November 2007

Building up Rice Lake

By D. Sarik

On August 23, 2006, San Gold Corporation poured its first gold bricks after purchasing and reopening the Rice Lake Mine in southeastern Manitoba. Now, just over a year later, ongoing exploration has led to many new developments.

The Rice Lake Mine had been closed since the end of 2001. At the end of 2003, with the belief that gold prices would rise, San Gold made an offer to purchase the mine. This was great news for the people of the small nearby town of Bissett. Presently, about 230 people are employed at the mine and San Gold takes pride in the fact that the workforce is mainly local and that a large portion of it is comprised of First Nation people.

San Gold took over the mine with the vision of maximizing cost-effectiveness in two ways. Firstly, in order to maintain a constant feed to the mill, they intend to develop a number of mines in the Rice Lake area. Secondly, with some deposits relatively close to the surface and therefore having lower operational costs, overall production costs across the company should be averaged down.

Exploration in the area is anticipated to continue in accordance with the company’s strategy. Dale Ginn, CEO of San Gold, said they “expect continuous drilling in the Rice Lake Mine over the foreseeable future.” With its location in the southeastern part of Manitoba, Rice Lake is in a belt of volcanic and igneous rock that stretches into Ontario. Ginn explained that the geology and age of the rock is the same in Rice Lake’s greenstone belt as it is in the gold-producing Red Lake belt in Ontario. Ginn estimated that 100 times more dollars have been spent on exploration in the Red Lake area than at Rice Lake, which suggests great potential for further discoveries at San Gold. Gold reserves have gone from 550,000 ounces to over 1,600,000 ounces in just over two years. Pleased with results to date, Ginn added “with high grade out in some of the new zones of the Rice Lake Mine itself, we anticipate adding significantly again to 1,600,000 ounces.”

With the goal of mining in multiple locations, San Gold has explored four new sites to date. In addition to new development in the main Rice Lake Mine, recent discoveries have been made to the east and west at San Gold-1, San Gold-3, Cartwright, and Gabrielle.

Rice Lake has existed since 1932 and has produced 1.5 million ounces to date. “What San Gold has done is to focus on exploring and developing some of the high-grade areas or areas that we thought had potential to contain high grade,” explained Ginn. During Phase I, San Gold drilled below the lowest developed areas of the mine around the main veins, to extend them and possibly discover some new ones. Phase II drilling, which is ongoing at a higher level in the mine, at 4,800 feet, has resulted in the discovery of veins of varied grades. Initial testing indicates two, and possibly three, of these veins are high grade.

To the east, SG-1 was discovered in the 2004 to 2005 time frame. It is three kilometres east of the Rice Lake Mine and was developed in 2006. It has been drilled to about 1,200 feet. SG-3, discovered towards the end of 2005, is a further three kilometres east of the mill. Exploration activities have resulted in 40 drill holes to date. SG-3 is hosted in the same structure as SG-1 and this body runs for at least 15 kilometres on the ground that San Gold controls. They will be working to identify the best location from which to mine reserves in the area.

To the west, two of the new discoveries are very close to the original mine. Cartwright, also drilled to about 1,200 feet, was discovered in the spring of 2006. This body is actually in the town of Bissett, one kilometre from Rice Lake. “It is part of the same unit that hosts the Rice Lake Mine so the characteristics are exactly the same,” explained Ginn. Gabrielle is between Cartwright and Rice Lake and will be explored in the same way.

Currently, the Rice Lake Mine itself and SG-1 are in production. According to Ginn, the new estimated gold production for 2007 is 20,000 to 30,000 ounces, with a target of 75,000 to 80,000 for 2008. The Bissett mill currently has a capacity of 1,250 tonnes per day and San Gold is presently operating at 500 tonnes. By year end, they expect to be at 800 tonnes and over 1,000 tonnes by the end of 2008. With an 800 tonne per day operation, the expected cost per ounce would be roughly $345.

When asked about any environmental impact, Ginn explained that he believes San Gold is a great example of how the mining industry can be positive for a region. “At Rice Lake you’ve got local people benefiting from the operations’ very, very insignificant footprint, and the town and the environment and industry co-existing,” he said.

With recent developments, the atmosphere at the mine is quite upbeat. Ginn takes pride in the fact that exploration efforts at San Gold have led to a production phase that many smaller organizations never reach. “There’s just so few of us actually going into production, relative to the number of projects that are out there and the number of companies exploring,” said Ginn. Given the odds, being one of the few who succeed is quite an accomplishment.

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