Rice Lake JV cuts high-grade gold in eastern extension

Vancouver – Joint venture partners San Gold Resources (SGR-V) and Gold City Industries (GC-V) have tied into high-grade gold values while drilling the San Gold #3 zone, located about 6 km east of the Rice Lake mine site near Bissett in eastern Manitoba.

The latest drilling tested an eastern extension along the 15 km east-west trending shear structure that hosts the “mine” horizon within the Rice Lake greenstone belt. Results include:

• Hole SG-05-05 Drilling intersected 1.5 metres (from 128 metres) grading 4 grams gold per tonne, followed slightly further downhole by a 1.3-metre intercept running 4.9 grams gold;
• Hole SG-05-07 A 1.5-metre section (from 92.5-metres depth) averaged 12.4 grams gold;
• Hole SG-05-12 In the deepest hole drilled on the zone to date, a 3.5-metre interval (from 196 metres) assayed 22 grams gold, including a 1.1-metre section of 68.2 grams gold.

Gold mineralization in the San Gold #3 zone occurs over widths similar to those previously mined at the Rice Lake operation.

Four zones have so far been identified over 6 km of the 15 km east-west trend: the Rice Lake mine, the San Gold #1 deposit, and the San Gold #2 and #3 zones.

The Rice Lake mine, previously known as Bissett, commenced operation in the early-1930s and ran continuously until 1968, producing about 1.4 million oz. of gold from underground operations. In the mid-1990s, a few companies had a look at restarting the operation, with Rea Gold finally grabbing the baton and ambitiously sinking about $60 million in upgrading underground workings and infrastructure. Rea Gold slipped into bankruptcy prior to any significant production from the mine and the project was placed on the block by creditors.

South African producer Harmony Gold Mining (HMY-N) was looking for a beachhead in North America and grabbed the project in mid-1998 for about $14 million, recommencing production by the end of that year. Harmony operated the mine until late-2001 when low gold prices pushed the company to cease output and place the mine into care-and-maintenance.

In early-2004, San Gold and Gold City reached an agreement with Harmony to purchase the operation and all infrastructures, including mill and tailing management facility, for $7.6 million.

The joint venture partners are in the midst of a planned merger that will structure ownership of the project into a single entity, to be called Rice Lake Gold, facilitating easier investor participation and financing options. Completion of the merger is anticipated by mid-2005.