Here is the summary from the four page SGR report that was published by TD Waterhouse this morning:

Pre-market yesterday, San Gold reported Q2/11 preliminary operating results.

Impact – POSITIVE

The company reported gold production of 20,055 oz, in line with our forecast of 20,121 oz and well above its Q1/11 output of 14,688 oz. Operating costs will be disclosed along with financial results on August 15, but the company suggested that cash costs are expected to come in below full-year guidance of $825/oz. We currently forecast Q2/11 cash costs of $759/oz.

We believe the company is on track to beat its 2011 production guidance of 80,000 oz based on our expectation that throughput continues to ramp up over the balance of the year. We understand that in the last two weeks of June the mill has operated at a production rate of approximately 1,500 tpd, well ahead of the company’s target 2011 exit rate of 1,400 tpd. We have reviewed our mine plan assumptions, which were based on the company’s October 2010 resource estimate of 2.6mm oz at an average grade of 10.3 g/t in all categories. Since then, the company has completed a great deal of drilling and has shifted toward mechanized cut and fill mining from a more selective shrinkage method previously.

To reflect this, we are revising our model to include a larger mineable resource of 2.6mm oz (1.6mm oz previously) at a lower grade of 7.4 g/t (9.2 g/t previously). With this and other minor changes, our corporate NAV5% increases to $2.69/share (from $1.94) and our target price to $4/share (from $3). We maintain our BUY recommendation.