..Old plan was viable

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..Old plan was viable

posted on Jul 25, 2012 09:21AM

Table 10.2 presents a summary of a financial valuation that Howe has completed (See Appendix 6 for details) that

demonstrates the economic viability of the Rice Lake Project.

Table 10.2 includes inferred resources for years beyond 2009 the financial evaluation includes inferred mineral

resources.

Mineral resources that are not mineral reserves do not have demonstrated economic viability and there is

no certainty that the results of the economic analysis will be realized.

It has been assumed that inferred resources

will be converted to measured and indicated resources which would allow them to have Rice Lake Project economic

factors applied to them which would allow them to be converted to proven and probable reserves.

All of the development capital required to convert the inferred resources to reserves and develop those resources has

been included in the financial evaluation.

Over a 10-year mine life the project will generate $150 million cash surplus after taxes and EBITDA of $240 million

(average EBITDA approximately $24 million per year). The breakeven life-of-mine gold price is US$375 to allow for

recovery of ongoing development capital expenses.

San Gold Corporation, Rice Lake Project, December 2006 Page 40

The project has a 5-year mine life based on the reserves plus measured and indicated resources. Because the project is

not exposed to large startup capital requirements and there is minimal ongoing development capital required to exploit

the established reserves, the breakeven gold price for recovery of capital over the life of the mineral reserves and

measured and indicated resources is US$345 per ounce. Over the 5 year mine life the project will generate $65 million

in cash surplus after taxes and earnings before income tax, depreciation and amortization (EBITDA) of $94 million

(average EBITDA approximately $19 million per year).

10.11 PAYBACK

Basically the project is fully paid back at this time as the acquisition costs and costs to bring the project to the

production stage have been paid for fully and are basically sunk costs funded by equity financings and convertible