The only problem is the other 323 million fractional owners you have to share it with.

"The overall cost per ton of ore for the year ended December 31, 2011 decreased 28% to approximately $132 compared to $183 in the same period of 2010. The lower cost per ton of ore in 2011 compared to the previous period is primarily attributed to better productivities and efficiencies in the mines resulting in lower unit costs.

Exploration

For the year ended December 31, 2011, the Company invested $5.0 million in exploration, engineering and permitting work to support future mine development. Total exploration expenditures in 2011 were $29.5 million, of which $24.5 million was expensed, while $5.0 million was capitalized relating to work performed at the 007, Cohiba and L10 deposits. The Company’s exploration activities were pre-funded by a $29.8 million flow-through financing that was completed in the first quarter of 2011.

San Gold also undertook its largest ever exploration program, which included drilling of approximately 350,000 metres this year, making it one of Canada’s largest drill programs by a gold producer in 2011. The goals of the 2011 drill program were to provide definition drilling ahead of mining crews for near and mid-term production planning purposes; upgrade a significant portion of the Company’s inferred mineral resources to the measured and indicated categories; identify new inferred mineral resources; and to confirm that the recently discovered near surface zones extend to depths exceeding 1,000 metres. The Company is planning to present an updated mineral resource and reserve statement in the first half of 2012.

The Company had up to 14 drill rigs operating in 2011, with exploration activities focused on the San Antonio Mining Unit, the Shoreline Basalt Unit, an intermediate volcanic rock unit north of the Shoreline Basalt Unit, and the Normandy Creek Shear Zone, in addition to other exploration activities. In total, the Company drilled approximately 350,000 metres in 925 holes in 2011.

In 2012, the exploration program will be somewhat less aggressive than it was in 2011. Approximately 250,000 meters of drilling are initially planned; these activities may increase if successful results are encountered. Exploration activities with joint venture partners are described later in the document.

San Antonio Mining Unit

The San Antonio Mining Unit (or the Historic Mining Unit) is a gold bearing, steeply dipping, mafic volcanic rock unit. Gold mineralization in the San Antonio Mining Unit is associated with gold-bearing quartz veins and stockwork related to shear zones and tensional fractures near the hanging wall contact. The San Antonio Mining Unit was originally discovered in 1911 and intermittent mining operations since 1927 have produced more than 1.5 million ounces. Mineralization in the San Antonio Mining Unit has been traced to a depth exceeding 1,500 metres.

In 2011, exploration activities in the San Antonio Mining Unit focused on underground exploration and definition drilling of the ore envelope ahead of mining crews for near and mid-term production planning purposes in proximity to the 26 and 28 levels. In 2011, the Company drilled 59,523 metres in the San Antonio Mining Unit. (there must be something there, that's a lot of drilling for one area)

Shoreline Basalt Unit

The Shoreline Basalt Unit is a steeply dipping, mafic volcanic rock unit that is geologically similar to the San Antonio Mining Unit. In late 2010, the Company determined that a system of stacked lenses containing several significant, near-surface, high-grade gold-bearing zones, including the Company’s 007 and L10 deposits, was associated with the Shoreline Basalt Unit. Gold mineralization is typically associated with tabular quartz veining along, or in close proximity to, the north hanging wall contact of the Shoreline Basalt Unit, that strike east-west, and dip steeply to the north.

Drilling from both surface and underground locations over the past two years has demonstrated that the Shoreline Basalt Unit has a strike length of more than two kilometres, a plunge that has been traced to more than 1,400 metres from surface, and that it remains open along strike and to depth. Recent geophysical surveys and other geologic evidence suggest that the Shoreline Basalt may extend for at least another three kilometres east of the 007 Deposit towards the Company’s SG-1 Mine near the Normandy Creek Shear Zone.

Exploration activities in 2011 along the Shoreline Basalt consisted of both surface exploration drilling and underground definition and exploration drilling. Drilling repeatedly intersected high-grade gold mineralization over mineable widths along the Shoreline Basalt Unit in close proximity to the 007 Deposit, and is expected to be demonstrated as continuous through the drill program. The cumulative drill-indicated strike length of the 007 and L10 zones along the Shoreline Basalt Unit is in excess of 600 metres and these zones have been located with drilling at depths exceeding 500 metres from surface.

One of the Company’s exploration objectives in the year was to locate the down-dip extensions of the near-surface Shoreline Basalt zones and to determine the degree of continuity between them. During the year, the Company received initial assay results from deep drilling below the L10 Zone that located the zone at depths of up to 575 metres below surface, suggesting a potential 200-metre down dip extension to the zone. Notable assay results included 5.4 metres grading 22.86 g/t Au and 3.0 metres grading 5.08 g/t Au in drill hole DX-11-009. The L10 Zone remains open along strike and down-dip, and additional assays are pending.

Management is very encouraged by the results of the Shoreline Basalt drilling program as it continues to demonstrate the potential for the expansion of existing mineralized zones and the discovery of new zones along the Shoreline Basalt both east and west and at depth. The Company expects to continue its aggressive drilling program along the Shoreline Basalt for the next several years.

The Shoreline Basalt will be a top exploration priority in 2012. One surface drill will focus on extending and defining the 007 complex vertically and horizontally, starting from known mineralization and working outwards. A second surface drill will focus on the 007 complex and the Shoreline Basalt at greater depth, as well as testing the Hanging Wall Intermediate Volcanics to the north. As well, one underground drill will focus on extending and defining the L10 Zone below our modeled resource and testing the Shoreline Basalt both east and west of L10. A second underground drill will be exploring the Shoreline Basalt between the 007 and L10 down-dip projections from both 16L and 26L.

Intermediate Volcanic Rock Unit

The Company’s L13, Hinge, and Cohiba zones are near-surface, epithermal gold deposits contained within an intermediate volcanic rock unit located to the north of the Shoreline Basalt Unit. To-date, the epithermal deposits delineated along this trend typically occur as tabular quartz veining within a northeasterly striking shear zone and have individual drill-indicated strike lengths between 100 and 150 metres, vary in width from 1 to 10 metres, and have been located at a depth of up to 400 m below surface.

During the year, drilling activities within this intermediate volcanic rock unit have focused primarily on underground definition drilling of the L13 and Hinge zones, and exploration drilling in close proximity to the Hinge Zone.

Late in the year, a new Hinge-like zone (L8) was discovered just to the NW of the original Hinge Zone. It has been traced vertically from 300 to 700 metres below surface and is in close proximity to both the Hinge and Rice Lake Mine workings (at 16 Level). The L8 Zone is located adjacent to another newly discovered zone that was found from drilling from 26 Level. If these two zones prove to tie together, the vertical extent would approach 1,000 metres.

Drilling in the L8 Zone during 2012 will focus primarily on the upper portion of the zone.

The Company also initiated a drilling program to the northeast of the Cohiba Zone to test a prospective zone for new epithermal gold deposits. Initial drilling in this area has discovered some mineralization, with further testing to take place in conjunction with drilling targeted at the down-dip projection of the 007 complex.

Management continues to be encouraged by exploration results from within this intermediate volcanic rock unit and considers this southwest – northeast corridor to be very prospective for the discovery of new epithermal gold deposits.

Normandy Creek Shear Zone

The Normandy Creek Shear Zone is a long splay fault of the Wanipigow Fault, a large east-west regional fault that forms the northern border of the Rice Lake greenstone belt that is associated with the Wanipigow Plutonic Complex to the east of the Rice Lake Mining Complex. This zone of intense ductile deformation is in close proximity to the northwestern edge of the Ross River Pluton. Gold mineralization along the Normandy Creek Shear is typically stratabound and tabular.

The Company’s 100%-owned SG-1 Mine is located approximately 4.5 kilometres northeast of the Company’s Rice Lake Mill and has a dedicated decline. Near surface production at the SG-1 Mine commenced in 2006, but the mine was placed on care-and-maintenance in October 2008 when the Company reallocated mining and exploration resources to develop the higher grade and lower cost Hinge Mine. Historically, gold mineralization in the SG-1 Deposit and the SG-2 and SG-3 zones has been interpreted to be associated with the Normandy Creek Shear.

Prior to the initiation of the recent exploration drilling, the drill-indicated mineralized envelope of the SG-1 Deposit extended from surface to a depth of approximately 200 metres. In 2011, partial assay results from 5,357 metres of surface drilling completed located high-grade gold mineralization outside of the mineral resource envelope between depths of 290 metres and 475 metres below surface over economic grades and widths beneath the existing SG-1 Mine infrastructure. Notable intervals include 5.5 m grading 6.56 g/t Au in SG-11-013, 9.1 m grading 6.48 g/t Au in SG-11-016, and 18.3 m grading 6.48 g/t Au in SG-11-017. Additional assays are pending and drilling is ongoing to drill-test outside of the mineral resource envelope for extensions of the zone along strike and at depth.

These recent drill results, combined with other geological evidence and geophysical interpretation, suggests that the Company may have found a new horizon for gold mineralization along the Normandy Creek Shear Zone that may be associated with an eastern limb of the Shoreline Basalt Unit. Management is very encouraged by the recent success of the SG-1 Mine area drilling program outside of the existing mineral resource estimate and within close proximity to exciting mine infrastructure. These drilling results have the potential to significantly increase SG-1 mineral resources and reserves.

Other Exploration Activities

In addition to delineating and exploring for gold deposits hosted in the mafic and intermediate volcanic units, and the Normandy Creek Shear, the Company continues to pursue other prospective exploration targets within its mineral claims packages, option agreements, and joint venture agreements in Manitoba and Ontario.

In the second quarter of 2011 the Company entered into an option agreement with Cougar Minerals Corp. (“Cougar”) to earn an 80% interest in 18 claims in the Rice Lake area. Under the terms of the option agreement, the Company committed to spend a minimum of $1.5 million over a four-year period on exploration activities. Additionally, the Company subscribed for $0.2 million in units of Cougar and has agreed to subscribe for an additional $0.6 million in units of Cougar over a 3-year period.

In the third quarter of 2011, the Company entered into an option agreement with Wildcat Exploration Ltd. (“Wildcat”) to earn an 80% interest in 122 claims in the Rice Lake area. Under the terms of the option agreement, the Company committed to spend a minimum of $5.1 million over a four-year period on exploration activities. Additionally, the Company subscribed for $0.25 million in common shares of Wildcat and has agreed to subscribe for an additional $0.75 million in common shares of Wildcat over a 3-year period.

During the third quarter of 2011, third party contractors completed a 3,600 line-kilometre high-resolution airborne magnetic geophysical survey on the Company’s 100%-owned projects and on a portion of the projects that it has under option agreement within the Rice Lake greenstone belt. The Company is awaiting the preliminary interpretation and expects geophysical anomalies identified from the survey to help guide the Company’s first-ever regional exploration program in the Rice Lake area.

San Gold is also encouraged by positive exploration drilling results announced by SGX Resources Inc. (“SGX

Resources”) (TSX Venture: SXR) at its Timmins exploration drilling programs. San Gold is the single largest shareholder in SGX Resources. At the Timmins North Project joint venture with San Gold in Tully Township, SGX Resources announced positive infill drilling results during 2011 confirming the grade and width of mineralization at the Timmins North Deposit in the upper 200 metres of the deposit. Additionally, SGX Resources announced that exploration drilling had located a 200-metre down dip extension to the eastern extremities of the Timmins North Deposit. The Timmins North Deposit remains open in all directions and drilling continued into the fourth quarter.

Subsequent to year end, at the Timmins South project in Sothman Township, SGX Resources announced positive initial results from the Edleston Zone. 33 holes have been drilled into this zone covering an area 300 m along strike and 100 m to depth.