20.0 20.0 20.0 22.0 

1954 0.0 0.0 0.0 2.0 0.0 18.0 23.0 27.0 6.0 0.0 0.0 0.0 27.0 

1955 12.0 0.0 0.0 0.0 1.0 14.0 37.0 37.0 0.0 53.0 7.0 0.0 53.0 

1956 0.0 0.0 0.0 10.0 40.0 10.0 12.0 23.0 19.0 0.0 13.0 0.0 40.0 

1957 0.0 0.0 0.0 0.0 10.0 0.0 11.0 12.0 23.0 31.0 0.0 31.0 

1959 0.0 0.0 0.0 6.0 6.0 7.0 13.0 47.0 6.0 15.0 15.0 2.0 47.0 

1960 3.0 0.0 0.0 0.0 20.0 12.0 28.0 111.0 35.0 16.0 0.0 5.0 111.0 

1961 8.0 0.0 0.0 5.0 15.0 45.0 39.0 16.0 17.0 15.0 3.0 3.0 45.0 

1962 3.0 0.0 0.0 0.0 0.0 25.0 37.0 22.0 15.0 11.0 0.0 9.0 37.0 

1963 2.0 0.0 0.0 17.0 6.0 20.0 15.5 35.0 23.0 20.0 6.0 3.0 35.0 

1964 8.0 5.0 2.0 0.0 40.0 24.0 15.0 25.0 35.0 4.0 8.0 3.0 40.0 

1965 13.0 10.0 0.0 5.0 0.0 32.0 22.0 15.5 16.5 4.0 2.0 6.5 32.0 

1966 0.0 2.0 4.0 7.0 7.0 25.0 55.5 33.0 30.0 20.0 0.0 2.0 55.5 

1967 4.0 1.0 6.0 0.0 3.0 27.0 45.0 25.0 13.0 80.0 0.0 5.0 80.0 

1968 6.0 4.0 20.0 5.0 7.0 18.0 22.0 20.0 32.0 11.0 10.0 18.0 32.0 

1969 8.0 0.0 0.0 0.0 1.5 0.0 45.0 25.5 28.0 1.0 6.0 6.0 45.0 

1970 0.0 24.0 4.0 0.0 3.0 34.0 34.0 10.0 85.0 35.5 0.0 0.0 85.0 

1971 0.0 0.0 0.0 2.0 20.0 25.0 48.0 35.0 22.0 22.0 0.0 5.0 48.0 

1972 3.0 0.0 0.0 0.0 20.0 22.0 16.0 60.0 31.0 17.0 26.0 0.0 60.0 

1973 8.0 7.0 0.0 0.0 7.0 22.5 42.0 50.0 26.0 4.0 0.0 15.0 50.0 

1974 0.0 0.0 4.0 17.0 15.0 0.0 20.0 16.0 27.0 16.0 5.0 8.0 27.0 

1975 0.0 0.0 0.0 0.0 0.0 11.0 70.0 20.0 6.5 30.0 0.0 16.0 70.0 

1976 2.0 0.0 0.0 5.5 2.0 20.0 46.0 15.0 53.0 17.5 0.0 0.0 53.0 

1977 0.0 0.0 0.0 6.0 0.0 26.0 26.5 25.0 33.0 17.0 0.0 0.0 33.0 

1978 0.0 0.0 0.0 0.0 2.0 17.5 28.0 30.0 31.0 6.0 4.0 0.0 31.0 

1979 4.5 8.0 0.0 0.0 0.0 27.0 30.0 35.0 8.0 0.0 8.0 4.0 35.0 

1980 0.0 6.0 0.0 0.0 0.0 8.0 13.0 38.0 22.0 16.0 0.0 0.0 38.0 

1981 36.0 6.0 0.0 15.0 0.0 45.0 25.0 42.0 70.0 22.0 0.0 40.0 70.0 

1982 0.0 0.0 0.0 0.0 0.0 5.5 30.0 8.0 9.5 0.0 34.0 20.0 34.0 

1983 12.0 0.0 0.0 0.0 24.0 15.0 20.0 15.5 56.5 14.0 0.0 56.5 

1984 40.0 0.0 0.0 0.0 6.0 32.0 24.5 6.0 8.0 20.0 0.0 0.0 40.0 

1985 35.0 4.5 0.0 0.0 16.0 35.0 20.0 22.0 50.0 10.5 0.0 14.0 50.0 

1986 0.0 3.0 0.0 10.5 16.0 25.0 13.0 20.0 45.0 8.5 10.5 14.5 45.0 

1987 0.0 8.0 0.0 8.0 13.0 28.0 31.0 60.0 20.0 0.0 0.0 5.0 60.0 

1988 0.0 0.0 0.0 0.0 0.0 20.0 31.0 25.0 11.0 4.0 0.0 15.0 31.0 

1989 0.0 0.0 0.0 0.0 11.0 2.0 1.9 12.0 19.0 8.0 31.0 6.0 31.0 

1990 9.0 0.0 1.0 0.0 2.0 11.0 29.0 29.0 34.0 20.0 0.0 0.0 34.0 

1991 0.0 4.0 0.0 0.0 0.0 7.0 32.0 44.0 22.0 17.0 33.0 14.0 44.0 

1992 21.0 7.0 1.4 14.0 8.0 7.0 29.0 6.0 3.0 1.0 0.0 29.0 

1993 0.1 0.0 0.0 0.0 0.5 7.0 20.0 10.0 30.0 25.0 12.0 0.0 30.0 

1994 0.0 0.0 7.0 1.0 0.0 20.0 15.0 16.0 9.0 32.0 3.0 6.0 32.0 

1995 0.0 0.0 0.0 0.0 0.0 14.0 30.0 40.0 8.0 0.0 2.0 0.0 40.0 

1996 5.0 0.0 0.0 0.0 10.0 24.0 13.0 40.0 35.0 56.0 0.0 6.0 56.0 

1997 9.0 0.0 15.0 15.5 11.0 15.0 13.0 12.0 3.0 0.0 15.5 

1998 0.0 0.0 0.0 0.0 0.0 24.0 34.0 40.0 14.5 15.0 1.5 0.0 40.0 

1999 0.0 0.0 0.0 1.0 0.0 46.5 40.0 10.5 14.5 0.0 0.5 1.0 46.5 

2000 0.0 1.0 0.0 2.0 20.0 50.0 16.5 25.5 47.1 12.0 7.5 0.0 50.0 

2001 0.0 0.0 14.0 7.5 2.0 21.5 22.5 20.0 21.0 3.0 2.0 22.5 

MAX 40.0 24.0 20.0 17.0 40.0 54.0 70.0 111.0 85.0 80.0 34.0 40.0 

13

The village of Atotonilco, is located about 6 km from the Property and has a small supply of unskilled 

labor (± 150 inhabitants). The town of San Juan del Rio is located approximately 15 km from the 

Property and it has a slightly larger supply of unskilled labor (± 2,500 inhabitants) as well as a limited 

supply of housing. Some basic supplies are available in San Juan del Rio while most supplies and some 

contractors for construction and mining are available in Durango. 

Durango is a major regional population center with approximately 500,000 inhabitants. There are daily 

flights to Durango from Mexico City and Mazatlán. Both Mexico City and Mazatlán have daily air 

connections to major cities in North America. 

Plate 1. Photograph of the El Castillo area, showing topography, vegetation and current open-pit bench 

development as of December 2007 (looking south). 

14

3.0 HISTORY 

The El Castillo Project is a grass roots discovery that resulted from a regional exploration program 

initiated by Battle Mountain Gold in 1995 to explore for sub-one gram Au per tonne bulk tonnage targets. 

Battle Mountain was taken over by Newmont in 2000 and Newmont decided that the El Castillo was too 

small to meet their corporate requirements. Newmont completed a modest program of site reclamation 

(replanting drill pads, and recontouring and replanting some of the drill roads) and turned the property 

back to the Government of Mexico. 

Initial regional work by Battle Mountain involved interpretation of satellite imagery, regional geophysical 

data and regional geological mapping. A number of areas were selected on the basis of the regional 

studies, one of which was the El Castillo project area. Subsequent stream sediment geochemical surveys 

outlined a significant gold geochemical anomaly in the El Castillo area which led to a successful program 

of drilling that resulted in delineation of the El Castillo gold resource by Battle Mountain. 

Battle Mountain completed 207 reverse-circulation (“RC”) holes and six diamond drillholes (twins of six 

RC holes) within the El Castillo project area. This drillhole data has provided the basis for Howe’s 

evaluation of the resource and reserve potential of the El Castillo deposit. 

Battle Mountain (Schumacher 1999) completed a resource estimate, scoping study, preliminary mine plan 

and reserve estimate that indicated the potential for a viable mining operation with similarities to Hecla’s 

La Choya deposit in northern Mexico. 

Castle Gold acquired the Property in 2002. Work completed by Castle Gold includes six twin diamond 

drillholes, air-track drilling, rock ship sampling and bulk metallurgical testing. This 2006 work will be 

described in the following sections of the report. 

15

4.0 GEOLOGICAL SETTING 

4.1 REGIONAL GEOLOGY 

The Property lies within the Altiplano Subprovince of the Sierra Madre Occidental (“SMO”) (Consejo de 

Recursos Minerales, 1993). The SMO is a regionally extensive Eocene to Miocene volcanic field, which 

extends southeast from the U.S-Mexico border to Central Mexico. The Altiplano Subprovince is on the 

east flank the SMO and is comprised of Jurassic to Late Tertiary sedimentary and volcanic rocks. 

The oldest rocks in the El Castillo region are Late Cretaceous siltstones, sandstones and limestones of the 

Indidura and Caracol formations (Table 6), which, crop out in the incised stream valleys at El Castillo. 

These sedimentary rocks commonly occur as small windows in the younger volcanics and further east as 

prominent northwest-trending ranges. This sedimentary sequence is unconformably overlain by a thick 

package of Tertiary volcanic rocks, which characterizes the SMO. The package is comprised of an older 

andesite-dominated series and a younger pyroclastic-dominated rhyolite series. The traditional 

nomenclature refers to these as the “Serie Volcanica Inferior” (Lower Volcanic Series), and the “Serie 

Volcanica Superior” (Upper Volcanic Series) respectively. 

The Lower Series in the SMO reaches a thickness of 1,000 m and is dominated by Paleocene and Eocene 

andesitic lava and pyroclastic rocks with interbedded volcaniclastic strata. Extensive outcroppings of this 

andesite unit are located near San Lucas de Ocampo, approximately 20 km southwest of El Castillo. The 

Lower Series is cut by calc-alkaline intrusives that typically occur as dacite-rhyodacite domes, sills and 

dykes. These intrusive units are exposed in the road cuts at El Castillo and in a large dome field near the 

village of San Agustín. The Upper Series unconformably overlies the Lower Series and is up to 1,000 m 

thick. The Upper Series forms a regionally extensive cap throughout the SMO and is dominated by 

Oligocene and Early Miocene dacite-rhyolite pyroclastic strata. Precious metal deposits are abundant in 

the Lower Series, however, the Upper Series is mostly devoid of precious metal mineralization with the 

exception of the Cienaga Mine, operated by Peñoles, in northwestern Durango. 

Table 6. General stratigraphy of the El Castillo area. 

ERA PERIOD EPOCH ROCK TYPE FORMATION 

Alluvium 

RECENT 

QUATERNARY 

Volcanic agglomerate 

PLEISTOCENE Basalt Metates 

PLIOCENE 

Upper Series 

TERTIARY MIOCENE Rhyolite, ignimbrites 

Volcanics 

OLIGOCENE Rhyolite tuff 

Upper Series 

Volcanic 

EOCENE 

Andesite, porphyritic with Lower Series 

hornblende 

Volcanics 

CENOZIOC 

PALEOCENE 

Andesite 

Lower Series 

Volcanic 

MESOZOIC 

CRETACEOUS 

Siltstone, sandstone, 

limestone 

Indidura, Caracol 

The prominent structural trend in the region is northwest and is delineated by northwest-trending basin 

and range (horst and graben) topography with ranges of both sedimentary and volcanic rocks. The ranges 

16

commonly reach elevations of 2,500 m above mean sea level (amsl) and valleys vary from 1,500 m to 

1,800 m amsl. Northwest-trending range front faults, such as the Rodeo Fault, are common and east-west 

trending faults are found locally. The El Castillo Project is regionally associated with the intersection of 

the Rodeo Fault and a secondary east-west trending fault. 

The Sierra Madre Occidental is recognized as a gold-copper metallogenic province with potential for 

porphyry copper-gold mineralization and epithermal gold mineralization related to areas of Tertiary 

volcanic and subvolcanic intrusive activity. 

4.2 PROPERTY GEOLOGY 

The El Castillo property is underlain by massive to porphyritic andesitic rocks of the Tertiary Lower 

Series Volcanics. These rocks have been intruded by dacite porphyry sills and dikes. The Lower Series 

Volcanics are unconformably overlain by felsic ignimbrites of the Upper Series Volcanics and Quaternary 

to recent rhyolite, conglomerate, and alluvium (Figure 3 and Figure 4). 

The rocks of the Lower Volcanic Series strike in a northwesterly direction and dip 40 to 75 degrees to the 

northeast in the immediate vicinity of the El Castillo Project. 

An orthogonal set of faults has been mapped on the Property; a northwest striking set related to the 

regional horst and graben basin and range structures and a northeast striking set. Complex offsetting 

relationships between the two fault sets suggest that they are contemporaneous. 

17

Figure 3. Generalized geologic map of the El Castillo Property. 

18

Figure 4. Cross-section through the El Castillo area. 

19

5.0 DEPOSIT TYPE 

El Castillo is an epithermal gold prospect. Epithermal deposits form in the shallow parts of magmarelated 

hydrothermal systems (Figure 5). They are generally associated with volcanism and intrusions of 

calc-alkaline magmas, commonly in sub-aerial volcanic arcs. There are two end-member styles of 

epithermal mineral deposits: low-sulphidation and high-sulphidation (Figure 5-1). Mineralization at El 

Castillo is somewhat enigmatic, partly due to the lack of detailed geologic study, but in general shares 

more characteristics with low-sulphidation type of epithermal mineralization than high-sulphidation 

mineralization (Cook and Simmons, 2000; White and Hedenquist, 1995). 

Figure 5. Diagram of the geologic environment for epithermal deposits. 

Sulphide mineralization is generally introduced along faults and fractures although mineralization can also 

be disseminated in permeable rock strata. Sulphide assemblages include electrum, native gold, native 

silver, argentite, pyrargyrite, proustite, chalcopyrite, sphalerite, galena, tetrahedrite and occasional 

telluride minerals. Common gangue minerals include quartz, chalcedony, adularia, calcite and amethyst. 

Vertical metal zonation is manifested with higher amounts of gold, silver, or gold and silver along with 

mercury, tellurium and antimony in the upper portions of the system, and higher lead, zinc and copper 

contents at deeper levels. 

Gold and silver grades in low-sulphidation epithermal systems can be very high, occasionally reaching 

gold grades on the order of tens-of-grams of gold per tonne and kilograms of silver per tonne. Lowsulphidation 

epithermal deposits typically average around 770,000 tonnes and average 7.5 grams per tonne 

(“g/t”) Au, 110 g/t Ag with minor Cu, Zn and Pb (Panteleyev, 1996). It should be noted that these grades 

and tonnages are representative of vein-type low-sulphidation deposits. 

20

At El Castillo, the presence of chalcedonic silica combined with the absence of mineral species 

characteristic of high-sulphidation mineralization such as enargite and alunite as well as characteristic 

alteration such as vuggy silica, support the low-sulphidation nature of the mineralization. Examples 

include Kinross’s Round Mountain deposit in the United States and Minefinders’ Dolores and Exmin 

Resources’ La Guitarra deposits in Mexico. It should be noted that mineralization on these or any 

other properties in this class of deposit are not necessarily indicative of the mineralization on the 

Property. 

21

6.0 MINERALIZATION 

Gold mineralization on the Property is hosted by thinly-bedded volcaniclastic rocks of the Lower Volcanic 

Series and adjacent dacitic sills or dikes. The mineralized zones have locally been oxidized to depths 

greater than 200 m below surface but an average depth is more in the order of 150 m. 

Mineralization occurs in a series of northwest-trending lenses up to 150 m in length and 40 m in width. 

This northwest trend probably reflects individual mineralized volcaniclastic units. While the trend of the 

individual mineralized bodies is to the northwest, the overall trend of ALL the mineralized bodies is to the 

northeast, suggesting a possible northeast-trending structural control such as a structure through which the 

mineralizing fluids gained access to the permissive host rocks. 

Mineralization in thinly-bedded volcaniclastic rocks is disseminated and occurs with earthy red hematite 

(Plate 2) or in narrow fractures with earthy red hematite (Plate 2). Quartz is rare although quartz veinlets 

are present locally. 

Plate 2. Mineralized thinly-bedded volcaniclastic rocks. 

Due to extensive oxidation, primary hydrothermal alteration is difficult to characterize. Silicification is 

rare, although some of the chalcedonic silica may have formed by replacement of volcaniclastic units. 

Argillic alteration is widespread but may be related to supergene processes. Strong potassic alteration in 

the form of biotite and potassium feldspar in fractures with some secondary copper minerals within 

intermediate intrusive rocks may suggest a porphyry copper environment at depth (Arturo Guerrerro, 

personal communication). 

22

Toward the center of the mineralized area, just below the alluvial cover, is an area with abundant 

chalcedonic silica. This silica occurs as veins and irregular masses and is occasionally mineralized, 

although it is more likely that mineralization will occur in the immediate, argillized wallrocks (Plate 4). 

Chalcedonic silica ranges in color from white through ochre and red to black and occasionally is cut by 

narrow brecciated intervals ranging in width from a few millimeters to a few centimetres. In at least one 

location, dark gray to black chalcedonic silica is intimately associated with chrysocolla. 

Plate 3. Mineralized fractures in dacite porphyry. 

23

Plate 4. Chalcedonic silica cutting altered volcaniclastic rocks. 

24

7.0 EXPLORATION 

In 2006, Castle Gold collected 413 rock chip samples on the Property. Castle Gold uses these rock chip 

samples to identify additional targets outside the main area as well as to understand controls on 

mineralization within the known area of mineralization. 

Castle Gold established an on-site sample preparation and laboratory facility in 2006 whereby all of the 

rock chip samples were analyzed for gold at this facility. During a previous site visit carried out by Howe 

in 2006 (Priesmeyer et al, 2006), Castle Gold had indicated that as of the date of Howe report 896, results 

obtained from this laboratory were intended for internal use only as a tool for short term mine planning 

purposes. As a result of this, and the fact that this facility was uncertified, none of the results from Castle 

Gold’s 2006 exploration work were presented in Howe’s report #896. As of the date of this new report, 

the majority of the resource which was drilled as part of the 2006 program has now been mined and 

therefore this data has also not been incorporated into the present resource estimations. 

Since 2006, there has been no systematic exploration work carried out by Castle Gold within the El 

Castillo permit area (i.e. trenching, pitting, drilling). However, as a result of increasing gold prices (which 

permit a reduction in cut-off grade for determining mineral resources), there are now a number of areas 

inside the in-pit minable reserves that have been considered as waste in the model due to the absence of 

sufficient drill data. Castle Gold should complete infill RC and/or core drilling in these areas in order to 

convert these areas into Measured-Indicated resources prior to completing revised reserve estimates. 

Furthermore, according to the existing resource database, the El Castillo deposit appears to have the 

potential to remain open to the west and south. It is recommended for Castle Gold to plan additional 

drilling in these areas with the intention of expanding the known resource. 

25

8.0 DRILLING 

No drilling has been carried out on the property since 2006. All previous drilling work and results have 

been previously disclosed in the following NI 43-101 technical reports: 

A. C. A. Howe International Limited (2002), Prefeasibility Report, El Cairo Gold Project, State of 

Durango, Mexico, for Castle Gold Minerals Limited, Toronto, Canada; Howe Report 845, 

available for public viewing on the TSX Sedar Filing website at http://www.sedar.com/. 

A. C. A. Howe International Limited (2003), Revised Prefeasibility Report, El Cairo Gold Project, State 

of Durango, Mexico, for Castle Gold Minerals Limited, Toronto, Canada; Howe Report 850, 


A. C. A. Howe International Limited (2004), Technical Report on the 2003 Diamond Drill Program, El 

Cairo Gold Project, State of Durango, Mexico, for Castle Gold Minerals Limited, Toronto, 

Canada; Howe Report 861, 59 p. 

A. C. A. Howe International Limited (2006), Pre-Feasibility Report El Castillo Project, Durango, 

Mexico, for Castle Gold Minerals Limited, Toronto, Canada; Howe Report 897, 143 p. 

26

9.0 SAMPLING METHOD AND APPROACH 

The sampling methods and approaches used by Castle Gold have been previously disclosed in the 

following NI 43-101 technical reports: 












27

10.0 SAMPLE PREPARATION, ANALYSIS AND SECURITY 

10.1 SAMPLE PREPARATION AND ANALYTICAL PROCEDURES ON CORE SAMPLES 

Since the completion of the last NI 43-101 compliant technical report by Howe on the El Castillo Gold 

Project, there has been no material changes to the sample preparation, analysis and security procedures. 

The sample preparation, analysis and security procedures have been previously disclosed in the following 

NI 43-101 technical reports: 












28

11.0 DATA VERIFICATION 


A quality assurance and quality control program (“QA/QC”) covering the database management and 

sampling programs of Castle Gold’s hole twinning diamond drill program was administered and 

monitored on a number of levels throughout the program. 

A strict adherence to the data management procedures and geological administrative framework facilitated 

Castle Gold and Howe’s internal due diligence program. The aims of the review procedures of data 

collection, input, and ultimately data validation, seek to illustrate the quality of data handling achieved on 

the project. Where errors were identified in the database, Howe staff reviewed the erroneous data, verified 

the hardcopy records (i.e.; sample tag booklets, digital data files, etc.) and made the amendments if the 

data was incorrect. 

An analytical QA/QC program was not implemented by Castle Gold during this program since no local or 

commercial standard reference materials were available. However, Howe used blank material and 

initiated a particle size analysis study for monitoring ALS-Chemex’s sample preparation protocols. 

11.2 ANALYTICAL DATA CORROBORATION AND QUALITY ASSURANCE AND 

QUALITY CONTROL PROGRAM 

11.2.1 Laboratories Used By Castle Gold for the Twin Drilling Program 

Samples collected during Castle Gold’s twin diamond drill program were submitted to the following 

laboratory: 

• ALS-Chemex Laboratories (“ALS”), Hermosillo, Mexico (sample preparation); 

• ALS-Chemex Laboratories (“ALS”), Vancouver, British Columbia (sample analysis). 

ALS-Chemex employs a procedure of internal submission of standards and blanks as well as carrying out 

repeat assays on approximately 10% of the client submitted samples. ALS provides an electronic QA/QC 

file with the results of their internal blanks and standards analyses. ALS-Chemex’s internal QA/QC was 

reviewed by Castle Gold and Howe staff upon reception in order to compare ALS-Chemex’s results to 

Castle Gold’s QA/QC blanks. 

Howe has not carried out an audit of the ALS-Chemex sample preparation laboratory in Hermosillo. 

11.2.2 PQ Hole Twinning Quality Assurance and Quality Control Program 

Castle Gold’s hole twinning diamond drill QA/QC program consisted of the following stages/steps: 

• Data acquisition and validation; and, 

• Sampling Quality Assurance and Quality Control. 

11.2.2.1 Data Acquisition and Validation 

The following steps were carried out during the data acquisition and validation of the lithological and 

collar and assay data: 

• For the core logs, all data was recorded on hardcopy core log sheets; 

• The hardcopy of the core logs was reviewed by Howe’s geologist in order to verify that the 

number and insertion sequence of blanks was correct, and; 

• The geological information for each core log was then drafted onto cross-sectional maps. The 

lithology from the completed drillhole was then cross-referenced with the lithologies of the 

29

previous Battle Mountain drilled holes for correlation purposes. Where lithological discrepancies 

occur between the Castle Gold DDH and the Battle Mountain RC and/or core hole information, 

both the Battle Mountain hardcopy logs and Castle Gold’s core were reviewed and re-logged if 

necessary. 

The verified data from the core logs was then inputted manually or digitally into Microsoft® Excel files. 

11.2.2.2 Sampling Quality Assurance and Quality Control 

11.2.2.2.1Sampling Quality Assurance by ALS-Chemex - Diamond Drillhole Sample Repeat Assay 

As previously mentioned, ALS-Chemex provides gold fire assays with either Atomic Absorption 

Spectroscopy (“AAS”) or gravimetric finish. Routine gold assays are by 30 g fire assays and the repeat 

analyses have been carried out on pulps stored from the initial analyses. Two repeat assays were carried 

out by ALS-Chemex from Castle Gold’s twin diamond drill program (Table 7). 

Although only two repeat assay pairs were generated by ALS-Chemex, the original and subsequent gold 

assays show acceptable repeatability for gold data (Table 7 and 8). 

Table 7. Repeat assays performed internally by ALS-Chemex. 

SAMPLE NUMBER 

ORIGINAL FIRE ASSAY Au2 ASSAY Au3 ASSAY 

(g/t Au) 

(g/t Au) (g/t Au) 

50303 0.428 0.727 0.571 

50305 3.78 3.33 3.08 

Arithmetic Average 2.104 2.029 1.826 

11.2.2.2.2 Results for Assay Blanks 

A total of 27 blank samples consisting of a buff colored brick material were inserted into the twin drill h 

ole sample stream during sample collection. The blank sample material served as a measure for Castle 

Gold and Howe to monitor for possible sample contamination at ALS-Chemex’s sample preparation 

facility. Two coarse-grained clay-rich brick samples were submitted to ALS-Chemex for assay in order to 

determine if the material was suitable as blank material. Gold values for both samples were below the 

detection limit for gold (

Morgain Minerals Inc. El Cairo Gold Project 

Coarse Blank Standard Control Chart (lower detection limit is 0.005 g/t Au) 

0.02 

0.015 

+/- 3 S.D. 

Assay (g/t A 

0.01 

Blanks 

0.005 

0 

50023 

50060 

50100 

50130 

50160 

50200 

50230 

50250 

50270 

50300 

50340 

50380 

50410 

50430 

Sample Sequence 

Figure 6. Coarse blank standard control chart. 

Table 8. Data verification sample results from Howe’s 2002 site visit. 

SAMPLE 

NUMBER 

HOWE SAMPLE 

Au (g/t) 

BATTLE MOUNTAIN SAMPLE 

Au (g/t) 

1 1.710 1.823 

2 3.700 2.869 

3 5.790 7.594 

4 0.820 0.701 

5 0.199 0.286 

31

12.0 ADJACENT PROPERTIES 

There are no adjacent properties of interest. 

32

13.0 MINERAL PROCESSING AND METALLURGICAL TESTING 


Several metallurgical tests on mineralized oxidized material from the Property have been completed, both 

by Castle Gold and by independent groups between 2004 and 2006. The tests were designed to determine 

the leaching characteristics of the oxidized material and consisted of: 

• Bottle roll leach tests in 2004 and later column leach tests in 2006 by Kappes, Cassiday and 

Associates (“KCA”); 

• Two onsite bulk heap leach tests conducted by Castle Gold in 2005, followed by a residual 

analysis of the heaps conducted by Metcon Research (“Metcon”) in 2006. 

The data from the various tests have been reviewed and vetted by, D. Koningen, P.Eng, acting in the 

capacity of Castle Gold’s internal Qualified Person (“QP”) in matters of process engineering and 

metallurgy. Mr. Koningen is also a Director of Castle Gold. Much of the information presented in this 

section is taken from Mr. Koningen’s 2006 summary review of the metallurgical test work completed to 

date on the Property (Koningen, 2006; in Appendix A). 

13.2 2004 KCA BOTTLE ROLL TESTS 

In early December 2003, 15 boxes of core samples from the El Castillo Project were shipped to KCA for 

cyanide bottle roll tests. All samples were split and pulverized to

13.3 2005 CASTLE GOLD TEST HEAPS 

In 2005 Castle Gold initiated the construction and leaching of two test heaps on the Property using 

material mechanically excavated from two pits. The oxidized and weathered material from the two pits 

were found to be fragmented to a size possibly amenable to direct leaching; with the majority of fragments 

being less than 2 inches in size. Pit 1 (Plate 5) is located near the east side of the mineralized area and Pit 

2 is located near the west side of the mineralized area. All ore used for the test heaps was supplied as runof-mine 

(“ROM”) material with no crushing in order to determine the feasibility of directly leaching 

material upon excavation. 

Heap 1 was constructed as a single 3 m lift containing 18,205 tonnes of low-grade material (averaging 

0.25 g/t Au) from Pit 1. Leaching commenced at the end of August 2005 and was completed in October 

2005. Heap 2 was constructed as a single 3 m lift containing 8,372 tonnes of high-grade material 

(averaging 1.78 g/t Au) from Pit 2. Leaching commenced in November 2005 and was completed in 

December 2005. The two leach pads and leached residue were observed and inspected during the 2006 

Howe site visit. 

Plate 5. Test pit #1. 

Gold recovery from the resulting gold-cyanide solutions collected from the two heaps was performed offsite 

by Metals Research Corporation. Following the completion of the leach cycles, extensive sampling of 

the heap residues was completed by Castle Gold under the direction and supervision of Tucson, Arizonabased 

Metcon. The results of Metcon’s analysis of the samples are presented in Section 13.3.1. The leach 

results and observations for the two heaps from Koningen (2006) are summarized in Table 9. 

34

Table 9. Castle Gold test heap leach results and observations. 

Heap 1 - Low Grade Ore 

The cyanide solution application rate was consistent 

at ~0.002 gpm/ft 2 . 

Leaching was performed for a period of 45 days. 

The decision to discontinue leaching was made 

based on the fact that the difference between the 

gold content in the barren and pregnant leach 

solutions at this time was extremely low (~0.03 

ppm). The data indicates that the vast majority of 

leaching was completed in the first 25 days. 

Dissolved copper levels in the leach solutions were 

extremely low (

The amount of gold reported recovered from heaps 1 and 2 were 325.50 ounces and 320.62 ounces of gold 

respectively. This gold was sold on the market in 2006 (Babcock, 2006, Northern Front, 2006). 

13.3.1 2006 Metcon Residual Analysis of the Heaps 

Following completion of the two test heaps Metcon was contracted by Castle Gold to carry out an analysis 

and reporting of gold distribution by size fraction; comparing head ore samples with leached ore residues 

for both heaps (no head sample was collected for Heap 1). Metcon’s summary report for this work 

(Iasillo, 2006) can be found in Appendix A as part of the Koningen (2006) report. The results of the 

analysis are summarized in Tables 10 and 11. 

Table 10. Metcon gold-size fraction distribution of Heap 1 leached ore residue. 

Nominal Opening 

(inches) 

Weight Distribution 

(%) 

Heap 1 (Low Grade Ore) Leached Ore Residue 

Assay 

(g/t) 

Gold 

Distribution 

(%) 

5.0 4.5 0.39 15.0 

-5 +1¾ 7.0 0.28 16.8 

+1¾ +¾ 11.2 0.17 16.6 

-¾ 77.3 0.08 51.6 

Totals 100 100 

Average Grade 0.12 

Table 11. Metcon gold-size fraction distribution of Heap 2 head ore and leached ore residue. 

Nominal Opening 

(inches) 

Weight Distribution 

(%) 

Heap 2 (High Grade Ore) Head Ore Sample 

Assay 

(g/t) 

Gold 

Distribution 

(%) 

5.0 10.0 1.43 8.0 

-5 +1¾ 19.6 1.39 15.3 

+1¾ +¾ 10.2 1.73 9.9 

-¾ 60.2 1.98 66.8 



Heap 2 (High Grade Ore) Leached Ore Residue 

5.0 6.8 1.99 16.0 

-5 +1¾ 19.0 1.34 30.3 

+1¾ +¾ 15.4 0.91 18.7 

-¾ 58.8 0.53 31.0 



13.3.1.1 Heap 1 Analysis 

For Heap 1, the calculated average gold grade is 0.12 g/t Au. Combining this with the carbon stripping 

records yielded a calculated head grade for Heap 1 of 0.25 g/t Au and an ultimate gold recovery of 51.7%. 

From Heap 1’s distribution of gold by size fraction, Koningen (2006) concluded that it is reasonable to 

expect that if all of the +¾” material were crushed to

material is relatively consistent across the particle size ranges). This would serve to increase the expected 

gold recovery for the low grade material to 68% (0.17 g/t Au recovered from a head grade of 0.25 g/t Au). 

In total, approximately 23% of the low grade material is +¾” and would need to be crushed under this 

scenario. 

13.3.1.2 Heap 2 Analysis 

For Heap 2, the average head grade is 1.78 g/t Au, and 0.84 g/t Au for the leached ore residue. This yields 

an ultimate gold recovery of 52.5%. It should be noted that the leached residue data, when combined with 

the carbon stripping records, yielded a calculated head grade of 1.77 g/t Au. This is in good agreement 

with the assayed head grade of 1.78 g/t Au. 

From Heap 2’s distribution of gold by size fraction, Koningen (2006) concluded that it is reasonable to 

expect that if all of the +¾” material were crushed to

value is also consistent with the discussion in Sections 13.3.1.1 and 13.3.1.2 and the estimated 

gold heap recoveries associated with crushing of the ore to

Plate 6. View of the El Castillo site facilities. 

13.5 CONCLUSIONS 

Based on the metallurgical testing completed in 2006, the following conclusions are made: 

1. Ultimate gold recoveries from ROM ore material placed directly on the leach pad (no crushing) 

are in the 50-55% range; 

2. Crushing of material to

14.0 MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES 

14.1 HISTORICAL MINERAL RESOURCE RESERVE ESTIMATES 

Several mineral resource and reserve estimates have been produced for the Property. 

• The first estimate was completed by Battle Mountain in 1999 (Schumacher, 1999); 

• A second resource estimate was prepared by Howe in 2002 (Howe 2002) followed by two reserve 

statements (Howe, 2002 and 2003); 

• Two subsequent resource estimates were prepared by Arizona-based Resource Modeling 

Incorporated (RMI, 2004b and 2004c). 

The above mentioned historical mineral resource-reserve estimates have been previously disclosed in the 

following NI 43-101 technical reports: 




A. C. A. Howe International Limited (2003), Revised Prefeasibility Report, El Cairo Gold Project, 

State of Durango, Mexico, for Castle Gold Minerals Limited, Toronto, Canada; Howe Report 

850, available for public viewing on the TSX Sedar Filing website at http://www.sedar.com/. 






The Battle Mountain and Resource Modeling Incorporated (“RMI”) estimates are not NI 43-101- 

compliant and are therefore treated herein by Howe as “historic estimates”. Prior to the completion of 

this report, the 2002 Howe resource estimate was considered the current estimate for the Property since 

the estimate is CIM-based and NI 43-101-compliant and has not been superseded by a more recent NI 43- 

101-compliant estimate. It should be noted that the authors of this report were not involved in the 

preparation of the 2002 Howe estimate. 

14.2 2008 HOWE RESOURCE AND RESERVE ESTIMATE 

In 2008, at the request of Castle Gold, Howe has revised the 2002 pre-feasibility study for an operational 

scenario which reviewed an increase annual production to 4,000,000 tpy at a higher average gold price 

compared to the 4,000,000 tpy scenario that was the operational criteria in the 2002 report. 

Howe’s methodology for the revised resource estimate remains the same (refer to Howe report No. 845, 

896) except for some adjustments made to the topographic data as well as account for material mined to 

date by Castle Gold during their pre-production stage of development work at El Castillo. 

40

14.2.1 Methods 

A shift of –500,000 metres east and –2,700,000 metres south was applied for ease in modeling. This had 

the same effect as trimming the left digit from the easting (ie: the “5”) and the left two digits from the 

northing. 

Up-to-date topographic contours were supplied in digital format (Autocad) in the file “Bancos Actuales - 

29102007-.dwg” (1 metre contour interval). Because those contours did not cover the entire block model, 

the surrounding contours (6 metre contour interval) were taken from the digital file “topo.dwg”. Collar 

coordinates were used to supplement the surrounding contours. 

A “top of oxide” surface was created from the uppermost oxide contact point in each drill hole. Similarly, 

a “bottom of oxide” surface was created at the bottom most oxide contact point. 

A block model was created with similar dimensions as the 2002 resource model (ACA Howe, 2006). No 

sub-blocking was used. 

Dimension Block Size (m) Number of Blocks Extents (m) 

East 10 1200 46,925-48,125 

North 10 1200 50,355-51,555 

Elevation 6 330 1,500-1,830 

Oxide and overburden geology was applied to the block model using the topographic, oxide upper contact 

and oxide lower contact surfaces. 

Gold grades were estimated for oxide blocks using ordinary kriging along with the parameters that were 

used for the 2002 resource estimate (ACA Howe, 2006). 

Category 

Measured 

(Category 1) 

Indicated 

(Category 2) 

Inferred 

(Category 3) 

Dip 

Dir. Strike Dip 

Dip 

Range 

Strike 

Range 

Across 

Dip 

Range 

Max # 

Per 

Hole 

Min 

Number 

of 

Samples 

Max 

Number 

of 

Samples Sill Nugget 

45 315 -45 120 65 6 2 4 8 1.73 0.10 

45 315 -45 250 135 6 2 2 3 1.73 0.10 

45 315 -45 250 135 12 1 1 1 1.73 0.10 

14.2.2 Cut-off Grade 

A cut-off grade of 0.15g/tonne Au was used to determine which blocks were to be included in the mineral 

resource. Meaning, blocks with a grade less than 0.15g/tonne Au were not included in the mineral 

resource. 

14.2.3 Results 

Mineral resources in the Measured + Indicated categories amounted to 94million tonnes with an average 

gold grade of 0.39g/tonne (Table 14-16). Inferred Resources totaled 4.5 million tonnes with an average 

gold grade of 0.38g/tonne. Mineral Resources at various cut-off grades are also shown in Table 12 below. 

41

Table 12. Remaining Mineral Resources as of October 2007 

Measured Indicated Meas + Ind Inferred 

Cut-off Tonnes Avg Tonnes Avg Tonnes Avg Tonnes Avg 

Grade Above Grade Above Grade Above Grade Above Grade 

(g/t) Cut-off (g/t) Ounces Cut-off (g/t) Ounces Cut-off (g/t) Ounces Cut-off (g/t) Ounces 

0.00 102,000,000 0.31 1,011,840 97,000,000 0.13 403,520 199,000,000 0.22 1,415,360 18,000,000 0.13 74,880 

0.05 93,000,000 0.33 982,080 67,000,000 0.18 385,920 160,000,000 0.27 1,368,000 10,000,000 0.23 73,600 

0.10 80,000,000 0.37 947,200 45,000,000 0.23 331,200 125,000,000 0.32 1,278,400 6,200,000 0.31 61,504 

0.15 65,400,000 0.43 899,904 28,900,000 0.30 277,440 94,300,000 0.39 1,177,344 4,500,000 0.38 54,720 

0.20 52,300,000 0.50 836,800 18,300,000 0.37 216,672 70,600,000 0.46 1,053,472 3,100,000 0.48 47,616 

0.25 41,900,000 0.57 764,256 11,800,000 0.45 169,920 53,700,000 0.54 934,176 2,300,000 0.58 42,688 

0.30 33,600,000 0.64 688,128 8,400,000 0.53 142,464 42,000,000 0.62 830,592 1,900,000 0.63 38,304 

0.35 27,100,000 0.71 615,712 6,100,000 0.61 119,072 33,200,000 0.69 734,784 1,800,000 0.65 37,440 

0.40 22,200,000 0.79 561,216 4,700,000 0.68 102,272 26,900,000 0.77 663,488 1,500,000 0.71 34,080 

0.45 18,300,000 0.87 509,472 3,900,000 0.74 92,352 22,200,000 0.85 601,824 1,300,000 0.74 30,784 

0.50 15,200,000 0.95 462,080 3,200,000 0.79 80,896 18,400,000 0.92 542,976 1,000,000 0.83 26,560 

0.60 11,000,000 1.11 390,720 2,300,000 0.89 65,504 13,300,000 1.07 456,224 840,000 0.88 23,654 

0.70 8,180,000 1.26 329,818 1,650,000 0.98 51,744 9,830,000 1.21 381,562 640,000 0.95 19,456 

0.80 6,270,000 1.42 284,909 1,150,000 1.09 40,112 7,420,000 1.37 325,021 580,000 0.97 18,003 

0.90 4,980,000 1.56 248,602 630,000 1.29 26,006 5,610,000 1.53 274,608 560,000 0.98 17,562 

1.00 4,040,000 1.71 221,069 490,000 1.39 21,795 4,530,000 1.67 242,864 220,000 1.07 7,533 

* Blocks under 0.15 g/tonne are not considered to be "Resources" and are included for information purposes only. 

Notes: 

• Base case is 0.15g/tonne Au; 

• Metal price used US$625/oz Au; 

• Assumed metal recovery based on previous metallurgical studies is 68% 

• Not all tonnage will be recovered in mining, nor will all metal be recovered in milling and processing 

42

14.2.4 Pit Optimization Parameters 

Optimum pit shells were calculated to estimate the property’s mineral reserves. The Lerchs-Grossman 

optimization function within Microlynx mine planning software was used to determine the optimum pit 

shells for the following cost, revenue and mining parameters. 

Only Measured and Indicated resource blocks were used to determine the optimum pit. In other words, 

the Inferred Mineral Resource blocks were considered to be “waste” for the purpose of pit optimization. 

Practical pit design work was not carried out. In other words, haul roads and other practical 

considerations were not added to the various pit optimization runs. 

14.2.4.1 Revenue Considerations 

Gold Price ($US per troy ounce) 

$550-700 in $25 Steps 

Dilution 5 % 

Mining Recovery 100 % 

Processing Recovery 68% 

Smelter Return 99 % 

14.2.4.2 Operating Costs (Direct) 

Mining cost of $0.98 per tonne of ore or waste was used. Processing, Labour, Geology & Engineering, 

Site Construction and Miscellaneous costs were applied only to ore blocks. These costs are based on 

Castle Gold’s actual operating costs and were subsequently modified in the financial analysis, but the 

differences were insignificant. 

(per tonne of ore) 

Mining (Ore or Waste Rock) $0.98 

Processing (Ore) $1.23 

Labour (Ore) $0.21 

Geology & Engineering $0.05 

Site Construction (Plant & Leach Pads) $0.31 

Miscellaneous $0.15 

14.2.4.3 Maximum Slopes 

Overall Pit Slope Angle 45 ° 

14.2.5 Results 

Proven and Probable Mineral Reserves at the base case of $625 ($US per troy ounce) gold price totaled 

46.9 million tonnes with an average gold grade of 0.50g/tone Au (before dilution). Level sections through 

the resource model and the optimum pit outline are included in Appendix A (shown as the blue “ultimate” 

pit outline). 

Inferred mineral resources occurring within the optimum pit outline totaled 100,000 tonnes with an 

average gold grade of 0.32g/tone Au. This material would have to be mined and would be processed if the 

block grade was above the operating cut-off grade. However, this material is not considered to be a 

mineral reserve. 

43

Mineral reserves for this study were reported using a 0.15g/tonne Au operating cut-off grade. Blocks 

within the optimum pit with grades less than 0.15g/tonne Au would have to be mined, but would be 

considered as waste. 

14.2.5.1 Reserve Cut-off Grades 

There are several different types of cut-off grades. During the pit design process when one is determining 

whether a block will be mined and processed, an operational cut-off grade is used. This is the grade at 

which revenue exceeds mining and processing costs. For the base case, $625 gold price scenario, the 

operational cut-off grade was 0.22 grams Au per tonne. 

Once the pit limit has been decided, it follows that everything within the pit must be mined. In other 

words, mining costs are sunk and the decision shifts to whether a mined block will be sent to the mill or to 

the waste pile. The processing cut-off grade is the grade at which revenue exceeds only the processing 

costs. For the base case, $625 gold price scenario, the processing cut-off grade was 0.15 grams per tonne. 

The following tables are the undiluted reserves results of the pit optimization based on various gold prices: 










0.15 40,000,000 0.53 680,000 0.15 35,000 0.32 400 










0.15 42,400,000 0.52 707,000 0.15 41,000 0.32 400 

44










0.15 44,300,000 0.51 725,000 0.15 63,000 0.33 700 










0.15 46,800,000 0.50 752,000 0.15 101,000 0.32 1,000 










0.15 49,500,000 0.49 774,000 0.15 108,000 0.31 1,100 










0.15 56,600,000 0.47 852,000 0.15 122,000 0.30 1,200 

45




Subtotal, Waste Rock 43,300,000 






0.15 58,400,000 0.46 870,000 0.15 131,000 0.30 1,300 

* This material must be mined but does not meet the processing cut-off. 

14.2.6 Mine Plan and Schedule 

Mine plans and a mining schedule were developed for the $625 per ounce scenario (see Appendix A). A 

bias was introduced into the optimization process that outlined incremental pits within the $625 pit that 

could be mined at higher average grades. This resulted in higher grades being mined during the early 

years to repay capital costs, with progressively lower grades being mined in later years. While Howe has 

developed an optimized production schedule to show the potential of long term mine planning, Howe has 

used the average grade in developing the Castle Gold mine cash flow forecasts. 

The overall mine life based at a US$625/oz Au price is eleven years. Ore production ramps up to 

5,000,000 tonnes per year (diluted) by Year 3. Also in Year 3, recovered gold production is at its peak at 

52,000 ounces) and overburden (waste rock and below-cut-off-oxide) stripping reaches 3,100,000 tonnes 

per year. 

Level sections showing the resource model and the optimum pit outlines at Year 4, Year 7, Year 9 and 

Year 11 (end of mine life) are included in Appendix A 

14.2.7 Comparison between Howe 2003 and Howe 2008 Reserve Estimates 

Table 13 is a summary table comparing the results between the proven and probable reserve estimates 

obtained from the Howe 2003 and Howe 2008 reserve estimates based on various gold prices. 

46

Table 13. Comparison of Howe 2003 and Howe 2008 Reserve Estimates 

RESERVE 

ESTIMATE 

2003 

GOLD 

PRICE 

CUT-OFF PROVEN & PROBABLE RESERVES 

GRADE 

(g/t) TONNES (‘000) GRADE (g/t) 

MINEABLE OUNCES 

(‘000) 

Howe 2003 $325 0.27 17,656 0.88 497 

Howe 2003 $350 0.26 20,878 0.82 548 

Howe 2003 $375 0.25 24,238 0.77 597 

RESERVE 

ESTIMATE 

2008 

GOLD 

PRICE 

CUT-OFF PROVEN & PROBABLE RESERVES 

GRADE 

(g/t) TONNES (‘000) GRADE (g/t) 

MINEABLE OUNCES 

(‘000) 

Howe 2008 $625 0.15 46,800 0.50 752 

2003 gold 

price 

Change in-pit tonnes from 

Howe 2003 to Howe 2008 

reserve estimate 

Change in average gold 

grade from Howe 2003 to 

Howe 2008 reserve estimate 

Change in mineable ounces 

from Howe 2003 to Howe 

2008 reserve estimate 

$325 165% -43% 51% 

$350 124% -39% 37% 

$375 90% -35% 26% 

It is clear that the increase in gold price itself significantly increases the estimated mineable gold ounces 

and the amount of in-pit tonnes. 

47

15.0 OTHER RELEVANT DATA AND INFORMATION 

15.1 ENVIRONMENTAL CONSIDERATIONS 

Howe is not aware of any historic environmental permitting for the project area other that that required for 

Battle Mountain to receive permits for their drilling program. This environmental permit required Battle 

Mountain to submit for approval a reclamation plan relating to rehabilitation of drill pads and temporary 

drill roads. 

The environmental permitting process for a mining project follows a similar format in that the mining 

company must submit for approval to the appropriate government agencies an environmental impact 

statement and a detailed plan for environmental monitoring and protection of the environment during 

operations plus a plan for closure and reclamation of the proposed project site. The government agencies 

respond to the company with comments and amendments, which the company must then incorporate into 

their environmental statement. 

The final approved document, including the approved closure and rehabilitation plan, when signed off by 

the government agencies becomes the binding legal document relating to the project. 

15.2 ENVIRONMENTAL PERMITTING 

Castle Gold currently holds two permits: 

• a “Resolution on Environmental Impact” (or “Manifest on Environmental Impact”), and; 

• a “Change of Land Use” 

15.2.1 Resolution on Environmental Impact 

• Under the Company’s current Resolution on Environmental Impact, Castle Gold has the right to 

carry out all work and activities related to the development, operation, maintenance and 

reclamation of the El Castillo Project over a total area of 108 Ha. 

• The Resolution allows for a 24 month period to complete any necessary preparatory and 

construction work, and 10 years for operations and maintenance. The permit can be renewed as 

long as the company fulfills all the necessary requirements under Mexican law. 

• Under the current Resolution, Castle Gold is permitted to construct an open pit to a depth of 

maximum depth of 70 m (or ten 6 m benches) and an initial area of 25 Ha and a 8,000 ton per 

month production rate. The area may be increased by 5 Ha per year to a maximum of 54.5 Ha. 

• Under the Resolution, the leach pad may have a capacity of 10 million tons across an area of 33 

Ha. This area may be increased by 8 Ha per year. 

• The two planned waste dump areas will be approximately 14 Ha (6.6 million tons) and 2.74 Ha 

(1.23 million tons) in area. 

Any changes to the operations approved under the current Resolution will require further approval of the 

Sectretaría de Ambiente y Recursos Naturales (SEMARNAT), the Secretary of the Environment and 

Natural Resources. An environmental impact assessment for any proposed changes must be submitted to 

SEMARNAT for evaluation and approval before an amended Resolution on Environmental Impact is 

issued and the proposed changes allowed to proceed. 

48

15.2.2 Change of Land Use 

The Company’s Change of Land Use permit has a term of 15 years. Application for the permit required a 

payment to provide “environmental compensation for the change of land use”. The criteria used for 

determining such payment for affected forestry lands are based on information contained in the Official 

Federation Diary, dated September 28, 2005. 

• The Company’s permit covers an area of 108 Ha that is classified as semi-arid land. According to 

the Official Federation Diary, semi-arid lands are compensated at an approximate ratio of 3:1. 

Castle Gold was required to pay compensation for an area equivalent to 356 Ha. 

• Cost calculations are based on a cost of approximately P$0.57 per Ha (according with costs 

published by the government in April, 2006). Castle Gold was therefore required to pay a 

compensation of P$2,031,664.90. This payment was made in 2007. 

15.3 CLOSURE AND REHABILITATION PLANS 

As per the requirement of the Change of Land Use permit, Castle Gold has submitted a reclamation plan 

to SEMARNAT under which Castle Gold will reclaim or rehabilitate the following: 

• Solution pads: fresh water will be added to the circuit for several days until cyanide 

concentrations are 10 ppm, then hydrogen peroxide is added until all cyanide has been destroyed. 

• Solution ponds: after evaporation of existing barren solution, they will be filled with neutralized 

material from the pad and covered with fertile soil. 

• Plant and Workshops: all installations will be removed from its foundations and disposed as fill in 

the solution ponds. 

• Land restoration: all areas will be levelled and filled, then covered with fertile soil and reforested. 

Implementation of reforestation activities in the impacted surfaces through terraces, infiltration 

ditches, considering local vegetation. 

The reclamation plan activities are estimated to cost P$160,000. 

49

16.0 ADDITIONAL REQUIREMENTS FOR TECHNICAL REPORTS ON DEVELOPMENT 

PROPERTIES AND PRODUCTION PROPERTIES 

16.1 EARLIER PROPOSED MINING PLANS 

Howe’s 2002 report proposed mining by standard open pit mining methods. This plan was for four 

million tonnes of ore to be mined annually. Howe (2002) believed that much of the rock to be mined was 

sufficiently weathered and that blasting would not be required. The recent Howe site visit noted 

significant amounts of chalcedonic silica which could require blasting to remove. A mining contractor 

was to assume most mining costs with the price per tonne to include amounts for equipment purchase and 

certain administrative costs such as payroll, purchasing and warehousing. Castle Gold would provide 

survey and grade control, including geology and sampling. 

In 2003, Howe proposed a revised operation with an annual production rate of one million tpy. This 

significantly smaller operation reduced the required mine equipment (primarily vehicles for supervisory 

staff and site maintenance) by 75%. Infrastructure costs were to be reduced with the purchase of the 

1,000,000 tpy heap leach plant located at the San Francisco mine north of Hermosillo in Sonora, Mexico 

from Geomaque Explorations Ltd. The plant had sufficient capacity to be expanded to 3,500,000 tpy with 

minimal additional capital investment. The availability of this plant at the present time is unknown. 

Water is available from local wells and in sufficient quantities to support a heap leaching operation at El 

Castillo. 

16.1.1 Open Pit Parameters 

For purposes of the 2002 and 2003 Howe studies, an open pit design incorporating an overall pit slope of 

45 o , a main ramp with an 8% grade, and a road allowance of 24 m, and bench height of 6 m was used for 

Whittle pit optimization purposes (see Table 14-14). These same parameters were used for the current 

study. Several optimum pit shells and production schedules were generated for several different gold 

prices (US$550, US$575, US$600, US$625, US$650, US$675 and US$700/oz Au) and cost scenarios. 

Tonnages of ore and waste in each pit were calculated from the optimized pit shells. The base case gold 

price is $625 and is based on three year moving average. The three year moving average gold price is 

commonly used within the mining industry to estimate long term gold prices. 

16.2 FINANCIAL EVALUATION 

The following financial evaluation examines the economic viability and robustness of the El Castillo 

project under recent gold prices and capital and operating costs estimates, as well as a revised proposed 

production rate of approximately 5.0 million tpy. 

This evaluation applies the recent gold prices and new costs and production rate to develop a new 

optimized pit and mining schedule. Howe developed optimum pits for gold prices ranging from $550 to 

$700 and an optimized mine schedule for the $625 case. While the optimized mining schedule calls for 

the mine to produce on a fairly aggressive schedule, the optimum plan appears feasible and Howe 

recommends that Castle Gold acquire the necessary software and expertise to develop its own block 

model, pit designs and optimized mining schedules. Note that in this report only the average grade, not 

optimized grade schedules, are used unless otherwise noted. In particular, the Base Case is based on the 

average mine grade, not the optimized grade schedule. Table 14 on the following page illustrates the 

distribution of Ore and Waste as well as the average gold grade at each of the gold prices. 

50

16.2.1 Capital and Operating Cost Estimates 

For this financial evaluation, Howe has relied on operating cost estimates provided by Castle Gold that are 

based in part on recent contractor quotes for hauling, drilling, and blasting, as well as company experience 

operating in Mexico. While the El Castillo Mine is now in production, and the capital to bring it into 

production has been spent, Howe has allowed for a total of $4.5 million in sustaining capital over the next 

nine years of mining operations.. The operating costs are summarized in Table 15. Howe has carefully 

reviewed the cost estimates provided by Castle Gold and deems them to be reasonable. 

Table 14. Ore – Waste Distribution and Average Gold Price – El Castillo 

This financial evaluation has been carried out in constant Year 2008 U.S. dollars. This eliminates the 

need to make assumptions with regards to inflation. The use of constant dollars could understate the 

current year dollar amount of taxable income, which therefore could understate taxes payable if a slidingscale 

tax rate was involved. Based on current federal tax rates in Mexico this is a moot point as the 

projected tax rate for the life of this project is constant at 28%. 

16.2.1.1 Gold Recovery 

All financial scenarios assume a 68% gold recovery during heap leap operations. While the median 

projected recovery level is 70% (68-72%) for crushed ore based on metallurgical testing completed to date 

(see Section 13), Howe has lowered the gold recovery to 68% to reflect the fact that a portion of the ore 

from the mine will be delivered to the leach pad uncrushed (ROM ore). 

51

Operating experience has indicated that much of the higher grade material presently being crushed (up to 

70%) is already below the required final size range. Castle Gold management has indicated that it intends 

to introduce a screening plant ahead of the crusher. This should ensure that only about 30% of the 

material will actually go through the crusher; drastically reducing the crushing costs and allowing for a 

greater proportion of ROM ore to be sent to screening and crushing thereby increasing the overall heap 

leach recoveries. The scenarios do not account for any agglomeration of El Castillo ROM material. 

Operating experience from the mine indicates that the material mined to date would not have benefited 

from agglomerating. 

16.2.1.2 Metal Prices 

Recently gold prices have exceeded the US$1,000/ounce threshold. When Howe first began this project 

(January 2008) the average 3 year gold price (London Daily Fixing) was US$578/oz. At the current time 

(June 27, 2008) the average trailing three year gold price is US$652/oz. In addition the June 27, 2008 

London Gold price Second Fixing was US$919.50 per oz. Howe has used a gold price of $712 in 2008, 

$697 in 2009 and $625 per ounce for the remainder of the mine life. These prices are based on a National 

Bank compilation of the forecasts of 35 major institutions in November 2007. 

16.2.1.3 Mine Dilution 

Howe has added 5% dilution at zero grade to the gold grades in the cash flow calculations. 

52

Table 15. Operating Cost Summary (US$). 

1,500,000 Tonnes Ore per Year 5,000,000 Tonnes Ore per Year 

Ore and Waste Mined (tonnes) 

Ore 1,500,000 5,000,000 

Waste (assume W:O 1.5:1.0) 2,250,000 7,500,000 

Total 3,750,000 12,500,000 

Details of Payments Amount $/t ore % Amount $/t ore % 

Ore/Waste Mining $3,860,000 $2.57 43.5% $12,250,000 $2.45 55.1% 

Mining/Geological Engineering & Misc. $200,000 $0.13 2.3% $200,000 $0.04 0.9% 

Screening and Crushing $1,110,000 $0.74 12.5% $1,750,000 $0.35 7.9% 

Plant/Processing Misc. (incl. 

Reagents) $1,310,000 $0.88 14.8% $4,400,000 $0.88 19.8% 

Labour $1,000,000 $0.67 11.3% $1,000,000 $0.20 4.7% 

Durango Office Expenses $310,000 $0.21 3.5% $288,000 $0.06 1.3% 

Site Construction (Plant and Ponds) $730,000 $0.49 8.2% $1550,000 $0.31 7.0% 

Miscellaneous Costs $350,000 $0.23 3.9% $700,000 $0.15 3.4% 

Total $8,870,000 $5.92 100% 

$22,138,000 

$4.45 100.0% 

Mining Cost per tonne moved $1.03 $0.98 

Notes: 

1) The mining cost has been reduced from $1.03 to $0.98to reflect new larger scale contracts being negotiated with the mining contractors 

2) The Plant Process costs is based on experience to date 

3) Screening and Crushing assumes that 40% of the material will be crushed after the screening system is installed. 

53

16.2.1.4 Mexican Taxation 

16.2.1.4.1 Federal Corporate Tax 

Corporate taxable income is subject to federal corporate tax at a rate of 28% for 2008 and subsequent 

years. The income tax laws recognize the effects of inflation on the following items and transactions: 

depreciation of fixed assets, costs of sales of fixed assets, sales of capital stock (shares), monetary gains 

and losses, and tax loss carried forward. In addition, mandatory Profit Sharing (see below) is now 

deductible when calculating taxable income. 

Taxable income is computed in accordance with generally accepted accounting principles. Depreciation 

of tangible fixed assets and amortization of intangible assets is made with the straight-line method. 

Howe has assumed that all new capital has been depreciated over 10 years using the straight line method. 

No opening tax pools have been assumed. Business losses may be carried forward for 10 years and as 

noted above are subject to adjustment for inflation. 

16.2.1.4.2 Net Assets Minimum Tax 

The Net Assets Minimum Tax was eliminated in Mexico starting January 2008. The federal government 

has replaced this tax with a new IETU flat minimum tax. The tax is calculated as 16.5% of the company's 

monthly profits. The tax is not paid in additional to the federal corporate tax (ISR - see section 16.2.4.1). 

At the end of each month the company calculates the taxes owing using both the ISR and IETU protocols. 

The higher of the two calculated values is then paid for that month. 

The main difference in the calculation procedures for the ISR and IETU taxes is that tax losses from 

previous years cannot be carried forward for the calculation of the new IETU. The IETU can be deducted 

or credited by the parent company in Canada. 

16.2.1.4.3 Value Added Tax (IVA) 

The 15% IVA is payable on any supply of goods and services including imports. The IVA payable can be 

reduced by IVA collected by the taxpayer in the course of its annual business operations. 

16.2.1.4.4 State Tax 

State taxes are based on salaries paid in the state during the tax year. The tax rate for State of Durango is 

1.375%. 

16.2.1.4.5 Other Payroll Taxes 

The company must pay a 15% Social Insurance Tax and a 5% Housing Contribution Tax based on annual 

payroll. 

16.2.1.4.6 Mining Tax 

During the period of exploitation, the mining lands tax is approximately $10 per hectare in year 1, and 

increases approximately 10% per year thereafter. 

For the purposes of this financial evaluation, it has been assumed that payroll related tax costs are 

included in the operating costs (i.e. State Tax, Social Insurance Tax and Housing Contribution Tax). It 

has also been assumed that IVA payable on contract mining services is included in the contract mining 

costs. 

16.2.1.4.7 Profit Sharing 

The company is required to pay a 10% profit sharing tax to its employees. Profit sharing is calculated in 

the same manner as Corporate Tax but is calculated before Corporate Tax and is deductible when 

calculating the Corporate tax. On the other hand, Corporate Tax is not be deducted when calculating 

Profit Sharing. Castle Gold has advised Howe that it will not be required to pay Profit Sharing Tax as it 

54

will be operating the mine indirectly through the use of a separate services company. All employees will 

be employed by the services company and any profits will flow directly to Castle Gold and will not incur 

Profit Sharing Tax. 

16.2.1.4.8 Financial Results 

The Base Case ($625 Gold) 

The Base Case scenario produces 488,000 ounces of gold, while mining 46.9 million tonnes of ore and 

28.2 million tonnes of waste at an overall cash cost of $3.58 per tonne of ore, or US$370 per ounce of 

recovered gold and a total of $4.6 million in capital costs over the mine life. The Base Case produces a 

Net Cash Flow of $95 million after all operating and capital costs, and corporate taxes are deducted. The 

overall waste to ore ratio is 0.6:1.0. 

Sensitivity 

Howe has tested the sensitivity of the El Castillo project to changes in Gold Price and Operating and 

Capital Costs. As one would expect, the project is most sensitive to the price of gold followed by changes 

in the operating costs. Since El Castillo is an operating mine with most of its capital already sunk, the 

impact of changes in capital costs is quite small. Howe tested the Base Case for sensitivity by varying the 

prices and costs by changes of ± 30%. Tables 16, 17, and 18 illustrate the Sensitivity of the El Castillo 

project. 

55

Table 16. Sensitivity Analysis 

Sensitivity of Net Present Values (US$ millions) to changes in Gold Price, and 

Operating and Capital Costs - Discounted at 0%, 5%, 7.5% and 10% 

Gold Price Operating Cost Capital Cost 

Change $/oz 0.0% 5.0% 7.5% 10.0% $/t ore 0.0% 5.0% 7.5% 10.0% $millions 0.0% 5.0% 7.5% 10.0% 

-30% $438 28.8 20.5 17.5 15.1 $2.51 131.4 97.9 85.5 75.3 $3.19 96.2 71.4 62.3 54.7 

-25% $469 39.8 28.8 24.8 21.5 $2.69 125.3 93.3 81.5 71.7 $3.41 96.0 71.2 62.1 54.5 

-20% $500 50.9 37.2 32.1 28.0 $2.87 119.3 88.7 77.5 68.1 $3.64 95.8 71.1 62.0 54.4 

-15% $531 61.9 45.5 39.4 34.4 $3.05 113.2 84.2 73.4 64.5 $3.87 95.6 70.9 61.8 54.2 

-10% $563 73.0 53.8 46.7 40.9 $3.23 107.2 79.6 69.4 60.9 $4.10 95.5 70.7 61.6 54.1 

-5% $594 84.0 62.1 54.0 47.3 $3.41 101.1 75.0 65.3 57.4 $4.32 95.3 70.6 61.5 53.9 

- $625 95.1 70.4 61.3 53.8 $3.58 95.1 70.4 61.3 53.8 $4.55 95.1 70.4 61.3 53.8 

+5% $656 106.1 78.7 68.6 60.2 $3.76 89.0 65.8 57.3 50.2 $4.78 94.9 70.2 61.1 53.6 

+10% $688 117.2 87.0 75.9 66.7 $3.94 83.0 61.2 53.2 46.6 $5.01 94.7 70.1 61.0 53.5 

+15% $719 128.2 95.3 83.2 73.1 $4.12 76.9 56.7 49.2 43.0 $5.23 94.5 69.9 60.8 53.3 

+20% $750 139.3 103.7 90.5 79.6 $4.30 70.9 52.1 45.2 39.5 $5.46 94.3 69.7 60.6 53.1 

+25% $781 150.3 112.0 97.8 86.0 $4.48 64.8 47.5 41.1 35.9 $5.69 94.1 69.5 60.5 53.0 

+30% $813 161.4 120.3 105.1 92.5 $4.66 58.8 42.9 37.1 32.3 $5.92 93.9 69.3 60.3 52.8 

56

Table 17. Sensitivity Analysis – Graphical Representation 

Table 18. Project Net Cash Flow at Selected Gold Prices 

57

Table 19. Financial scenario at $625/oz Au 

59

16.2.2 Economic Evaluation 

The Base Case financial scenario at a conservative gold price of US$625 per ounce (Table 19) shows the 

El Castillo Project to be NPV positive and economically viable. At a gold price of US$625, the El 

Castillo project creates an after tax Net Cash Flow of US$95.0 million with a Net Present Value of $70.4 

million at a discount rate of 5%, $61.3 million at 7.5% and $53.8 million at 10% discount rate. The 

breakeven (after tax) long term gold price is approximately US$ 370/oz Au. The breakeven price includes 

recovery of capital and operating costs. For comparison purposes, Table 20 summarizes the NPV 

differences at a 10% discount rate and variable gold prices between the 2006 Howe report and the current 

report (Table 21). 

Table 20. NPV differences at a 10% discount rate. 

Gold Price (US$) NPV (10%) % Difference with Howe 

2008 US$625 Base Case 

Scenario 

450* 12,350,000* 335 

500* 19,065,000* 182 

550* 25,783,000* 108 

600* 32,500,000* 65 

* Data from Howe 2006 Report #897 

Table 21. Gold Price Chart (1995-2008) 

60

The El Castillo Project contracts out a large amount of its operating costs including drilling, blasting, 

mining, truck haulage and crushing. Thus, the project will require very little capital to increase production 

to 4.8 million tonnes of ore per year. The breakeven gold price of $370 per ounce should be sufficiently 

low to protect El Castillo from a substantial drop in the price of gold. Thus Howe concludes the El 

Castillo Project is economically viable and robust under conservative operating scenarios. 

In the current evaluation, Howe has created an “Optimum Pit” for each of the gold prices from $550 to 

$700 per ounce of gold. In addition, Howe has optimized the mine production schedule to maximize the 

present value of the El Castillo project for the US$625/ounce Base Case. Thus, the present value of the 

Net Cash Flow for the $625 case discounted at 10% increases from $53.8 million to $64.3 million. This is 

done by mining the highest gold grades as early in the mining schedule as reasonably feasible. While 

Howe has not created optimized production schedules for each of the other optimum pits, using the grade 

schedule from the $625 case, Howe has created a pseudo-optimized production schedule for each of the 

other gold price cases. Table 22 illustrates the impact of optimizing the mine schedule on each of the 

other optimum pits using the 10% discount rate. 

The Exchange rate for the Mexican Peso and the US Dollar has been relatively stable for the last few years 

as compared to other Resource Exporters such as Canada, Australia, South Africa and Brazil, all of whom 

have experienced rapid increases in their exchange rates against the US dollar. 

Table 22. Impact of Mine Schedule Optimization based on a 10% Discount Rate 

61

Table 23. US$ - Mexican Peso Exchange Rate Chart (1990-2008) 

62

17.0 INTERPRETATIONS AND CONCLUSIONS 

17.1 CONCLUSIONS 

• The Property contains a low-sulphidation epithermal gold system. 

• Castle Gold has carried out many of the recommendations given in the 2002 and 2003 Howe reports; 

principally column and bottle roll metallurgical testing, bulk leach testing, and core drilling for 

comparison with, and verification of, the Battle Mountain RC drilling assays. 

• The metallurgical test work completed to date indicates that gold recoveries of between 68 and 72% 

are achievable, but would require crushing of 23-40% of ROM material to

• Castle Gold should complete geotechnical evaluations to determine if a steeper pit wall angle can be 

utilized for mine design purposes (in order to reduce mine strip ratios) 

• Castle Gold should purchase and install a weight station in order to better control the amounts hauled 

and the costs incurred by mine contractors 

• Castle Gold should continue to focus on opportunities to optimize the overall project economics. 

These activities should include: 

• Completion of plans to install a screening plant ahead of the crushing system in order to 

minimize the amount of material passing through the crushers 

• Performing leach tests on numerous ore samples to better understand the variations in recoveries 

by rock/mineral types and optimal reagent additions; 

• Completing engineering evaluations of various project expansion scenarios in order to determine 

best combinations of capital costs and overall project cash flows; 

• Examining opportunities to “right size” present mining operations equipment fleet for maximum 

throughput and minimum operating costs; 

• Evaluating possibility for use of ore transport conveyors versus trucking activities; 

• Assessing alternate future leach pad locations with respect to minimizing ore haulage distances. 

64

18.0 SOURCES OF INFORMATION 











Mexico, for Castle Gold Minerals Limited, Toronto, Canada; Howe Report 897, 143 p 

Analytical Solutions Ltd, 2004, A Comparison of Reverse Circulation and Diamond Drill Core Assays 

for the El Cairo Project, Durango, Mexico prepared on behalf of Castle Gold Minerals Inc., 12 p. 

Babcock, C., 2006, Letter of sale release to Metals Research Corporation on March 6, 2006. 

Canadian Institute of Mining, Metallurgy and Petroleum, 2000, CIM Standards on Mineral Resources 

and Reserves, Definitions and Guidelines, 18 p. 

Cook D. R. and Simmons S. F., 2000, Characteristics and Genesis of Epithermal Gold Deposits: Society 

of Economic Geologists, Reviews in Economic Geology, v. 13, p.221-244. 

Consejo de Recursos Minerals, 1993. Monografia geologico-minera del estado de Durango 204p. 

Cormier, A., 1998, Metallurgical Summary of El Cairo Tests: in-house report for Battle Mountain Gold, 

8p. 

Iasillo, E., 2006, Letter Report to Castle Gold Minerals on Gold Recovery of Heaps 1 and 2: Metcon 

Research. 

Kappes, Cassiday and Associates, 2002, EL Cairo, Mexico, Project Review and Recommendations: 

Report prepared on behalf of A.C.A. Howe International Limited, Kappes, Cassiday & 

Associates, August 5, 2002, 10 p. 

Kappes, Cassiday and Associates, 2006a, Drill core leach test – interim data from Kappes, Cassiday & 

Associates. 

Kappes, Cassiday and Associates, 2006b, Bottle roll leach tests, a letter report from Kappes, Cassiday & 

Associates dated March, 24, 2006 (author: Manning, T.). 

Koningen, D. 2006, Castillo Metallurgical Review: in-house report for Castle Gold Minerals Inc., 21p. 

Long, S. D. 1998. Practical Quality Control Procedures in Mineral Inventory Estimation: Exploration 

Mining Geology, Vol. 7, Nos. 1 and 2, pp. 117-127. 

Minera Real del Oro, 2006, Sample Preparation Procedure for Column Tests: Summary Report by 

Mineral Real Del Oro staff. 

Northern Front LLC, 2006, Letter dated March 23, 2006 to Chris Babcock, President of Mineral Real 

Del Oro, S.A. de C.V. 

65

Panteleyev, A., 1996, Epithermal Au-Ag: Low Sulphidation, in Selected British Columbia Mineral 

Deposit Profiles, Volume 2 - Metallic Deposits, Lefebure, D.V. and Hõy, T, eds., British 

Columbia Ministry of Employment and Investment, Open File 1996-13, pp 41-44. 

White, N. C. and Hedenquist, J. W., 1995, Epithermal Gold Deposits: Styles, Characteristics and 

Exploration: SEG Newsletter, Number 23, 6 p. 

66

19.0 CERTIFICATES OF AUTHORS 

DANIEL C. LEROUX 

37 Pittmann Cres, 

Ajax, Ontario, L1S 3G4 

Telephone: +1-905-686-3786 

Email: dclerouxpgeo@yahoo.ca 

CERTIFICATE of AUTHOR 

I, Daniel C. Leroux, B.Sc., P.Geo. (ON, SASK), do hereby certify that: 

1. I have been employed since 2007 as Vice President, from 2005 to 2007 as a Senior 

Consulting Geologist, from 1999 to 2004 as an associate consulting geologist and from 

1993 to 1999 as Project Geologist with the firm of A.C.A. Howe International Limited, 

Mining and Geological Consultants located at 365 Bay St., Suite 501, Toronto, Ontario, 

Canada. M5H 2V1. 

2. I graduated with a Bachelor of Science, Geology degree from Laurentian University in 

1993. 

3. I am a Professional Geoscientist (P.Geo.) registered with the Association of Professional 

Geoscientists of Saskatchewan (APEGS, No. 10475) and with the Association of 

Professional Geoscientists of Ontario (APGO, No. 742), a member of the Canadian 

Institute of Mining and Metallurgy and of the Society of Economic Geologists. 

4. I have a total of 18 years of direct experience with gold projects located in Canada, Africa 

and South America, including managerial responsibilities for all various exploration stage 

gold projects from conceptual grassroots exploration projects to resource estimation and / 

or feasibility studies on advanced gold projects. Additional experience includes the 

completion of various National Policy 2A and NI 43-101 technical reports for gold 

projects worldwide. 

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 

43-101”) and certify that by reason of my education, affiliation with a professional 

association (as defined in NI 43-101) and past relevant work experience, I fulfill the 

requirements to be a “qualified person” for the purposes of NI 43-101. 

6. I am responsible for all sections of the technical report and share responsibility for 

Section 16 and the portions of the summary, conclusions and recommendations that are 

based on those sections of the technical report titled: “Technical Report on the El Castillo 

Gold Project, Durango State, Mexico for Castle Gold Corporation dated July 31, 2008 

(the “Technical Report”). I visited the property on December 1, 2007. 

7. I have not had prior involvement with the issuer, nor with the property that is the subject 

of the Technical Report 

8. I am not aware of any material fact or material change with respect to the subject matter 

of the Technical Report that is not reflected in the Technical Report, the omission to 

disclose which makes the Technical Report misleading.

9. To the best of my knowledge, information and belief, the Technical Report contains all 

scientific and technical information that is required to be disclosed to make the Technical 

Report not misleading. 

10. I am independent of the issuer applying all of the tests in section 1.5 of National 

Instrument 43-101. 

11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report 

has been prepared in compliance with that instrument and form. 

12. I consent to the filing of the Technical Report with any stock exchange and other 

regulatory authority and any publication by them, including electronic publication in the 

public company files on their websites accessible by the public, of the Technical Report. 

DATED this 31st Day of July, 2008. 

(Signed and sealed) 

Daniel C. Leroux, B.Sc., P. Geo. 

68

W.DOUGLAS ROY 

35 Colbeck Street 

Halifax, Nova Scotia, PC 

CERTIFICATE of AUTHOR 

I, W. Douglas Roy, M.A.Sc., P.Eng. do hereby certify that: 

1. I am an associate mining engineer with the firm of A.C.A. Howe International Limited, 

Mining and Geological Consultants located at 330 Bay St., Suite 830, Toronto, Ontario, 

Canada, M5H 2S6. 

2. I obtained a Bachelor of Engineering degree from Dalhousie University in 1997 and a 

Master of Science Applied degree from Dalhousie University in 2000. 

3. I am a Professional Engineer licensed to practice with Professional Engineers of Nova 

Scotia. 

4. I have practiced my profession continuously since graduation for 10 years. 

5. I have read the definition of “qualified person” set out in National Instrument 43-101 (“NI 

43-101”) and certify that by reason of my education, affiliation with a professional 

association (as defined in NI 43-101) and past relevant work experience, I fulfill the 

requirements to be a “qualified person” for the purposes of NI 43-101. 

6. I share responsibility for Section 16 of the technical report titled: “Technical Report on 

the El Castillo Gold Project, Durango, Mexico for Castle Gold Corporation dated July 31, 

2008 (the “Technical Report”) I have not visited the El Castillo property. 

7. I have not had prior involvement with the issuer, nor with the property that is the subject 

of the Technical Report. 

8. I am not aware of any material fact or material change with respect to the subject matter 

of the Technical Report that is not reflected in the Technical Report, the omission to 

disclose which makes the Technical Report misleading. 

9. To the best of my knowledge, information and belief, the Technical Report contains all 

scientific and technical information that is required to be disclosed to make the Technical 

Report not misleading. 

10. I am independent of the issuer applying all of the tests in section 1.5 of National 

Instrument 43-101. 

11. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report 

has been prepared in compliance with that instrument and form. 

12. I consent to the filing of the Technical Report with any stock exchange and other 

regulatory authority and any publication by them, including electronic publication in the 

public company files on their websites accessible by the public, of the Technical Report. 

DATED this 31st Day of July, 2008. 

(Signed and sealed) 

W. Douglas Roy, M.A.Sc., P. Eng. 

69

CERTIFICATE OF AUTHOR 

dated July 31, 2008 

I, Gordon Watts, do hereby certify that: 

1. I reside at 347 Berkeley Street, Toronto, Ontario, Canada, M5A 2X6 

2. I am a graduate from the University of Toronto, Toronto, Ontario with a B.A.Sc. Degree in 

Mining Engineering (1966), and I have practised my profession continuously since 1969. 

3. I am a member of the Association of Professional Engineers Ontario (Membership Number 

49149016). 

4. I am a Senior Associate Mineral Economist with ACA Howe A.C.A. Howe International Limited, 

Mining and Geological Consultants located at: 

330 Bay St., Suite 830, 

Toronto, Ontario, 

Canada. 

M5H 2S6 

A firm of consulting geologists and engineers, which has been authorized to practice professional 

engineering by Professional Engineers Ontario since 1971, and professional geoscience by the 

Association of Professional Geoscientists of Ontario. 

5. I am a qualified person for the purpose of NI 43-101. I have worked as a professional engineer 

for over 42 years since graduation. My relevant experience for the purpose of this Technical 

Report is: 

• The preparation of over 250 financial models during the past 28 years; 

• Skilled in tax modelling, risk analysis and Monte Carlo simulations; 

• Constructed numerous mining cash flows models for mining consulting companies e.g. ACA 

Howe ; Watts, Griffis and McOuat; Scott Wilson Roscoe Postle Associate;; MPH; Derry 

Michener Booth and Wahl; and 

• Prepared reports on mineral properties throughout Canada, the United States of America and 

internationally. 

6. I have visited the mining properties. 

7. I was solely responsible for Parts of Section 16 and 17 of The Technical Report On The El 

Castillo Gold Project, Durango, Mexico For Castle Gold Corporation. 

8. I have no personal knowledge as of the date of this certificate of any material fact or change, 

which is not reflected in this report. 

9. Neither I, nor any affiliated entity of mine, is at present, under an agreement, arrangement or 

understanding or expects to become, an insider, associate, affiliated entity or employee of Castle 

Gold, or any associated or affiliated entities. 

70

10. Neither I, nor any affiliated entity of mine own, directly or indirectly, nor expect to receive, any 

interest in the properties or securities of Castle Gold Corporation, or any associated or affiliated 

companies. 

11. Neither I, nor any affiliated entity of mine, have earned the majority of our income during the 

preceding three years from Castle Gold Corporation, or any associated or affiliated companies. 

12. I have read NI 43-101 and Form 43-101F1 and have prepared the technical report in compliance 

with NI 43-101 and Form 43-101F1; and have prepared the report in conformity with generally 

accepted Canadian mining industry practice, and as of the date of the certificate, to the best of my 

knowledge, information and belief, the technical report contains all scientific and technical 

information that is required to be disclosed to make the technical report not misleading. 

Gordon Watts, B.A.Sc., P.Eng. 

July 31, 2008 

71

Appendix A 

Pit Optimization Level Plan Maps

Ultimate Pit Limit (Blue) - Yr 11 

Year 7 (Green) 

Year 9 (Magenta) 

Year 4 (Red)

43-101 2008 Technical Report On The La Fortuna Project, Durango ...

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