SGR AGM June 23, 2008 – Part 3
Question and Answer Time

[Note: Elementwise separately compiled a list of questions and answers which he has posted and which will likely overlap this chronicle in many places. This rendition is not intended to compete with his work, which I expect will be more detailed, but is simply a record of what happened in the last part of the meeting, written from my own perspective and then double-checked by Elementwise for correctness].


1. How many ounces will you produce per year by 2102? Projection is for 150,000 ounces per year, based on .23 ozs per ton.

2. Is anything more being planned for promotion? The most effective thing right now has been one-on-one meetings with heads of mutual funds. Whereas up to a year ago we could not get an audience with them, now we are being asked to come in and present to them. (We have an advantage now since we are not asking for any financing).

3. Someone noted that we should include a chart in the presentation showing that our share price is undervalued when considering all we have, when compared to other juniors.

4. Are we valued as a typical junior on the basis of $250 per ounce as a gold price or more like a senior using $500 or more as a gold price? Dale said these valuations are all over the map.

5. Is SGR planning to seek any more financing to expand exploration? No plans for that at this time, but if they did, it would definitely go toward developing the hinge zone.

6. Someone suggested that SGR should join with other juniors in the new initiative aimed at thwarting the shorting of junior gold companies by bankers. Dale agreed that it sounded logical, and he will give the matter some review to see whether it would really be beneficial, keeping in mind that SGR needs to keep good relationships with its bankers too.

7. How is employee retention now as compared to a year ago when they had difficulties in this area? Things have stabilized a lot now. Adding contractors has introduced a higher standard and adding Mr. Ian Berzins, the new COO, will also help.

8. Has the company considered other alternative financing such as convertible debentures or royalty-connected financing? Nothing else is being considered at this time.

9. When does SGR expect to be cash flow positive? Later this year, likely around the end of the third quarter.

10. What level of production does SGR now have? SGR processed 450 tons of ore per day in May and is hoping for better in June. Since January 1st, SGR has produced approx. 3000 ounces of gold in Q1, and it will be between 6000 and 7000 ounces in Q2. The target now is for 40,000 ounces for 2008.

At this point, the new Chief Operating Officer, Ian Berzins, was introduced. He mentioned that SGR is developing a world-class ore body, and that we now need to step-up the production. The grade has still been low on account of a fair bit of developmental ore still being processed. They will be working at getting some of their best former people back on the workforce and ramping up production.

11. When do they expect to get D Zone production to the mill? SGR has been shrinkage mining in 3 veins for about 6 months, so the ore is not coming out from there yet, but it will be in the 2nd half of 2008. There should be between 100 and 150 tons per day coming out from there. That will increase the production going through the mill from the current 400 ozs from RLGM and 200 ozs from SGR1, upping the amount from RLGM. The stockpile of broken ore has grown bigger from the 30,000 tons they had before; they expect to have an ongoing stockpile going forward as some ore gets taken to the mill and other new ore is added to the stockpile.

12. Will they need to expand the workforce further? Not much now; the work crews have more experience all the time and adding the contractors has also helped.

13. Is SGR able to meet its estimates for production since last year you had projected 40,000 ounces production in 2007? Dale admitted that the company is way behind on achieving previous estimates, partly due to financing delays when CIBC financing fell apart last year, and partly due to some workforce issues. But SGR can now produce at a cost of $350/ton based on a steady rate of 800 tons of production/day.

14. Is SGR pursuing any joint-ventures with others? SGR is fulfilling its current JV commitments, but is more focused on developing the new zones on its own property.

15. How many drills are operating? There are currently 4 surface drills (2 on the recent Hinge zones, 1 on the “fringe of the hinge”, and 1 exploring the newer hinge areas. The are 2 to 4 drills underground and more underground drills are expected. The underground drills are working in the relatively untouched deep east zones and at 26 level.

’16. What will be the cut-off point for the next 43-101? That is a difficult question as we were adding ounces so quickly. It doesn’t make sense to issue a 43-101 when you have 2+ million ounces when you know that you would have another 1 million to add if you wait just a little longer. But, they are going to cut it off shortly, including what they now have from the recent Hinge Zones. (see exact quote in elementwise’s post)

17. There were previously plans to build a ramp from 26 level; is that still happening? They need to split the high grade zones into manageable blocks. They now have an area where there is 1000 feet without access, so this must be split up. By putting a ramp down into this zone they can develop manageable blocks to create shrinkage stopes. Although the ramp is started, it is not far along yet as they are concentrating on first drilling off this zone from the 26th level to better define the veins for actual mining in order to justify the capital expense of the complete decline. Therefore, they need to get more ore per vertical foot which they may be able to do going laterally more than vertically right now. The drilling is required to determine the best way forward. Ian B. added that there has been a tendency to spread out and work in diverse areas before, and they want to try concentrating efforts more in one area now to help keep cost of production lower.

18. Are you “forward selling” inventory? No.

19. If you do any further financing, would it be practical to go to your existing shareholders first through a rights offering? It was agreed that this made sense.

20. In SGR1, is the method of mining still long-holing or shrinkage mining now? Some of both, but we now need to do more drilling ahead to make it bigger.

21. What should our share price be? The market has not been friendly to our sector in general, but the SGR story and plan has made this company more attractive than others and helped our share price. The new discoveries have helped drive the share price up recently. Dale said: “Nobody else is finding high grade near surface, near a mill, on permitted land ….there is no question that this is driving what is going on now.”

22. Will the new 43-101 also help drive up the share price? When will it be out? It is expected that the 43-101 will help the share price, but Dale would give no guidance on a date; it is being worked on right now, and since dates have been missed too often in the past, that it is better to not give a date.

23. Is the mill running on and off still? Yes, running 4 to 6 days and then shutting down for maintenance. Then they build up inventory and run it again.

24. How long does it take to get drilling results? It usually takes between 6 to 8 weeks to get results; sometimes you have to get after the labs for them. Then they have to get all our checks back before they can confirm the numbers and release them.

25. Does SGR have any issues with acid drainage from its tailing ponds? No, they are actually an acid consumer because there is carbonate in the rock that actually works against acidity so there has not been an acid issue.

26. Comments on recent mine issues by delegations? There have been about 10 visits in the last year, and in exponentially increasing numbers.

Hugh Wynne then took the floor and introduced the new Director, Michael Power. Hugh then made some closing remarks, thanking everyone for their patience: seldom does everything go according to plan, but hopefully there will be much more progress to report by the next meeting.