San Gold Corporation (SGRCF)

[Brookwinn]

Here is an excerpt from the CEO letter in the AGM Package (emphasis mine):

Since this annual report is occurring well into the 2007 fiscal year, there is much to report subsequent to 2006.

The underground diamond drilling has continued in the deep levels of the Rice lake mine and the Company has encountered impressive gold intersections as described in our press releases during 2006 and 2007. The D shaft and the Mechanized Zone ore zones continue to be explored and developed for mining during 2008 at grades that are expected to be higher than grades that have been historically encountered at the Rice Lake mine. The three-drill underground exploration program is being maintained to fully outline these important new zones.

Interestingly, and significantly, the results of the D Shaft zone underground drilling have generated a new geological model for the Rice Lake Mine. Past operators of the mine interpreted that the gold-rich veins predominantly occurred on the hanging wall portion of the 200 metre thick "gabbro" host unit. It was assumed that the deposits degraded chemically as the veins moved into the footwall portion. Results from recent drilling indicate that the veins continue structurally across to the footwall portion of the "gabbro" unit and along the entire known strike lengths of the vein system.

The significance of this new geological model is that:

1. Some or all of the known veins may extend from the mine's deepest levels all the way to the surface "under" the previously mined zones that dip at 70 degrees. This means additional tonnages and ounces could be added to the existing resources, both downward and upward to the surface.

2. Access to these new veins is relatively inexpensive since they are located immediately adjacent to existing haulage tunnels.

3. Initial drilling results indicate that the new veins carry higher gold grades than the historical mine grades at the Rice Lake Mine (0.26 opt for 1.4 million ounces produced to date).