San Gold Reports Record-Low Total Cash Costs on Record Gold Production, Revenue, and Cash Flow from Operations

WINNIPEG, Aug. 15, 2011 - San Gold Corporation (TSX: SGR) (OTCQX: SGRCF) ("San Gold" or the "Company") reports financial and operating results for the second quarter of 2011.


Second Quarter 2011 Highlights:

- Recognized record revenue of $28.4 million on gold sales of 19,276 ounces.

- Generated operating income from operations of $7.6 million, or $0.03 per share.

- Achieved record gold production of 20,111 ounces.

- Record-low total cash costs of $820 per ounce of gold sold.

- Realized a record cash operating margin of $655 per ounce of gold sold.

- Achieved record average mill throughput of 1,260 tons per day.

- Reported a total and comprehensive loss of $4.0 million, or $0.01 per share.

- Cash and cash equivalents balance of $37.7 million as at June 30, 2011.

- Appointed Mr. Jeremy Link as Vice-President, Corporate Development. Promoted Eric Setchell to Mine General Manager.

- Appointed two experienced directors to the Board of Directors, Mr. Michael Anderson and Mr. Stephen Harapiak.

- Achieved a new safety milestone of 500,000 man hours without a lost time accident.

"I am very pleased with this quarter's financial and operating results," stated George Pirie, President and Chief Executive Officer of San Gold. "The Company generally reported record financial results with higher revenue, cash flow from operations, and income from operations relative to prior periods. Today's results also confirmed our belief that the operational improvements implemented over the past two years would result in increased productivity leading to higher production and lower costs, as evidenced by record gold production and record-low total cash costs. I am also pleased to report that we remain on track to deliver on our full-year guidance of 80,000 ounces at an average total cash cost of $825 per ounce of gold."

This press release should be read in conjunction with the Company's consolidated financial statements for the quarter ended June 30, 2011 and associated Managements' Discussion and Analysis ("MD&A"), which are available from the Company's website (www.sangold.ca), in the "News & Reports" section under "Financial Statements", and on SEDAR (www.sedar.com).


Review of Financial Results

Record gold sale revenues in the second quarter of 2011 of $28.4 million on the sale of 19,276 ounces were 126% higher than revenues of $12.6 million recognized in the second quarter of 2010. The increase in gold sales revenue in the second quarter of 2011 is a result of a 61% increase in the number of ounces sold and a 40% increase in the average realized gold price compared to the second quarter of 2010.

The Company generated record cash flows from operating activities before changes in non-cash working capital of $3.0 million ($0.01 per share), compared to a use of $2.4 million ($0.01 per share) in the second quarter of 2010. After changes in non-cash working capital, operating activities used $10.5 million ($0.03 per share) in the second quarter of 2011, a substantial change from $5.5 million ($0.02 per share) generated in the second quarter of 2010.

Income from operations in second quarter of 2011 was $7.6 million ($0.02 per share), a substantial improvement relative to a loss from operations of $2.0 million ($0.01 per share) in the same period of 2010. Income from operations in the second quarter also represents an increase of 137% from income from operations of $3.2 million in the first quarter of 2011. Relative to prior periods, the increase in income from operations in the second quarter of 2011 is attributable to higher cash operating margins of $655 per ounce, resulting from lower total cash operating costs and higher realized gold prices.

After exploration, general and administrative, and other net expenses, total and comprehensive loss in the second quarter of 2011 improved by 50% to $4.0 million ($0.01 per share), compared to a $7.9 million ($0.03 per share) in the same period of 2010.

Capital spending in the second quarter of 2011 was focused on increasing mill capacity, improving key infrastructure, and sustaining capital. Investments in operating capital and development activities were $4.1 million in the second quarter of 2011.

Key financial metrics for the second quarter of 2011 compared to the second quarter of 2010are presented at the end of this press release in Table 1.


Review of Operational Results

The Company's Rice Lake, Hinge, and 007 mines (the "Rice Lake Project") produced a record of 20,111 ounces during the second quarter of 2011, an increase of 119% relative to gold production of 9,188 ounces in the second quarter of 2010 and 37% higher than gold production of 14,688 ounces in the first quarter of 2011. Gold production in the first half of 2011 increased 61% to 34,799 ounces compared to gold production of 21,650 ounces in the first half of 2010.

In the second quarter of 2011, total cash operating costs were $820 per ounce of gold sold, slightly below full year guidance of $825, and a 24% reduction from $1,084 in the second quarter of 2010. These lower total cash operating costs, combined with a realized gold price of $1,475 per ounce, resulted in a cash operating margin of $655 per ounce in the second quarter of 2011.

Year-to-date gold production of 34,799 ounces is in-line with the Company's full year 2011 production guidance of 80,000 ounces. Year-to-date total cash cost per ounce of gold sold of $832also is in-line with full-year guidance of $825.

Key operational metrics and production statistics for the second quarter of 2011 compared to the trailing three quarters are presented at the end of this press release in Table 2.


Outlook

In the first half of 2011, the Company achieved record operating performance with quarterly gold production of 14,688 and 20,111 ounces in the first and second quarters of 2011, respectively, for year-to-date production of 34,799 ounces. Record quarterly production was accompanied by record-low total cash costs per ounce of gold sold of $862 and $820 in the first and second quarters of 2011, respectively. On a year-to-date basis, total cash costs per ounce of gold sold of $832. The increase in crushing and milling capacity, the implementation of more cost-effective mining methods, and the general debottlenecking of operations contributed to the substantial increase in gold production and the reduction in total cash operating costs per ounce.

Production is forecast to continue to incrementally increase throughout the second half of the year and result in full year gold production of 80,000 ounces at an average total cash cost of $825 per ounce sold. Higher gold production is expected be driven by an increase in daily throughput from the second quarter average rate of 1,260 tons per day to a year-end exit rate of approximately 1,600 tons per day. Concurrent with the production increases, total cash operating costs are expected to continue to decline throughout the remainder of the year and are forecast to exit the year at a total cash operating cost approaching $650 per ounce.

At current gold prices and production volumes, cash flow from operations, and cash-on-hand is expected to be sufficient to fund the Company's mill expansion plans, additional operations projects to increase activity levels, and an aggressive 300,000-metre exploration drilling program.

Exploration activities in the second half of 2011 will continue to focus on definition and extension drilling at the Company's recently identified Shoreline Basalt Unit for both production planning and exploration purposes. The Shoreline Basalt Unit is a system of stacked lenses, including the L10, 007, Cohiba, and Emperor zones. This unit has a strike length of more than two kilometres, a plunge that has been traced to over 1,400 metres from surface, and remains open along strike and to depth. The objective of the Company's exploration programs is to develop a larger mining complex that can be exploited through existing infrastructure. The Company plans to report an updated Mineral Resource and Reserve Statement in 2012.

With rising production and declining total cash operating costs, combined with a strong gold-price environment, the Company has positioned itself to finance its existing mining and exploration plans, as well as grow through potential acquisitions and new discoveries.


Reminder of Second Quarter 2011 Financial Results Conference Call and Webcast

The Company's senior management plans to host a conference call today, Monday, August 15, 2011 at 11:00 am Eastern Standard Time to discuss the 2011 second quarter financial results, and to provide an update of the Company's operating, exploration, and development activities.

Participants may join the conference call by dialing 1 (888) 231-8191 or 1 (647) 427-7450 for outside Canada and the United States. The conference call will also be available by webcast at the following link: www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3595460.

A recorded playback of the conference call can be accessed after the event until August22, 2011 by dialing 1 (800) 642-1687 or 1 (416) 849-0833 for calls outside Canada and the United States. The pass code for the conference call playback is 81672417. The archived audio webcast will also be available on the Company's website at www.sangold.ca.


About San Gold

San Gold is an established Canadian-based gold producer, explorer, and developer that owns and operates the Hinge, 007, and Rice Lake mines near Bissett, Manitoba. The Company employs more than 400 people and is committed to the highest standards of safety and environmental stewardship. The Company has over $40 million in cash and equivalents and is unhedged to the price of gold. As of August 1, 2011, San Gold has 310,966,175 common shares outstanding (327,360,186 shares fully diluted), which are traded on the Toronto Stock Exchange under the symbol "SGR" and on the OTCQX under the symbol "SGRCF".

For further information on San Gold, please visit www.sangold.ca.


Cautionary Non-IFRS Statements

The Company believes that investors use certain indicators to assess gold mining companies. They are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared with International Financial Reporting Standards ("IFRS"). "Total cash operating costs" as used in this analysis is a non-IFRS term typically used by gold mining companies to assess the level of gross margin available to the Company per ounce of gold by subtracting these costs from the unit price realized during the period. This non-IFRS term is also used to assess the ability of a mining company to generate cash flow from operations. There may be some variation in the method of computation of "total cash operating costs" as determined by the Company compared with other mining companies. In this context, "total cash operating costs" reflects the per ounce cash costs allocated from in-process and dore inventory associated with ounces of gold sold in the period and net royalties. "Total cash operating costs" may vary from one period to another due to operating efficiencies, quantity of ore processed, grade of ore processed, and gold recovery rates.


Cautionary Note

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. This news release includes certain "forward-looking statements". All statements, other than statements of historical fact included in this release, including, without limitation, statements regarding forecast gold production, gold grades, recoveries, cash operating costs, potential mineralization, mineral resources, mineral reserves, exploration results, and future plans and objectives of the Company, are forward-looking statements that involve various risks and uncertainties. These forward-looking statements include, but are not limited to, statements with respect to mining and processing of mined ore, achieving projected recovery rates, anticipated production rates and mine life, operating efficiencies, costs and expenditures, changes in mineral resources and conversion of mineral resources to proven and probable mineral reserves, and other information that is based on forecasts of future operational or financial results, estimates of amounts not yet determinable and assumptions of management.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as "expects" or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "estimates" or "intends", or stating that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved) are not statements of historical fact and may be "forward-looking statements." Forward-looking statements are subject to a variety of risks and uncertainties that could cause actual events or results to differ from those reflected in the forward-looking statements.

There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include, among others, the actual results of current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of precious metals, as well as those factors discussed in the section entitled "Other MD&A Requirements and Additional Disclosure and Risk Factors" in the Company's most recent quarterly Management's Analysis and Discussion ("MD&A"). Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.

Exploration results that include geophysics, sampling, and drill results on wide spacings may not be indicative of the occurrence of a mineral deposit. Such results do not provide assurance that further work will establish sufficient grade, continuity, metallurgical characteristics, and economic potential to be classed as a category of mineral resource. A mineral resource that is classified as "inferred" or "indicated" has a great amount of uncertainty as to its existence and economic and legal feasibility. It cannot be assumed that any or part of an "indicated mineral resource" or "inferred mineral resource" will ever be upgraded to a higher category of resource. Investors are cautioned not to assume that all or any part of mineral deposits in these categories will ever be converted into proven and probable reserves.


Table 1: Financial Highlights
Q2 Q2 YTD YTD
2011 2010 2011 2010

Total and Comprehensive Loss (000) ($3,973 ) ($7,919 ) ($9,308 ) ($10,641 )
Items not affecting cash (000) $6,940 $5,564 $12,784 $4,156
Cash provided (used) by operating activities before changes in non-cash working capital (000) $2,967 ($2,355 ) $3,476 ($6,485 )

Net change in non-cash working capital (000) ($13,514 ) $7,806 ($9,578 ) $4,831

Cash provided by operating activities (000) ($10,547 ) $5,451 ($6,102 ) ($1,654 )

Total and Comprehensive Loss (000) ($3,973 ) ($7,919 ) ($9,308 ) ($10,641 )

Loss per share
- basic and diluted $0.01 $0.03 $0.03 $0.04

Weighted average number of common shares outstanding
- basic and diluted 309,871,490 277,374,958 306,105,249 272,983,117


Table 2: Operating Highlights

Q2 Q2 Change Change
2011 2010 (#) (%)

Ore milled (tons) 114,624 58,098 56,526 97 %
Head grade (g/tonne Au) 6.35 5.90 0.45 8 %
Contained gold (ounces) 21,244 9,996 11,248 113 %

Ounces of gold produced 20,111 9,188 10,923 119 %

Ore mined (tons) 123,261 63,323 59,938 95 %

Ore milled per day (tons) 1,260 638 621 97 %
Ore mined per day (tons) 1,355 696 659 95 %
Mill recovery (%) 95 % 93 % 2 2 %


The TSX or the OTCQX have not reviewed and do not accept responsibility for the adequacy or accuracy of this release.

(All amounts are in Canadian dollars, unless stated otherwise)



Contact Information

San Gold Corporation
Tim Friesen, Communications Director
1 (204) 772-9149 ext. 202

San Gold Corporation
George Pirie, President and CEO
1 (416) 214-0024
www.sangold.ca