San Gold closes Timmins options spinout

2009-12-07 12:22 ET - News Release

Mr. Dale Ginn reports

SAN GOLD SPINS OFF MINERAL PROPERTIES

San Gold Corp. has completed its transfer, previously announced in Stockwatch on Oct. 29, 2009, to SGX Resources Inc., formerly a wholly owned subsidiary of San Gold, of its interest in five option agreements relating to mineral properties located in and around Timmins, Ont. As previously announced in Stockwatch on Oct. 29, 2009, San Gold determined to spin off its interest in the properties to SGX in order to form a new company that will explore and develop high-grade gold deposits in Canadian mining camps.

San Gold will continue to focus its activities on developing its high-grade gold mines, deposits and exploration properties in the Rice Lake belt of Manitoba and on developing advanced-stage deposits in other areas as they may be acquired according to a strict internal acquisition protocol. The transfer of San Gold's interests in the properties to SGX will have little or no effect on San Gold's overall operations.

San Gold shareholders will continue to benefit from any SGX exploration successes indirectly through San Gold's continuing equity investment in SGX. San Gold will not be obligated to enter into any future investments and shall not be responsible for any costs associated with SGX's continuing exploration activities. However, as previously announced in Stockwatch on Oct. 29, 2009, San Gold has agreed to issue certain shares of San Gold pursuant to the Timmins option agreements and San Gold has agreed to remain bound to issues those shares, subject to receipt of compensation from SGX for the issuance of such shares and subject to receipt of applicable regulatory and stock exchange approvals. San Gold received total consideration of $2.5-million in exchange for transferring the properties to SGX, an amount approximately equal to the funds so far expended on the properties. Payment to San Gold was in the form of 19 million common shares of SGX, at a deemed price of 13.16 cents per share ($2.5-million) in compensation for cash expended and initial opportunity risk undertaken by San Gold. San Gold currently holds a total of 25 million SGX common shares. San Gold also received a first right of refusal to purchase any mineral property or interest of SGX for a period of five years from the date hereof.

San Gold also wishes to announce the completion by SGX of the first closing of its private placement offering, previously announced in Stockwatch on Oct. 29, 2009, of up to 2.4 million units at a price of $2.75 per unit for gross proceeds of $6.6-million. Each unit consists of 10 SGX common shares issued as flow-through shares within the meaning of the Income Tax Act (Canada) and one regular SGX common share, for an effective cost of 25 cents per share. Each unit also included 11 SGX common share purchase warrants. Each warrant entitles the holder thereof to purchase one SGX common share at a price of 30 cents per share for a period of 12 months from the date of issuance. At the closing of the offering, SGX issued 1,449,440 units for total gross proceeds of $3,985,960. The SGX common shares and warrants, and any SGX common shares issued on exercise of the warrants, will be restricted from transfer for an indefinite period pursuant to applicable securities laws. As the offering is for up to 2.4 million units, SGX intends to hold a second closing where it will issue up to an additional 950,560 units.

Certain finders assisted SGX by introducing potential subscribers for the offering and each finder received fees equal to 5 per cent of the purchase price of the units sold to subscribers for the offering introduced by such finder.

Certain directors and officers of San Gold purchased an total of 145,445 units pursuant to the offering for total gross proceeds of $399,974 to SGX. Hugh Wynne, the executive chairman and a director of San Gold purchased 54,545 units, and Ben Hubert, a director of San Gold, purchased 90,900 units. These transactions are exempt from the formal valuation and shareholder approval requirements of Multilateral Instrument 61-101, Protection of Minority Security Holders in Special Transactions, because the fair market value of the SGX common shares and warrants acquired by these persons does not exceed 25 per cent of the market capitalization of San Gold.

Dale Ginn, the chief executive officer of San Gold, resigned as a director of SGX following completion of the offering in order to completely devote his services to the benefit of San Gold. Additionally, immediately prior to the closing of the offering, David Filmon and Douglas Stewart were appointed as directors of SGX.