More High Grade For San Gold Near Rice Lake

VANCOUVER — Drills keep hitting high-grade gold in new zones near San Gold’s (SGR-V, SGRCF-O) producing Rice Lake mine in Manitoba — and the company’s share price keeps climbing in response.

While continuing to develop the high-grade, underground Rice Lake gold mine, the company’s exploration work has been focused on the Hinge zone, a cluster of lenses roughly 1.5 km distant. San Gold has discovered and started to develop six deposits at Hinge within a year. The six zones lie within a 250-metre strike length and reach 400 metres depth, with the area open to expansion along strike to the northeast and southwest, as well as at depth.

The company is now exploring all six deposits via surface and underground drilling, as well as chip and bulk sampling where underground development has reached the area. As of late May, the company had tunnelled more than 230 metres within Hinge lenses 1, 2, and 3. In fact, San Gold discovered the No. 3 lens during definition drilling and development work at lenses 1 and 2. Lens No. 3 has since been developed with face samples averaging 25.3 grams gold over an average true width of 1.1 metres and a strike length of 61 metres.

Underground drills targeting the rest of lens No. 3 have returned consistently strong grades to date. In the latest batch of results, the No. 3 lens intercepts were 1.2 metres of 32.2 grams gold, 4.7 metres of 16.8 grams gold, 1.2 metres of 81.5 grams gold, and 1.8 metres of 30.5 grams gold.

At lens No. 1, recent drill intercepts include 5.2 metres of 13.7 grams gold, 2.4 metres of 34.6 grams gold, 2 metres of 25.3 grams gold, and 3.4 metres of 30.6 grams gold. At No. 4, drills have returned 2 metres of 30.1 grams gold, 2.6 metres of 36.2 grams gold, 2.2 metres of 50.6 grams gold, and 2.1 metres of 82 grams gold. No. 4 also provided the highest-grade intercept to date from the Hinge area: 2.3 metres averaging 207.1 grams gold. And lens No. 6 is also promising, providing intercepts such as 2.1 metres of 30.1 grams gold and 3.9 metres of 36.6 grams gold.

San Gold took a 3,700-tonne sample from Hinge lenses 1 and 2 and processed it in the Rice Lake mill. Now, the first stope material from those lenses is being stockpiled and is scheduled for processing shortly.

The Hinge zones developed to date consist of multiple zones and numerous vein offshoots, with mineralization consisting of pyrite and free gold hosted in quartz-carbonate- tourmaline veins. San Gold says ground conditions have been excellent to date and development continues towards both the east and west. The company is also developing inclines and declines to access zones at levels above and below the 100-metre level.

And now stepout drilling has hit an entirely new zone 500 metres farther east. Dubbed Cohiba, the new zone has already returned several high-grade drill intercepts that define a 100-metre strike length to date. The best intercept from Cohiba came in hole 22, which cut 2.1 metres grading 25.4 grams gold per tonne from 100 metres depth. Other strong intercepts include 2 metres of 21.4 grams gold and 2 metres of 14.1 grams gold.

The new zone appears to sit in the same stratigraphic horizon as the Hinge 1 lens; San Gold believes Cohiba may in fact be a continuation of that lens.

Discovering Cohiba prompted Dale Ginn, San Gold’s CEO, to state in a news release, “It is becoming obvious that the Hinge zone is not a ‘one-off’ but is part of a much larger mineralized system.”

San Gold has two drill rigs working to define the known Hinge lenses while a third rig searches for parallel veins to the north. A fourth rig is testing for new Hinge-like zones along strike and in doing so, already discovered Cohiba. San Gold has not updated the resource estimate for Rice Lake since late 2006. Work on a new resource estimate, to incorporate the Hinge zones, is under way and the results are expected soon.

The mill at Rice Lake can process 1,250 tonnes of ore per day, producing gold dor bars. The company has not yet reached a level of commercial production that generates positive cash flows. As of the end of March, San Gold had assets valued at $28.1 million, of which working capital accounted for $19.4 million.

San Gold’s share price has doubled since the beginning of the year and at presstime, sat near $2.16. The company has a 52-week trading range of 57¢-$2.56 and 255 million shares outstanding.