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

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