From a San Gold email this morning...

"National Bank Financial Initiates Coverage

HIGHLIGHTS

Revitalizing a past producer

San Gold hopes to bring the past producing Rice Lake Mine (1.4 mln ozs) into commercial production in 2009. The mine, together with the nearby Cartwright and San gold #1 deposits has a resource base of 1.6 mln ozs, and a 1,250-tpd (tons/day) mill facility that can be expanded to 1,800 tpd at a low capital cost. Current ore is sourced from the D-Shaft area, and a ramp from surface is underway to exploit the recently discovered high-grade Hinge Zone, located approximately 1.3 kms east of the Rice Lake mill. Production for 2009 is estimated at 63,000 ozs at a cash cost of US$570/oz. Production ramps up to 100,000 ozs at US$430/oz in 2010, and hits 190,000 ozs at US$360/oz by 2012. The increase in production largely relates to mining higher grades from the Hinge Zone.

High-grade Hinge targets could be the future

Drilling in 2008 encountered high-grade gold mineralization (i.e. 2.49 opt [oz/ton] over 20.7 feet) in a new target known as the Hinge Zone. A decline is currently advancing on this zone to bring it into production. We have assumed that the Hinge Zone will contain a 1.0 mln ozs resource at a grade of 0.66 opt. An initial resource for the Hinge Zone is expected by the end of Q1 2009. There are at least six other potential Hinge Zone targets on the property. Should the Hinge Zone and adjacent target areas prove to be significant sources of high-grade ore, we believe that San Gold will become a prime candidate for consolidation.

NAV based valuation

Our NAV for San Gold is $2.02 per share. Junior producers have historically traded at 0.40 to 1.86x NAV (averaging 1.1). Given the increased momentum in the gold space, we believe that San Gold deserves a 1.1x multiple to NAV. On this basis, our target price is $2.20. The new high-grade discovery at the Hinge Zone should provide the operations with a new supply of high margin ounces. These ounces should dramatically improve the profitability of the Rice Lake Mine. As such the shares are rated Outperform."