Results of Operations

For the quarter ended September 30, 2010, San Gold processed 75,263 tons at 6.25 g/tonne to produce 12,568 ozgold. Processed tonnage increased by 30% over the prior quarter, gold produced increased by 37% and gradeincreased by 7.5% while achieving a mill recovery of 92.8%. Over 1,600 meters (5,300 ft) of primary developmentwas achieved during the quarter at the Rice Lake Mine, Hinge Mine and 007 Project, as well; a new surface declineaccess was collared for the 007 Project.

The Company recognized revenue of $13.9 MM for the quarter and $40.5 MM for the year to date. The result wasincome from operations of $4.1 MM, which is a significant improvement over the prior quarter’s loss of $2.0 MM andan income of $0.2 MM in the same quarter last year. The operating loss on a year to date basis is $0.3 MM which
compares favourably to last year’s cumulative loss of $10.7 MM to this point. The comprehensive loss fromoperations for the quarter was $4.6 MM and $12.9 MM for the YTD in comparison to a loss of $5.0 MM in the same quarter of the prior year and $24.3 MM for the prior YTD. In cash terms, the quarter generated a significant operating
contribution before non-cash items and exploration and general and administrative expenses.

Operating profit margin (please see discussion of Non-GAAP Financial Measures) per ounce is calculated as $508 at the Hinge mine and an operating loss per ounce of $174 at Rice Lake. Cash cost per ounce at the Hinge was $828 and $131 per ton, cash
cost at Rice Lake was $1,510 per ounce and $276 per ton. In total this meant the overall cash cost was $1,080 perounce and $180 per ton. (Please see discussion on Non-GAAP financial measures for a detailed calculation and reconciliation of these figures to our GAAP financial statements). The operations at the Hinge demonstrate better
economic viability in the short term than the deeper historical Rice Lake mine. Rice Lake has utility both in expanded production of the ore body but also provides an optimum platform for exploration and future access to potential extensions of the Hinge, 007, L-13 and Emperor zones at depth. It is expected that production from Rice Lake can
materially increase which will bring operating costs much more in line with profitable levels.

With respect to drilling and exploration activity, the Company continues its program with $4.7 MM spent during the quarter on exploration activity in comparison to $2.7 MM in the same quarter last year. The surface and underground drilling programs continue to confirm the geologic model that correlates historical mining in Rice Lake with the new
near surface discoveries at the Hinge and 007. This predictive model will be used to identify new targets through extrapolation between the known mineralization and stepping out in the surrounding area.

San Gold mined 75,263 tons during the quarter or the equivalent of 776 tons per day average production rate during the third quarter with 14 days in excess of 1,000 tons per day. The Company has completed the commissioning of a 30 x 42 mobile jaw crusher to crush oversize ore from the Hinge and waste rock for roads. On a year-to-date basis
the mine has had two lost time accidents or LTA’s and the LTA frequency has been reduced to 0.74. The current LTA frequency continues to be the lowest in San Gold history. The target for 2010 is an LTA frequency rate below 1.00. On a YTD basis San Gold employees have had nine medical aids (MA’s) and the MA frequency has increased
to 3.33. The target for 2010 is a MA frequency of less than 4.00. At quarter end, four San Gold employees remain off work due to injuries incurred in 2007, 2008 and 2009.

There were no reportable environmental issues during the quarter. The Company initiated the annual discharge of effluent from the tailings pond after Labour Day. During the month, 91 million US gallons of effluent was discharged from the pond. Effluent discharge will continue in October 2010.

The Company continued to be successful in attracting and retaining experienced miners and technical staff and is well positioned to continue increasing daily production levels. Closures of other mines as well as the continued successes of San Gold is attracting and retaining experienced miners and technical staff in what has historically been
a key challenge facing the Company. The Company will continue to utilize contractors on an as required basis to supplement the current workforce in performing non-core work. Additionally, the Company has implemented a 3% of base pay defined contribution pension plan for its employees with the intent of enhancing attraction and retention.