We are disproving the perception held by some, that junior mining companies cannot be profitable. Given that the commodity price is still trading at a 28 year high (and may yet rise again to equal the high watermark of $1,023.50 set earlier in 2008) one may wonder, why this point of view still prevails. By continuing on the course we have set in Mexico, producing gold averaging
less than $250 per ounce (excluding royalty), we will continue to buck the trend and remain profitable.

At our El Chanate mine, we are producing gold at a cost less than half of our peers. John Brownlie, Capital Gold’s Chief Operating Officer, explains: “We are able to keep our costs low and profit high for several key reasons. First, we mine in a relatively populated area of Sonora, Mexico, with an excellent skilled workforce from which to choose. We have no need to furnish housing or meals for the crew as they can go home at the end of the day. In fact, our mining staff, from the general manager down, is entirely Mexican. We employ a good local mining contractor and diesel fuel costs are lower in Mexico. All of these factors have combined to make us one of the lowest cost gold producers in North America.” By way of proving our point, we produced over 40,000 ounces of gold in the first year of operation. In the first three quarters, profits were over US$6.5 million translating to $0.04 earnings per share (based on number of outstanding shares of approximately 173 million). In 2009, we project a 40 percent increase in gold production while still maintaining a low cost of production.

“We are proving-everyday-that all ounces are not created equal,” asserts Brownlie. Even though our production totals may not equal those of our peer group, our low cost allows us to show higher gross profits than other mining companies with double our production. With considerable early success under our belt, we are now focused on growing the Company into a mid-tier gold producer and have been looking at a number of potential acquisitions and purchase targets in Northern Mexico, including late-stage development projects as well as producing mines. “We are not about to add ounces for the sake of adding ounces,” says Executive Vice President Jeff Pritchard. “We plan to use the profits and the synergies we have created at El Chanate to grow our resources and to develop other low-cost gold mines in Mexico.”
Significant Achievements for Fiscal 2008

 

Proceeds from Gold sales UP 95.6%*
Proceeds from Silver sales UP 500%*
Gold Reserves UP 73%
Ounces Produced UP
Standard Bank loan restructured
Exploration targets identified at newly acquired Saric property
Sustaining capital and plant upgrades financed through operating cash flow
AngloGold did not exercise their one time back-in right
 

 

*Based on feasibility study projections.
 


First Anniversary of Production

Capital Gold Celebrates Milestone

In July 2007, after a year of detailed planning and construction, Capital Gold began producing gold at the El Chanate mine in the State of Sonora, Mexico. In the first three months of operation, the mine produced some 9,000 ounces of gold, a production rate that increased each quarter to more than 11,000 ounces in the last quarter. Overall, the mine produced approximately 40,000 ounces of gold in the first year of operation, and all this was accomplished with a cost of production that ranks among the lowest in the industry.

The outstanding achievements in this first year of production deserved a celebration that recognized the dedication and superior performance of our mine staff and managers, and conveyed our appreciation for the warm welcome and cooperation we have received from the Mexican government and the local authorities. On July 31st, 2008, we hosted a “fiesta” in Caborca, held in local style with a Mariachi band, dancing and a traditional pig roast. The event was attended by more than 150 guests including representatives of the Governor of Sonora, the Mayor of our neighboring city of Altar, local merchants and suppliers, as well as our corporate staff and all of our mining staff. We were pleased that the event was featured in several of the regional Mexican newspapers.

At the award ceremony also held that evening, 23 mine employees were recognized for their outstanding dedication, shown by their perfect on-job attendance and timeliness, and for receiving superior job performance ratings from their supervisors. We were proud to honor these people whose strong work ethic will enable us to continue to achieve the goals we have set for the mine, and for the Company. The celebration clearly demonstrated the positive morale of the staff and emphasized the goals of encouraging productivity, while maintaining low turnover rates. “We are a team that works closely together – that’s why we are a success,” said General Manager, Marco Galindo, at the ceremony. “We are immensely proud of what we have achieved in just one year of operation.”

Why Mexico?

Unlike several of its South American neighbors, Mexico offers a secure and stable environment to companies like Capital Gold. The country’s appeal to mining companies stems from a combination of factors including a strong mining culture, good experienced workforce, excellent geology and climate, political stability and favorable tax and permitting structures. Capital Gold also enjoys strong government support from the local, state and federal levels. Added to which, non- Mexican companies can maintain 100% ownership of their properties and thereby reap the full benefits of successful exploration. For Capital Gold, Mexico’s newest gold producer, it has been a very agreeable and profitable experience.

 
CAPITAL BRIEFS


Construction of ADR plant nears completion

The new adsorption desorption recovery (ADR) plant is scheduled to be completed by year end 2008. The new plant will have over 100,000 ounces of gold extraction capacity, allowing Capital Gold to increase its processing and reach 70,000 ounces of gold production in calendar year 2009. We were able to make the upgrades throughout our first year of production using operation cash flow. Recent photos of the ADR plant construction are available on our website.


Analyst Coverage Initiated

In March 2008, Stuart McDougall of Jennings Capital began coverage on our company. In August, Precious Metals Analyst Eduardo Baer of Octagon Capital Corporation initiated coverage. We now are focused on obtaining additional coverage on Capital Gold by year end.

 
CAPITAL IDEAS

What’s Next for Capital Gold
Increase gold production at El Chanate to 70,000 ounces annually in 2009
Begin drilling at depth within the pit at El Chanate to produce a new 43-101 Resource Estimate
Acquire another property in Mexico where we can use the synergies at El Chanate
Continue exploration efforts on other wholly-owned properties in Mexico

For further information please contact:

Capital Gold Corporation

76 Beaver Street, New York, NY 10005
Kelly Cody, Director of Corporate Communications
Tel: 212-344-2785
Email: kelly@capitalgoldcorp.com
This document contains “forward-looking statements” concerning future operations of Capital Gold Corporation (the “Company”). All forward-looking statements concerning the Company’s future plans and operations, including management’s assessment of the Company’s projects, expectations or beliefs may be subject to certain assumptions, risks and uncertainties beyond the Company’s control. Investors are cautioned that any such statements are not guarantees of future performance and financial results may differ materially from any estimates or projections as at September 2008.