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Saturday, 04/21/2007 7:44:54 PM

Saturday, April 21, 2007 7:44:54 PM

Post# of 507
SGR MINE TOUR - APRIL 19th

After making arrangements to visit San Gold this week, 4 of us investors from Winnipeg drove up to Bissett on April 19th. The road is good, paved to Manigotagan and graveled the last half hour to Bissett. It was a great day for traveling – sunny and warm, and also a great day to visit the mine as there was a gold pour happening soon after we arrived.

Both Hugh Wynne and Dale Ginn were away, so we were taken around on our tour by their Training and Safety Officer, John Lockhart and his assistant Vern. After some coffee and a visit where we talked about the challenges John faces in acquiring, training and keeping qualified staff, we put on hard hats and went over to the mill where they had the crucible fired up white hot, almost ready to pour some gold bars.

We had a chance to look over some of their processing equipment in the mill such as different separators used to divide rock and sludge from metals, and leeching tanks, and a few minutes later gold was ready to pour. The top part of the liquid in the crucible has a lot of impurities so it is poured off first for further refining later. After that a couple of bricks were poured (they look like loaves of bread) – one was 43 pounds and one was 22 pounds. These bricks (called “dore bars”) are all metal, but contain some copper and other elements; the gold content varies some from pour to pour, but it is believed that there is between 70% and 85% gold in each brick (we were not told that, but have heard that from others). These bricks are then sent to Ontario for further processing until 99.9% pure gold bars result.

From there we walked around the main mine site where we saw maintenance shops, core sampling rooms, the headframe on the mine shaft and the control room for the shaft, mine offices, parts room, geologists’ rooms, etc. We then took a little drive to view the tailings pond where the slurry from the mill is pumped after processing is done. The slurry in the tailings pond settles and chemically breaks down over time until it eventually is environmentally neutral.

After a nice lunch back at the main mine building, we donned mining boots, belt, battery pack and light and drove over to San Gold #1 about 2 miles to the east, where we prepared to go down into the mine. We rode in a cart behind a tractor and headed down the inclined shaft to get down to where the mining of good ore takes place. The shaft we drove through is about 16 feet high, 14 feet wide and to-date has been extended about 6000 feet through solid rock, now reaching down to about 700 or 800 feet below surface! That is an amazing amount of rock to remove in order to get at some gold! The shaft angles down, curls back 180 degrees and then becomes a downward spiral where each loop around takes you down approximately 100 feet further into the ground. We stopped at the second level and the fifth level; we could see where they have been blasting out large areas of rock underground. If you can imagine a horizontal corridor running off the main access shaft at each 100 foot level, what they are doing now is blasting both up and down at the end of these horizontal corridors, opening up a large vertical cavity between the horizontal corridors. The rock blasted like that falls to the lower corridor and then it is taken out from there to the surface (back up the winding, inclined shaft). This is a very rough description of the “long-holing” that they are doing. It was incredibly interesting to have the opportunity to see in person what takes place underground. We did not go down the shaft in the main Rice Lake mine.

Following this, we returned to the main building at the original mine site, where we spent a bit of time talking with Bill Ferreira, their head geologist. He explained more about the areas they have been exploring using maps and charts, and we had a closer look at some of the core samples they had on hand, where we could see good sized flecks of gold at points on the sides of the core samples.

By then it was time to leave and we headed back to Winnipeg.

The tour was excellent and gave us a much better picture of what goes on at San Gold’s mine and properties. The folks there were very hospitable and discussed their operation very openly. Unfortunately, we were not able to ask some of the business questions some have been concerned about, since both Hugh and Dale were away (for example, “What is happening with the website?” or “Who is accumulating vast numbers of shares?” or “What is happening with the share price?”). Not that we would necessarily have had all such questions answered anyways, as they are quite concerned about improper disclosure of information. Nevertheless, we did find out some things that might be helpful to answer questions floating around.

We did meet the new V.P. of Finance, Gestur Kristjansson in our travels and had a bit of a visit with him. He is working hard on finalizing the year-end financial statements, hoping to have them complete by April 30th. He then will work on the 2007 1st Quarter Statements in May. His "gut-feeling sense" is that they may soon be approaching a cash-flow breakeven point as they have begun selling gold. He was careful to not make any definite statements to us as such information should be properly disclosed in official news releases. From other comments we heard while on-site, Gestur’s value as the new VP of Finance is much appreciated.

Production – They have been pouring about twice per month now; they have done as many as five bricks at one time. At the present time about 650 tons of ore per day is being extracted and that will soon be moving up to 850 tons per day. It has taken time to get things ready for long-holing, and now they are ready to blast more frequently and to increase ore production. The mill is still not operating every day – it has been 2 weeks on, 2 weeks off, but the aim is to get it to the point where it will be running steadily. There are plans to expand the mill, but there is nothing happening with that as yet; it is not likely to happen till they are more in need of the extra capacity, we think.

Drilling – if we heard things correctly, there are 4 drills going now above ground and 1 below ground, with another drill on its way. Two of the drills are working in the Cartwright area, and two are working east of the main Rice Lake mine.

Cartwright – Ore is presently being taken from the main Rice Lake mine and from SGR#1. The next target is Cartwright. They are waiting on proper permits to begin work on the Cartwright portal, and our sense was that it may be a few months yet before permits are given and work can begin.

Workers – San Gold presently has about 240 miners. There are 38 full-trained Mine Rescue workers and they are #1 in Southern Manitoba in mine rescue. They have had their challenges in training and keeping miners, as they have been working with the local area people with no previous mining experience. There has been a high turnover; last year over 100 miners were fired for various reasons. However, many of these have since returned with better attitudes and there was been a much improved stability and morale in the work force over the past three months. They do have some veteran miners on staff (about 20%). They have also been able to find mechanics, electricians and other trades-people who have come onto their staff, so that they are using private contractors for fewer and fewer things.

Other Personnel – San Gold has 5 trained EMR’s (Emergency Responders) and is working in co-operation with the Town of Bissett to keep the ambulance station in place there. There was also talk of a couple of nurses possibly moving to Bissett, which would add further to the health and safety providers in the town.

Corporate Offices – the second floor of the main building at the mine has not been in use, but is now being developed into Corporate Offices with modern, spacious work areas for the geologists, engineers, and corporate administration personnel. The construction now is at the stage where walls and wiring are in and drywall is completed. It will be a very functional facility when completed – a big step forward from the crowded rooms currently in use on the main floor.

Other General Impressions – the atmosphere at San Gold was very warm and positive; it appeared to us that the employees are happy and upbeat. They are working together on a huge undertaking – one that will take time to develop properly. They have chosen the longer, better route of developing their own work force and doing a proper mine development. The amount of upgrading, repair and refurbishing that was needed when taking over this place from the previous owners was huge. This has all resulted in longer than expected time frames: longer than they expected themselves, and also much longer than anticipated by investors and the general public. Nevertheless, things are progressing, production is increasing and cashflow is improving. This progress will show up in future financial reports and resource updates as released from time to time by the company.

I am on the cheapie plan, so can't PM. Please use email: lion@ldj.net