TD Waterhouse published a three page report this morning on SGR. They are maintaining a buy rating and raising the target from $3.00 to $3.25.

Here are a couple of excerpts from the report:

"The drill results were positive, particularly the potential discovery of a new zone of mineralization, while the progress the company is making toward production continues to be slower than expected. We view San Gold as primarily an exploration-driven story and therefore see the news as a moderate net positive."

"The ongoing bulk sample of the Hinge Zone is progressing more slowly than we had expected. We were anticipating 5,000 tons/month to be processed in Q2, but the company has only milled 3,700 tons to date. At a rate of 200 tpd, we expect the bulk sample will not be complete until July. Moreover, first quarter production from the Rice Lake mine averaged 296 tpd, which was materially lower than our forecast. As a result, we are lowering our 2009 production forecast to 46,000 ounces. Within a largely fixed cost structure, this has a significant impact on our financial forecasts."

TD's estimates of gold production are listed as follows:
2009: 45,553oz.
2010: 119,206oz.
2011: 161,215oz.
2012: 220,255oz.

They summarize their report as follows:

"We view San Gold as an exploration-driven story and the results on this front continue to impress and, in our view, more than offset the slower than expected progress toward production. We are particularly enthused by the potential discovery of a new zone of apparently high grade mineralization 500 meters to the east of the known Hinge Zone and look forward to assay results within two weeks."