San Gold cuts Rice Lake high grade (August 05, 2005)

Vancouver — Deep drilling by newly reorganized San Gold (SGR-V) has tied into high-grade gold near its idled Rice Lake Mine at Bisset, Manitoba.

Hole 05-47 on the San Gold #3 zone, about 6 km east of the Rice Lake mine, returned 6 metres (from 442 metres depth) grading 18 grams gold per tonne, including 2.5 metres of 37.3 grams gold within a strongly sheared and pyritized volcanic.

Drilling over 1.1 km of strike on the San Gold #2 and #3 zones indicates a possible continuous gold mineralized horizon open in both directions along strike and to depth.

Four major zones have so far been identified along 6 km of the 15 km long 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 both Bissett and San Antonio, first saw production in the early-1930s operating continuously until 1968 with total gold output of about 1.4 million oz., at an average grade of 9.6 grams gold. In the mid-1990s, a few companies examined restarting the underground operation, with Rea Gold stepping forward and ambitiously investing about $60 million in upgrading underground workings and constructing new surface infrastructure including mill and hoist. Rea Gold subsequently fell into bankruptcy prior to any significant production and the project was placed on the block by creditors.

South African producer Harmony Gold Mining (HMY-N), looking for a North American beachhead, grabbed the project in mid-1998 for about $14 million. Following modifications to the mill and underground workings, they restarted production in late-1998. Harmony operated the mine until late-2001, producing a total of about 110,000 oz. gold, when low bullion prices led to the decision to cease output and place the mine on care-and-maintenance.

An audit of Harmony’s resource estimate, conducted by engineers A.C.A. Howe International, reviewed a NI43-101 compliant measured and indicated resource of 1.15 million tonnes grading 8.9 grams gold. Within the resource, there is a proven and probable mineable reserve of 818,000 tonnes at 9.3 grams gold. Resources are accessible from existing underground workings.

The Rice Lake greenstone belt occurs in the western portion of the regional Uchi Sub-province that also contains the Red Lake, Pickle Lake and Musselwhite gold camps.

San Gold recently merged with Gold City Industries, consolidating ownership of the Rice Lake project. The company is working toward resuming production at Rice Lake by late-2005.

With 77 million shares outstanding, San Gold has a $35-million market capitalization given its recent trading level of 45 per share.