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San Gold Reports Strong Quarterly Gold Production, Exploration Results, and Provides Notice of Third Quarter 2011 Financial Results Conference Call

06.10.2011  |  Marketwire
WINNIPEG, Oct. 6, 2011 - San Gold Corporation (TSX: SGR) (OTCQX: SGRCF) ("San Gold" or the "Company") reports preliminary operating results for the third quarter of 2011 and is providing drilling results from its SG1 Mine Area and from a portion of the Shoreline Basalt. The Company is also announcing that it plans to report third quarter 2011 financial results before market open on Tuesday, November 15, 2011, and that senior management will host a conference call that day at 11:00 am Eastern Standard Time.


Third Quarter 2011 Preliminary Operating Results

In the third quarter of 2011, the Company's Rice Lake, Hinge, and 007 mines (the "Rice Lake Complex") produced 19,119 ounces of gold at a total cash operating cost that is expected to be in-line with the Company's full-year guidance of $825 per ounce of gold sold. Year-to-date production of 53,918 ounces is consistent with the Company's full-year production forecast of 80,000 ounces.

Commenting on these results, George Pirie, President and Chief Executive Officer of San Gold, stated, "We continue to execute on our plan of growing the production profile, as evidenced by our greatly improved year-over-year performance. With the crushing and milling circuit upgrades approaching completion, we expect to post record operating results in the fourth quarter and to achieve our full-year production guidance."

Gold production in the third quarter of 2011 was 52% higher than production of 12,568 ounces in third quarter of 2010. Gold production of 53,918 ounces in the first nine months of the 2011 was 58% higher than production of 34,217 ounces in the same period of 2010. Higher gold production in 2011 is a result of increased mill throughput relative to the comparable periods of 2010.

During the third quarter of 2011, the Company milled ore at a record quarterly rate of approximately 1,324 tons per day ("tpd") for a total of 121,844 tons, an increase of 62% compared to 818 tpd in the same period of 2010. Milling rates have increased relative to prior periods as a result of crusher and milling system expansion initiatives implemented over the past year. The benefits of increased crushing and milling rates during the quarter were partially offset by four days of unscheduled downtime in July related to power supply issues that have since been resolved.

The Rice Lake Mill processed ore at an average head grade of 5.83 grams of gold per tonne of ore ("g/t Au") in the third quarter of 2011, a decrease of 5% relative to the head grade of 6.12 g/t Au in the same period of 2010. The decrease in head grade is a result of substantially less than budgeted ore being mined from the higher-grade 007 Mine during the month of July.

Gold recovery from the mill was 92% in the third quarter of 2011, 2-percentage points lower than the 94% achieved during the comparable period of last year, and below the budgeted rate of 93%. The lower than budgeted gold recovery is a result of the ongoing installation of new flotation cells in the milling circuit, which has not required any mill downtime. Commissioning of the new flotation cells is planned to be completed near the middle of October, after which, gold recovery is expected to return to the budgeted rate.

During the third quarter of 2011, the Company mined ore at a record quarterly rate of approximately 1,358 tpd for a total of 124,952 tons, an increase of 75% compared to 777 tpd in the same period of 2010. The increase in mining rates is attributable to a larger mechanized mining fleet, improved safety performance, and an increased number of active mining areas. During the quarter, approximately 78% of the tons mined were sourced from the generally lower cost and higher grade Hinge and 007 mines. Currently, ore from the 007 Mine contributes approximately 50% of the ore being mined and milled. The Company has a surface stockpile of approximately 26,000 tons of ore ahead of the crushing circuit.

Commenting on the improved quarterly operating results, Ian Berzins, Chief Operating Officer of San Gold, stated "I am very pleased that we have delivered another strong quarter of gold production, further demonstrating that we are executing on our strategy of debottlenecking the operation and improving safety performance as a result of investing in new infrastructure and equipment. Mill throughput increased steadily throughout the third quarter, and we are currently processing ore at a rate of 1,500 tons per day. When we complete the commissioning of the flotation cell upgrade later this month, we expect mill throughput to increase to a rate of at least 1,600 tons per day. With the mill expansion ahead of schedule, I am confident that we will achieve our full-year production guidance of 80,000 ounces."

Key operational metrics and production statistics for the third quarter of 2011 compared to the third quarter of 2010 and on year-to-date bases are presented in tables 1 and 2 at the end of this press release, respectively.


Exploration Update

San Gold is currently undertaking its largest ever exploration program, which includes more than 300,000 metres ("m") of drilling utilizing up to 14 rigs, making it one of Canada's largest drill programs by a gold producer in 2011. The goals of this aggressive exploration program are to upgrade existing mineral resources, extend areas of known mineralization to depths of 1,000 m or more, and discover new mineral resources in preparation for an updated mineral reserve and resource statement in 2012.

This exploration update primarily discusses drilling activities that were targeting down-dip extensions to mineralized zones at the SG-1 Mine Area and along the Shoreline Basalt. The general locations of these exploration areas are presented in Figure 1 at the end of this press release.

The Company is awaiting a significant number of assay results, as laboratory turn-around-times are currently in excess of one month, due to the recent conclusion of the Canadian summer drilling season.


SG1 Mine Area

The Company recently received assay results from a drilling program in the vicinity of its 100%-owned SG1 Mine, located approximately 4.5 km northeast of the Company's Rice Lake Mill. The SG1 Mine has a dedicated decline, was brought into production during 2006, and was placed on care-and-maintenance in October of 2008 when the Company reallocated mining and exploration resources to the higher grade and lower cost Hinge Mine. The gold mineralization in the SG1 Mine Area is interpreted to be associated with the Normandy Creek Shear and, potentially, an eastern limb of the Shoreline Basalt.

Prior to the initiation of this drilling program, the drill-indicated mineralized envelope extended from surface to a depth of approximately 200 m. Selected results are shown in the table below, with the pierce points of these drill holes shown in Figure 1.

Drill Hole 	From (m)  To (m)  Interval(1) (m)  Uncut Grade
(g/t Au)
SG-11-013 296.4 301.9 5.5 6.56
including 296.4 299.2 2.7 11.13
SG-11-016 468.5 477.6 9.1 6.48
including 473.9 477.6 3.7 10.59
SG-11-017 472.9 491.1 18.3 6.48
including 474.9 480.7 5.8 10.32

(1)- May not represent true width

These drill holes have located gold mineralization outside of the mineral resource envelope in between depths of 290 m and 475 m below surface over potentially economic widths and grades beneath existing mine infrastructure. The initial success of the SG1 Mine Area drilling program outside of the existing mineral resource envelope has the potential to significantly increase mineral resources and reserves.

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.


Shoreline Basalt

Along the Shoreline Basalt Unit, a system of stacked lenses that includes the 007 Trend, L10, and Emperor zones, drilling continues to expand the mineralized envelope both along strike and at depth. This unit has a strike length of more than 2,000 m, a plunge that has been traced to over 1,400 m from surface, and remains open along strike and to depth. Geological and geophysical evidence suggest that the Shoreline Basalt may extend 5 kilometres eastward to the SG1 Mine Area.

The Company has received assay results from initial deep drilling below the L10 zone that has located a down-dip extension within 200 m of the Company's existing Rice Lake Mine's underground infrastructure. Selected results are shown in the table below, with the pierce points of these drill holes shown on Figure 1.

Drill Hole From (m) To (m) 	Interval (1) (m) Uncut Grade (g/t Au)
DX-11-009 595.6 601.1 5.4 22.86
including 598.8 599.0 0.2 310.62
and 611.3 614.3 3.0 5.08
including 612.0 612.6 0.5 17.97

(1)- May not represent true width

Drill holes DX-11-009 located the L10 zone at depths of up to 575 m below surface, suggesting a potential 200 m down dip extension to depth from the limits of previous drilling. The L10 zone has a drill-indicated strike of at least 100 m, begins 250 m below surface, and typically varies in width from 2 to 5 m. The L10 zone remains open along strike and down-dip, and additional assays are pending.

The Company has also received assay from a previously undrilled 500 m section along the Shoreline Basalt between the L10 and 007 Trend zones. Drilling encountered near surface, high-grade gold mineralization along the hanging wall contact of the Shoreline Basalt at a depth of approximately 200 m below surface and within 100 m of the 007 decline. Selected results are shown in the table below, with the pierce points of these drill holes shown on Figure 1. Additional assays are pending.

Drill Hole 	From (m) 	To (m) 	Interval (1) (m)   Uncut Grade (g/t Au)
S936-11-001 424.7 129.6 0.2 338.91
S936-11-002 333.1 353.2 20.1 13.44

(1)- May not represent true width

The Company is very encouraged by these results as it demonstrates the potential for the expansion of existing mineralized zones and the discovery of new zones along the Shoreline Basalt.

Commenting on these results, George Pirie, stated, "I am very impressed with the initial results from the drilling beneath SG1, due to both grades and widths encountered and because of the proximity to existing mine infrastructure. I am also excited about the initial deep drilling results from the L10 zone, which supports our interpretation that the Shoreline Basalt zones are likely to exceed to depths exceeding 1,000 m. The implications from all of these are tremendous with respect to how the future development of the Rice Lake Complex may unfold."


Exploration Activities for the Remainder of 2011

Year-to-date, San Gold has drilled approximately 275,000 m in 925 holes and will achieve its target of drilling 300,000 m in 2011. For the remainder of the year, drilling will continue to focus on in-fill and step-out drilling at areas of known mineralization, plus drill-testing grassroots exploration targets, albeit at a slightly slower pace until the 2012 exploration season commences.

In addition to its Rice Lake Project exploration programs, the Company recently completed a 3,600 line-km high-resolution airborne geophysical survey on its 100%-owned projects and on a portion of the projects that it has under option agreement. The Company is awaiting the preliminary interpretation and expects geophysical anomalies identified from the survey to help guide the Company's first regional exploration program in the Rice Lake area.


QA/QC Programs

Surface drill programs are carried out under the supervision of William Ferreira, B.Sc. Geology, Registered Professional Geologist. Underground drill programs are carried under the supervision of Dale Ginn, B.Sc. Geology and Registered Professional Geologist. Mr. Ferreira and Mr. Ginn are Qualified Persons as defined by National Instrument 43-101 of the Canadian Securities Administrators.

Strict sampling and QA/QC protocol are followed, including the insertion of standards, blanks, and duplicates on a regular basis, plus the retention of pulps and rejects. Surface drilling core samples are sent to TSL Laboratories in Saskatoon, Saskatchewan ("TSL") for sample preparation and analysis. Analytical method is fire assay with atomic adsorption finish and gravimetric finish. Whole metallic assays are performed on samples containing visible gold. Additional QA/QC testing is provided by Accurassay Laboratories of Thunder Bay, Ontario ("Accurassay") on a routine basis.

Underground drill core samples are prepared and assayed on site in the Company's assay lab using the fire assay method with an atomic adsorption finish and gravimetric finish. Strict sampling and QA/QC protocol are followed, including the insertion of standards, blanks, and duplicates on a regular basis, plus the retention of pulps and rejects, and spot checks utilizing independent labs including TSL and Accurassay.

Due to the exploratory nature of this exploration program and the variable orientations of the high-grade mineralized zones, drill intersections reported in this press release may not necessarily represent the true width of mineralization. All assays reported in this press release are uncut.


Notice of Third Quarter 2011 Financial Results Conference Call

The Company's senior management plans to host a conference call on Tuesday, November 15, 2011 at 11:00 am Eastern Standard Time to discuss the 2011 third 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 (877) 240-9772 or 1 (416) 340-8530 for participants outside of Canada and the United States. The conference call will also be available by webcast on the Company's website at www.sangold.ca.

A recorded playback of the conference call can be accessed after the event until November 22, 2011 by dialing 1 (800) 408-3053 or 1 (905) 694-9451 for calls outside Canada and the United States. The pass code for the conference call playback is 2825740. 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 over 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 October 1, 2011, San Gold has 312,509,841 common shares outstanding (327,201,851 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 Regarding Forward Looking Statements

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.


Cautionary Note to United States and Other Investors Concerning Estimates of Measured, Indicated and Inferred Mineral Resources:

This press release uses the terms "Measured", "Indicated", and "Inferred" resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. "Inferred Mineral Resources" have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies. United States investors are cautioned not to assume that all or any part of Measured or Indicated Mineral Resources will ever be converted into Mineral Reserves. United States investors are also cautioned not to assume that all or any part of a Mineral Resource is economically or legally mineable.




Table 1: Third Quarter 2011 and 2010 Production Summary and Statistics (1,2)

Q3
2011 Q3
2010 Change
(#) Change
(%)

Ore mined (tons) 124,952 71,463 56,721 75%

Ore milled (tons) 121,844 75,263 46,581 62%
Head grade (g/tonne Au) 5.83 6.12 -0.29 -5%
Contained Gold (ounces) 20,732 13,436 7,296 54%

Ounces of gold produced (3) 19,119 12,568 6,551 52%

Ore mined per day (tons) 1,358 777 581 75%
Ore milled per day (tons) 1,324 818 506 62%
Mill recovery (%) 92% 94% -2 -2%

(1) All amounts for Q3-2011 are preliminary and based on initial end of period estimates. Final adjustments may be required.
(2) Certain numbers may not compute due to the effects of rounding and truncation.
(3) Before final refinery settlements, which may result in increases or decreases to reported gold production.



Table 2: Year-to-Date Production Summary and Statistics (1,2)

Q3
2011 Q2
2011 Q1
2011 YTD-Q3
2011 YTD-Q3
2010 Change
(#) Change
(%)

Ore mined (tons) 124,952 123,261 102,200 350,413 197,810 152,603 77%

Ore milled (tons) 121,844 114,624 82,792 319,260 192,686 126,574 66%
Head grade (g/tonne Au) 5.83 6.35 6.47 6.19 6.52 -0.33 -5%
Contained Gold (ounces) 20,732 21,244 15,636 57,612 36,668 20,944 36%

Ounces of gold produced (3) 19,119 20,111 14,688 53,918 34,217 19,701 58%

Ore mined per day (tons) 1,358 1,355 1,136 1,284 725 559 77%
Ore milled per day (tons) 1,324 1,260 910 1,169 706 463 66%
Mill recovery (%) 92% 95% 94% 94% 93% 1 0%

(1) All amounts for Q3-2011 are preliminary and based on initial end of period estimates. Final adjustments may be required.
(2) Certain numbers may not compute due to the effects of rounding and truncation.
(3) Before final refinery settlements, which may result in increases or decreases to reported gold production.


To view, "Figure 1: Northeast-looking Longitudinal Section," please visit the following link:
http://media3.marketwire.com/docs/sgold_fig_1007.pdf.


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



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
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