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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
  OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended December 31, 2007

[    ] TRANSITION REPORT PURSUANT TO SECTION
  13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
  For the transition period from _____________ to _______________

Commission File Number: 0-20430

SANTA FE GOLD CORPORATION(Exact name of Registrant as specified in its charter)

|Delaware                        | 84-1094315                       
|------------------------------- | ---------------------------------
|(State or other jurisdiction of | (IRS Employer Identification No.)
|incorporation or organization)  |                                  

1128 Pennsylvania NE, Suite 200Albuquerque, NM 87110(Address of principal executive offices)

(505) 255-4852(Issuers telephone number)

Check whether the issuer (1) filed all reports required to be
  filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
  for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ]   No [     ]

Indicate by check mark whether the registrant is a shell company
  (as referred in Rule 12b-2 of the Exchange Act).

Yes [     ]  No [ X ]

The number of shares outstanding of each of the issuers
  classes of common equity was 74,773,510 shares of common stock, par value $0.002,
  as of February 13, 2008.

Transitional Small Business Disclosure Format (check one): Yes
  [     ]  No [ X ]

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SANTA FE GOLD CORPORATIONINDEX TO FORM 10-QSBFOR THE QUARTER ENDED DECEMBER 31, 2007

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

|        |                                                                                        | Page
|------- | -------------------------------------------------------------------------------------- | ----
|        |                                                                                        |     
|Item 1. | Financial
      Statements                                                             | 3   
|        | Consolidated Balance Sheet, December 31, 2007 (Unaudited)                              | 3   
|        | Consolidated
      Statements of Operations                                            |     
|        | For the Three Months and Six Months Ended December 31, 2007
      and 2006 (Unaudited) | 4   
|        | Consolidated
      Statements of Cash Flows                                            |     
|        | For the Six Months Ended December 31, 2007 and 2006 (Unaudited)                        | 5   
|        | Notes to the Unaudited Consolidated Financial Statements                               | 7   
|        |                                                                                        |     
|Item 2. | Managements
      Discussion and Analysis and Plan of Operations                      | 13  
|        |                                                                                        |     
|Item 3. | Controls
      and Procedures                                                          | 17  

PART IIOTHER INFORMATION



|               |                                                                   | Page
|-------------- | ----------------------------------------------------------------- | ----
|               |                                                                   |     
|Item 2.        | Unregistered
      Sales of Equity Securities and Use of Proceeds | 17  
|               |                                                                   |     
|Item 3.        | Defaults Upon Senior Securities                                   | 17  
|               |                                                                   |     
|Item 4.        | Submission of Matters to a Vote of Security Holders               | 18  
|               |                                                                   |     
|Item 6.        | Exhibits                                                          | 18  
|               |                                                                   |     
|SIGNATURES     | 18                                                               
|               |                                                                  
|CERTIFICATIONS | 19                                                               

2

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PART IFINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SANTA FE GOLD CORPORATIONCONSOLIDATED BALANCE SHEETDecember 31, 2007(Unaudited)

|ASSETS                                                      |  
|----------------------------------------------------------- | -
|CURRENT ASSETS:                                             |  
|Cash and
      cash equivalents                             | $
|Prepaid expenses                                            |  
|Total Current
      Assets                                  |  
|                                                            |  
|PROPERTY, PLANT AND EQUIPMENT, net                          |  
|                                                            |  
|OTHER ASSETS:                                               |  
|Idle plant and equipment,
      net                         |  
|Deferred
      finance costs                                |  
|Restricted cash                                             |  
|Deposit                                                     |  
|                                                            |  
|                                                            |  
|Total Assets                                                | $
|                                                            |  
|LIABILITIES AND STOCKHOLDERS' (DEFICIT)                     |  
|CURRENT LIABILITIES:                                        |  
|Accounts payable                                            | $
|Accrued liabilities                                         |  
|Line of credit                                              |  
|Derivative
      instrument liabilities                     |  
|Accrued interest payable                                    |  
|Total Current
      Liabilities                             |  
|LONG TERM LIABILITIES:                                      |  
|Convertible
      notes payable, less discounts of $161,440 |  
|Convertible note subscriptions                              |  
|Asset retirement
      obligation                           |  
|Total Liabilities                                           |  
|                                                            |  
|COMMITMENTS AND CONTINGENCIES                               |  
|                                                            |  
|STOCKHOLDERS' (Deficit):                                    |  
|Common stock,
      $.002 par value, 200,000,000 shares     |  
|authorized;
      74,773,510 shares issued and outstanding  |  
|Additional
      paid in capital                            |  
|Accumulated (deficit)                                       |  
|Total Stockholders'
      (Deficit)                         |  
|Total Liabilities and Stockholder's (Deficit)               | $

The accompanying notes are an integral part of the consolidated
  financial statements.

3

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SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS
  (Unaudited)

|                                                      |   | Three Months Ended |   |   | Six Months Ended |  
|----------------------------------------------------- | - | ------------------ | - | - | ---------------- | -
|                                                      |   | December 31,       |   |   | December 31,     |  
|                                                      |   | 2007               |   |   | 2006             |  
|SALES                                                 | $ | -                  |   | $ | 7,201            |  
|                                                      |   |                    |   |   |                  |  
|OPERATING COSTS AND EXPENSES:                         |   |                    |   |   |                  |  
|Exploration
      and mine related costs              |   | 89,782             |   |   | 58,405           |  
|General and administrative                            |   | 236,064            |   |   | 276,529          |  
|General and
      administration stock compensation   |   | 18,385             |   |   | 8,846            |  
|Depreciation and amortization                         |   | 1,366              |   |   | 3,593            |  
|Accretion
      of asset retirement obligation        |   | 1,250              |   |   | 1,250            |  
|                                                      |   | 346,847            |   |   | 348,623          |  
|                                                      |   |                    |   |   |                  |  
|(LOSS) FROM OPERATIONS                                |   | (346,847           | ) |   | (341,422         | )
|                                                      |   |                    |   |   |                  |  
|OTHER INCOME (EXPENSE):                               |   |                    |   |   |                  |  
|Interest
      income                                 |   | 4,448              |   |   | 21,037           |  
|Gain on settlement of financing
      lease liability |   | -                  |   |   | 2,883,280        |  
|Relief of
      debt                                  |   | -                  |   |   | 893              |  
|(Loss) on sale of asset                               |   | -                  |   |   | (7,500           | )
|Foreign currency
      translation (loss) gain        |   | (359               | ) |   | 1,553            |  
|(Loss) on derivative instrument
      liabilities     |   | (929,109           | ) |   | (1,203,156       | )
|Accretion
      of discounts on notes payable         |   |                    |   |   |                  |  
|and
      financing lease liability                   |   | (312,479           | ) |   | (484,325         | )
|Interest
      expense                                |   | (274,296           | ) |   | (79,213          | )
|                                                      |   | (1,511,795         | ) |   | 1,132,569        |  
|                                                      |   |                    |   |   |                  |  
|INCOME (LOSS) BEFORE PROVISION                        |   |                    |   |   |                  |  
|FOR INCOME
      TAXES                                |   | (1,858,642         | ) |   | 791,147          |  
|                                                      |   |                    |   |   |                  |  
|PROVISION FOR INCOME TAXES                            |   | -                  |   |   | -                |  
|                                                      |   |                    |   |   |                  |  
|NET INCOME (LOSS)                                     | $ | (1,858,642         | ) | $ | 791,147          |  
|                                                      |   |                    |   |   |                  |  
|Basic and Diluted Income (loss) per
      Share       | $ | (0.02              | ) | $ | 0.01             |  
|                                                      |   |                    |   |   |                  |  
|Weighted Average Common Shares                        |   |                    |   |   |                  |  
|Outstanding - Basic and diluted                       |   | 74,754,204         |   |   | 66,620,777       |  

The accompanying notes are an integral part of the consolidated
  financial statements.

4

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SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)

|                                                                           |   | Six Months Ended |  
|-------------------------------------------------------------------------- | - | ---------------- | -
|                                                                           |   | December 31,     |  
|                                                                           |   | 2007             |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                      |   |                  |  
|Net (loss)                                                                 | $ | (3,401,288       | )
|Adjustments to reconcile net (loss)
      from operations to               |   |                  |  
|net cash (used in)
      operating activities:                             |   |                  |  
|Gain on settlement
      of financing lease liability                      |   | -                |  
|Depreciation
      and amortization                                        |   | 1,703            |  
|Stock compensation                                                         |   | 36,693           |  
|Stock
      issued for interest                                            |   | 948,389          |  
|Accretion of
      discount on financing lease liability and notes payable |   | 991,009          |  
|Accretion
      of asset retirement obligation                             |   | 2,500            |  
|Loss on sale
      of assets                                               |   | -                |  
|Foreign
      currency translation loss (gain)                             |   | 3,165            |  
|Relief of debt                                                             |   | -                |  
|Loss
      on derivative instrument liabilities                            |   | 718,541          |  
|Net change in current assets and
      liabilities:                        |   |                  |  
|Prepaid
      expenses                                                     |   | 29,107           |  
|Deferred financing
      costs                                             |   | 72,594           |  
|Accounts
      payable                                                     |   | 43,134           |  
|Accrued liabilities                                                        |   | (6,493           | )
|Accrued
      interest payable - related party                             |   | -                |  
|Accrued interest
      payable - other                                     |   | 7,736            |  
|Accrued
      lease payments                                               |   | -                |  
|Net Cash (Used in)
      Operating Activities                              |   | (553,210         | )
|                                                                           |   |                  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                      |   |                  |  
|Proceeds from asset
      disposition                                      |   | -                |  
|Purchase of property, plant and
      equipment                            |   | (350             | )
|Net
      Cash (Used in) Investing Activities                              |   | (350             | )
|                                                                           |   |                  |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                      |   |                  |  
|Proceeds from convertible notes
      and note subscriptions               |   | 954,000          |  
|Payments on letter
      of credit                                         |   | (13,200          | )
|Payments on convertible notes                                              |   | (945,411         | )
|Deferred finance
      costs                                               |   | -                |  
|Net Cash (Used in)
      Provided by Financing Activities                  |   | (4,611           | )
|                                                                           |   |                  |  
|(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                           |   | (558,171         | )
|CASH AND CASH EQUIVALENTS, BEGINNING
      OF PERIOD                       |   | 639,852          |  
|                                                                           |   |                  |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                   | $ | 81,681           |  

The accompanying notes are an integral part of the consolidated
  financial statements.

5

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SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS
  (Unaudited)

|                                                        |   | Six Months Ended | 
|------------------------------------------------------- | - | ---------------- | 
|                                                        |   | December 31,     | 
|                                                        |   | 2007             | 
|SUPPLEMENTAL CASH FLOW INFORMATION:                     |   |                  | 
|Cash paid for interest                                  | $ | 11,341           | 
|                                                        |   |                  | 
|Cash paid for income
      taxes                        | $ | -                | 
|                                                        |   |                  | 
|SUPPLEMENTAL DISCLOSURE OF NON-CASH
      INVESTING AND |   |                  | 
|FINANCING ACTIVITIES:                                   |   |                  | 
|Stock issued for
      conversion of convertible        |   |                  | 
|notes payable                                           | $ | 945,420          | 
|                                                        |   |                  | 
|Stock issued for conversion of accrued
      interest   | $ | 28,777           | 

The accompanying notes are an integral part of the consolidated
  financial statements

6

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SANTA FE GOLD CORPORATIONNOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2007

NOTE 1  NATURE OF OPERATIONS

Santa Fe Gold Corporation (the
  Company) is a U.S. mining company incorporated in Delaware in August 1991. Its
  general business strategy is to acquire, explore and develop mineral properties.
  The Companys principal assets are the leased Ortiz gold project in New
  Mexico, the 100% owned Black Canyon mica project in Arizona, and the 100% owned
  Summit silver-gold property located in New Mexico.

At the Annual Meeting held on July
  24, 2007, the Companys stockholders approved proposals to amend the Companys
  Certificate of Incorporation, as amended, to change its name, formerly Azco
  Mining Inc., to Santa Fe Gold Corporation, and to increase its authorized
  common stock from 100,000,000 to 200,000,000 shares.

The unaudited interim consolidated
  financial statements of the Company included herein have been prepared in accordance
  with generally accepted accounting principles for interim financial information
  and in accordance with the instructions for Form 10-QSB under the Security Exchange
  Act of 1934. These statements do not include all of the information and notes
  to the financial statements required by generally accepted accounting principles
  for complete financial statements. In the opinion of management, all adjustments
  (consisting of normal recurring accruals) considered necessary for a fair presentation
  have been included. Operating results for the six-month period ended December
  31, 2007, are not necessarily indicative of the results that may be expected
  for the year ending June 30, 2008. The unaudited consolidated financial statements
  should be read in conjunction with the audited consolidated financial statements
  and notes thereto for the fiscal year ended June 30, 2007, included in the Companys
  Annual Report on Form 10-KSB, as filed with Securities and Exchange Commission.

Basis of Presentation and Going Concern

The financial statements have been
  prepared on a going concern basis, which contemplates the realization of assets
  and satisfaction of liabilities and commitments in the normal course of business.
  Should the Company be unable to continue as a going concern, it may be unable
  to realize the carrying value of its assets and to meet its liabilities as they
  become due.

The Company incurred a net (loss)
  of ($3,401,288) for the six months ended December 31, 2007, has a working capital
  (deficit) of ($3,615,310) and has a total accumulated (deficit) of ($46,383,059)
  at December 31, 2007. In addition, the Company has had no revenue-generating
  operations. To continue as a going concern, the Company is dependent on continued
  fund raising for project development and deployment and administrative operating
  expenses. In late October 2007, the Company completed a private placement of
  senior subordinated convertible notes for an aggregate purchase price of $450,000
  to three accredited investors. In December 2007, the Company entered into a
  definitive agreement for the private placement from another investor of an additional
  $13.5 million under similar terms (see NOTE 4). In addition to these funds,
  the Company will need to continue to raise additional working capital to meet
  general operating expenses.

The Companys financial statements
  do not include any adjustments relating to the recoverability and classification
  of recorded asset amounts and classification of liabilities that might be necessary
  should the Company be unable to continue in existence.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures
  to cash flow, market, or foreign currency risks.

The Company reviews the terms of
  convertible debt, equity instruments and other financing arrangements to determine
  whether there are embedded derivative instruments, including embedded conversion
  options that are required to be bifurcated and accounted for separately as a
  derivative financial instrument. Also, in connection with the issuance of financing
  instruments, the Company may issue freestanding options or warrants that may,
  depending on their terms, be accounted for as

7

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derivative instrument liabilities, rather than as equity. The
  Company may also issue options or warrants to non-employees in connection with
  consulting or other services they provide.

Derivative financial instruments
  are initially measured at their fair value. For derivative financial instruments
  that are accounted for as liabilities, the derivative instrument is initially
  recorded at its fair value and is then re-valued at each reporting date, with
  changes in the fair value reported as charges or credits to income. For option-based
  derivative financial instruments, the Company uses the Black-Scholes option
  pricing model to value the derivative instruments. To the extent that the initial
  fair values of the freestanding and/or bifurcated derivative instrument liabilities
  exceed the total proceeds received, an immediate charge to income is recognized,
  in order to initially record the derivative instrument liabilities at their
  fair value.

The discount from the face value
  of the convertible debt or equity instruments resulting from allocating some
  or all of the proceeds to the derivative instruments, together with the stated
  interest on the instrument, is amortized over the life of the instrument through
  periodic charges to income, usually using the effective interest method.

The classification of derivative
  instruments, including whether such instruments should be recorded as liabilities
  or as equity, is reassessed at the end of each reporting period. If reclassification
  is required, the fair value of the derivative instrument, as of the determination
  date, is reclassified. Any previous charges or credits to income for changes
  in the fair value of the derivative instrument are not reversed. Derivative
  instrument liabilities are classified in the balance sheet as current or non-current
  based on whether or not net-cash settlement of the derivative instrument could
  be required within 12 months of the balance sheet date.

Net (Loss) per Common Share

The Company calculates net income
  (loss) per share as required by Statement of Financial Accounting Standards
  (SFAS) No. 128, Earnings per Share. Basic earnings (loss)
  per share is calculated by dividing net income (loss) by the weighted average
  number of common shares outstanding for the period. Diluted earnings (loss)
  per share is calculated by dividing net income (loss) by the weighted average
  number of common shares and dilutive common stock equivalents outstanding. During
  the periods when they are anti-dilutive, common stock equivalents, if any, are
  not considered in the computation. The impact of outstanding stock options and
  warrants has not been included as it would be anti-dilutive.

NOTE 3 - DERIVATIVE INSTRUMENT LIABILITIES

On March 20, 2006, the Company
  completed a private placement of senior secured convertible notes, additional
  investment rights and warrants to institutional investors for an aggregate purchase
  price of $2,500,000. These notes were evaluated using Emerging Issues Task Force
  (EITF) issue No. 00-19, Accounting for Derivative Financial
  Instruments Indexed to, and Potentially Settled in, a Companys Own Stock
  (EITF 00-19) and it was determined that the warrants, embedded conversion
  and interest components and additional investment rights should be accounted
  for as derivative instrument liabilities. Accordingly, they are to be marked
  to market each reporting period, with the corresponding non-cash gain or loss
  reflected in the Companys current period statement of operations.

On September 6, 2006, the Company
  amended the terms of the private placement of the senior secured convertible
  notes that were issued on March 20, 2006. The common stock warrants and additional
  investment rights held by the investors were also amended. In connection with
  the amendment, the investors agreed to purchase in the aggregate an additional
  $1,000,000 of notes under the amended terms, bringing the total outstanding
  principal, including interest and liquidated damages, due under the notes to
  $3,781,662.

The Company uses the Black-Scholes
  option pricing model to value options, warrants, imbedded conversion option
  components and additional investment rights that are recorded as derivative
  liabilities. The fair values calculated on the original placement of senior
  secured convertible notes were re-computed for the amended terms of the placement
  agreement for the increased principal amount of the convertible notes and the
  cost of reducing the conversion price of the existing convertible notes, warrants
  and additional investment rights from $1.58 to $1.00. The aggregate fair values
  exceeded the additional proceeds received and $2,400,000 was recognized as a
  charge to loss on derivative liabilities in the period ended September 30, 2006.
  The initial convertible notes had no carrying value and the modifications made
  to the notes resulted in no additional carrying value,

8

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as the fair value of the derivative instruments issued exceeded
  the proceeds received. As of the date of the amendment, the Company re-computed
  the effective interest rate on the convertible notes to accrete the carrying
  value of the notes to their redemption dates, based on the revised repayment
  schedule and amounts.

On February 23, 2007, the Company
  agreed with the institutional investors to amend the terms of the private placement
  of senior secured convertible notes, additional investment rights and warrants
  issued March 20, 2006 and September 6, 2006. Under terms of this Amendment 2,
  the date by which the Company was required to file a registration statement
  with the Securities and Exchange Commission was extended from November 5, 2006,
  until April 30, 2007 (filed March 23, 2007), and the date by which such registration
  statement was required to be declared effective, was extended from February
  4, 2007, until July 31, 2007. The investors agreed to forgo all liquidated damages
  and penalties related to the previous deadlines. The Company agreed to seek
  stockholder approval for an increase in the Companys authorized capital,
  from the authorized limit of 100 million shares, to 200 million shares, and,
  if necessary, to file additional registration statements. In connection with
  the amendment, the Company issued 1,750,000 warrants, giving note holders the
  right to purchase common stock at a price of $1.25 per share for a period of
  five years. The fair value of the derivative instruments liability for these
  warrants at the time of issuance was determined to be $1,773,013 with the following
  assumptions: (1) risk free interest rate of 4.67%, (2) remaining contractual
  life of 5 years, (3) expected stock price volatility of 115.5%, and (4) expected
  dividend yield of zero.

On December 21, 2007, the warrant
  exercise price of $1.25 per share on the 1,750,000 warrants was reduced to $1.00
  under the terms and conditions of the warrant with the reduction resulting from
  the placement of a 7% Senior Secured Convertible Debenture with attached warrants
  at an exercise price of $1.00 per share. The original warrant also contained
  an anti-dilution provision and the warrants were increased by 437,500 to 2,187,500.
  The fair value of the derivative instruments liability for these warrants was
  recalculated at the time of the price reduction and warrant increase which is
  further described below.

On October 30, 2007, the Company
  completed the placement of 10% Convertible Senior Subordinated Notes in the
  amount of $450,000. The notes were placed with three accredited investors in
  the amount of $150,000 each. The notes have a term of 60 months and bear interest
  at 10% per annum. In connection with the transaction, the Company issued a five
  year warrant for each $2.50 invested, each warrant giving the note holder the
  right to purchase common stock at a price of $1.25 per share. An aggregate of
  180,000 warrants were issued under the notes.

On December 21, 2007, the Company
  entered into a definitive agreement for the placement with a single investor
  of a 7% Senior Secured Convertible Debenture in the amount of $13,500,000. Proceeds
  from the debenture will be issued in accordance with a pre-determined funding
  schedule and the term of the debenture is 60 months. In connection with the
  transaction, for every $2.00 of the original principal amount of the debenture,
  the investor will receive a warrant to purchase one share of common stock at
  a price of $1.00. The warrants are exercisable from July 1, 2010 to December
  31, 2014. On December 27, 2007, the Company received the initial advance under
  the agreement of $350,000 and issued 175,000 warrants relating to the advance.

The fair value of the derivative
  instruments liability for these warrants issued under the placements at the
  time of issuance in the October 2007, and December 2007, transactions was determined
  to be $163,627 with the following assumptions: (1) risk free interest rate of
  3.50% to 4.05%, (2) remaining contractual life of 5 and 7 years, (3) expected
  stock price volatility of 113.889% to 118.299%, and (4) expected dividend yield
  of zero. This derivative instruments liability was recorded as a discount to
  the convertible notes at the time of the transaction.

The fair value of the derivative
  instruments liability at June 30, 2007, was determined to be $2,402,970 with
  the following assumptions: (1) risk free interest rate of 4.91% to 4.93%, (2)
  remaining contractual life between 0.50 to 4.65 years, (3) expected stock price
  volatility of 115.602%, and (4) expected dividend yield of zero. The fair market
  value of the derivative instruments liability at December 31, 2007, was determined
  to be $3,285,138 with the following assumptions: (1) risk free interest rate
  of 3.45% to 3.7%, (2) remaining contractual life between 0 .68 to 7.0 years,
  (3) expected stock price volatility of 114.91%, and (4) expected dividend yield
  of zero. Based upon the change in fair value, the Company has recorded a non-cash
  loss on derivative instruments for the six months ended December 31, 2007, of
  $718,541 and a corresponding increase in the derivative instruments liability.
  The impact of EITF 00-19 on the financial statements as of and through December
  31, 2007, was as follows:

9

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|                                                                              |   | Derivative      |  |   | Derivative        |  |   | Derivative Gain   |  
|----------------------------------------------------------------------------- | - | --------------- |  | - | ----------------- |  | - | ----------------- | -
|                                                                              |   | Liability as of |  |   | Liability as of   |  |   | (Loss) Through    |  
|                                                                              |   | June 30, 2007   |  |   | December 31, 2007 |  |   | December 31, 2007 |  
|Convertible Debentures:                                                       |   |                 |  |   |                   |  |   |                   |  
|Compound Embedded Derivatives                                                 | $ | 353,534         |  | $ | --                |  | $ | 353,534           |  
|Additional Investment Rights                                                  |   | 552,996         |  |   | 670,444           |  |   | (117,448          | )
|Purchase Agreement Warrants                                                   |   | 775,120         |  |   | 1,324,547         |  |   | (549,427          | )
|Amendment 2 Warrants                                                          |   | 721,320         |  |   | 1,290,147         |  |   | (568,827          | )
|Totals                                                                        | $ | 2,402,970       |  | $ | 3,285,138         |  |   | (882,168          | )
|                                                                              |   |                 |  |   |                   |  |   |                   |  
|Amount allocated to convertible
      note discounts at transaction inception |   |                 |  |   |                   |  |   | 163,627           |  
|                                                                              |   |                 |  |   |                   |  | $ | (718,541          | )

NOTE 4  CONVERTIBLE DEBENTURE NOTES PAYABLE

During the period July 1, 2007
  to December 31, 2007, the Company paid on the convertible debenture notes, principal
  installments aggregating $1,890,831, with the issuance of 945,420 shares of
  the Company’s common stock at a value of $945,420 and cash payments of
  $945,411. Interest payments aggregating $988,505 were paid with the issuance
  of 2,745,804 shares of the Company’s common stock and cash aggregating
  $11,341.

On October 31, 2007, the Company
  completed the placement of 10% Convertible Senior Subordinated Notes of $450,000.
  The notes were placed with three accredited investors for $150,000 each. The
  notes have a term of 60 months, and at such time all remaining principal and
  interest shall be due. The notes bear interest at 10% per annum. Interest will
  accrue for 18 months from the date of closing. Interest on the outstanding principal
  balance will then be payable in quarterly installments commencing on the first
  day of the 19th month following closing. In connection with the transaction,
  the Company issued a five year warrant for each $2.50 invested, for a total
  of 180,000 warrants, each warrant giving the note holder the right to purchase
  one share of common stock at a price of $1.25 per share. At the option of the
  holders of the convertible notes, the outstanding principal and interest is
  convertible at any time into shares of the Company’s common stock at conversion
  price of $1.25 per share. The notes will be automatically converted into common
  stock if the weighted average closing sales price of the stock exceeds $2.50
  per share for ten consecutive trading days. The shares underlying the notes
  and warrants will be registered on request of the note holders, provided the
  weighted average closing price of the stock exceeds $1.50 per share for ten
  consecutive trading days.

In connection with the October
  30, 2007 placement, the Company received an additional $154,000 in note subscriptions
  through December 31, 2007, and the subscriptions were converted to a 10% Convertible
  Senior Subordinated Note under the same terms and conditions on February 1,
  2008.

On December 21, 2007, the Company
  entered into definitive agreements for the placement with a single investor
  of a 7% Senior Secured Convertible Debenture in the amount of $13,500,000. Proceeds
  from the debenture will be issued in accordance with a pre-determined funding
  schedule related to the Summit project’s anticipated construction requirements
  during 2008. The term of the debenture is 60 months, at the end of which time
  all remaining principal and interest shall be due. The debenture bears interest
  at the rate of 7% per annum. Interest will be accrued until June 30, 2009. Interest
  on the outstanding principal balance will then be payable in quarterly installments
  commencing on July 1, 2009. Interest may be paid in cash or stock at the investor’s
  election. If paid in stock, the number of shares will be calculated using the
  average of the daily volume weighted average sales prices of the common stock
  for the twenty (20) trading days immediately preceding the payment date. The
  entire amount of principal and any unpaid interest will be due December 31,
  2012, subject to the investor’s right to require the Company after 36
  and 48 months to apply up to 30% of the Summit project’s positive cash
  flow toward retirement of the debenture. The debenture is secured by a mortgage
  on the Summit real property and a security interest in Summit personal property.
  The investor may at any time convert unpaid principal and interest into shares
  of our common stock at the rate of $1.00 per share. The debenture will be automatically
  converted into common stock if the weighted average closing sales price of the
  stock exceeds $2.50 per share for 10 consecutive trading days. Beginning January
  1, 2011, the Company may redeem the entire outstanding amount of the debenture,
  including principal and outstanding interest, subject to the investor’s
  right to convert the debenture into shares of common stock. In connection with
  the transaction, for every $2.00 of the original principal amount of the debenture,
  the investor will receive a warrant to purchase one share of common stock at
  a price of $1.00. The warrants are exercisable from July 1, 2010 to December
  31, 2014. On December 27, 2007, the Company received the initial scheduled advance
  under the agreement of $350,000 and issued 175,000 warrants relating to the
  advance. The Company was obligated for an account management fee of 2% ($270,000)
  in connection with the transaction that was paid in January 2008 after the second
  advance under the agreement.

10

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NOTE 5  COMMITMENTS AND CONTINGENCIES

On December 13, 2007, the Board
  of Directors granted an award of 500,000 shares of restricted stock to the President
  and Chief Executive Officer that will vest on December 31, 2008. The shares
  are subject to forfeiture contingent on attainment of certain performance objectives
  related to the Summit project. As of the date of this filing, the shares have
  not been issued.

NOTE 6 - STOCKHOLDERS (DEFICIT)

Issuances of Common Stock

During the period July 1, 2007,
  to December 31, 2007, the Company paid on the convertible debenture notes, principal
  installments aggregating $945,420, with the issuance of 945,420 shares of the
  Companys common stock and interest payments aggregating $977,164 with
  the issuance of 2,745,804 shares of the Companys common stock.

2007 Equity Incentive Plan

At the Companys Annual Meeting
  on July 24, 2007, the stockholders approved the 2007 Equity Incentive Plan ("2007
  EIP"). The 2007 EIP became effective on July 25, 2007, and will terminate on
  July 24, 2017. A maximum of 8,000,000 shares of common stock are reserved for
  the grant of non-qualified stock options, incentive stock options, restricted
  stock awards and other stock awards under the 2007 EIP. The 2007 EIP replaces
  the Companys 1989 Stock Option Plan, which terminated on April 30, 2007.

The purpose of the 2007 EIP is
  to provide the employees, non-employee directors, and consultants who are selected
  for participation in the 2007 EIP with added incentives to continue in the long-term
  service of the Company and to create in such persons a more direct interest
  in the future success of the Companys operations by relating increases
  in compensation to increases in stockholder value, so that the income of the
  participants in the 2007 EIP is more closely aligned with the financial interests
  of the Companys stockholders. The 2007 EIP is also intended to provide
  a financial incentive that will enable the Company to attract, retain and motivate
  the most qualified directors, employees, and consultants. As of December 31,
  2007, one executive officer, two non-employee board members and approximately
  five other employees and consultants are eligible to receive grants under the
  2007 EIP.

In July 2007, the Company granted
  a five (5) year option to purchase 100,000 shares of common stock to a director.
  The option exercise price is $0.46 per share, the closing price on the date
  of grant and the options have a vesting period of one year from the date of
  grant. The options were valued at $37,849 using the Black-Scholes option pricing
  model and will be expensed over the vesting period. The options were valued
  using a volatility of 114.622%, a risk free interest rate of 4.8%, an expected
  life of 5.0 years and zero quarterly dividends. During the six months ended
  December 31, 2007, $19,001 was recognized as stock compensation expense.

On December 13, 2007, the Board
  of Directors granted an award of 500,000 shares of restricted stock to the President
  and Chief Executive Officer that will vest on December 31, 2008. The shares
  are subject to forfeiture contingent on attainment of certain performance objectives
  related to the Summit project. As of the date of this filing, the shares have
  not been issued. The Board also granted under the Companys policy, five
  year options to purchase 75,000 shares of common stock to each of the two outside
  directors and 100,000 five year options to an employee who is the son the President
  and Chief Executive Officer. The options were valued at $0.55, the closing price
  on the date of the grant and vest on June 30, 2008. The options were valued
  at $111,619 using the Black-Scholes option pricing model and will be expensed
  over the vesting period beginning January 1, 2008. The options were valued using
  a volatility of 113.286%, a risk free interest rate of 3.45%, an expected life
  of 5.0 years and zero quarterly dividends.

In addition to options under the
  1989 Stock Option Plan and 2007 EIP, the Company also has issued options outside
  of these plans and these options are exercisable over various terms up to a
  maximum of ten years.

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Issuances of Warrants

On October 31, 2007, in connection
  with the issuance of 10% Convertible Senior Subordinated Notes aggregating $450,000,
  the Company issued a five year warrant for each $2.50 invested, for a total
  of 180,000 warrants, each warrant giving the note holder the right to purchase
  one share of common stock at a price of $1.25 per share.

On December 21, 2007, the warrant
  exercise price of $1.25 per share on 1,750,000 warrants was reduced to $1.00
  under the terms and conditions of the warrant with the reduction resulting from
  the placement of a 7% Senior Secured Convertible Debenture with attached warrants
  at an exercise price of $1.00 per share. The original warrant contained an anti-dilution
  provision and the warrants were increased by 437,500 to 2,187,500.

On December 27, 2007, in connection
  with a scheduled advance of $350,000 on the 7% Senior Secured Convertible Debenture,
  the Company issued 175,000 warrants, each warrant giving the note holder the
  right to purchase one share of common stock at a price of $1.00 per share. The
  warrants are exercisable from July 1, 2010 to December 31, 2014.

Stock option and warrant activity,
  both within the 1989 Stock Option Plan and 2007 EIP and outside of these plans,
  for the six months ended December 31, 2007 are as follows:

|                                 |  | Stock Options |  |   | Stock Warrants | 
|-------------------------------- |  | ------------- |  | - | -------------- | 
|                                 |  |               |  |   | Weighted       | 
|                                 |  |               |  |   | Average        | 
|                                 |  | Shares        |  |   | Price          | 
|Outstanding at June 30, 2007     |  | 9,600,000     |  | $ | 0.11           | 
|Granted                          |  | 350,000       |  | $ | 0.52           | 
|Canceled                         |  | ---           |  |   | ---            | 
|Expired                          |  | ---           |  |   | ---            | 
|Exercised                        |  | ---           |  |   | ---            | 
|Outstanding at December 31, 2007 |  | 9,950,000     |  | $ | 0.12           | 

Stock options and warrants outstanding and exercisable at December
  31, 2007, are as follows:

Outstanding and Exercisable Options
      Outstanding and Exercisable
        WarrantsWeighted
      Weighted
      
      
      Weighted
      WeightedExercise
      
      Average
      Average
      Exercise
      
      Average
      AveragePrice
      
      Contractual
      Exercise
      Price
      
      Contractual
      ExerciseRange
      Number
      Life
      Price
      Range
      Number
      Life
      Price$0.10
      5,000,000
      1.46
      $0.10
      $1.00
      4,078,330
      3.94
      $1.00$ 0.11
      4,500,000
      5.23
      $0.11
      $1.25
      180,000
      4.86
      $1.25$0.74
      50,000
      4.32
      $0.74
      $1.58
      75,001
      1.70
      $1.58$1.24
      50,000
      3.34
      $1.24
      
      ---9,600,000
      
      $0.11
      
      4,333,331
      
      $1.08


The weighted average excise price
  for outstanding warrants has changed from the prior reporting due to warrant
  price change and quantity referred to above on December 21, 2007.

NOTE 7  SUBSEQUENT EVENTS

Subsequent to December 31, 2007,
  the Company received cash proceeds aggregating $1,808,028 from convertible notes
  and additional investment rights under current financing facilities.

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ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS AND
  PLAN OF OPERATION

THIS FORM 10-QSB MAY CONTAIN CERTAIN FORWARD-LOOKING
  STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM
  ACT OF 1995 AND BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS
  AND RELEASES, WHICH REPRESENT THE COMPANYS EXPECTATIONS OR BELIEFS, INCLUDING
  BUT NOT LIMITED TO, STATEMENTS CONCERNING THE COMPANYS OPERATIONS, ECONOMIC
  PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS,
  AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN
  THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
  STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS
  MAY, WILL, EXPECT, BELIEVE,
  ANTICIPATE, INTENT, COULD, ESTIMATE,
  MIGHT, PLAN, PREDICT OR CONTINUE
  OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED
  TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE
  SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANYS
  CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF
  IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL
  REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND
  ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED
  IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
  THE COMPANY DOES NOT INTEND TO UNDERTAKE TO UPDATE THE INFORMATION IN THIS FORM
  10-QSB IF ANY FORWARD-LOOKING STATEMENT LATER TURNS OUT TO BE INACCURATE. THE
  FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE INFORMATION PRESENTED IN THE
  COMPANYS ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED JUNE 30, 2007.

General

Santa Fe Gold Corporation (the
  Company, our or we) is a U.S. mining company,
  incorporated in August 1991 in the state of Delaware, with a general business
  strategy to acquire and develop mining properties amenable to low cost production.
  We currently are focused on: (1) developing our Summit silver-gold property
  located in New Mexico and putting the property into production, (2) conduct
  further studies on our Ortiz gold project located in New Mexico, (3) fund the
  re-opening and enhancement of our Black Canyon mica project located in Arizona
  or sell the project, continue raising working capital for general operating
  and administrative expenses and (4) acquire high quality gold, silver and/or
  copper properties.

Basis of Presentation and Going Concern

The financial statements have been
  prepared on a going concern basis, which contemplates the realization of assets
  and satisfaction of liabilities and commitments in the normal course of business.
  Should we be unable to continue as a going concern, we may be unable to realize
  the carrying value of our assets and to meet our liabilities as they become
  due. We incurred a net (loss) of ($3,401,288) for the six months ended December
  31, 2007, and have a total accumulated (deficit) of ($46,383,059) at December
  31, 2007. To continue as a going concern, we are dependent on continued fund
  raising for project development, deployment and general and administrative operating
  expenses. In late October 2007, we completed a private placement of senior subordinated
  convertible notes for an aggregate purchase price of $450,000 to three accredited
  investors. On December 21, 2007, we entered into definitive agreements for the
  placement with a single investor of a 7% Senior Secured Convertible Debenture
  in the amount of $13,500,000. Proceeds from the debenture will be issued in
  accordance with a predetermined funding schedule related to the Summit projects
  anticipated construction requirements during 2008.

In addition to these funds, we
  will need to continue to raise additional working capital to deploy other segments
  of our business plan and for corporate general and administrative operating
  expenses. There is no assurance that such funding will be available when needed,
  or if available, that its terms will be favorable or acceptable to the Company.
  We have $81,681 cash on hand at December 31, 2007. We will be required to raise
  additional working capital in equity or financing transactions in order to satisfy
  our expected cash expenditures and continue to deploy our current business strategies.
  Subsequent to December 31, 2007, we have received cash proceeds from convertible
  notes and additional investment rights under current financing facilities aggregating
  $1,808,028.

The Companys financial statements do not include any adjustment
  relating to the recoverability and classification of

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recorded asset amounts and classification of liabilities that
  might be necessary should we be unable to continue in existence.

Derivative Financial Instruments

In connection with the issuance
  of debt or equity instruments, we may issue options or warrants to purchase
  our common stock. In certain circumstances, these options or warrants may be
  classified as derivative liabilities, rather than as equity. Additionally, the
  debt or equity instruments may contain embedded derivative instruments, such
  as conversion options, which in certain circumstances, may be required to be
  bifurcated from the associated host instrument and accounted for separately
  as a derivative instrument liability.

The identification of, and accounting
  for, derivative instruments is complex. Company derivative instrument liabilities
  are re-valued at the end of each reporting period, with changes in the fair
  value of the derivative liability recorded as charges or credits to income,
  in the period in which the changes occur. For warrants that are accounted for
  as derivative instrument liability, we determined the fair value of these warrants
  using the Black-Scholes option pricing model. That model requires assumptions
  related to the remaining term of the instruments and risk-free rates of return,
  our current common stock price and expected dividend yield, and the expected
  volatility of our common stock price over the life of the warrants. The identification
  of, and accounting for, derivative instruments and the assumptions used to value
  them can significantly affect our financial statements.

RESULTS OF OPERATIONS

Operating Results for the Three Months Ended December 31,
  2007 and 2006

Sales

We had revenues of $-0- for the
  three months ended December 31, 2007 as compared to $7,201 for the comparable
  period ended December 31, 2006. The sales in the prior comparable period consisted
  of Mica sales from inventory on hand.

Operating Costs and Expenses

Exploration and mine related costs
  increased in the quarter ended December 31, 2007, to $89,782 from $58,405 for
  the comparable quarter ended in 2006, an increase of $31,377. This increase
  in the current quarter is mainly attributable to increased costs incurred on
  the Summit site aggregating $23,543 and increased land lease fees at Ortiz of
  $7,159.

General and administrative decreased
  to $236,064 for the quarter ended December 31, 2007, from $276,529 for the comparative
  quarter ended December 31, 2006, a decrease of $40,465. The decrease in the
  current quarter is mainly attributable to decreases in rent expense of $36,352;
  accounting and legal fees of $5,065; investor relations of $3,014 and per diem
  costs of $15,045. These decreases were mainly offset by increases in financing
  fees of $4,500; travel related costs of $2,499; SEC filing costs of $4,718,
  attributable to bringing our reporting requirements current and director fees
  of $6,000.

General and administrative stock
  compensation increased to $18,385 for the quarter ended December 31, 2007, from
  $8,846 for the comparative quarter ended December 31, 2006, an increase of $9,539.
  The increase is attributable to amortized costs associated with options issued
  to a director aggregating $9,539 that are being amortized over the vesting period
  of one year.

Other Income and Expenses

Other income and (expenses) for
  the quarter ended December 31, 2007, were $(1,511,795) as compared to $1,132,569
  for the comparable quarter ended December 31, 2006. The increase in other expenses
  incurred in the current quarter of $2,644,364 is mainly attributable to decreases
  from a gain on settlement of financing lease and interest income aggregating
  $2,899,869 and increased interest expense of $195,083, consisting mainly of
  interest recognized on debt conversion of the senior secured convertible debt.
  These increases in the current period were mainly offset by a decrease loss
  recognized on derivative instruments liability of $274,047 and a decrease in
  accretion of discounts on notes payable and financing lease liability of $171,846.

(Loss) on Derivative Financial
  Instruments

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We recognized a (loss) on derivative
  financial instruments of $(929,109) for the quarter ended December 31, 2007,
  as compared to a (loss) of $(1,203,156) for the prior year comparable period.
  The non-cash (loss) arise from adjustments to record the derivative financial
  instruments at fair values in accordance with current accounting standards.
  The derivative financial instruments arose in connection with a financing lease
  and senior secured convertible notes. Otherwise, we generally do not use derivative
  financial instruments for other purposes, such as hedging cash flow or fair-value
  risks. The decrease in the derivative (loss) in the quarter ended December 31,
  2007, is mainly attributable to changes in the market price of our common stock,
  which is a component of the calculation model and offset by the issuance of
  additional warrants resulting in derivative treatment. We use the Black-Scholes
  option pricing model to estimate the fair value of this derivative. Because
  Black-Scholes uses the Companys stock price, changes in the stock price
  will result in volatility in the earnings in future periods as the Company continues
  to reflect the derivative financial instruments at fair values.

Operating Results for the Six Months Ended December 31, 2007
  and 2006

Sales

We had revenues of $-0- for the
  six months ended December 31, 2007 as compared to $7,201 for the comparable
  period ended December 31, 2006. The sales in the prior comparable period consisted
  of Mica sales from inventory on hand.

Operating Costs and Expenses

Exploration and mine related costs
  increased in the six months ended December 31, 2007, to $150,103 from $128,661
  for the comparable six months ended in 2006, an increase of $21,442. This increase
  in the current six month period is mainly attributable to increased costs incurred
  on the Summit site aggregating $25,683 and offset by an increase in costs at
  the Ortiz site aggregating $5,582.

General and administrative decreased
  to $537,315 for the six months ended December 31, 2007, from $647,254 for the
  comparative six months ended December 31, 2006, a decrease of $109,939. The
  decrease in the current six months is mainly attributable to decreases in rent
  expense of $168,704; accounting and legal fees of $27,919 and per diem costs
  of $30,090. These decreases were mainly offset by increases in financing fees
  of $15,636; travel and related costs of $7,383; investor relations of $37,861;
  costs associated with the corporate annual shareholder meeting of $32,876; payroll
  burden of $4,945; SEC filing costs of $3,038, attributable to bringing our reporting
  requirements current and director fees of $12,000.

General and administrative stock
  compensation increased to $36,693 for the six months ended December 31, 2007,
  from $20,011 for the comparative six months ended December 31, 2006, an increase
  of $16,682. The increase is attributable to amortized costs associated with
  options issued to a director aggregating $19,001 that are being amortized over
  the vesting period of one year.

Other Income and Expenses

Other income and (expenses) for
  the six months ended December 31, 2007, were $(2,672,974) as compared to $(428,782)
  for the comparable six months ended December 31, 2006. The increase in other
  expenses incurred in the current six month period of $2,244,192 is mainly attributable
  to decreases from a gain on settlement of financing lease and interest income
  aggregating $2,907,074; increased accretion of discounts on notes payable and
  financing lease of $124,467 and increased interest expense of $764,011, consisting
  mainly of interest recognized on debt conversion of the senior secured convertible
  debt. These increases in the current six month period were mainly offset by
  a decrease loss recognized on derivative instruments liability of $1,549,474.

(Loss) on Derivative Financial
  Instruments

We recognized a (loss) on derivative
  instruments liability of $(718,541) for the six months ended December 31, 2007,
  as compared to a (loss) of $(2,268,015) for the prior year comparable six month
  period. The non-cash (loss) arise from adjustments to record the derivative
  financial instruments at fair values in accordance with current accounting standards.
  The derivative financial instruments arose in connection with a financing lease
  and senior secured convertible notes. Otherwise, we generally do not use derivative
  financial instruments for other purposes, such as hedging cash flow or fair-value
  risks. The decrease in the derivative (loss) in the six months December 31,
  2007, is mainly attributable to changes in the market price of our common

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stock, which is a component of the calculation model and offset
  by the issuance of additional warrants resulting in derivative treatment. We
  use the Black-Scholes option pricing model to estimate the fair value of this
  derivative. Because Black-Scholes uses the Companys stock price, changes
  in the stock price will result in volatility in the earnings in future periods
  as the Company continues to reflect the derivative financial instruments at
  fair values.

PLAN OF OPERATIONS

Liquidity and Capital Resources

To continue with the deployment
  of our business strategies, we will require significant additional working capital.
  We also will require additional working capital for employment of necessary
  corporate personnel, and related general and administrative expenses.

As of December 31, 2007, we had
  cash on hand of $81,681, a working capital (deficit) of $3,615,310, which is
  mainly attributable to non-cash derivative instrument liabilities of $3,285,138,
  and an accumulated (deficit) of $(46,383,059). Subsequent to December 31, 2007,
  we have received cash proceeds from convertible notes and additional investment
  rights under current financing facilities aggregating $1,808,028.

We are continuing to pursue a joint
  venture or sale of the Black Canyon mica project. Management has determined
  that it would be significantly more beneficial for the Company to deploy its
  resources in the area of precious metals based upon the current and projected
  market trends in this area.

We continue to seek funding to
  advance our business plan and strategies. We require funding to meet our corporate
  general and administrative commitments, to continue feasibility studies on our
  mineral properties and to initiate exploration programs. We anticipate that
  our operations for the remaining quarters in fiscal 2008 will be funded from
  our current financing facilities; sale of our securities and possibly through
  the exercise of certain options and warrants. While we believe we will be able
  to finance our continuing activities, there are no assurances of success in
  this regard or in our ability to obtain continued financing through capital
  markets, joint ventures, or other acceptable arrangements. If our plans are
  not successful, operations and liquidity may be adversely impacted. In the event
  that we are unable to obtain additional required capital, we may be forced to
  reduce our exploration and operating expenditures or to cease development operations
  altogether.

On October 31, 2007, the Company
  completed the placement of 10% Convertible Senior Subordinated Notes in the
  amount of $450,000. The notes were placed with three accredited investors in
  the amount of $150,000 each. The notes have a term of 60 months, at the end
  of which time all remaining principal and interest shall be due. The notes bear
  interest at 10% per annum. Interest will accrue for 18 months from the date
  of closing. Interest on the outstanding principal balance will then be payable
  in quarterly installments commencing on the first day of the 19th month following
  closing. In connection with the transaction, the Company issued a five year
  warrant for each $2.50 invested, for a total of 180,000 warrants, each warrant
  giving the note holder the right to purchase one share of common stock at a
  price of $1.25 per share. At the option of the holders of the convertible notes
  the outstanding principal and interest is convertible at any time into shares
  of the Companys common stock at a conversion price of $1.25 per share.
  The notes will be automatically converted into common stock if the weighted
  average closing sales price of the stock exceeds $2.50 per share for ten consecutive
  trading days. The shares underlying the notes and warrants will be registered
  on request of the note holders, provided the weighted average closing price
  of the stock exceeds $1.50 per share for ten consecutive trading days.

In connection with the October
  30, 2007, placement, the Company received an additional $154,000 in note subscriptions
  through December 31, 2007, and the subscriptions were converted to a 10% Convertible
  Senior Subordinated Note under the same terms and conditions on February 1,
  2008.

On December 21, 2007, the Company
  entered into definitive agreements for the placement with a single investor
  of a 7% Senior Secured Convertible Debenture in the amount of $13,500,000. Proceeds
  from the debenture will be issued in accordance with a pre-determined funding
  schedule related to the Summit projects anticipated construction requirements
  during 2008. The term of the debenture is 60 months, at the end of which time
  all remaining principal and interest shall be due. The debenture bears interest
  at the rate of 7% per annum. Interest will be accrued until June 30, 2009. Interest
  on the outstanding principal balance will be payable in quarterly installments
  commencing on July 1, 2009. Interest may be paid in cash or stock at the investors
  election. If paid in stock, the number of shares will be calculated using the
  average of the daily volume weighted average sales prices of the

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common stock for the twenty (20) trading days immediately preceding
  the payment date. The entire amount of principal and any unpaid interest will
  be due December 31, 2012, subject to the investors right to require the
  Company after 36 and 48 months to apply up to 30% of the Summit projects
  positive cash flow toward retirement of the debenture. The debenture is secured
  by a mortgage on the Summit real property and a security interest in Summit
  personal property. The investor may at any time convert unpaid principal and
  interest into shares of our common stock at the rate of $1.00 per share. The
  debenture will be automatically converted into common stock if the weighted
  average closing sales price of the stock exceeds $2.50 per share for 10 consecutive
  trading days. Beginning January 1, 2011, the Company may redeem the entire outstanding
  amount of the debenture, including principal and outstanding interest, subject
  to the investors right to convert the debenture into shares of common
  stock. In connection with the transaction, for every $2.00 of the original principal
  amount of the debenture, the investor will receive a warrant to purchase one
  share of common stock at a price of $1.00. The warrants are exercisable from
  July 1, 2010 to December 31, 2014. On December 27, 2007, the Company received
  the initial scheduled advance under the agreement of $350,000 and issued 175,000
  warrants relating to the advance. The Company is obligated to an account management
  fee of 2% ($270,000) in connection with the transaction that was paid in January
  2008 after the second advance under the agreement.

Factors Affecting Future Operating Results

We have deployed our plan to place
  the Company on an improved financial footing. Additional important elements
  of the plan include maintaining current in the filing of our annual and quarterly
  financial reports and continuing to raise interim funding to provide for deployment
  of operations on our various property sites. If we are able to continue to secure
  additional interim financing on acceptable terms and obtain the additional required
  project financing, we believe we will be in a position to expand our business
  plan deployment on our other property sites.

Off-Balance Sheet Arrangements

During the three months ended December
  31, 2007, we did not engage in any off-balance sheet arrangements defined in
  Item 303(c) of the SECs Regulation S-B.

ITEM 3  CONTROLS AND PROCEDURES

We maintain disclosure controls
  and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
  and Exchange Act of 1934, as amended (the Exchange Act) that are
  designed to ensure that information required to be disclosed by us in the reports
  that we file or submit under the Exchange Act is recorded, processed, summarized
  and reported, within the time periods specified in the Securities and Exchange
  Commission's rules and forms, and is accumulated and communicated to our management
  as appropriate to allow timely decisions regarding required disclosure. Under
  the supervision of, and the participation of, our management, including our
  Chief Executive Officer, we have conducted an evaluation of our disclosure controls
  and procedures as of December 31, 2007. Based on this evaluation, our Chief
  Executive Officer has concluded that our disclosure controls and procedures
  are effective.

During the quarter ended December
  31, 2007, there were no changes in our internal controls over financial reporting
  that have materially affected, or are reasonably likely to materially affect,
  our internal controls over financial reporting.

PART IIOTHER INFORMATION

ITEM 2 - UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF
  PROCEEDS

During the period July 1, 2007,
  through December 31, 2007, we paid on the convertible debenture notes, principal
  installments aggregating $945,420, with the issuance of 945,420 shares of our
  common stock and interest payments aggregating $977,164 with the issuance of
  2,745,804 shares of our common stock.

ITEM 3  DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 6 - EXHIBITS

| | (a) | The following exhibits are filed as part of
      this report:
| | --- | --------------------------------------------------------------
| |     |                                                               
| |     | 31.1                                                          
| |     |                                                               
| |     | 32.1                                                          

SIGNATURES:

In accordance with the requirements of the Securities Exchange
  Act of 1934, the Registrant has caused this report to be signed on its behalf
  by the undersigned, thereunto duly authorized.

|Dated: February 14, 2008 | SANTA FE GOLD CORPORATION                             
|------------------------ | ------------------------------------------------------
|                         |                                                       
|                         | By: /s/ W. Pierce Carson                              
|                         | W. Pierce Carson                                      
|                         | Chief
      Executive Officer, President, Director and
|                         | Principal
      Accounting Officer                    

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