Mr. Ian Berzins reports

SAN GOLD CLOSES FIRST TRANCHE OF US$65M PRIVATE PLACEMENT

San Gold Corp. has closed the first tranche of a private placement offering of senior secured convertible notes. At the first closing, San Gold issued $23.75-million (U.S.) aggregate principal amount of notes to institutional subscribers.

The notes will bear interest with an annual coupon of 11 per cent and represent direct senior secured obligations of San Gold. The notes have a term of three years, are due at maturity, and are redeemable at a declining premium. Each note is convertible into common shares of San Gold at the option of the holder at a price of 25.45 U.S. cents (currently 28 Canadian cents) per share at any time while the notes remain outstanding, subject to certain anti-dilution provisions. The notes will not be listed for trading on the Toronto Stock Exchange or any other exchange. In addition, San Gold entered into financial offtake agreements with each of the subscribers for notes whereby such subscribers would receive settlement payments based on 40 per cent of the gold production from San Gold's Rice Lake operation for a period of three years.

San Gold anticipates that it will determine whether or not to seek formal approval for the second tranche of the offering in the next few months. The second tranche of the placement for an additional $36.25-million (U.S.) principal amount of notes and $5-million (U.S.) of common shares of San Gold, is subject to various conditions, including regulatory, stock exchange and shareholder approval, and San Gold's requirement for additional funds.

The proceeds from the offering will be used to finance continued development of San Gold's mineral properties, in particular the Rice Lake complex, and for general working capital purposes.

"We are extremely pleased to complete this financing on the heels of a very challenging market period. This placement significantly strengthens the company's balance sheet. It gives us the confidence to advance capital projects associated with the integration of our Rice Lake and Hinge/007 mines, and optimize our mine plan to improve margins across all aspects of the company," said Ian Berzins, San Gold's president, chief executive officer and chief operating officer.

All notes issued are subject to a four-month hold period.

Fairfax Securities Corp. doing business as Jett Capital Advisors LLC acted as agent for the offering.

We seek Safe Harbor.