San Gold on cusp of resource update (August 25, 2008)

VANCOUVER–Exploration drilling in and around San Gold’s (SGR-V, SGRCF-O) operating Rice Lake mine, 230 km northeast of Winnipeg, Man., continues to pay off with high-grade gold. San Gold CEO Dale Ginn says the company is close to having enough results to upgrade its resource estimate at Rice Lake and to calculate “a nice, tight resource” for its recently discovered Hinge zone, 1.5 km northeast.

The drill campaign in the mine proper has focused on level-30 and 31 targets, 1,370 metres underground — near existing ore extraction but outside the current resource calculation. At the mine, San Gold has outlined 894,000 proven and probable tonnes grading 7.37 grams gold per tonne, with a further 875,000 tonnes grading 8.22 grams gold in the measured and indicated categories.

Highlights from drilling include: 6.4 metres of 27.84 grams gold in hole 12, starting at 31.2 metres down-hole; 12.6 metres of 41.3 grams gold in hole 13, starting at 37.5 metres; 12.5 metres at 41.1 grams gold in hole 36, starting at 15.2 metres; and 7.2 metres grading 23.5 grams gold in hole 18, starting at 24.8 metres.

Ginn says the mineralization primarily occurs in a sill-like gabbroic San Antonio Mine (SAM) unit, although it may in fact be a mafic volcanic flow. Based on drill results from the SAM unit at the nearby Cartwright deposit, San Gold geologists see metamorphic effects in underlying Bidou felsic pyroclastic rocks at the base of the SAM but not at the top. This suggests a volcanic flow, not a sill.

“Government geologists haven’t made up their minds on that one,” Ginn says.

Regardless, the results could add resources to San Gold’s roster. Ginn says he expects to have an updated resource for the Rice Lake mine by October.

“We’re under the gun from the board,” he says.

Nearby in the Hinge zone, the company has two drills churning out core and has started to sink a decline.

“We just collared it, which is nice, and we’re down to about 150 feet,” Ginn says.

The latest highlights from the Hinge zone include 3.9 metres grading 19.9 grams gold in hole 45, starting at 105.7 metres depth, and 6.5 metres of 9.9 grams gold in hole 55, starting at 201.2 metres. Earlier in the year, San Gold hit 6.2 metres grading 85.1 grams gold in hole 33, starting at 100 metres.

On the surface of the Hinge zone, Ginn says there are workings from the 1920s that predate the Rice Lake mine, which went into production in 1927 (and was then known as the San Antonio mine). “These are probably the result of small companies trying to bootstrap themselves.”

But the going would have been tough. San Gold surface trenching only produces results in the 3- grams-gold-per-tonne range, he says. “It isn’t until you get below 100 to 200 feet that it really blossoms.”

Like the updated resource at the Rice Lake mine, Ginn expects to have a resource calculation for the Hinge zone anywhere between September and October. If it goes to production, he says there will be “relatively little permitting” as the area is included in its Rice Lake mining lease.

All told, San Gold has 1.2 million proven and probable tonnes grading 7.37 grams per tonne at its Rice Lake project. That includes its Rice Lake mine, its smaller SG1 mine and the Cartwright deposit.

On news of the drill results, San Gold’s share price dropped 2 to close at $1.68.