Gryphon Gold Reports $3.2 Million in Revenue for the Third Quarter of Fiscal 2013

CARSON CITY, NEVADA--(Marketwire - Feb. 14, 2013) - Gryphon Gold Corporation (the "Company" or "Gryphon Gold") (TSX:GGN)(OTCQB:GYPH), a gold exploration, development and production company focused on its Borealis Oxide Heap Leach Project in Nevada (the "Borealis Property"), reported financial results for its third quarter of fiscal 2013, which ended December 31, 2012.

The Company reported revenue of $3.2 million in the third quarter of fiscal 2013 on sales of 1,904 gold equivalent ounces, compared with revenue of $0.9 million in the third quarter of fiscal 2012. Revenue in the trailing second quarter was $3.5 million on sales of 2,262 gold equivalent ounces.

During the third quarter, approximately 196,585 tons of ore was placed on the heap leach pad compared with 261,730 tons in the trailing second quarter. The Company produced 1,942 gold equivalent ounces in the quarter at a recovery rate of approximately 40% with an average cash cost per ounce of $1,292. For the first nine months of fiscal 2013, the average cash cost per ounce was approximately $1,346. This is a non-GAAP measurement, see page 4 for reconciliation.

James T. O'Neil Jr., CEO and Interim CFO of Gryphon Gold, commented, "We have continued to make progress in advancing the Borealis Property; however, necessary construction interruptions related to expansion efforts, unforeseen equipment difficulties at the Adsorption Desorption Recovery ("ADR") refining facility and inclement weather typical of this time of the year impacted our production and corresponding sales for the quarter."

Mr. O'Neil Jr. continued, "As we had previously noted, our capital was severely strained and, as a result, our Board of Directors reviewed a number of options with the objective to strengthen our financial position. The joint venture that was announced with Waterton at the end of January not only improved our balance sheet and our working capital, it also brought an ideal partner with extensive technical and operational expertise that we believe will be critical to maintain the initiatives currently underway, and advance the property to a level greater than previously thought, including stronger recovery rates and a longer mine life."

Joint Venture Agreement with Waterton Global Value L.P.

On January 31, 2013, Gryphon Gold entered into multiple agreements with Waterton Global Value L.P. ("Waterton") and a subsidiary of Waterton, forming a joint venture with Gryphon's subsidiary, Borealis Mining Company ("Borealis"). Under terms of the agreement, Waterton converted $17.0 million, or approximately two-thirds of amounts due under its Senior Credit Facility with Gryphon Gold for a 60% ownership interest in Borealis. Gryphon Gold will own a 40% interest in Borealis and the amount due under the Senior Credit Facility will be reduced to $8.0 million, which is to be repaid in monthly installments commencing on January 31, 2013 through the end of the term in November 2014. The reduction of the amount outstanding under the facility will reduce the Company's monthly debt payments by approximately $1.0 million to $0.4 million.

Additionally, Gryphon Gold and Waterton entered into an operating agreement which will govern the operational and financial obligations of both parties with respect to the joint venture.

Third Quarter Fiscal 2013 Results

Operating expenses of $0.7 million for the third quarter were consistent with the prior-year period and the trailing second quarter. A decrease in employee related costs for the quarter were offset by increased asset retirement obligations due to the expansion of the heap leach pad and higher legal and audit fees. The Company realized a loss from operations of $1.3 million and $0.7 million for the third quarter of fiscal 2013 and 2012, respectively.

Interest expense, net of capitalized interest, was $0.5 million for the quarter, up from $0.4 million in the prior-year period for interest payments made on promissory and convertible notes issued to reduce potential future royalty obligations and debt incurred since April 2011.

For the third quarter of fiscal 2013, the Company had a net loss of $1.8 million, or $0.01 per diluted share, compared with a net loss of $1.2 million, or $0.01 per diluted share, for the same period of the prior year.

Liquidity Position

At December 31, 2012, the Company had cash on hand of $0.6 million, relatively consistent with the cash balance at March 31, 2012, but down significantly from the $4.5 million cash balance at September 30, 2012. The change in cash from the second quarter reflects ongoing operational investments to expand production capacity at the Borealis Property.

At December 31, 2012, the Company had $6.1 million of inventory. Additional current assets at the end of the third quarter included $0.1 million in accounts receivable, $0.7 million in prepaid expenses and $0.5 million in deferred debt costs.

Nine-Month Summary

Revenue for the nine-month period ending December 31, 2012 was $12.6 million on sales of 7,989 gold equivalent ounces compared with revenue of $0.9 million for the first nine months of fiscal 2012. The Company produced 7,709 gold equivalent ounces at a recovery rate of approximately 40%.

Operating expenses for the first nine months of fiscal year 2013 were $2.1 million, an increase of $0.2 million over the first nine months of fiscal year 2012, which reflects higher legal and audit fees associated with royalty negotiations, the senior credit facility and increased reporting associated with production.

Interest expense increased $1.3 million to $1.8 million from $0.5 million in the first nine months of fiscal 2012, due to the interest incurred on promissory and convertible notes issued to reduce the potential future obligations under the royalty liability and the credit facility. The Company also recognized a gain of $0.8 million in the nine-month period ending December 31, 2012 for the change in liability warrants issued in Canadian dollars.

Year-to-date fiscal 2013 net loss was $3.2 million compared with a net loss of $2.5 million in the prior-year period.

Focused on Expanding Production Capacity

The Company's strategy is to facilitate an increase in production volume and sales at Borealis to create operational leverage which will reduce cash costs per ounce and improve the recovery rate, as well as generate sufficient cash to invest in further exploration and development.

"While we experienced a setback with the failure of the ADR facility's boiler, we were able to quickly find a replacement and Borealis has begun pouring gold again," stated Donald B. Tschabrun, Chief Operating Officer of Borealis Mining Company LLC. "With production resuming and having Waterton onboard, we have shifted our focus back to investments aimed at expanding Borealis' production capacity including additional crushing capabilities and hauling equipment."

Third Quarter Fiscal 2013 Conference Call and Webcast

The Company will host a conference call and webcast to discuss its results, progress in advancing the Borealis Property and its recent joint venture agreement on Friday, February 15, 2013 at 1:00 p.m. ET. The teleconference call can be accessed by calling (201) 689-8560. The webcast can be found on the Company's website at www.gryphongold.com.

A telephonic replay will be available from 4:00 p.m. ET the day of the teleconference until Friday, February 22, 2013. To listen to a replay of the call, dial (858) 384-5517 and enter replay pin number 407895. An archive of the webcast will be available on the Company's website, along with a transcript, once available.

ABOUT GRYPHON GOLD:

Gryphon Gold holds a 40% joint venture interest in the gold producing Borealis Property, which is located in Nevada's Walker Lane Gold Belt. The Company and its joint venture partner Waterton Global Value L.P. are expanding the Borealis Property production capacity and advancing the development of the oxide heap leachable gold and silver historically identified that includes both pre-processed and unprocessed ore. The Borealis Property contains unpatented mining claims (including claims leased to the Company's wholly owned subsidiary) of approximately 20 acres each, totaling about 15,020 acres, which has successful past production.

Gryphon Gold routinely posts news and other important information on its website: www.gryphongold.com.

Safe Harbor Statement

This press release contains "forward-looking statements" and "forward-looking information" within the meaning of United States and Canadian securities laws, which may include, but are not limited to, statements relating to projected production rates, expected capital contribution, and plans to advance the development of the Borealis Property. Such forward-looking statements and forward-looking information reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions, including risks associated with the possible dilution of Gryphon's interest in Borealis if it is unable to meet its capital contribution or loan repayment obligations, risks associated with mining operations, risks associated with the installation and operation of new equipment, risks associated with the reduction in revenue from operations for the periods referred to in this release; risks associated with Gryphon's limited capital resources, risks associated with the oxide heap, risks associated with exploration, metallurgical design and project permitting and development and the risks and uncertainties outlined under the section headings "Forward-Looking Statements" and "Risks Factors and Uncertainties" in the Annual and Quarterly Reports, as filed with the SEC and Canadian securities administrators and in the Company's other reports, documents, and registration statements filed with the SEC (available at www.sec.gov) and with Canadian securities administrators (available at www.sedar.com). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company does not undertake to update forward-looking statements or forward-looking information, except as may be required by law. Full financial statements and securities filings are available on the Company's website: www.gryphongold.com and www.sec.gov or www.sedar.com .

FINANCIAL TABLES FOLLOW.

Non-GAAP Measures

Cash costs per ounce of gold represent non-U.S. Generally Accepted Accounting Principles ("GAAP") measurements that the Company believes provide management and investors an indication of net cash flow. Management also uses this measurement for the comparative monitoring of performance of mining operations period-to-period from a cash flow perspective. Cash cost per ounce is a measure developed by gold companies in an effort to provide a comparable standard; however, there can be no assurance that our reporting of this non-GAAP measure is similar to that reported by other mining companies. Cost of sales and other direct production costs was the most comparable financial measures calculated in accordance with GAAP to total cash costs.

Gryphon Gold Corporation
Cash Cost Per Ounce Reconciliation
(Unaudited)
(Stated in U.S. dollars)
	Three months ended		Nine months ended
	December 31, 2012
Cost of sales	$	2,141,627	$	11,576,597
Impairment on inventory		-		(323,570)
Royalties		(165,574)		(659,272)
Inventory change		515,994		(214,198)
Production cash costs	$	2,492,047	$	10,379,557
Gold equivalent ounces produced		1,929		7,709
Cash cost per ounce	$	1,292	$	1,346

Gryphon Gold Corporation
Consolidated Balance Sheets
(Unaudited)
(Stated in U.S. dollars)
		December 31, 2012		March 31, 2012
ASSETS
Current assets:
	Cash	$	576,038	$	602,343
	Accounts receivable		107,777		358,005
	Prepaid expenses		715,377		171,515
	Inventories		6,113,735		6,363,016
	Deferred debt issue costs		477,546		312,549
			7,990,473		7,807,428
	Property, plant and equipment, net		31,477,227		19,565,395
	Reclamation bonds and deposits		3,741,418		2,839,559
		$	43,209,118	$	30,212,382
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt	$	5,243,004	$	583,458
	Accounts payable and accrued liabilities		4,884,010		5,004,298
	Note payable		-		1,376,479
			10,127,014		6,964,235
	Long-term debt, net of discount and current portion		20,611,574		10,198,611
	Asset retirement obligation		3,814,005		1,675,877
	Warrant derivative liabilities		375,214		137,291
			34,927,807		18,976,014
Stockholders' equity:
	Common stock		194,644		194,103
	Additional paid in capital		54,355,144		54,114,438
	Accumulated deficit		(46,268,477)		(43,072,173)
			8,281,311		11,236,368
		$	43,209,118	$	30,212,382

Gryphon Gold Corporation
Consolidated Statement of Operations
(Unaudited)
(Stated in U.S. dollars)
		Three months ended				Nine months ended
		December 31,				December 31,
		2012		2011		2012		2011
Net Sales		$	3,215,242	$	931,794	$	12,608,898	$	931,794
Cost of sales and other direct production costs			3,547,914		930,399		11,576,597		930,219
Depreciation			264,648		41,498		1,022,683		41,678
Gross profit (loss)			(597,320)		(40,103)		9,618		(40,103)
Operating expenses:
	Exploration (refund)		15,111		(26,394)		43,313		68,860
	Salaries and consulting fees		231,246		364,297		757,124		836,465
	General and administrative		180,705		152,554		552,261		527,164
	Legal and audit		108,438		62,202		483,449		203,202
	Travel and accommodation		26,300		66,328		91,864		159,589
	Depreciation		7,143		17,714		20,616		35,176
	Write down of mining property		-		-		11,003		-
	Loss on disposal of equipment		3,347		-		2,917		-
	Asset retirement obligation accretion		81,095		10,284		189,817		27,280
			653,385		646,985		2,152,363		1,857,736
Loss from operations			(1,250,705)		(687,088)		(2,142,745)		(1,897,839)
Other (income) expense:
	Loss (gain) on foreign exchange		(1,146)		94,653		49,718		189,449
	Gain on warrant derivative liability		(9,288)		-		(801,643)		-
	Interest income		(122)		(7,926)		(3,773)		(11,153)
	Interest expense, net of capitalized interest		512,428		381,212		1,809,257		466,814
Net loss		$	(1,752,577)	$	(1,155,027)	$	(3,196,304)	$	(2,542,949)
Basic and diluted net income (loss) per share		$	(0.01)	$	(0.01)	$	(0.02)	$	(0.01)
Weighted shares used in calculating basic and diluted net income (loss) per share			194,644,091		193,992,040		194,644,091		177,175,447

Gryphon Gold Corporation
Consolidated Statements of Cash Flows
(Unaudited)
(Stated in U.S. dollars)
		Nine months ended
		December 31,
		2012			2011
Operating activities:
Net cash used by operating activities		$	(3,583,513)		$	(4,790,874)
Investing activities:
	Reclamation bonds purchased		(901,859)			(2,033,500)
	Purchase of property, plant and equipment		(3,460,450)			(8,732,729)
	Proceeds from sale of equipment		1,000			-
	Mineral property expenditures		-			(248,203)
	Option payment to amend and reduce royalty		-			(175,000)
	Proceeds from note receivable		-			2,975
Net cash used in investing activities			(4,361,309)			(11,186,457)
Financing activities:
	Repayment of borrowings		(2,271,761)			(46,693)
	Proceeds from borrowings, net		10,290,095			7,480,676
	Shares and warrants issued for cash		-			11,134,317
	Public offering costs		-			(1,198,621)
	Debt and share issue costs		(100,535)			(829,587)
Net cash provided in financing activities			7,917,799			16,540,092
Effect of foreign exchange on cash			718			(20,141)
Net increase (decrease) in cash			(26,305)			542,620
Cash, beginning of year			602,343			837,457
Cash, end of period		$	576,038		$	1,380,077
Reconciliation of net loss to net cash used by operating activities:
Net loss		$	(3,196,304)		$	(2,542,949)
Adjustments to reconcile net loss to net cash used by operating activities:
	Interest expense paid with debt		149,229			-
	Depreciation		1,043,299			76,854
	Asset retirement obligation accretion		189,817			27,280
	Loss on disposal of equipment		2,917			-
	Stock compensation expense, net of tax		229,997			181,041
	Common stock issued for services provided		11,250			-
	Amortization of debt offering costs		515,538			199,947
	Amortization of notes payable discount		465,314			199,877
	Unrealized gain (loss) on foreign exchange		(718)			20,141
	Impairment of inventory		323,570			-
	Write down of mining property		11,003			-
	Gain on warrant derivative liability		(801,643)			-
Other changes in operating assets and liabilities:
	Accounts receivable		(73,342)			(497,977)
	Accounts payable and accrued liabilities		(2,056,597)			1,239,602
	Inventories		147,019			(3,537,564)
	Prepaid expenses		(543,862)			(157,126)
		$	(3,583,513)		$	(4,790,874)