Castle Gold Corporation TSX VENTURE: CSG

TORONTO, ONTARIO--(Marketwire - Aug. 20, 2008) - CASTLE GOLD CORP. (Castle Gold, the Company) (TSX VENTURE:CSG) is pleased to announce the results of an updated National Instrument 43-101, report dated July 31, 2008, by A.C.A. Howe International Ltd. (Howe) on the El Castillo Gold Mine, Durango State, Mexico ("Howe 2008 Report"). The report studies the mineral resources, reserves and performed an economic evaluation that results from the mining of these enhanced reserves at various gold price and cost scenarios.

Highlights of this report include:

- a 16% increase in Measured and Indicated resources to 1,177,344 ounces of gold;

- a 50% increase in Proven and Probable reserves to 752,000 ounces of gold;

- a recommendation to increase production by over 200% to 5.0 million tonnes per year, thereby increasing average annual gold production by approximately 79% to 52,000 ounces per year over a 10-year mine life;

- a 50% increase in the net present value of the mine to US$53.6 million based on a long-term gold price of US$625 per ounce gold, increasing to 170% to US$97.0 million based on analyst consensus gold forecasts;

- potential for further increases in production and reduction in costs through pit optimization and efficiencies; and

- opportunity to further increase resources and reserves through additional in-pit drilling plus step-out drilling beyond updated pit limits.

The above quoted increases are in comparison to the most recent technical report on the El Castillo project dated October 20, 2006 (A.C.A. Howe report - Pre-feasibility Report El Castillo Mine Project, Durango, Mexico for Morgain Minerals, filed on Sedar - www.sedar.com - under Morgain Minerals, November 28, 2006 - "Howe 2006 Report"). The increase in resources and reserves results from utilizing a higher gold price (US$625 per ounce, the approximate 3-year trailing average daily gold price from the first quarter 2008 versus US$325 per ounce gold as of the date of the preparation of the 2006 Report), facilitating a lower cut-off grade that permits the mining of the larger resources and reserves.

Darren Koningen, Vice President Mine Development at Castle Gold commented on the results from the Howe 2008 Report, stating: "We recently attained commercial production at Castillo. As a result of the knowledge we've gained in the asset through this ramp-up period, we've also noted and began advancing opportunities to further create value. The opportunities identified in the Howe report are the next phase of the asset's development that unlock this value. However, work doesn't stop there as we continue to see additional opportunities to further increase production and enhance value as we implement the Howe report recommendations."

Thomas Atkins, President and CEO of Castle Gold added: "This report identifies some of the value adding opportunities that originally attracted me to Castle Gold. The report considers conservative life-of-mine estimates for the future gold price, only limited future success in achieving operating efficiencies and doesn't consider any future increases in resources or reserves, all of which are strong opportunities for additional value creation. Even under these conservative estimates the report suggests an approximate US$25 million increase in the NPV of the project or the equivalent of C$0.35 per Castle Gold share. If one considers these same conservative estimates for operating performance, but includes average annual consensus gold price forecasts over the life of the mine by 25 global gold analysts, the NPV of the mine increases by US$61 million or about C$0.84 per Castle Gold share. We're excited to be advancing the recommendations of this report that will permit the Company to achieve annualized gold production of in excess of 50,000 ounces of gold as the next stage of the project's development. The stronger cash flow the project will generate will aid in financing further development of El Castillo plus advance other exciting investment opportunities that exist within the Company, including development of the La Fortuna gold-silver-copper project in Mexico."

Results of the Howe 2008 Report

Based on the Howe 2008 Report, recently filed on Sedar (www.sedar.com), Measured and Indicated resources at El Castillo total 1,177,344 ounces of gold at a 0.15 cut-off grade, a 16% increase compared to the Measured and Indicated resources of 1,015,185 ounces of gold at a 0.25 cut-off grade as calculated by Howe in 2006 Howe 2006 Report). Refer to Table 1: Mineral Resource Summary, El Castillo Mine - Howe 2008, presented below.

                        Table 1


Mineral Resource Summary, El Castillo Mine - Howe 2008


--------------------------------------------------------------
                         Measured                   Indicated
--------------------------------------------------------------
Cut-off           Avg.  Contained             Avg.  Contained
Grade   Tonnes   Grade       Gold   Tonnes   Grade       Gold
--------------------------------------------------------------
(g/t)   (000's)   (g/t)   (ounces)  (000's)   (g/t)   (ounces)


0.05    93,000    0.33    982,080   67,000    0.18    385,920
0.15    65,400    0.43    899,904   28,900    0.30    277,440
0.25    41,900    0.57    764,256   11,800    0.45    169,920
0.35    27,100    0.71    615,712    6,100    0.61    119,072
0.45    18,300    0.87    509,472    3,900    0.74     92,352
0.50    15,200    0.95    462,080    3,200    0.79     80,896
0.60    11,000    1.11    390,720    2,300    0.89     65,504
--------------------------------------------------------------



----------------------------------
             Measured + Indicated
----------------------------------
Cut-off           Avg.  Contained
Grade    Tonnes  Grade       Gold
----------------------------------
(g/t)    (000's)  (g/t)   (ounces)


0.05    160,000   0.27  1,368,000
0.15     94,300   0.39  1,177,344
0.25     53,700   0.54    934,176
0.35     33,200   0.69    734,784
0.45     22,200   0.85    601,824
0.50     18,400   0.92    542,976
0.60     13,300   1.07    456,224
----------------------------------

Based on the Howe 2008 Report, Proven and Probable reserves at El Castillo total 752,000 ounces of gold, a 50% increase over Proven and Probable reserves of 499,597 ounces of gold in the Howe 2006 Report (Howe 2008 Report employed a US$625 per ounce pit shell outline and was based on actual operating costs realized to-date compared to the Howe 2006 Report which employed a US$325 per ounce gold price and Pre-feasibility operating costs). Refer to Table 2: Proven and Probable Reserve Summary, El Castillo Mine - Howe 2008, presented below.

                        Table 2


Proven and Probable Reserve Summary, El Castillo Mine - Howe 2008


-----------------------------------------------
            In-pit Proven and Probable Reserves
-----------------------------------------------
L-O-M         Tonnes
Average        Above
Gold         Cut-off      Average
Price(i)       Grade        Grade         Gold
-----------------------------------------------
US$/oz        (000's)        (g/t)         (oz)


$550          40,000         0.53      680,000
$600          44,300         0.51      725,000
$625          46,800         0.50      752,000
$700          58,400         0.46      870,000
-----------------------------------------------
(i) for pit planning purposes which leads to changes in reserves

Based on the increased reserves, the limited requirement for additional capital (in part due to the reliance on contractor mining) and actual realized operating costs at the El Castillo mine, the Howe 2008 Report recommended increasing production by over 200% to 5.0 million tonnes per year, from 1.5 million tonnes per year (Howe 2006 Report). Average annual production is estimated to increase by 79% to approximately 52,000 ounces of gold, compared to approximately 29,000 ounces of annual gold production estimated in the Howe 2006 Report.

Based on the reserves, operating costs (life-of-mine average cash costs of US$370/oz) and production rates suggested in the Howe 2008 Report and a life-of-mine (L-O-M) gold price of US$625 per ounce gold (a gold price that creates an attractively robust pit shell and resilient operating cost against potential fluctuations in the gold price, based on the three year trailing average gold price) the net present value of the El Castillo mine increases by 49% to $61.3 million assuming a 7.5% discount rate or US$70.4 million at a 5% discount rate. Under these same operating assumptions, but utilizing the average gold price estimates of 25 global gold industry analysts during the life of the mine, the net present value of El Castillo increases by 170% to US$97.0 million at a 7.5% discount rate, or to US$110.3 million at a 5% discount rate. This compares to the financial model and resulting net present value (NPV) of US$35.9 million contained in the Howe 2006 Report that was based on a US$325 pit shell, corresponding mineable reserves containing 499,567 ounces of gold, a L-O-M gold price of US$600 per ounce gold, pre-feasibility capital and operating costs and an 8.0% discount rate.

The Company envisions attaining annualized production of between 25,000 and 30,000 ounces of gold early in 2009 and that by the second half of 2009, the Company will have attained an annualized production rate of 50,000 ounces of gold at the El Castillo mine. Refer to Table 3: NPV and Average Annual Forecasted Cash Flow, El Castillo Mine - Howe 2008, presented below.

                                Table 3


NPV and Average Annual Forecasted Cash Flow, El Castillo Mine - Howe 2008


----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                 NPV(i)              NPV(ii) Average Annual
 L-O-M Gold Price    (5% discount rate) (7.5% discount rate)      Cash Flow
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(US$/oz)                     (US$000's)           (US$000's)      (US$000's)


Howe 2006 - US$600                 n/a              $35,793          $4,792
Howe 2008 - US$632             $70,406              $61,313          $7,922
Howe 2008 - US$700             $88,179              $76,708          $9,939
Howe 2008 - 25 Analysts(iii)  $110,252              $97,046         $12,140
----------------------------------------------------------------------------


(i)   NPV was not calculated at 5% discount rate in Howe 2006 Report


(ii)  except for Howe 2006 Report - US$600 at 8.0% disc rate


(iii) average annual forecasted gold price for the 5 year period 2008 to 
      2012 and the long-term price beyond 2012 of US$915, $940, $880, $830,
      $790 and $725, respectively estimated by 25 global gold analysts 
      including those of: Blackmont, BMO, Canaccord, CIBC, Cormark, Credit
      Suisse, Deutsche Bank, Genuity, GMP, Goldman Sachs, Haywood, HSBC, JP
      Morgan, Merrill Lynch, Morgan Stanely, National Bank, Paradigm, RBC,
      Raymond James, Research Capital, Scotia Capital, TD Newcrest and UBS
      as of June 2008.

Howe 2008 Report - Additional Recommendations

The Howe 2008 Report recognized that the rate of return on the expanded production scenario (production expanding to 50,000 ounces per year) at Castillo was infinite due to there being negligible capital requirements (other than working and sustainable capital) as the mine is reliant on contractor mining and crushing and the plant and ponds have, or it is already planned to have, sufficient capacity to accommodate additional leaching. The Report suggested that the L-O-M break-even gold price for the expanded scenario would be US$370 per ounce of gold produced and that "the El Castillo Project is economically viable and robust under conservative operating scenarios."

The Company has already begun advancing activities to achieve targeted, enhanced gold production and improve operating efficiencies as contained in various recommendations within the Report., some of which include:

- Infill drilling in areas within the current new pit limits where an absence of drilling has resulted in areas being considered as waste in the mine model, yet which, with in-fill drilling, could result in increased resources and reserves. Refer to Figure 1: Level Plan of El Castillo Pit Illustrating Historical Pit Outline, Howe 2008 Pit Outline and Outline of Reserves with in 2008 Howe Pit.

- Drilling to the west and south of the known 2008 pit limits of the Castillo deposit where the deposit remains open with the potential of expanding the known resources.

- Implementing the use of geological modeling, optimized pit design and mine scheduling software thereby permitting better forward planning and optimization of the value of the El Castillo project.

- Completing geotechnical evaluations to determine if a steeper pit wall angle can be utilized for mine design purposes with the possibility of reducing mine strip ratios.

- Installing a screening plant ahead of the crushing system in order to minimize the amount of material passing through the crushers thereby reducing costs of crushing.

- 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 reduced operating costs.

- Evaluating possibility for use of ore transport conveyors versus trucking activities to reduce costs.

- Assessing alternate future leach pad locations with respect to minimizing ore haulage distances and potential to reduced costs.

A number of these activities are already being advanced and the Company looks forward to the opportunity to report on the results from these activities over the following quarters as it continues to strive towards further increases in production and enhanced value.

Qualified Person Comments/Quality Control Procedures

This press release has been reviewed by Mr. Darren Koningen, P. Eng., Castle Gold's Vice President Project Development a Qualified Person under National Instrument 43-101 for the El Castillo Mine. The resource study was prepared by Mr. Daniel C. Leroux, B.Sc., P. Geo., (ON, SASK), Vice President A.C.A. Howe International Limited, a Qualified Person under the NI 43-101 guidelines. The resource estimate has been prepared in compliance with National Instrument 43-101 and form NI 43-101F1, which requires that the estimate be prepared in accordance with the "CIM Definition Standards on Mineral Resources and Mineral Reserves as prepared by the CIM Standing Committee on Reserve Definitions and as adopted by CIM Council, December 11, 2005."

Where applicable, in recent corroborative analysis of the historic data base, drill core or RC chip samples were prepared by ALS-Chemex in Hermosillo, Mexico and analysis conducted by ALS-Chemex Laboratories in Vancouver, Canada using gold fire assays with either Atomic Absorption Spectroscopy ("AAS") or gravimetric finish. Routine gold assays are by 30 gram 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 with the original and subsequent gold assays showing acceptable repeatability for gold data.

About Castle Gold

Castle Gold Corporation is a growth oriented gold producer with projects focused in the America's. The Company owns a 100% interest in the El Castillo gold mine in Mexico and a 50% interest in the El Sastre gold mine in Guatemala. Castle Gold is also advancing exploration and development work at its La Fortuna gold-silver-copper project in Mexico and at its El Sastre and El Arenal project in Guatemala.

To view Figure 1, please visit the following link: http://media3.marketwire.com/docs/CS...

TSX-V Trading Symbol:                    CSG
Total Shares Outstanding:             75.3MM
Fully Diluted:                        88.1MM
52-Week Trading Range:        C$0.38 - $0.90