Gold mining producer San Gold (SGR.TSXV) announced that underground exploration drilling has encountered multiple new high-grade gold zones above the eastern end of the 26th level at its Rice Lake Gold Project in SE Manitoba, Canada. The Canadian-based gold mining company reported that new drill hole assay information has been received for the high grade “ 98 ” area, an area San Gold previously announced results from on January 20, 2010 - which included the discovery of the highest grading chip sampled face to date at 909 grams per ton of gold over 3 meters. It is this type of high-grade gold discovery that has caused investors to push up San Gold’s stock price 151% over the past 52 weeks.

The highlight of San Gold’s drill results was the discovery of a series of high-grade veins as well as large, broad breccia vein systems above the eastern extremity of their mine in an open area above the “D“ internal winze (shaft). Notable results included drill hole #28-10-38, which cut 82 grams per tonne of gold over 6.4 meters and hole #26-09-35, which intersected three new zones including a large, homogenous breccia vein grading 12 grams per tonne of gold over 21.4 meters. Potential new gold discoveries were encountered, evidenced by a downward extension of the “ 84 ” vein - as drill hole #26-09-37, cut 13 meters of 10 grams per ton of gold while other holes represented widths of up to 28 meters.

According to Eldon Brown of CI Capital Markets, who has a C$4.70 price target on the shares of San Gold, “These additional results should support our assumption that head grades will track above the resource grade at Rice Lake in the coming year.”

The eastern end of the 26th level (4200 feet) at Rice Lake has not been accessible since the 1950s and San Gold has left it untested by drilling until recently. The gold miner’s recent exploration and development progress from the 28th level in the high grade “ 98 ” vein system extends upward toward this end of the 26th level. The large “ 84 ” vein - which was last developed on the 24th level (3900 ft) in the 1940s - extends downward.

San Gold also stated that its recent exploration success has discovered “numerous new high grade veins plus broad breccia style veins in an area with rough dimensions of 200 meters in height, 200 meters in width and 400 meters in length, between the mine’s 24th and 28th levels. Any new mining that is to occur above the 26th level has the efficient advantage of moving directly to the main shaft, avoiding the internal “D” winze (shaft), a step that all Rice Lake ore must currently pass through. As well, the 26th level will be used as an exploration platform in order to look for deep extensions of the Hinge and 007 systems which are currently only explored to depths of 400 meters below surface.” According to gold mining analyst Paolo Lostritto of Wellington West, this 200 x 200 x 400 meter area looks to contain approximately 190,000 ounces of gold.

Over the past two years San Gold has worked diligently to improve access and infrastructure to the “ 98 ” vein area in preparation for mining and exploration. The “ 98 ” vein is located at the southeastern extremity of the current Rice Lake mine above the 28th level (4500 feet). The main “ 98 ” vein above the 28th level has been developed to over 500 feet in length and is open above where drilling from the 26th level (4200 ft) is searching for extensions. Mining is presently underway in several stopes within this vein above the 29th and 28th levels. The “ 98 ” vein area has already contributed to an enhancement in Rice Lake’s contribution of 0.30 ounces per ton of gold and to a record production grade in December of 2009. Moreover, the Canadian gold mining producer stated that this area is expected to comprise 30% of the company’s gold production in 2010.

In mid-day trading, shares of SGR.TSXV were up 6.3%, or C$0.21, to C$3.54, while the gold price was up $2.88 to $1,096.54 per ounce.