Part 1 – the Business Session

The San Gold AGM was again held at the Victoria Inn in Winnipeg.

Hugh Wynne welcomed everyone to the meeting at 10:02 and asked that everyone make sure that they were registered with the two CIBC Mellon ladies at the entrance. Kathy Sargent (CIBC Mellon) was the official scrutineer for the meeting. CFO Gestur Kristjansson again acted as Secretary for the meeting.

The CIBC Mellon scrutineers reported that there were 114 shareholders present representing (in person or by proxy) 111,672,501 common shares which is 45.31% of the outstanding shares. There being a quorum, the meeting was declared officially constituted.

The first item of business was a review of the audited financial statements for the fiscal year ended December 31, 2008. There were no questions, so this item was approved.

Next, the company proposed to fix the number of directors at seven, and the following were nominated as directors: Hugh Wynne, Dale Ginn, Richard Boulay, Michael Power, Courtney Shearer, Ben Hubert and James McCutcheon, QC.
There being no other nominations, a motion was made to close nominations and the slate of 7 directors was therefore elected as nominated.

The meeting then approved the appointment of Scarrow & Donald as auditors for another year.

The Company’s stock-option plan for management and board members was then brought up for re-approval for another year. Being a “rolling stock option plan”, it must be re-approved each year. There were a few questions raised regarding it. Since the plan allows for stock options to be issued up to 10% of the OS count, could employees exercise their options, and then have the company issue more options since the count of outstanding options would be reduced through the previous exercise of options? The answer was that, although this was technically possible, there was also a restriction in that only one-third of employee options vest in a year, so it takes 3 years to fully exercise options that are granted. Someone else asked at what price stock options are issued. The answer was that, while the company is allowed to discount the price on options, that raises tax issues for the recipients, so they have always issued them at market price. The motion to approve the stock option plan was then passed.

The business part of the meeting was then concluded and adjourned at 10:16.

SGR AGM June 23, 2009 – Part 2

Dale Ginn then led the meeting as he showed the most recent Powerpoint presentation. Some of the points made during the presentation (taken from slides or from what Dale said include):

San Gold has a competitive advantage due to a number of factors in its favour such as its location in a politically-stable jurisdiction, easily accessible by road, one of the lowest power costs in the world, etc. The labour shortage that has been a problem in the past has no longer been a problem over the past six months as experienced miners are now available. [Sidenote – housing for the miners is still a limitation as they do not have adequate space for them all.]

There are plans to expand the mill capacity to 1800 tons per day by 2011.

SGR has the dominant land position in the Rice Lake Greenstone Belt. There are numerous other players in the area, and SGR is co-operative with their advancement as it helps generate interest in the area.

We then looked at a series of maps showing locations of the various deposits, and access routes. The new Cohiba discovery is about half a kilometre east of the Hinge zone (Hinge#4).

There is about 400 tpd coming out of the main RLGM. The hoist upgrade is now complete – that was a capital project to upgrade the electrical technology from a 1940’s Genset type set-up to up-to-date workings – this was a project that took about 1.5 years to bring to completion.

The hinge decline is now down to the 320 ft level (approx.100 metres) below surface.

The 2006 Resource numbers totaled 1,610,000 ounces (Cartwright – 420,000, Rice Lake Mine – 830,000, SGR#1 – 270,000, SGR#3 – 86,000). That number has grown a lot, but no official number has been given – it will become clear with the next 43-101 (more on that later).

Dale showed a graph with production estimates for the next 4 years. The estimates were: (approximations - just taken off the graph):
2009 60,000
2010 110,000
2011 180,000
2012 200,000
Also, over these same years, the graph showed production costs dropping from $450 (Cdn) per ounce this year to $350 per ounce.

Estimates are that ore production will be something like this:
600 tpd from RLGM deep zones
250 tpd from the Hinge zone
300 tpd from the Cartwright area (by 2010)
(there is work being done to extend the decline ramp to the Cartwright, but it is not the highest priority so that is not progressing too quickly.

There is drilling being done in the new Cohiba area to help clarify what they have there. They are also drilling east of the RLGM and exploring areas north of the areas currently being worked – all of this to further clarify the extent to which the new geological model is correct. The model postulates a series of parallel axes regularly spaced apart, and current drilling results together with historic mining locations are tending to verify the model. SGR is the first company to have the land package to put all of this together. Previously, various operators worked sporadically in various locations without anyone trying to put it all together in a co-ordinated plan.

The first mill-able ore from the Hinge zone was taken out on March 17th of this year. A 3700 ton bulk sample has now been taken out of the Hinge zone and the results will be very important to the numbers that show up in the 43-101. If the grade of bulk sample is higher than what drilling results may previously have indicated, it allows for extrapolation to the adjacent areas below to boost the values in 43-101.

When a person compares SGR’s share price to other companies, like Gold Eagle, Rubicon, and Eleonore, we have better g/t (especially in the Hinge) and yet our share price is much lower. Eventually we should see share price action like Rubicon has had recently as we have so much more going for us.

We then looked at cross-sections and vertical views of mine sections, especially of the Hinge area to better visually grasp the progress that has been made – where the access tunnel goes, where the six “lenses” are – where the gold-bearing ore is being found. The decline is being extended further to establish a lower mining level below the 100 metre level that they have been primarily working in, and they have also provided access to a new level higher up.
As they go further, they have to continually upgrade the ventilation systems to ensure adequate fresh air for the workers and equipment. As it is, there are restrictions on the amount of diesel equipment they can operate below ground for this reason.

About half a km. to the east of Cohiba is another zone, called the Emperor zone, which is also being looked at – it has not been drilled yet. So this is not just a gold mine being developed, but a gold camp.

We then looked a map of the Timmins area and it was noted that drilling has been done with some success on the western properties, which lie adjacent to Lakeshore Gold’s land.

There are approximately 255,000,000 shares of SGR outstanding, and valued at $2.10, that gives the company a Market Cap of $540,000,000. Management holds about 15% of the shares and institutions now hold about 55%. The largest institutional holders are:
#1 Goodman and Co/Dynamic
#2 Gold 2000 (Swiss fund, has been in since 2005)
#3 RBC/Geologic.
#4 Van Eck
and then there are now 8 or 9 New York funds that also hold shares (e.g. Oppenheimer)

Coverage of SGR has grown from basically “zero” a year ago to eight, with some US houses likely to also start soon: Cormark, Dundee, Wellington West, TD, Pacific Int’l, National, BMO and GMP.

As of June 15th, all warrants have expired and most were exercised. The company now has approx. $40 million cash on hand.

Dale then showed a few graphs comparing SGR’s share price with other major gold companies as well as with some medium/junior producers. The one-year views show us keeping pace with the others, whereas 2-year and 5-year views show us outperforming. Dale’ comment was that they try to not get distracted by the daily moves in share price.

With the amount of cash now on hand, Dale said that “they do not anticipate going to the market anytime soon”. They expect to be profitable by the second half of 2009 and they were very close in this quarter. They are not “beholden to the market.”


SGR AGM June 23, 2009 – Part 3
Question and Answer Time


1. How many tons per day is the mill handling – what % of capacity is being used? It is now operating on less than 50% of capacity and it should be at 66% for the second half of 2009. (Dale also commented on expected ounces of gold to be produced: approx 10,000 in Q2, and 20,000 in both Q3 and Q4.)

2. How long is the $40 million expected to last? There was no clear answer given to this question.

3. Someone asked whether we can expect further share dilution over the next five years, partly on account of employee share options getting exercised (implying that the share count might even double over 5 years)? The answer was that this is very unlikely. Not all share options given get exercised and there is no plan to raise more cash through financing; Dale did add “never say never”, but it is not in view right now. Anyways, all new share issues have been done at new high prices per share.

4. Could a limit be placed on employee share options? Dale pointed out that, although they may issue up to 10% of the outstanding share count in share options, they never have. It has been more like 5%. At the end of March, the number of share options outstanding were 16 million, and only 8.4 million had vested (so only that amount could be exercised at this time).

[One gentlemen a little later rose to commend the company on its policy of not paying high senior management salaries and instead offering incentive based share options which actually returns money to the company. Compared to many other public companies, this was refreshing and outstanding in his opinion. His comments evoked applause, after which Dale said, “I should be the one saying that.”]

5. Another person said that the credibility of the company has been undermined by the failure of the company to meet their own deadlines. He suggested that, for instance, had we issued the 43-101 before the warrants came due, we wouldn’t have had to pay 6% to brokers to make sure warrants got exercised. Dale disagreed with that comment, saying that putting out a 43-101 prematurely would understate the company’s resources and could have caused a share price decline. He went on to explain why the 43-101 has not yet been issued as expected. At last year’s meeting, they thought they had one vein to include. Now they find they have 6 veins in the present Hinge zone and there are new zones being found besides.

6. Someone else asked when the 43-101 might be out or would it be delayed again. Dale replied to say that it is not “delayed”, but rather it has not been completed. At this point, they need the results of the bulk sample as the grade that it shows is critical to the number of ounces they can include in the 43-101. The 43-101 will not be completed and issued until the geological team of the company is satisfied that it is ready and until management is comfortable to release it.
[Later, Dale commented that they are just weeks from having the results report from the bulk sample.]

7. When are we going to move to the TSX? Dale: Everything is in place now for that – they just need an updated technical report (43-101) and then they can complete the application. However, he added, that there is a perception that some funds won’t invest in companies that aren’t on the TSX, and that isn’t necessarily accurate . He had two funds they approached say that they couldn’t invest in a company on the Venture exchange, yet he found out 6 months later that invested in SGR anyways..

8. What is the main goal of the company? It is to add ounces to the resource, and to operate (i.e. to produce gold).

9. If SGR doesn’t need to go to the market for more cash, why does it need to attract new investors? Dale: we need fresh investors to move the share price, not to raise capital.

10. How many employees does the company have? Presently around 300. Turnover is down from what it used to be. They have added housing which helps, and the locals that working at SGR are more experienced now.

11. With the growth in people and activity in Bissett, is this putting pressure on the town’s infrastructure and what is the Manitoba government doing to help? Dale: “they are leaving us alone, and that is probably a good thing!”

12. How many more employees will they need to be at capacity? Maybe another 10%.

13. Someone suggested that we may not need to upgrade the crusher after all – is that true? Dale: The ore from the hinge is breaking better and quicker than previous ore did, so it is allowing them to process more with the crusher they have – that helps take pressure off.

Hugh Wynne then concluded the meeting with a number of comments. A major part of the 43-101 is the number of inferred ounces, which is based on the consultant’s idea of what that is and what is mine-able. The picture is becoming much clearer as they go, so a much better report will result. The consultant recently spent one and a half weeks on site at the mine.

Someone reminded Hugh that he had suggested a share price of $5.00 at last year’s AGM and wondered what he would say this year. Hugh said that, after going through this past year, the last thing anyone should want to do is predict a share price. But, he added, the outlook for gold has never been better and it is certainly better today than it was when we met last year. A major issue for the viability of past companies at Bissett has been that the price of gold was too low. That shouldn’t be a problem anymore.

One other person asked whether the new zone (Cohiba) could perhaps be accessed from the same portal as the Hinge? Hugh replied that it was not possible to answer that now as there is not enough information available yet.

That concluded the 2009 San Gold AGM.

NorthLion