San Gold picks up $25 million for Rice Lake

Vancouver – Following a slew of promising drill results from the companys Rice Lake gold mine in Manitoba, San Gold (SGR-V, SGRCF-O) announced a $25-million bought deal private placement.

A syndicate led by Dundee Securities has agreed to purchase 17.9 million units of San Gold at $1.40 apiece for gross proceeds of $25.06 million. Each unit consists of one share and one-half of a transferrable share purchase warrant. The offering is expected to close by the end of the month, leaving San Gold cashed up to move ahead at Rice Lake.

San Gold opened Rice Lake in August 2006, a mine that produces through a two-shaft system and penetrates to 1610 metres depth. The deposit hosts measured and indicated resources of 874,600 tonnes grading 9.94 grams gold per tonne plus inferred resources of 1.7 million tonnes grading 9.94 grams gold, open at depth.

The company conducted a 33-hole drill program to explore the deposits depth potential. Exploration targeted the downdip area of the main vein sets mined by previous operators between 1932 and 1968, and again from 1999 to 2001.

Drilling intersected the main vein sets named 96, A, and C up to 150 metres below the 4,730-ft level, the lowest of the developed levels of the mine. For example, hole 12 returned 1.6 metres from the A vein grading 24.7 grams gold and hole 20B cut 3.4 metres of 8.6 grams gold from the C vein.

All in all, the 96 vein returned 13 intersections grading 5.49 grams gold to 50.1 grams gold over widths from 3 to 10 metres. The A vein, which strike roughly perpendicular to the 96 and is a stockwork or breccia-type vein, produced 19 intersections with grades 5.5 grams gold to 029.1 grams gold over widths from 1 metre to 30 metres. And the C vein, which runs parallel to the 96 but lies some 120 metres east, returned 9 intersections with grading from 5.5 grams gold to 20.6 grams gold over widths up to 6 metres.

In addition, the 33 drill holes in the program returned 17 intersections from new zones. Hole 16 intersected 1.1 metres of 13.4 grams gold from 77 metres downhole, followed 20 metres later by 6.9 metres grading 11.7 grams gold, from a previously unknown vein.

Moreover, the drilling results led San Gold to a new geological model. Past operators and explorers focused on the hanging wall or north portion of the host gabbro unit because they believed a slight chemical change in the host wall unit led to a greater concentration of veining and gold mineralization on the hangingwall side. From the recent results, San Gold geologists think the vein deposition is mainly structural in nature and should be prospective throughout the entire 200-metre thick host unit. Consequently, the thickness of the host unit from surface to maximum mine depth is now considered prospective for veining and gold mineralization.

San Gold opened another gold mine, the San Gold No. 1 mine, in April 2007 and also holds the nearby Cartwright deposit. The Rice Lake mine, San Gold No. 1 mine, and the Cartwright zone together make up the Rice Lake project, located 200 km northeast of Winnipeg, Man.Combined, the Rice Lake project holds proven and probable reserves of 1.3 million tonnes grading 7.4 grams gold, for 336,150 ounces contained gold.

San Golds share price fell slightly on news of the financing, losing 15 to close at $1.39 on 1.3 million shares traded. The company has a 52-week trading range of 91 to $1.66 and has 171.9 million shares issued.