SGRCF San Gold Corporation (CE)

TSX:SGR  ||  OTCQX:SGRCF

www.sangold.ca

BISSETT, MB, March 28 /PRNewswire-FirstCall/ - George Pirie, President and CEO of San Gold Corporation, (Bissett, Manitoba) (TSX:SGR) (OTCQX:SGRCF) has released the Company's 2010 year-end financial statements.

"2010 was a remarkable year for San Gold on both the exploration and production fronts.  The Company achieved unparalleled exploration success and produced a record number of ounces and tons in the year.  By year end, a new mineralized corridor was identified in a mafic volcanic unit which has been called the Shoreline Basalt.  This unit is a system of stacked lenses, including the L10, 007 complex and Emperor.  The unit now has a strike length of two kilometres and the plunge has been traced to over 1,400 metres (4,900 feet) from surface. It continues to be open along strike and to depth. The zones are currently being exploited by ramp from surface and can be developed from the 10, 16, and 26 Levels in the Rice Lake Mine. This development presents the opportunity of a totally new mine complex for San Gold which can be exploited through existing infrastructure. The 2011 exploration plan is designed to continue to test the strike and plunge extension of this new mineralized corridor," said Mr. Pirie.

"Production continued to ramp up and the operation achieved both record production tons and ounces during the year. The Company continued to transition into a steady state producer as the capital deployed into the operation has resulted in the elimination of bottlenecks in material flow and additions to processing capacity. The success of these projects results in continued downward pressure on the cost curve through an increasing production profile.  This allows San Gold to forecast production of 80,000 ounces at cash costs approaching $650 per ounce by year end. With a strong operational team in place, San Gold enters 2011 in an excellent position to take advantage of a strong global market for gold," said Mr. Pirie.

2010 Results:

• Gold production of  43,498 oz
• Diamond drilling of 200,000 m (657,000 feet)
• Capital Development of 5,681 m (18,638 feet)
• Graduated to Listing on Toronto Stock Exchange (TSX)
• Identification of a new mineralized corridor and mine trend contained in a mafic volcanic unit called the Shoreline Basalt
• Integrated Technical Report for Rice Lake Project Resources and Reserves (October)
• Equity financing during the year of $108 MM
• Year-end working capital surplus of $59 MM

2011 Outlook:

• Gold production of 80,000 oz (2,488 kg), starting at 15,000 oz in Q1 and increasing to 25,000 oz in Q4
• Increase in production to an average of 1,200 tons per day, exiting the year at 1,400 tons per day and cash cost approaching $650 per ounce.
• Exploration expenditures in excess of $20 MM near surface along Shoreline Basalt and at depth along projections of existing zones.
• Significant Capital Development planned to access new faces at 007, 007 East, Cohiba, L10, and L13 zones

The Company recognized revenue of $58.0 MM for the year and experienced an operating loss from operations of $4.0 MM. The comprehensive loss from operations for the year was $22.2 MM.  These figures compare to revenue in the prior year of $27.8 MM, an operating loss of $11.8 MM and a comprehensive loss of $29.5 MM.

In cash terms, the year was therefore close to breakeven from an operating perspective. Overall cash cost was $1,105 per ounce and $175 per ton.  This compares to 2009 cash costs of $1,221 per ounce and $220 per ton. While this represents a 25% reduction in cash cost per ton in comparison to last year and a 12% reduction in the cash cost per ounce, management expects significant cost reductions in the coming year as operations get closer to efficient levels of production. Cash costs are budgeted to start the year at about $1,060 per ounce and end the year approaching $650 per ounce for an average cost of about $825 for the year. (Please see discussion on Non-GAAP financial measures for a detailed calculation and reconciliation of these figures to our GAAP financial statements). 

In 2010, San Gold carried out 200,000 metres (657,000 feet) of diamond drilling from stations located at surface and underground. 91,000 metres (300,000 feet) of drilling occurred underground with another 109,000 metres (357,000 feet) carried out from surface. 56,000 metres (185,000 feet) of underground drilling occurred in the Rice Lake Mine, with the remainder carried out from surface. About one quarter of the 2010 drilling program was definition drilling with the remainder targeted for new exploration. While the rate of new discoveries in 2010 provided substantial optimism about the potential of the Rice Lake Project, 2011's exploration program will shift closer to identified deposits to improve production planning.

San Gold capitalized expenditures associated with mining properties and related equipment during the year to date in the amount of $39.7 MM (2009 - $24.2 MM).  This contributed to 18,638 feet (5,681 m) of Capital Development and $14.5 MM (2009 - $4.5 MM) of property, plant and equipment during the year. This Capital investment positions San Gold well going into 2011, providing many new faces with ore potential.

As at December 31, 2010, the Company had a working capital surplus of $59.0 MM compared to a working capital surplus of $25.5 MM at December 31, 2009. In the subsequent period, the Company has further enhanced its liquidity through a Flow-Through financing designed to fund exploration expenditure through 2011 and into 2012. Liquidity is currently very strong and the Company continues to have sufficient cash reserves to meet currently planned exploration and development activities and to fund operational activities in the short and medium term.

The information in this release may contain forward-looking information under applicable securities laws. This forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those implied in the forward-looking information. The TSX Exchange does not accept responsibility for the adequacy or accuracy of this release.

SOURCE San Gold Corporation