Narrow veins equal dilution

Not everything was positive with respect to our site visit. While the individual veins (or lenses) that comprise the near surface zones (Hinge, 007, etc) are high grade in nature, they pinch and swell, resulting in dilution that is greater than we had expected in some areas. We suspect the operation is currently experiencing dilution ranging from less than 10% to upwards of 100%, with an overall average of 35% to 50% likely. While our grade to the mill forecast for the deep Rice Lake Mine (which is expected to comprise about 20% to 25% of future mill feed) remains largely unchanged at 6.8 g/t, we have adjusted our grade to the mill for the near surface zones downwards to slightly less than 8.0 g/t from our earlier forecast of between 10.0 g/t and 13.0 g/t. There may be an opportunity to lessen dilution going forward, however. San Gold has on order a smaller, single boom jumbo drill that, when operational, should allow the company to lessen dilution by mining narrower widths.