San Gold Q2 Results: Continuing exploration success and improved operating results

BISSETT, MB, Aug. 16, 2010 (Canada NewsWire via COMTEX News Network) --

TSXV:SGR - OTCQX:SGRCF) San Gold Corporation is pleased to announce the release of its second quarter financials statements and related management discussion and analysis. The Company continued to achieve strong exploration results through the second quarter while implementing processes to improve its financial position and operating cost profile.

San Gold achieved a quarterly record of 63,024 tons mined during the quarter or 693 tons per day and milled 58,098 tons of ore or the equivalent of 638 tons per day during the second quarter. The Company also completed 1,400 feet of ramp development during the period toward the high-grade, near-surface 007 zone. This drift reached the 007 zone near the latter part of the quarter at approximately 240 meters (800 feet) below surface. Bulk sampling of this zone and subsequent development from this level as well as initial access from surface will be carried out for the remainder of this year.

The Rice Lake Mine continues to develop and produce from the 98, 98 FW and RL East veins at the eastern ends of the 26 and 28 levels. Low volumes combined with older infrastructure and the deeper locations render this ore is relatively expensive to extract compared with San Gold's newer near-surface ore bodies. The Rice Lake mine therefore continues to provide dual utility in terms of the production and development of these eastern zones and also in providing an optimum platform for the exploration and future access to potential depth extensions of the Hinge, 007, L-13 and Emperor Zones.

In cash terms, the quarter generated a modest operating contribution before non-cash items and exploration and general and administrative expenses. Operating profit margin (please see discussion of Non-GAAP Financial Measures in the MD and A) per ounce is calculated as $543 ($511 USD) at the Hinge mine and an operating loss per ounce of $324 ($305 USD) at Rice Lake. Cash cost per ounce at the Hinge was $685 ($645 USD) and $116 ($109 USD) per ton, cash cost at Rice Lake was $1,552 ($1,462 USD) per ounce and $283 ($267 USD) per ton. In total this meant the overall cash cost was $1,084 ($1,021 USD) per ounce and $190 ($179 USD) per ton - still developmental but materially improved over the same quarter last year of $280 ($264 USD) per ton and $2,833 ($2,669) per ounce cash costs. (Please see discussion on Non-GAAP financial measures within the MD and A for a detailed calculation and reconciliation of these figures to our GAAP financial statements). Note that 5,000 tons were mined at the Hinge that was not milled in the quarter and the above noted figures are calculated on milled tonnage only.

The Company recognized revenue of $12.6 MM for the quarter and $26.6 MM for the year to date. The result was a net loss from operations, similar to the prior quarter, of $2.0 MM for the quarter and a $4.3 MM for the year to date. The comparative quarter in the same period last year showed an operating loss of $6.9 MM and $10.9 MM for the prior YTD. The comprehensive loss from operations for the quarter was $7.9 MM for the quarter and $8.2 MM for the YTD in comparison to a loss of $10.8 MM in the same quarter of the prior year and $19.3 MM for the prior YTD.

San Gold drilled 22,250 meters (73,000 feet) of exploration from surface, 10,700 meters (35,000 feet) of underground drilling in the Rice Lake Mine, and 6,700 meters (22,000 feet) of underground drilling at the Hinge Mine. These programs were focused on further defining and extending the Hinge, 007, and RL East zones while pursuing new exploration targets such as the Emperor zone. Drilling especially focused on extending the known limits of the 007 zone down plunge and along strike, as well as infill drilling in order to upgrade resources to reserves.

The company also initiated a "bought deal" that resulted in substantial improvements to its financial position early in the subsequent period. On Aug. 4, the company raised net proceeds of $79.9 million through the issuance of 21,133,000 common shares.

Dale Ginn, CEO noted that: "We are encouraged by our performance during the first half of 2010, though we recognize there is considerable need to improve production rates at the Rice Lake Mine. Our outstanding success in discovering new high grade gold deposits near surface such as the 007 has forced us to remain in a development mode longer than anticipated. We look forward to lower costs and higher volumes as the near surface zones become much more prevalent in our production mix going forward. We also anticipate additions and enhancements to our management team in order to focus more closely on our development and production growth."

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                             San Gold Corporation
               CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
                                 (UNAUDITED)
    -------------------------------------------------------------------------
                    Three month period ended       Six month period ended
                      June           June           June           June
                      2010           2009           2010           2009
                 -------------- -------------- -------------- ---------------

    REVENUE      $  12,606,691  $   3,537,833  $  26,594,951  $   7,243,910


    OPERATIONS
      Operations    11,043,545      9,369,781     25,162,734     16,052,870
      Asset
       retirement
       accretion        41,780         37,909         83,560         75,818
      Amorization
       of property,
       plant and
       equipment       579,959        458,191      1,118,433        907,200
      Depletion
       of mineral
       properties    2,899,029        588,507      4,646,243      1,103,841
                 -------------- -------------- -------------- ---------------

    LOSS FROM
     OPERATIONS      1,957,622      6,916,555      4,416,019     10,895,819

      Exploration    2,161,521        725,338      4,674,304      2,729,348
      General and
       adminis-
       trative       1,900,677      1,868,174      3,357,665      3,525,044
      Accretion of
       convertible
       debentures            -         39,807              -         79,613
      Amortization
       of financing
       fees                  -         50,029              -        100,058
      Royalty
       expense       1,967,708      1,967,708      3,935,416      3,935,416
      Interest
       expense          41,520        299,189         67,781        590,105
      Share-based
       compensation  1,746,104        922,983      3,536,826      2,093,733
                 -------------- -------------- -------------- ---------------

    LOSS BEFORE
     OTHER REVENUE   9,775,152     12,789,783     19,988,011     23,949,136

    OTHER REVENUE
     AND EXPENSES
      Indemnification
       fee              63,788         63,788        127,576        127,576
      Interest
       income        2,180,589      1,928,430      4,159,775      4,552,063
      Equity loss
       of SGX
       Resources Inc.
       (Note 7)       (374,497)             -       (503,164)             -
                 -------------- -------------- -------------- ---------------

    LOSS BEFORE
     INCOME TAX      7,905,272     10,797,565     16,203,824     19,269,497

      Future
       income tax
       recovery              -              -      7,959,465              -
                 -------------- -------------- -------------- ---------------

    LOSS AND
     COMPREHENSIVE
     LOSS FOR
     THE PERIOD      7,905,272     10,797,565      8,244,359     19,269,497
                 -------------- -------------- -------------- ---------------

    DEFICIT,
     BEGINNING OF
     THE PERIOD    162,093,211    129,483,327    152,254,876    121,011,395

    Share issue
     costs                   -      1,236,701      1,539,783      1,236,701
    Expired
     Warrants                -        (75,210)             -        (75,210)
    Future
     income tax
     on flow-through
     shares                  -              -      7,959,465              -
                 -------------- -------------- -------------- ---------------

    DEFICIT, END
     OF THE
     PERIOD      $ 169,998,483  $ 141,442,383  $ 169,998,483  $ 141,442,383
                 -------------- -------------- -------------- ---------------
                 -------------- -------------- -------------- ---------------

    LOSS PER
     COMMON SHARE:
      Basic &
       diluted
       (Note 17) $        0.03  $        0.04  $        0.03  $        0.08
                 -------------- -------------- -------------- ---------------
                 -------------- -------------- -------------- ---------------
    >>

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

SOURCE: San Gold Corporation

Dale Ginn, Chief Executive Officer, San Gold Corporation, (204) 794-5818; Investor Relations, 1-800-321-8564

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