San Gold to nearly double production in 2011

San Gold (SGR-T, SGRCF-O) produced 43,498 oz. of gold last year and plans to nearly double that amount this year to 80,000 oz. 

In the first quarter of 2011, San Gold anticipates production of 15,000 oz., rising to 25,000 oz. in the fourth quarter, and believes the increased throughput will lower production costs.

Cash costs are budgeted to start the year at about US$1,060 per oz. and end the year at about US$650 per oz., for an average cash cost of US$825 per oz., the company reports. Total cash costs per oz. in 2010 were US$1,105 per oz., down from US$1,221 per oz. in 2009.

Throughput is expected to reach 1,400 tons per day by year-end but will average 1,200 tons per day for the full year.

In addition, the company plans to spend more than $20 million on exploration this year, focusing on near-surface zones along the Shoreline Basalt (a new mineralized corridor in a mafic volcanic unit that was discovered in 2010) and at depth along existing zones. It also aims to access new faces at five zones.

In 2010, the company reported revenues of $58 million, up from $27.8 million in 2009, and an operating loss of $4.4 million, down from an operating loss of $11.8 million in the year earlier. The comprehensive loss from operations in 2010 reached $22.2 million, down from $29.5 million in 2009.

San Gold’s Rice Lake gold mine is about 230 km northeast of Winnipeg, Man.

“Slower-than-expected progress toward filling the mill and high development costs have negatively impacted costs and hampered cash flow up to this point,” Adam Graf, a Dahlman Rose & Co. director, writes in a research note. “However, we believe that 2011 could be a turning point, as higher production from surface mines fills the mill – spreading fixed costs across a much larger production base.”

Graf has a 12-month target price on the stock of $3.02 per share. 

At presstime in Toronto, San Gold was trading at $2.53 per share. It has a 52-week range of $2.52 (March 11, 2011) and $5 per share (May 12, 2010). The company has 301 million shares outstanding.