San Gold on cusp of resource update (August 06, 2008)

Vancouver – Exploration drilling in and around San Gold‘s (SGR-V) operating Rice Lake mine, 230 km northeast of Winnipeg, Manitoba continues to pay off with high grade gold. San Gold CEO Dale Ginn says the company is close to having enough results to upgrade its resource estimate at the Rice Lake mine and to calculate “a nice, tight resource” for its recently discovered Hinge zone 1.5 km to the northeast.

The drill campaign in the mine proper has focused on level 30 and 31 targets, 1,370 metres underground – near existing ore extraction but outside its current resource calculation. At the mine San Gold has outlined 894,000 proven and probable tonnes grading 7.37 grams gold per tonne, with a further 875,000 tonnes grading 8.22 grams gold in the measured and indicated categories.

Highlights from the drilling include 6.4 metres grading 27.84 grams gold in hole 12 starting 31.2 metres downhole, 12.6 metres grading 41.3 grams gold in hole 13 starting 37.5 metres downhole, 12.5 metres grading 41.1 grams gold in hole 36 starting 15.2 metres downhole and 7.2 metres grading 23.5 grams gold in hole 18 starting 24.8 metres downhole.

Ginn says the mineralization primarily occurs in a sill-like gabbroic San Antonio Mine (SAM) unit, although it may in fact be a mafic volcanic flow. Based on drill results from the SAM unit at the nearby Cartwright deposit, San Gold geologists see metamorphic effects in underlying Bidou felsic pyroclastic rocks at the base of the SAM but not at the top. This suggests a volcanic flow, not a sill.

“Government geologists haven’t made up their minds on that one,” Ginn says.

Regardless, the results could add resources to San Gold’s roster. Ginn says he expects to have an updated resource for the Rice Lake mine by October.

“We’re under the gun from the board,” he says.

Nearby in the Hinge zone San Gold has two drills churning out core and has started to sink a decline.

“We just collared it, which is nice, and we’re down to about 150 feet,” Ginn says.

The latest, July 30, highlights from the Hinge zone include 3.9 metres grading 19.9 grams gold in hole 45 starting 105.7 metres downhole and 6.5 metres grading 9.9 grams gold in hole 55 starting 201.2 metres downhole. In May, San Gold hit 6.2 metres grading 85.1 grams gold in hole 33 starting 100 metres downhole.

On the surface of the Hinge zone, Ginn says there are workings from the 1920s that predate the Rice Lake mine which went into production in 1927 (and was then known as the San Antonio mine). “These are probably the result of small companies trying to bootstrap themselves.”

But the going would have been tough. San Gold surface trenching only produces results in the 3 grams gold per tonne range, he says.

“It isn’t until you get below 100 to 200 feet that it really blossoms.”

Like the updated resource at the Rice Lake mine, Ginn expects to have a resource calculation for the Hinge zone anywhere between September and October. If it goes to production, he says there will be “relatively little permitting” as the area is included in its Rice Lake mining lease.

All told San Gold has 1.2 million proven and probable tonnes grading 7.37 grams per tonne at its Rice Lake project. That includes its Rice Lake mine, its smaller SG1 mine and the Cartwright deposit.

On news of the drill results, San Gold’s share price dropped 2 to close at $1.68.