San Gold picks up $25M for Rice Lake

Vancouver — Following a slew of promising drill results from the company’s Rice Lake gold mine in Manitoba, San Gold (SGR-V, SGRCF-O) has 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 half a transferable 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, a mine that produces through a two-shaft system and penetrates to 1,610 metres depth, in August 2006. The deposit, which is open at depth, 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.

The company conducted a 33-hole drill program to explore the deposit’s 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 strikes roughly perpendicular to the 96 and is a stockwork or breccia-type vein, produced 19 intersections with grades between 5.5 grams gold and 29.1 grams gold over widths from 1 to 30 metres. And the C vein, which runs parallel to the 96 but lies some 120 metres east, returned 9 intersections grading from 5.5 grams gold to 20.6 grams gold over widths of 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 down-hole, followed by 6.9 metres grading 11.7 grams gold at 97 metres, from a previously unknown vein.

Moreover, the drilling results led San Gold to a new geological model. Past operators and explorers focused on the hangingwall 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 mine, San Gold No. 1, in April 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 contained ounces gold.

San Gold’s 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.