San Gold’s Rice Lake Gold Project is located about 145 miles by road to the northeast of

Winnipeg, Manitoba. The project is located in the past-producing Rice Lake gold belt. The

Rice Lake Mine (formerly known as the San Antonio or Bissett Mine) produced over 1.4

million ounces of gold from approximately 5.8 million tons of ore with an overall average

grade of 0.25 opt(ounces per tonne). Of that total, 1.35 million ounces was produced by San

Antonio Gold Mines (over 36 years) and 210,000 ounces by Harmony Gold Canada (over two

years).

In the 1990s and early 2000s, the Rice Lake mine had over $120 million spent on

improvements by Rea Gold ($90 million) and Harmony Gold ($30 million). In 2004, a joint

venture company (owned by the two predecessor companies of San Gold) purchased the

mine, mill complex (1,250 tpd), 550,000 ounces of audited gold resources, and a small mine

claim package from Harmony for $7.5 million. In 2005, the joint venture partners merged and

San Gold Corporation was the surviving entity. The company then commenced exploration of

the mine horizon and carried out a refit of the mine and mill in order to resume operations in

2006.

At present, ore is being sourced from the Rice Lake Mine and the San Gold #1 (SG-1)

deposit. The company is also exploring the Cartwright deposit and the recently discovered

high-grade New Hinge Zone (Figure 1).

The Rice Lake Mine – a past producer gets resurrected

The Rice Lake Mine utilizes a two-shaft system. The A-shaft extends to a depth of 4,200 ft

below surface. It then connects to the D-shaft via a 5,000-foot long rail crosscut. The D-shaft

currently extends to a depth of 1,200 ft and there is a spiral ramp from the bottom of the

D-shaft (32nd level) to a total depth of 5,290 ft.

The Rice Lake mine contains measured and indicated resources of 964,100 tons at a grade

of 0.29 opt (275,300 contained ounces). In addition, there are inferred resources of 1.88

million tons at a grade of 0.29 opt (551,620 contained ounces). This deposit remains open at

depth.

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Source: Company reports

At present, mining activities are focused in the D-Shaft area. The mining is exploiting quartz

veins within the mine sequence “gabbro” (similar to areas previously mined). A mining

contractor is exploiting the deeper levels of the D-Shaft area using ramp access and

mechanized mining. The targeted mining rate from this area is 300 tpd at a grade of about

0.25 opt. San Gold mining personnel are working the upper levels using conventional

shrinkage stoping (Figure 2). The targeted mining rate here is also 300 tpd, but at a slightly

higher grade of 0.3 opt

Ore from the D-Shaft is transported by rail to the A-Shaft using electric locomotives and then

hoisted to the surface for milling.

San Gold #1 (SG-1) Mine – an easily exploited ore source

The SG-1 deposit, which is located about 1.9 miles to the east of the Rice Lake mill, is a

quartz-carbonate altered shear zone in volcanic rocks with locally up to 3-5% pyrite. The

deposit is exploited via an underground ramp using mechanized mining (modified cut and fill).

The targeted mining rate from this area is about 300 tpd (tonnes per day) at a grade of 0.15

opt.

The SG-1 mine contains measured and indicated resources of 283,200 tons grading 0.22 opt

(62,430 contained ounces). In addition, there are inferred resources of 936,500 tons grading

0.22 opt (206,900 contained ounces).

About 2 miles further east of SG-1, the company has also delineated two other shear-hosted

gold deposits known as SG-2 and SG-3. These deposits contain indicated resources of

173,100 tons at 0.20 opt (35,320 contained ounces), and inferred resources of 195,600 tons

grading 0.26 opt (50,210 contained ounces). The company believes that there is good

potential for additional shear hosted deposits along the Normandy Creek Shear zone.

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Source: NBF

Cartwright and Hinge deposits – ramp access currently being developed

The Cartwright deposit is located about a mile northwest of the Rice Lake Mine in a similar

package of rocks. The company has recently collared a decline that will be used to access

both the Cartwright and New Hinge Zone Discovery (Figure 3). The Cartwright deposit is

expected to be mined using shrinkage methods, most likely at a rate of about 300 tpd by

mid-2009. The estimated capital cost for Cartwright is $7 million.

The Cartwright deposit contains an indicated resource of 136,200 tons grading 0.22 opt

(29,830 contained ounces). In addition, there are inferred resources of 1,761,200 tons

grading 0.26 opt (388,940 contained ounces).

The New Hinge zone is located about a mile northeast of the Rice Lake Mine, and is readily

accessible by gravel road. The Hinge Zone was discovered earlier this year, and has yielded

numerous high-grade intersections. The first eight holes averaged 18.4 ft with a grade of 0.93

opt gold between surface and a depth of about 1,300 ft. A previous drill hole in 1994 may have

hit the Hinge Zone at a depth of 5,100 ft below surface. This hole yielded 0.22 opt over 15.2 ft.

The company believes that the new Hinge deposits have the potential to add significant

ounces to the resource base and accelerate the company’s production profile. The company

says that it will take about 2,100 ft of ramp development to reach the New Hinge zone. The

estimated capital cost is $5 million.

At present, the Rice Lake Mill is configured to process 1,250 tpd of ore. The company has

sourced a new jaw crusher that should allow them to increase capacity to between 1,500 and

1,800 tpd. At present, the company is operating the mill at a rate of about 500 tpd. San Gold is

targeting a 50 tpd increase per month in the milling rate with a goal of reaching 800 tpd by

year-end.

About 50% of the gold is recovered in a gravity concentrate with the balance coming out of the

flotation and carbon-in-leach (CIL) circuit.

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Source: NBF

Production this year is expected to be about 40,000 ounces at a cash cost of around US$400

per ounce. When the Hinge zone comes on line (potentially by year-end), the company hopes

to get the annual production rate up to about 140,000 ounces.

Exposure to power and fuel costs is relatively low. The rate for electric power is only 2.5¢ per

KWhr, and much of the underground utilizes electric powered equipment, reducing the

dependence on diesel fuel. Mining costs are currently in the range of $50 to $60 per ton,

processing costs range from $12 to $15 per ton (depending on volume), and G&A costs are

$10 to $15 per ton.

San Gold currently owns 29,650 acres in the Rice Lake Greenstone Belt and has access to

an additional 7,400 acres through option agreements and joint venture agreements with other

explorers in the Belt. The company controls a land position about 7.5 miles long that runs east

and west along the mine horizon. Also, there is a large zone of alteration and several old

mining shafts from the 1920's and 1930's on holdings in the SE portion of the Belt. Over time,

the company hopes to explore these various target areas, however, at present most of the

activity is focused on the mine tenements.

A lot of the previous production at the Rice Lake Mine came from veins that were developed

near the hanging wall contact of the mine unit (thought to be a gabbro). Recent exploration

has successfully outlined new veins along the footwall contact of the mine sequence (21 ft at

0.90 opt) potentially opening up a large area for further new discoveries (from surface to a

depth of 5,000 ft).

The New Hinge Zone discovery is one of at least seven hinge zones that have been

postulated to occur on the property. These hinge zones are roughly parallel, about 1,200 ft

apart, dip to the north-west and are made up of quartz and carbonate veins containing gold

mineralization. Most of the proposed hinge zone targets have old workings that date back to

the 1920s and 1930s. The units that contain the new veins are located in a sequence of mafic

to intermediate volcanic (pyroclastic?) rocks which lie approximately 4,900 ft into the hanging

wall stratigraphically above and geographically to the north of the mineralized mine unit of the

Rice Lake Gold Mine.

To date, a total of at least four sub-parallel new veins have been discovered in the Hinge area,

as well as numerous uncorrelated breccia zones within 330 to 1,300 ft of surface. This zone

remains open along strike to the northeast and to the southwest as well as at depth. Three

diamond drills are currently drilling in the Hinge area (Figure 4), and a fourth drill is testing

another potential hinge zone.

Over the balance of the year, exploration and development spending in the Rice Lake area is

expected to be $5-$6 million (funded at present from existing flow through proceeds). The drill

budget for the Hinge Zone could be increased depending on success.

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Source: NBF

Over the past few months, San Gold has been building an exploration portfolio in Timmins,

Ontario. The company recently announced that it had acquired additional properties along the

Procupine-Destor fault (PDFZ) to the east, south and west of the City of Timmins. The new

properties are located in Ogden, Deloro, Shaw, Matheson, Bristol and Carscallen townships.

The company’s land holdings now total about 9,200 acres consisting of 1,350 acres of

patented claims and 7,850 acres of staked claims.

The new properties include the Big Marsh Property that is located in Carscallen and Bristol

Townships approximately 12.5 miles west of Timmins along Highway 101. The Big Marsh

property, consisting of two claim groups, is located in the West Timmins area that is being

intensively explored and developed for gold production by other companies. The Big Marsh

property lies across the Bristol Splay running off the main Porcupine-Destor regional fault.

The gold target rocks consist of mineralized zones that have been tested by 1940s drilling

and are known to contain gold values. The Big Marsh Property is also prospective for base

metal deposits since the central and northeastern parts of the property contain rhyolites that

are equivalent in age and composition to the Kidd Creek rhyolite.

The Deloro and Shaw Township Properties consist of the Delnor, Lynx, Bow Tie, Slade,

Hunter and Odyssey claim groups. All of these properties are located immediately south of

the PDFZ and are located approximately 6.2 miles southeast of Timmins. The West Ogden

property is located on Highway 101 approximately 5 miles west of Timmins and the Matheson

property is located in Matheson Township approximately 6.2 miles east of the Pamour mine

site.

In March, San Gold acquired the Dalton property, which covers about 930 acres in Mountjoy

and Ogden townships, adjacent to the southwest boundary of the City of Timmins, and

adjacent to claims held by Goldcorp that were formerly part of the Placer-Kinross Porcupine

Joint Venture.

The Dalton property lies 1.0 to 2.2 miles north of the PDFZ. It is underlain by distinct rock

packages, the younger Temiskaming Group consisting of conglomerates, turbidites,

greywackes and slates that are in unconformable contact with the underlying Tisdale basic

volcanic rocks, the later being hosts to many of the gold deposits in the Porcupine gold camp.

Like the Rice Lake Belt, San Gold believes that the Timmins camp still has unrecognized

exploration potential, and to this extent, the Company intends to systematically explore its

property holdings over the next three years utilizing contractors and geologists from the

Timmins area.