-Additionally, the Company has been working towards a batch test of ore from the explorative Hinge zone. Results of this activity are expected to be available for distribution during the second quarter. The capacity of the Rice Lake Mill is currently 1,250 tons of ore per day

-As of the date hereof, the Company has not updated its 43-101 documentation for drill results obtained over the last 31 months including the discovery of a series of high grade gold bearing quartz veins located near surface and 1.5 kilometers northeast of the Rice Lake Mill – the aforementioned Hinge Zone. Work on an updated 43-101 document for the Hinge area is underway and expected soon.

-Therefore, as at March 31st, 2009, the Company has sufficient cash reserves to meet currently planned exploration and development activities and to fund operational activities in the short term. The Company will be dependent upon future financings or an improvement in operations to generate sufficient cash to meet obligations and discharge liabilities as they become due

-The Company continued to confirm the high grade nature of the newly discovered Hinge deposits based on a very successful exploration drilling program from the surface. Drilling on the Hinge deposits continued from surface in the first quarter of 2009 and a concurrent underground diamond drilling program will commence in the second quarter of 2009 to support mining activities. The company expects to have an initial NI 43-101 resource estimate for the new discovery in the second quarter of 2009. Delays in preparing the document have been experienced mostly due to the rapidly changing discovery profile surrounding the Hinge. During the quarter the ramp at the Hinge intersected the new mineralized zone and the extracted bulk sample is being processed and results tallied as this report is finalized. Significant surface drilling continues to confirm the geologic model of the Hinge. A new underground drilling contractor began work during the quarter at both the Rice Lake mine and the Hinge zone.
The Company has been successful in attracting and retaining experienced miners and technical staff and is well positioned to ramp up production in 2009. Closures of other mines as well as the continued successes of San Gold is permitting the attraction and retention of experienced miners and technical staff and what has historically been a key challenge facing the Company is being addressed. The Company will continue to utilize contractors on an as required basis to supplement the current workforce and in the performance of non-core work.

-The Company recognized revenue during the quarter ended March 31st , 2009 of $3,706,077 on sales of 3,299 ounces of gold. This compares to revenue of $864,589 on sales of 992 ounces in the same quarter last year. The Company reported a net loss of $8,471,932 ($0.04 per share) for the three months ended March 31st , 2009 compared to a loss of $10,981,020 ($0.05 per share) for the comparable period in the prior year. The improvement in performance over the same period last year is mostly attributable to increases in revenue as the cost structure has a high component of fixed expense.

During the quarter mine production came solely from the Rice Lake mine. The mine uses shrinkage, panel, longhole and mechanized cut and fill mining methods. Currently the operation is dependent on a higher percentage of lower grade development ore than is planned once the operation reaches steady state. The recovered grade of the Rice Lake ore continues to show improvements over last year. As the Hinge mine continues its transition from exploration to development and production some Rice Lake employees will be redeployed and some additional personnel will be required to supplement the current workforce. The workforce at SG1 has been effectively redeployed to activities supporting the development of the Hinge Zone. During the first quarter of 2009 the Mill ran on an alternating two week on and two week off schedule. The Mill is expected to transition to a seven day a week operation in the second quarter of 2009 as mine production rates from the Rice Lake mine and the new Hinge mine are increased.

-The Company has plans for improvements to its main hoist infrastructure at the Rice Lake mine. The Company has identified $1.3 MM for mechanical improvements and installation of the hoist and related components. Upgrades were scheduled for the fourth quarter of 2008 but these have been delayed until the second quarter of 2009 due to delivery delays from the major electrical equipment supplier. These upgrades, once implemented, should result in improved reliability of hoist operations. The Company is also planning upgrades to its jaw crusher and cone crusher. The Company is planning for continued incremental underground development, completing camp upgrades and a small amount of $0.5 MM for equipment. The Company is also planning enhancements to the transformer and electrical capacities of its physical plant and has commissioned a formal engineering study and is expecting to procure new transformers at $1.0 MM but has not committed to this expenditure as of the date of this report but has committed to and paid for much of the related engineering in the amount of $0.350 MM. The Company is also evaluating an ERP system for enhanced control, maintenance planning functionality and operational reporting. Funding for known items has been obtained and is currently invested in short term, minimum risk securities described in Note 3 – Marketable Securities – in the Company’s annual audited financial statements

-As of May 21st , 2009, the date of this report, the Company had 242,681,766 common shares outstanding and an unlimited number of authorized common shares.