Exploration Insights

By Brent Cook

Issue No. 4

April 25, 2008

This week's letter comes to you from Argentina. Over the next two weeks, I will be on the road, visiting and evaluating properties in Argentina and Mexico. Both San Gold and Hathor Exploration had news this week. I discuss them below.

San Gold property visit confirms exploration upside

San Gold Corporation [SGR: TSX.V; $C 1.28] - - BUY

www.sangoldcorp.com

Capital Structure

* 200 Million Shares Outstanding

* 250 Million Shares Fully Diluted

I took the opportunity to visit San Gold's Rice Lake mine this week on the way back from New York. For those not familiar with San Gold - the company is developing a gold mine at Rice Lake, Manitoba. My interest in the company started when they seemed to come to grips with the geological controls related to the gold mineralization. Armed with a new interpretation, I felt that they should, in theory, discover more gold (see November 9, 2007 newsletter). I also felt that while SGR was a solid "developing gold producer” it still went unnoticed by the market. Finally, I believed that San Gold would ultimately attract the interest of larger investors and/or companies as the growth potential of this property came to fruition.

As evidenced by drill results reported this week, this thesis still holds true. Three drill holes into the Hinge Zone indicate that a fourth (Hinge No. 4) vein has been discovered in this new target. Drill results include 4.4 meters grading 7.5 grams per tonne gold; 1.6 meters grading 60 grams per tonne gold; and 1.8 meters grading 9.9 grams per tonne gold. The drilling also intersected a mineralized breccia between 3 and 7 meters wide, grading about 5 grams per tonne gold. Drilling in the Hinge Zone has now turned up four separate veins that appear to be structurally similar to the vein styles at the Rice Lake Mine. However, they potentially have overall higher grades. Assay results for 6 additional drill holes that reportedly intersected Hinge No. 4 are pending. The Hinge Zone could be very important to the Rice Lake Mine as it lies within 2 kilometers of the mill and offers readily available, near surface gold mineralization. This means that it could rapidly be put into production. Finally, results to date also suggest gold grades could be 30% to 50% higher than the Rice Lake average.

To understand how and why San Gold is finding more gold in a camp that has seen fairly extensive exploration, I am afraid we need to discuss some geology. The 10 kilometers of favorable geology San Gold controls consists of a series of Archean aged volcanic and intrusive rocks striking about east west and dipping to the north. These rocks have been squeezed and pinched to such extents that in certain directions the rocks open up while in others they are compressed. The openings provide the space for auriferous fluids to move through the rock units and deposit the gold. One rock type in particular, a gabbro, was more brittle and therefore conducive to breaking and providing the passageways for the fluids. Gabbro is the rock type where virtually all Rice Lake's historical mining took place. Blinded by the dogma that only the gabbro could host mineralization limited the camp's imagination and exploration to this single rock type.

So, in walks Bill Ferreira, a Manitoba geologist and probably the largest owner of mineral claims in the province. He does a bit of thinkin' and a bit of drinkin' and comes up with some unconventional ideas. His theories suggest that the gold mineralization should occur in other rocks as well, particularly along certain trends in the overlying intermediate volcanics. This week's drill results along one of these trends, the Hinge Zone, returned some very encouraging assays and are proving him right. There is insufficient information to determine the shape and size of the individual veins, but it looks as if they could contain enough tonnes to warrant going underground.

San Gold has also had some success finding additional mineralization at higher grades immediately adjacent to their current underground mining operations. This is once again a result of a re-assessment of the structural controls. In this case, drilling and drifting along narrow veins is defining grades in the 15 to 30 grams per tonne gold range over mineable widths. The new veins are somewhat oblique to the dominant vein direction. They are open both up dip and down dip and have lengths of 100 meters or so. These oblique veins offer the very real advantage of higher grades that would be immediately available to mine. This means more gold at less cost.

Looking forward, San Gold expects to have an updated resource by early summer that should include some of the new oblique veins in the mine, as well as some initial numbers for the Hinge Zone. This year's production will probably amount to roughly 40,000 ounces of gold as they ramp up production. In 2009, they should have mill capacity up to at least 800 tonnes per day as they work towards meeting design capacity of 1,200 tonnes per day. They are targeting a minimum of 100,000 ounces of gold production by the end of 2009. These estimates are based on last year's resource figures. However, their recent underground discoveries and success at the Hinge Zone are causing them to re-think their plans. If they face a problem, it is that they are finding more gold than they can efficiently produce under the old mining scenario. All things considered, I can think of worse problems.