San Gold plans to nearly double production in 2011

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

In the first quarter San Gold anticipates production of 15,000 ounces, rising to 25,000 ounces 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. for 2011, the company reports. Total cash costs per oz. in 2010 reached US$1,105 per oz., down from US$1,221 per oz. in 2009.

The company anticipates throughput will reach 1,400 tons per day by the end of 2011 and average 1,200 tons per day for the full year.

In addition the company plans to spend more than $20 million on exploration in 2011, 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, and is also planning to access new faces at five zones.

Last year 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 mine is about 230 km northeast of Winnipeg in the province of Manitoba.

“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 director at Dahlman Rose & Co. wrote in a research note to clients. “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 buy on the stock with 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. Over the last year it has traded in a range of $2.52 per share (Mar. 11 2011) and $5 per share (May 12, 2010). The company has about 301 million shares outstanding.