San Gold loses $339,087 in Q1

2010-05-13 19:27 ET - News Release

Mr. Gestur Kristjansson reports

SAN GOLD CONTINUES OPERATIONAL IMPROVEMENT AND EXPLORATION SUCCESS IN FIRST QUARTER 2010

First quarter-results show substantial improvements on the production, exploration and development fronts for San Gold Corp., including the following highlights:

    -   The company experienced its third straight quarter of revenue growth.

    -   Significant new discoveries were made in the Rice Lake East area of
        the Rice Lake mine.

    -   Ongoing exploration also continues to suggest a relationship between
        recent near-surface discoveries and known ore bodies deep within the
        Rice Lake Mine. Substantial progress was made toward accessing the
        high grade 007 deposit.

    The following sections provide additional detail on these items.

    Production

    Record safety, production and revenue performance achieved.

    -   We have achieved our best ever safety performance. The loss time
        accident (LTA) frequency has been reduced to 1.21.

    -   The quarter saw record production of 63,323 tons of ore or the
        equivalent of 704 tons per day despite the negative impact of the
        loss of a DC hoist motor at D shaft resulting in loss of access to
        lower Rice Lake for two weeks.

    -   Operations achieved 28 days with production levels in excess of
        800 tons per day.

    -   The mines achieved a new single day record of 1,506 tons including
        1,006 tons from The Hinge.

    -   This resulted in 11,984 oz of gold sales at $1,167 per ounce for
        total revenues of $13,988,260.

    -   Grades were slightly below budget this quarter due to mining the
        narrower extensions in No. 1 and No. 3 veins at the Hinge mine
        resulting in higher % dilution coupled with a higher proportion of
        development at Rice Lake.

    Development

A new development drift has been created to gain access to the high grade 007 deposit.

    -   During the quarter the drift was advanced over 1,400 feet of a total
        distance of 2,300 feet.

    -   This new access will provide for bulk sampling of the new 007 deposit
        in the third quarter of 2010 which wil provide a supplemental ore
        feed to Rice Lake and Hinge mine sources.

Exploration

San Gold continues to confirm that the geological model it is using at the Hinge mine is proving to be a predictive model for identifying mineralization across the surrounding area.

Our company geologists are now viewing the Rice Lake mine and new deposits as a larger single mineralized system rather than a collection of discrete deposits.

    -   On January 20, San Gold announced significant drill results in the
        28 Level of the Rice Lake Mine.

    -   On January 25, San Gold announced the discovery of a series of high
        grade veins as well as large, broad breccia vein systems had been
        encountered above the eastern extremity of mine development along the
        26 Level.

    -   On March 1, San Gold announced its initial mineral resource estimates
        for the Hinge and 007 deposits in accordance with the guidelines set
        out in National Instrument 43-101 and NI Form 43-101F1. This report
        also revealed that the Hinge and 007 deposits are related to the Rice
        Lake Mine "RLM" vein shear-structures.

    -   On March 31, San Gold announced the discovery of a new high grade
        gold zone located beyond the eastern limits of known exploration from
        the 26 and 28 levels of the Rice Lake Mine. Confirmed in the
        subsequent period with hole No. 28-10-53 which was 121 g/T (3.53 opt)
        over 13.3 M (44 feet).

    Finance

    -   On March 26, San Gold announced it had closed a $26 million "bought
        deal" private placement at $4.05 per share.

    -   The financing, along with improvements across San Gold's entire
        operations, has resulted in adequate funding for the company's short
        and medium term plans.

 
              CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
                       FOR THE QUARTER ENDED MARCH 31

                                            2010               2009
                                        ------------------ ------------------

    REVENUE                              $     13,988,260   $      3,706,077

    OPERATIONS
      Operations                               13,969,189          6,683,089
      Asset retirement accretion                   41,780             37,909
      Amortization of property, plant,
       & equipment                                538,474            449,009
      Depletion of mineral properties           1,747,214            515,334
                                        ------------------ ------------------

    LOSS FROM OPERATIONS                       (2,308,397)        (3,979,264)

      Exploration                               2,662,783          2,004,010
      General and administrative                1,456,988          1,656,870
      Accretion of convertible debentures               -             39,806
      Amortization of financing fees                    -             50,029
      Royalty expense                           1,967,708          1,967,708
      Interest expense                             26,261            290,916
      Share based compensation                  1,790,722          1,170,750
                                        ------------------ ------------------

    LOSS BEFORE OTHER REVENUE                 (10,212,859)       (11,159,353)

    OTHER REVENUE AND EXPENSES
      Indemnification fee                          63,788             63,788
      Interest income                           1,979,186          2,623,633
      Equity loss of SGX Resources Inc.          (128,667)                 -
                                        ------------------ ------------------

    LOSS BEFORE INCOME TAX                     (8,298,552)        (8,471,932)
      Future income tax recovery                7,959,465                  -
                                        ------------------ ------------------

    LOSS AND COMPREHENSIVE LOSS FOR THE
     YEAR                                        (339,087)        (8,471,932)


    DEFICIT, BEGINNING OF THE YEAR           (152,254,876)      (121,011,395)

      Share issue costs                        (1,539,783)                 -

      Future income tax on flow-through
       shares                                  (7,959,465)                 -
                                        ------------------ ------------------

    DEFICIT, END OF THE YEAR             $   (162,093,211)  $   (129,483,327)
                                        ------------------ ------------------
                                        ------------------ ------------------

    LOSS PER COMMON SHARE: Basic &
     diluted (Note 17)                   $              -   $          (0.15)

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This release is based on quarterly statements available for review at www.sedar.com.

We seek Safe Harbor.