San Gold Reports 2012 Q2 Results

WINNIPEG, MANITOBA--(Marketwire - Aug. 13, 2012) -

(All amounts in Canadian dollars unless otherwise stated)

San Gold Corporation (TSX:SGR)(OTCQX:SGRCF) is pleased to announce its quarterly financial and operating results for the second quarter of 2012.

2012 Q2 Financial and Operating Highlights

• Produced 18,241 ounces of gold despite having milling operations interrupted for 30 days, from June 1 up to and including June 30.


• Recognized record quarterly revenue of $31.6 million on gold sales of 19,648 ounces, generating $5.7 million cash flow from operating activities before changes in non-cash working capital.


• Generated quarterly operating income from operations of $3.1 million and recognized a loss of $7.8 million for the quarter including recognition of a $3.5 million loss related to our investment in SGX Resources Inc.


• Mined ore at a record quarterly rate of approximately 1,709 tons per day for a total of 155,495 tons, resulting in a surface stockpile of approximately 55,000 tons representing more than 10,000 ounces of gold. To underscore this statement, the Company produced 11,366 ounces in July.


• Set an average mill throughput record of 2,032 tons per day in May 2012.


• Realized a cash operating margin of $637 per ounce of gold sold with a realized price of $1,607 per ounce through the quarter.


• Released an updated resource and reserve estimate which increased total inferred resources by 93% to 3.5 million ounces of gold.


• Had a cash and cash equivalents balance of $25.7 million as at June 30, 2012.


• Completed approximately 62,000 metres of exploration and definition diamond drilling.


• Completed transactions to expand the Company's land base within the Rice Lake gold belt and in northern Ontario.


• Established Health, Safety and Environmental committee of the Board.

"The opportunity available to investors right now is outstanding. Our balance sheet is very strong. We provided a cash contribution of more than $5 million despite significant adversity. We are increasing our production capacity and continue to invest wisely in new properties while remaining debt-free during this difficult period for equity markets," said George Pirie, President and Chief Executive Officer of San Gold.

Review of Production Results

The Company produced 18,241 ounces of gold during the second quarter of 2012 compared with 20,111 ounces in the second quarter of 2011.

Milling operations were temporarily suspended in June due to an unexpected failure of the ball mill pinion and related damage to the ball mill motor. Repairs on the mill were completed in approximately 4 weeks with mill operations resuming on July 1, 2012. During this period, mining operations continued at an average rate of more than 1,700 tons per day while repairs were completed to the ball mill. As a result approximately 55,000 ton of ore, representing approximately 10,000 ounces of gold, were stockpiled as at June 30, 2012. Had mill operations not been suspended, the Company could have had total production of approximately 28,000 ounces of gold during the quarter. To underscore this statement, the Company produced 11,366 ounces in July.

Calculated production costs were higher than previous quarters primarily due to the mill shutdown. The total cost per ton of ore in the second quarter of 2012 increased 18% to approximately $164 compared to $138 in the same period of 2011. Mining cost per ton of ore was approximately $132 in the second quarter of 2012 compared to $121 for the three-month period ended June 30, 2011. Processing costs per ton of ore was approximately $31 in the second quarter of 2012 compared to $18 in the same period of 2011.

The cost per ton of ore for mining and processing are expected to decrease significantly in subsequent quarters and will more closely reflect the Company's true cost and production profile. Decreases in mining and processing cost per ton of ore will be realized from the mining of newer, near surface deposits in the Hinge, L10 and 007 zones as well as through increased average throughput rates.

Review of Financial Results

Financial results were generally lower during the second quarter, primarily due to the mill shutdown. Financial results during the remainder of the year are expected to experience a corresponding increase as the stockpile accumulated during the second quarter is processed and sold.

The Company reports quarterly operating income from operations of $3.1 million and a total and comprehensive loss of $7.8 million, compared to income from operations of $7.6 million and a total and comprehensive loss of $4.0 million in the second quarter of 2011.

The Company earned revenue during the second quarter of 2012 of $31.6 million, an 11% increase over revenue of $28.4 million in the second quarter of 2011. This increase was a result of both greater gold sales and a higher realized price of gold. The Company sold 19,648 ounces of gold in the second quarter of 2012, a 2% increase compared sales of 19,276 ounces in the second quarter of 2011. The Company realized $1,607 per ounce of gold sold in the second quarter of 2012, a 9% increase compared to the $1,475 the Company realized per ounce in the second quarter of 2011. San Gold recognized an expense of $3.5 million associated with its share of SGX's loss for the quarter. The carrying value of the Company's investment in SGX is currently therefore recognized at $0.9 million. The market value of the Company's 36.7 million shares of SGX is $11.4 million as at June 30, 2012.

The Company generated cash flow from operating activities before changes in non-cash working capital of $5.7 million in the second quarter of 2012, a considerable change compared to $3.0 million in the second quarter of 2011. After changes in non-cash working capital, operating activities generated $11.0 million in the second quarter of 2012, a substantial improvement compared to a use of $10.5 million in the second quarter of 2011.

Capital spending in the second quarter of 2012 was focused on mine development, increasing mill capacity, improving key infrastructure, and sustaining capital. The Company capitalized $14.8 million of mine development and $6.1 million of property, plant, and equipment during the second quarter of 2012 compared to $14.6 million and $4.1 million in the second quarter of 2011, respectively.

Tables 1 to 4 at the end of this release provide a detailed summary of the Company's key financial and operating metrics.

2012 Guidance:

• Production of between 95,000 and 105,000 ounces of gold.


• Cash Costs: $700 - $800 per ounce of gold.


• Exploration: In excess of 250,000 metres of diamond drilling.

Outlook

The Company is well positioned going into the second half of 2012, with 55,000 tons of ore stockpiled, representing approximately 10,000 ounces of gold inventory costed at just under $600 per ounce. The Company plans to mill the majority of this stockpile during the third quarter and remains confident in its annual guidance of between 95,000 and 105,000 ounces of gold produced in 2012 at an average total cash cost operating costs between $700 and $800 per ounce sold.

Capital investments made since 2010 in the Company's crushing and milling capacity, mechanized mining methods, and the removal of constraints from operations will continue to result in increased gold production and reduced cash costs per ounce of gold sold. Capital investments in the second half of 2012 will be targeted toward developing mining infrastructure in the Hinge and 007 mines, additional investments in its mechanized mining fleet, and the construction of an expanded tailings management area. The additional investments planned for 2012 are anticipated to further increase production capacity in both the mining and milling aspects of the Rice Lake Mining Complex.

In the second quarter of 2012, the Company continued its significant 2012 exploration program within the Rice Lake greenstone belt. Approximately 62,000 metres of exploration were completed by the Company in the second quarter of 2012. The Company is very encouraged by the results of the exploration drilling completed to date as it continues to demonstrate the potential for the expansion of existing mineralized zones and the discovery of new zones in the Rice Lake area. Exploration activities in the second half of 2012 will continue to focus on definition and extension drilling in the San Antonio Mining Unit, the Shoreline Basalt Unit, the Normandy Creek Shear zone, the intermediate volcanic rock unit north of the Shoreline Basalt Unit, and on properties optioned in and around the Rice Lake area. The primary objective of the Company's exploration program is to develop a larger mining complex that can be exploited through existing infrastructure with an increasing focus on converting mineral resources to mineral reserves. The Company will also work to expand its overall mineral inventory and remains optimistic about the down-dip potential of the currently known ore bodies in the Rice Lake area.

With rising production volumes and declining cash costs, combined with a strong gold-price environment and a strong balance sheet, the Company is well funded to finance its existing plans, as well as growth through new discoveries and potential acquisitions or joint venture opportunities