San Gold cuts Rice Lake high grade (August 22, 2005)

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

Hole 05-47 on the San Gold no. 3 zone, about 6 km east of the Rice Lake mine, returned 6 metres from 442 metres below surface grading 18 grams gold per tonne, including 2.5 metres of 37.3 grams gold within a strongly sheared and pyritized volcanic rock.

Drilling over 1.1 km of strike on the San Gold no. 2 and no. 3 zones indicates a possible continuous gold mineralized horizon open in both directions along strike and at 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 no. 1 deposit, and the San Gold no. 2 and no. 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. In the mid-1990s, a few companies examined restarting the underground operation, with Rea Gold stepping forward and investing about $60 million in upgrading underground workings and building new surface infrastructure, including a mill and hoist. Rea Gold 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, Harmony restarted production in late-1998 and operated the mine until late-2001, producing about 110,000 oz. gold. In early 2002, low bullion prices forced an end to production.

An audit of Harmony’s resource estimate, conducted by engineers A.C.A. Howe International, reviewed a measured and indicated resource of 1.15 million tonnes grading 8.9 grams gold, which is compliant with National Instrument 43-101. Within the resource, there is a proven and probable reserve of 818,000 tonnes grading 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 thereby consolidating ownership of the Rice Lake project. The company is working toward resuming production at Rice Lake by late-2005.

San Gold is trading at about 45 per share with 77 million shares outstanding.