San Gold Corporation 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.
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.
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.
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 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.
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.
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.
For further information:
San Gold Corporation
(855) 585-4653 or +1 (204) 772-9149 ext. 202
San Gold Corporation
Vice-President, Corporate Development
+1 (416) 214-0024 ext. 201