San Gold drilling points to ‘Rice Lake repeat’

Drillers underground at San Gold's Rice Lake gold mine in Manitoba. Credit: San GoldDrillers underground at San Gold's Rice Lake gold mine in Manitoba. Credit: San Gold

VANCOUVER — It’s been a rocky time for producer San Gold (TSX: SGR; US-OTC: SGRCF) as it strives to optimize operations at its Rice Lake gold complex near Bissett, Man., but recent drilling appears to offer upside. The company is expanding a new parallel mining horizon north of the Rice Lake mine, which it hopes can be accessed from current and historic workings within the next six months.

San Gold completed 30,000 metres over the first half of 2014, with drilling and development extending the 710 and 711 veins over another 100 metres along strike within the new horizon, bringing the combined strike length of the veins to more than 500 metres

The 710 and 711 veins occur within a mafic unit 100 to 200 metres north of Rice Lake in the mine’s hangingwall. The veins are being accessed and developed from the 26 level, which is the main tramming level and a major part of San Gold’s mining plan. The pattern of veins emerging within the new mine horizon is “similar in terms of size, geometry and grade to the original Rice Lake mine.”

Geological modelling has indicated that the discovery in the sub-parallel mafic unit could “significantly add” to the current resource and offers upside for future exploration to identify more sub-parallel, competent mafic units in the hangingwall and footwall regions of known zones.

“The new mining area under development not only holds exploration appeal — as early indications point to a repeat of the Rice Lake deposit — it also has immediate practical value, giving accessible high-grade stopes that add to mining flexibility and lower costs,” San Gold vice-president of Exploration Michael Michaud noted during the company’s second-quarter conference call.

Results released by San Gold on Oct. 15 are highlighted by hole 615-14-44 — drilled downdip of the 710 zone — which returned 10.4 metres grading 25.7 grams gold per tonne from 137 metres deep. Hole 615-14-21 also cut 52.3 metres of 5.4 grams gold from 129 metres deep and hole 615-14-10 returned 6.4 metres of 18.5 grams gold from 119 metres deep.

BMO Capital Markets analyst Brian Quast — who has a stock “underperform” rating on San Gold — noted that “while finding additional mineralization near existing infrastructure is positive for [the company], drilling the mineralization downdip provides little useful information on the mineability of these new zones. Due to the orientation of the drill holes, true widths are indeterminate, and are reported only as core widths.”

Meanwhile, San Gold implemented a number of operational improvements at Rice Lake during the second quarter, including: stricter grade control, better cost control, reduced capital expenses and lower overheads.

This year’s production guidance has been reduced to between 50,000 and 55,000 oz. gold. Cost savings associated with the production target are expected to lower cash costs through the rest of the year to between $700 and $800 per oz.

During the second quarter San Gold produced 11,375 oz. gold, as the Rice Lake mill processed 105,000 tonnes at a head grade of 4.18 grams gold.

But San Gold operates in the red, recognizing a quarterly loss from operations of $4.2 million and a total and comprehensive loss of $8.5 million.

San Gold shares have traded within a 52-week window of 9¢ to 27¢, and closed at 9¢ per share at press time.

The company reported cash and short-term investments totalling $10.4 million at the end of June, and has 374 million shares outstanding for a $33.6-million market capitalization.


Be the first to comment on "San Gold drilling points to ‘Rice Lake repeat’"

Leave a comment

Your email address will not be published.


By continuing to browse you agree to our use of cookies. To learn more, click more information

Dear user, please be aware that we use cookies to help users navigate our website content and to help us understand how we can improve the user experience. If you have ideas for how we can improve our services, we’d love to hear from you. Click here to email us. By continuing to browse you agree to our use of cookies. Please see our Privacy & Cookie Usage Policy to learn more.