Investment Analysis for Intelligent Investors

Siddharth Rajeev, B.Tech, MBA

Analyst

Martha Buckwalter-Davis, BA (Geology)

Research Associate—Mining and Energy

Kevin Liu, BBA, BSc

Research Associate

March 7, 2008



2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

San Gold Corporation (TSX.V: SGR) –Continued Exploration Success

Sector/Industry: Mining www.sangoldcorp.com

Market Data (as of March 7, 2008)

Current Price C$1.49

Fair Value C$1.82 ()

Rating* BUY

Risk* 4 (Speculative)

52 Week Range C$0.91 –C$1.66

Shares O/S 214,144,741

Market Cap C$319.08 mm

Current Yield N/A

P/E (forward) 18.85

P/B 7.88

YoY Return 29.6%

YoY TSXV -10.9%

*see back of report for rating and risk definitions

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

8-Mar -07 7-Jul -07 5-Nov-07 5-Mar -08

$ 0.00

$ 0.20

$ 0.40

$ 0.60

$ 0.80

$ 1.00

$ 1.20

$ 1.40

$ 1.60

$ 1.80

Investment Highlights

San Gold has focused their development and exploration work

on the Rice Lake Mine, using a new geologic model which

has been very successful.

The company recently announced the discovery of a new

mineralized zone, the Hinge Zone, located between the Rice

Lake and San Gold #1 Mines. This area opens up significant

exploration potential for the company.

They are currently operating at 500 tpd. The company plans

to bring their mill to a full capacity of 1,200 tonnes/day by the

beginning of 2009.

Although our average fair value estimate on the company

increased from $345.45 million to $402.84 million, our value

per share estimate dropped from $1.94 to $1.82 due to a

24.3% increase in the number of shares (diluted) outstanding

since our previous report.

San Gold Corp. initiated production in late August 2006 on their Rice Lake Gold Mine in Rice Lake, Manitoba. Their

continued exploration program has added new resources and reserves from several mineralized zones on the property. San

Gold is currently transitioning from mine development to production, and plans to reach full mill capacity by 2009.

Key Financial Data (FYE - December 31)

(C$) 2005 2006 2007E 2008E

Revenues - 768,771 5,417,504 40,295,871

Net Income (5,386,529) (18,445,817) (23,436,120) 16,926,004

EPS (0.07) (0.18) (0.11) 0.08

Cash + Marketable Securities 3,610,766 13,048,010 50,393,443 49,550,184

Working Capital (513,289) 12,309,769 32,634,361 41,981,712

Total Assets 36,945,480 114,333,003 198,441,376 211,890,199

Total Debt 2,525,443 16,237,846 15,298,379 537,682

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 2

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Company

Overview

Production

Update

Exploration

and

Development

San Gold Corporation has been producing gold from their Rice Lake and San Gold mines in

Manitoba, Canada, since August 2006. They are currently bringing mill operations up to 800

tpd by Q2-2008, and plan to achieve 1,200 tpd by the beginning of 2009, by bringing the

Cartwright Zone into production.

In our last update, we discussed the company’s transition from development mining to fullscale

operations. The mill is currently operating at 500 tonnes per day as they transition from

400 tpd to 800 tpd. We expect them to achieve 800 tpd by the end of Q2-2008. Through the

development of the Cartwright Zone, they plan to achieve full capacity of 1,200 tons/day by

the beginning of 2009.

The company is focusing on the exploration of the Rice Lake Mine, which has proven very

successful. In our previous report, we discussed the company’s exploration of high-grade

veins identified deep in the Rice Lake Mine. Many of these veins consistently grade between

one and two ounces of gold per ton, and they have not been included in the most recent

resource estimate. They have identified three large veins, known as 96, A, and C, as well as

numerous smaller veins and new discoveries. They have identified mineralization to up to 500

feet below the (4730 feet) level.

A new geologic model at the Rice Lake Mine has added great exploration potential. The

company has identified mineralization in the footwall and hanging wall in the Rice Lake

Mine, which was considered waste rock before. This opens up new resources that could be

readily accessible from current workings. Recently, the company announced the discovery of

multiple mineralized zones known as the “Hinge Zone”, 1.5 kilometers northeast of the Rice

Lake Mine in the hangingwall unit. This area does not outcrop at surface, and is located in

between Rice Lake and San Gold #1. This indicates very significant resource expansion

potential for the company, and the company has continued to release positive results from this

new zone. The drilling results from the Hinge Zone are outlined in the table below.

Source: San Gold Corporation

Hole # From To Length Gold g/tonne (oz/ton)

UPPER ZONE

GS-07-15 56.0 m 57.5 m 1.5 m (5.0 ft) 18.5 (0.55)

GS-07-16 48.7 m 9.7 m 1.0 m (3.3 ft) 30.2 (0.90)

GS-07-17 63.0 m 65.4 m 2.4 m (7.9 ft) 11.4 (0.34)

GS-07-18 69.3 m 71.8 m 2.5 m (8.3 ft) 23.2 (0.69)

GS-07-19 74.7 m 80.0 m 5.3 m (17.4 ft) 7.1 (0.21)

and 82.2 m 85.3 m 3.1 m (10.0 ft) 4.5 (0.13)

GS-07-28 132.5 m 134.2 m 1.7 m (5.6 ft) 9.7 (0.29)

and 158.6 m 159.6 m 1.0 m (3.3 ft) 13.1 (0.39)

LOWER ZONE

GS-07-15 248.2 m 249.2 m 1.0 m (3.3 ft) 18.5 (0.55)

GS-07-18 255.3 m 256.3 m 1.0 m (3.3 ft) 26.0 (0.77)

GS-07-28 319.9 m 321.5 m 1.6 m (5.3 ft) 9.7 (0.29)

and 324.1 m 326.4 m 2.3 m (7.6 ft) 4.7 (0.14)

and 330.4 m 332.7 m 2.3 m (7.6 ft) 20.1 (0.62)

and 346.2 m 351.1 m 4.9 m (16.1 ft) 7.4 (0.22)

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 3

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Exploration

and Production

Goals for 2008

Resource

Estimate

Management

Changes

San Gold’s goals for the next 12 months:

The company hopes to announce an updated NI 43-101 compliant resource estimate in Q1-

2008.

The company hopes to produce 50,000 ounces of gold in 2008.

To meet mine life upgrade goals, the company plans to achieve 800 tpd by Q2-2008.

In order to expand mill production to full capacity, the company expects to develop the

Cartwright gold deposit into a producing mine in 2008 and 2009.

Category Tons Grade Contained Gold

oz/ton Au (g/t Au) (in ounces)

Total Measured

and Indicated 1,556,600 0.26 (8.9) 402,880

Total Inferred 4,774,500 0.25 (8.9) 1,200,010

Total Reserves 1,306,900 0.26 (8.9) 336,150

Note: Proven and Probable Reserves are that portion of the measured and indicated resource

categories that are determined to be economically mineable based on a feasibility study.

In addition, we have estimated the following resource from the 96, A, and C Veins that have

not been incorporated into the most recent resource estimate.

The company has made a number of management changes and additions in conjunction with

their transition to a full-scale producer. The biographies of new mine and mill management

follow.

Ron Moran - Vice President, Technical Services

Ron will be responsible for long-term mine planning, budgeting, new projects and will

coordinate contractor activities with the Mine department. Ron will also be a key member of

the management team in evaluating new properties and acquisitions and will report directly to

the CEO and the San Gold board of directors. His over 25 years of mine management and

engineering experience includes Dumas Contracting, Placer Dome, Noranda, Denison,

HBM+S and most recently Mine Manager and Chief Engineer with River Gold / Wesdome.

Ron has been working with San Gold over the past year as a consultant and is a member of the

Professional Engineers of Ontario.

Richard McPherson - Manager of Mining

Mr. McPherson will be responsible for all aspects of underground production and

development. His vast experience of over 40 years in mining, safety and contract management

includes Procon Mining, Cementation, Echo Bay and as a mines inspector with the N.W.T.

Strike

(ft)

Width

(ft)

Depth

(ft)

Volume

(cubic feet)

Sp. Gv

(cubic feet/ton)

Tonnage

(tons)

Grade

(oz/ton)

Resource

(oz)

96 Vein 700 15 400 4,200,000 11.5 365,217 0.6 219,130

A Vein 400 10 400 1,600,000 11.5 139,130 0.3 41,739

C Vein 500 8 400 1,600,000 11.5 139,130 0.3 41,739

Total Resource 302,609

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 4

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Outlook for

Gold

government. Richard has been with San Gold as the Mine Superintendent since August 2005.

John Hutchison - Mill Manager

John was instrumental in the re-start of the Rice Lake Mill as Mill Superintendent for San

Gold since 2005 and is the former Mill Superintendent for the same mill under previous

operators Harmony Gold.

Don Bridges - Mill Superintendent

Don has extensive experience in the operation and management of gold mills, most recently

with River Gold / Wesdome and will report directly to the Mill manager.

The chart below shows gold prices since January 2006. Gold prices are currently trading at

their record highs, and as of March 5, 2008, were trading at US$990/oz, which reflects a YOY

increase of 54%.

Gold Price

(Jan 3, 2006 - Feb 19, 2008)

200

300

400

500

600

700

800

900

1000

3-Jan-06 16-Jul-06 26-Jan-07 8-Aug-07 18-Feb-08

US$ / oz

So urce :KITCO

Although gold prices have risen considerably in the second half of 2007, and early 2008, and

are currently trading at record highs, we have maintained our positive outlook on gold due to

the following macro economic conditions:

a) The US$ is expected to continue to depreciate with respect to other global currencies,

based on an expected slow down in the U.S. economy, relatively lower real interest rates in the

U.S., and persisting inflationary expectations.

The International Monetary Fund (IMF) expects U.S. GDP to grow at 1.5% in 2008, versus

2.2% in 2007, and the Federal Reserve predicts unemployment rates to increase YOY from

4.6% to 5.2% in 2008. Even though the U.S. Fed cut interest rates from 5.25% to 3.00% in

their last five meetings, we expect to see further rate cuts in the first half of 2008, to tackle the

ongoing credit crunch problems and the softening U.S. housing industry. Further rate cuts

imply that real interest rates in the U.S. could possibly go negative, which is very unfavorable

for the US$. The rate cuts in turn, we believe, will add to inflationary pressures and

simultaneously depreciate the value of the U.S.$. The Fed recently raised their forecasts for

inflation in 2008 from 1.8 –2.1% to 2.1 –2.4%.

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 5

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Financials

b) High Oil Prices: We have also noticed a positive correlation between gold and oil prices in

times of high oil prices. High oil prices create inflationary expectations among investors and

lead them to drift towards gold. The chart below shows oil and gold prices since 1986. We

noticed that the positive correlation between monthly log changes in oil and gold prices

increased during January 2006 –January 2008, when oil prices were high, from the historic

correlation (1986 –2006) of 0.18 to 0.53, which is a significant jump.

Oil Vs Gold Prices

0

20

40

60

80

100

Jan-1986 Jul-1991 Jan-1997 Jul-2002 Jan-2008

US$/bbl

0

200

400

600

800

1000

US$/oz

Source: EIA and Kitco WTI Spot Price Gold

Oil is currently trading close to US$100/bbl, and prices are expected to stay above $80/bbl

through at least 2010, which we believe will also have a positive effect on the demand for

gold.

c) Investment demand continue to stay strong: Currently, the total ETG (exchange traded

gold) assets held by the NEW York Stock Exchange (NYSE) and the London Stock Exchange

(LSE) are up 29% YOY. We believe, continued strength in investment demand reflects the

fact that gold continues to hold its status as a ‘capital preservation asset’.

Therefore, based on a depreciating U.S dollar, high oil prices and strong investment demand,

we continue to be bullish on gold prices. The average consensus forecasts for gold prices are

US$870/oz in 2008, and US$880/oz in 2009.

Revenues: In the first nine months of FY2007 (ended September 2007), the company reported

revenues of $3.26 million, from sales of 4,488 oz of gold (average gold price of $727.3/oz).

Based on the company’s production rate in the first nine months of 2007, and our forecasts for

Q4-2007, we have lowered our estimate of production to 7,564 oz of gold in 2007, compared

with 25,000 oz in our previous report. Also based on our new estimates of the company’s mill

processing rate (tpd), operating days and other parameters, we forecast the company will

recover 44,968 oz of gold in 2008, compared with 49,702 oz in our previous report.

Based on sales of 7,564 oz of gold in FY2007, we expect the company to report $5.50 million

in revenues (previous estimate was $17.82 million from 25,000oz). Revenues are expected to

significantly increase to $40.30 million in FY2008, as annual production increases to an

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 6

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

estimated 44,968 oz of gold (previous estimate was $38.31 million from 49,702 oz of gold).

Exploration expenditures in Q3-2007 reduced significantly as the company’s activities were

focused on development. SGR capitalized $1.63 million of expenditures in Q3 - 2007 ($7.35

million YTD) related to the Rice Lake and SG #1 mineral properties. The company also

expensed $2.95 million on exploration for the 9-month period ended September 30, 2007,

compared to $21.18 million for the same period in 2006.

EPS Forecasts: In the first nine months of FY2007, the company had a net loss of $23.06

million (EPS: -$0.15). Our EPS forecasts are a net loss of $23.44 million, and -$0.11 EPS for

FY2007 (previous forecast was net loss of $10.28 million, and -$0.06 EPS), and net income of

$16.93 million, and $0.08 EPS for FY2008 (previous forecast was net income of $12.37

million, and $0.07 EPS), respectively. Lower revenue forecasts and higher than expected costs

led us to lower our eps forecasts for FY2007.

Cash Position and Liquidity: As at September 30, 2007, the company had $11.79 million in

cash and marketable securities. We estimate the company had a burn rate (cash spent on

operating and investing activities) of $2.75 million per month for the 9-month period ended

September 30, 2007, compared to $2.71 million per month in FY2006 (12 month period). The

table below shows a summary of the company’s cash and liquidity position.

At the end of Q3-2007, the company had debt of $14.77 million (9.1% of assets) in term loans

and convertible debentures. In February 27, 2008, the company announced that the $10

million 2-year senior secured convertible redeemable debentures have been either redeemed

by the company or converted into common shares at a price of $0.80 per common share. We

estimate about 12.46 million common shares were issued pursuant to the conversion. The

company also issued about 0.49 million common shares in payment of approximately $0.55

million of the interest owing on the debentures, with the remainder of the interest satisfied by

cash payments to the holders of the debentures. We expect debt levels to drop to $0.54 million

(0.32% of assets) by the end of FY2008, as the company repays its terms loans and

convertible debentures that are due in 2008.

Recent Financings: In December 2007, the company closed a private placement by issuing

1,283,746 flow-through shares at a price of $1.69 per share for aggregate gross proceeds of

$2,169,530.70.

In November 2007, the company completed the issuance of 28,625,000 units at a price of

$1.40 per unit for aggregate gross proceeds of $40,075,000. Each unit consists of one common

share and one half common share purchase warrant. Each warrant entitles the holder to

(in C$) 2005 2006 Q3-2007 2007 (9mo)

Current Ratio 0.90 2.96 1.06 1.06

Working Capital (513,289) 12,309,769 1,149,722 1,149,722

Debt/ Assets 6.8% 14.2% 9.1% 9.1%

Total Debt 2,525,443 16,237,846 14,773,770 14,773,770

Burn Rate (per month) 451,376 2,712,878 2,700,183 2,751,758

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 7

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Valuation

purchase one common share at a price of $2.00 for a period of 18 months from the date of

issuance.

Conclusion: At the end of September 2007, the company had $11.79 million in cash and

marketable securities. In addition, the company raised about $42 million in the two recent

financings. Based on our discussions with management, we expect the company to spend

about $20 million ($8 million on exploration and $12 million on development) in the next 12

months. We believe the company is in a good cash position. We expect the cash on hand and

the cash flows from operations will be able to fund exploration and development work in the

future, thereby minimizing share dilution.

We have continued to value SGR based on four valuation techniques that we have used in our

previous reports. The following noteworthy changes were made in our revised valuation

models.

1. Raised our short-term commodity price forecasts –In our revised model, we have used an

average gold price forecast of US$870/oz in 2008 (previous estimate –US$748/oz), and

US$880/oz in 2009 (previous estimate –US$805/oz).

2. Higher C$/US$ forecast –We have increased our exchange rate forecast for 2009 to

C$1.07/US$, up from C$1.05 /US$.

3. Revised risk-free interest rate and annualized dividend yield –We have revised our riskfree

interest rate and annualized dividend yield (for the real options model) to 3.78% and

7.7%, respectively (previous estimates were 4.2% and 6.0%).

4. Increased capital costs –We have raised our capital cost estimates from $10 million to

$13.5 million.

5. Removed Lake Shore Gold (TSX: LSG) from our comparable valuation model –Since

LSG has not yet achieved commercial production, we have removed LSG from our

comparables valuation model.

Our average revised valuation on the company increased (primarily due to increases in shortterm

gold price forecasts) from $345.45 million to $402.84 million. However, due to a 24.3%

increase in our estimate of the number of diluted shares (from 178.24 million to 221.60

million) since our previous report, our value per share estimate dropped from $1.94 per share

to $1.82 per share.

Valuation Summary

Fair Value VPS Fair Value VPS

DCF $273,577,038 $1.53 $326,302,324 $1.47

Real Options $341,785,875 $1.92 $437,318,300 $1.97

Comparables $254,878,819 $1.43 $329,442,279 $1.49

Cash Flow Multiple $511,540,008 $2.87 $518,280,932 $2.34

Average $345,445,435 $1.94 $402,835,959 $1.82

Previous Revised

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 8

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Conclusions &

Rating

Risks

The sensitivity of our DCF valuation to changes in our long-term gold price forecasts is shown

below.

As shown in the table, our DCF valuation will range between $0.83 per share and $2.38 per

share, if gold prices range between US$350/oz to US$950/oz.

San Gold is planning to ramp up production in 2008 to 800 tpd, and bring the Cartwright Zone

into production at the end of the year. The company is continuing with aggressive exploration

to increase their resource base, and we expect to see an updated NI 43-101 compliant resource

estimate in 2008. The exploration success has been great in 2007, including the discovery of

deep veins in Rice Lake and a new geologic model that has identified gold mineralization in

what was previously interpreted as barren waste rock. We believe Rice Lake is a very

important emerging gold camp and that continued exploration success can be expected, as the

region is still underexplored.

We believe the company’s fundamentals have remained strong, even though our fair

value per share estimate dropped. Based on our revised valuation models and review of

the company’s progress since our previous report, we reiterate our BUY rating on the

company, but lower our fair value estimate from $1.94 per share to $1.82 per share. Our

fair value estimate reflects an upside potential of 22% from current price levels.

We rate the shares a RISK of 4 (Speculative). The following risks, though not exhaustive,

will cause our estimates to differ from actual results:

Like other producing companies, the value of the company depends heavily on gold prices.

The success of further development, exploration, and expansion is a significant factor in

San Gold’s success.

Gold Price Value/Share (C$)

$350 $0.83

$400 $0.96

$450 $1.09

$500 $1.21

$550 $1.34

$600 $1.47

$650 $1.60

$700 $1.73

$750 $1.86

$800 $1.99

$850 $2.12

$900 $2.25

$950 $2.38

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 9

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Consolidated Statement of Operations & Deficit

(in C$)

2005 2006 2007E 2008E

Revenues - 768,771 5,417,504 40,295,871

Operating Costs 1,230,038 8,502,278 15,591,131 9,938,333

Gross Margin (1,230,038) (7,733,507) (10,173,628) 30,357,538

Direct Exploration Expenses 1,483,376 7,496,599 3,527,374 6,000,000

General & Administrative Expenses 2,011,189 5,829,586 4,195,103 4,969,167

Royalty Expenses - 578,176 4,244,328 3,045,012

Interest and Bank Charges 174,756 962,861 1,576,811 529,498

Deferred Financing Costs 102,806 294,567 877,604 -

Accretion - Convertible Debentures 45,400 305,218 524,609 262,305

Accretion - Asset Retirement Obligation 58,350 113,973 124,832 124,832

Depletion of Mineral Properties - 445,647 674,820 598,192

Amortization - Property, Plant & Equipment 26,810 64,602 1,634,389 598,192

Share based Compensation 1,125,839 2,780,299 1,779,635 1,779,635

Net Income before other revenue (6,258,564) (26,605,035) (29,333,133) 12,450,706

Indemnification Fee 64,907 58,423

Mineral Exploration Assistance Program 79,493 195,040 - -

Project Management Fee 92,036 - -

Interest Income 19,506 5,091,471 5,838,590 7,270,346

Future Income Tax Recovery 681,000 2,807,800

Income Tax 2,795,048

Net Income (5,386,529) (18,445,817) (23,436,120) 16,926,004

Earning (Loss) per common share (0.07) (0.18) (0.11) 0.08

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 10

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Consolidated Balance Sheet

(in C$) 2005 2006 2007E 2008E

Current Assets

Cash 3,544,872 12,210,678 41,239,228 40,395,969

Marketable Securities 65,894 837,332 9,154,215 9,154,215

Accounts Receivable 747,557 1,862,244 1,955,356 2,053,124

Supply Inventory 788,961 828,409 869,830

Gold in Process 2,719,891 2,855,886 2,998,680

Prepaid Expenses 137,181 180,525 189,551 199,029

Total Current Assets 4,495,504 18,599,631 56,222,645 55,670,846

Property, Plant & Equipment 21,715,304 6,878,139 10,144,049 15,045,857

Mineral Properties 28,245,175 35,496,192 43,398,000

Collateral Deposits 450,000 450,000 450,000 450,000

Deferred Financing Costs 110,023 877,604 - -

Mining Claims and Options 174,649 332,649 459,649 459,649

Promissory Notes 10,000,000 58,949,805 95,668,842 96,865,847

Total Assets 36,945,480 114,333,003 198,441,376 211,890,199

Current Liabilities

Accounts Payable & Accrued Liabilities 2,281,332 4,893,516 5,138,192 5,395,101

Current portion of LT debt 106,416 172,950 363,867 362,621

Deferred Revenues 644,383 644,383 644,383

Convertible Debentures 2,071,822 14,396,830 -

Current portion of royalty obligations 579,013 3,045,012 7,287,029

Deferred Interest 549,223

Total Current Liabilities 5,008,793 6,289,862 23,588,284 13,689,134

Asset retirement obligation 1,108,333 1,222,306 1,347,138 1,471,970

Convertible Debentures 15,811,741 - -

LT Debt 347,205 253,155 537,682 175,061

Royalty Obligation 10,000,000 58,868,163 92,623,830 89,578,818

Total Liabilities 16,464,331 82,445,227 118,096,934 104,914,983

Shareholders' Equity

Share capital 32,839,089 65,466,412 135,579,564 143,504,699

Contributed Surplus 5,115,520 5,428,333 7,207,968 8,987,602

Deficit (17,473,460) (39,006,969) (62,443,089) (45,517,085)

20,481,149 31,887,776 80,344,442 106,975,216

Total S.E & Liabilities 36,945,480 114,333,003 198,441,376 211,890,199

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 11

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Consolidate Statement of Cash Flows

(in C$) 2005 2006 2007E 2008E

Operating Activities (5,386,529) (18,445,817) (23,436,120) 16,926,004

Loss for the period

Items not affecting cash

Accretion - convertible debentures 45,400 305,218 524,609 262,305

Accretion - asset retirement obligation 58,350 113,973 124,832 124,832

Amortization - deferred financing costs 102,806 294,567 877,604 -

Amortization - property, plant and equipment 26,810 64,602 1,634,389 598,192

Depletion - 445,647 674,820 598,192

Share based compensation 1,125,839 2,780,299 1,779,635 1,779,635

Adjustment from accounting policy adoption

Future Income Tax Recovery (681,000) (2,807,800) - -

Net change in non-cash working capital (230,366) (1,418,466) (32,905) (34,551)

(4,938,690) (18,667,777) (17,853,136) 20,254,609

Investing Activities

Purchase of Property, Plant and Equipment (393,304) (3,120,333) (4,900,299) (5,500,000)

Purchase of Marketable Securities (771,438) (8,316,883)

Investments in Mineral Properties - (10,716,426) (7,925,837) (8,500,000)

Investment in Promissory Note (48,869,000)

Purchase of Mining Claims and Options (30,000) (50,000) (127,000) -

Amalgamation Costs (54,512)

(477,816) (63,527,197) (21,270,019) (14,000,000)

Financing Activities

Proceeds from shares issued and subscribed 4,889,865 26,899,815 70,951,042

Proceeds from capital lease

Proceeds from royalty obligation - 48,869,000 (497,371) -

Proceeds from debentures 2,111,000 16,734,000 (1,939,520) (6,734,000)

Convertible debt issue costs (262,040) (1,172,171)

Share issue costs (203,382) (442,348) (837,890)

LT debt 390,047 (27,516) 475,444 (363,867)

Collateral Deposit (450,000)

6,475,490 90,860,780 68,151,705 (7,097,867)

Change in Cash 1,058,984 8,665,806 29,028,550 (843,258)

Cash, beginning of the period 55,176 3,544,872 12,210,678 41,239,228

Cash, end of the period 1,114,160 12,210,678 41,239,228 40,395,969

Siddharth Rajeev, B.Tech, MBA San Gold Corporation (TSX.V: SGR) - Update Page 12

2008 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Fundamental Research Corp. Equity Rating Scale:

Fundamental Research Corp. Equity Rating Scale:

Buy –Annual expected rate of return exceeds 12% or the expected return is commensurate with risk

Hold –Annual expected rate of return is between 5% and 12%

Sell –Annual expected rate of return is below 5% or the expected return is not commensurate with risk

Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events.

Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry.

The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is

conservative with little or no debt.

2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive

to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash

flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt.

3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive

to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and

coverage ratios are sufficient.

4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a

turnaround situation. These companies should be considered speculative.

5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products.

Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding.

These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and

opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness.

There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares

of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject

company. Fees of less than $30,000 have been paid by SGR to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes

steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional

Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of

liability for negative reports are protected contractually. To further ensure independence, SGR has agreed to a minimum coverage term including four updates.

Coverage cannot be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then

made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and

are available at www.investars.com.

The distribution of FRC’s ratings are as follows: BUY (79%), HOLD (9%), SELL (4%), SUSPEND(8%).

To subscribe for real-time access to research, visit http://www.researchfrc.com/subscription.htm for subscription options.

This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and

uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are

not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services;

competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in

the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making

these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or

changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent

updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter.

Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS

INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT

ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS

TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S

RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR

UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN

YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a

complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared

unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available

upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit,

including citing Fundamental Research Corp and/or the analyst, when quoting information from this report.

Fundamental Research Corp is registered with the British Columbia Securities Commission as a Securities Adviser which is not in any way an endorsement from the

BCSC. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person

or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.