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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

[ x ]     QUARTERLY REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

[     ]    TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _____ to _______

Commission File Number: 001-12974

SANTA FE GOLD CORPORATION(Exact Name of Small Business Issuer as Specified in its
Charter)

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

1128 Pennsylvania NE, Suite 200, Albuquerque, NM
87110(Address of Principal Executive Offices)

Registrant's telephone number including area code: (505)
255-4852

N/AFormer name, former address, and former
fiscal year, if changed since last report

Indicate by check mark whether the registrant (1) filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 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 large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See definition of large accelerated filer, accelerated
filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

|Larger accelerated filer [     ] | Accelerated filer [    
    ]  
|-------------------------------- | -------------------------------
|Non-accelerated filer [     ]    | Smaller reporting company [ x
]

Indicate by check mark whether registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [    
]     No [ x ]

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date: 75,904,760
shares outstanding as of November 19, 2008.

---

|SANTA FE GOLD CORPORATION               
|----------------------------------------
|INDEX TO FORM 10-Q                      
|FOR THE QUARTER ENDED SEPTEMBER 30, 2008
|                                        
|                                        
|TABLE OF CONTENTS                       
|                                        
|PART I                                  
|FINANCIAL INFORMATION                   

|                  | Page                                                                                                                
|----------------- | --------------------------------------------------------------------------------------------------------------------
|Item 1.           | Financial
      Statements                                                                                          
|                  | Consolidated Balance Sheets,
      September 30, 2008 (Unaudited) and June 30, 2008                                 
|                  | Consolidated
      Statements of Operations for the Three Months Ended September 30, 2008 and
      2007 (Unaudited)
|                  | Consolidated Statements of
      Cash Flows for the Three Months Ended September 30, 2008 and 2007 (Unaudited)      
|                  | Notes to the
      Unaudited Consolidated Financial Statements                                                      
|Item 2.           | Managements Discussion
      and Analysis and Plan of Operations                                                   
|Item 4.           | Controls and
      Procedures                                                                                       
|PART II          
|OTHER INFORMATION
|Item 1.           | Legal Proceedings                                                                                                   
|Item 1A.          | Risk factors                                                                                                        
|Item 2.           | Unregistered Sales of Equity
      Securities and Use of Proceeds                                                   
|Item 3.           | Defaults Upon
      Senior Securities                                                                               
|Item 4.           | Submission of Matters to a
      Vote of Security Holders                                                           
|Item 5.           | Other Information                                                                                                   
|Item 6.           | Exhibits                                                                                                            
|SIGNATURES        | 15                                                                                                                  
|CERTIFICATIONS    |                                                                                                                     

2

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PARTIFINANCIALINFORMATION

ITEM1.          
FINANCIALSTATEMENTS

SANTA FE GOLD CORPORATIONCONSOLIDATED BALANCE SHEETS

|                                                                                |   | September 30, |   |   | June 30,    |  
|------------------------------------------------------------------------------- | - | ------------- | - | - | ----------- | -
|                                                                                |   | 2008          |   |   | 2008        |  
|ASSETS                                                                          |   | (Unaudited)   |   |   |             |  
|CURRENT ASSETS:                                                                 |   |               |   |   |             |  
|Cash and cash equivalents                                                       | $ | 4,482,604     |   | $ | 3,255,754   |  
|Accounts receivable                                                             |   | 17,752        |   |   | -           |  
|Interest receivable                                                             |   | 1,593         |   |   | 1,424       |  
|Prepaid expenses                                                                |   | 96,563        |   |   | 101,103     |  
|Equipment deposits                                                              |   | 249,225       |   |   | -           |  
|Total Current Assets                                                            |   | 4,847,737     |   |   | 3,358,281   |  
|MINERAL PROPERTIES                                                              |   | 579,000       |   |   | 579,000     |  
|                                                                                |   |               |   |   |             |  
|PROPERTY, PLANT AND EQUIPMENT, net                                              |   | 5,491,340     |   |   | 3,137,329   |  
|OTHER ASSETS:                                                                   |   |               |   |   |             |  
|Idle equipment, net                                                             |   | 1,311,500     |   |   | 1,311,500   |  
|Restricted cash                                                                 |   | 202,903       |   |   | 182,548     |  
|Deferred finance costs                                                          |   | 259,909       |   |   | 275,197     |  
|Deposit                                                                         |   | 1,342         |   |   | 1,342       |  
|Total
      Other Assets                                                        |   | 1,775,654     |   |   | 1,770,587   |  
|                                                                                | $ | 12,693,731    |   | $ | 8,845,197   |  
|                                                                                |   |               |   |   |             |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                  |   |               |   |   |             |  
|CURRENT LIABILITIES:                                                            |   |               |   |   |             |  
|Accounts payable                                                                | $ | 1,180,087     |   | $ | 873,434     |  
|Accrued liabilities                                                             |   | 85,555        |   |   | 96,172      |  
|Line of credit                                                                  |   | 2,600         |   |   | 11,400      |  
|Derivative instrument liabilities                                               |   | 2,095,491     |   |   | 2,884,189   |  
|Current portion,
      note payable                                             |   | 79,606        |   |   | 50,000      |  
|Current portion, capital leases                                                 |   | 33,261        |   |   | -           |  
|Current portion
      senior secured convertible notes payable, net of discount |   |               |   |   |             |  
|of $522,974
      and $491,603, respectively                                    |   | 27,956        |   |   | 10,925      |  
|Accrued interest
      payable                                                  |   | 348,933       |   |   | 154,666     |  
|Total
      Current Liabilities                                                 |   | 3,853,489     |   |   | 4,080,786   |  
|LONG TERM LIABILITIES:                                                          |   |               |   |   |             |  
|Senior secured convertible notes
      payable, net of discount of              |   |               |   |   |             |  
|$4,184,306 and $2,637,191, respectively                                         |   | 5,389,271     |   |   | 3,541,038   |  
|Derivative instrument liabilities                                               |   | 2,777,861     |   |   | 2,173,865   |  
|Notes payable, net
      of current portion                                     |   | 213,141       |   |   | 200,000     |  
|Capital leases, net of currrent
      portion                                   |   | 147,292       |   |   | -           |  
|Asset retirement
      obligation                                               |   | 81,559        |   |   | 80,309      |  
|Total
      Liabilities                                                         |   | 12,462,613    |   |   | 10,075,998  |  
|STOCKHOLDERS' EQUITY (DEFICIT):                                                 |   |               |   |   |             |  
|Common stock, $.002 par value, 200,000,000
      shares authorized;             |   |               |   |   |             |  
|75,904,760
      and 75,473,510 shares issued and outstanding, respectively     |   | 151,810       |   |   | 150,948     |  
|Additional paid in capital                                                      |   | 46,973,576    |   |   | 46,304,115  |  
|Deferred stock compensation                                                     |   | (224,000      | ) |   | (448,000    | )
|Accumulated (deficit)                                                           |   | (46,670,268   | ) |   | (47,237,864 | )
|Total Stockholders' Equity (Deficit)                                            |   | 231,118       |   |   | (1,230,801  | )
|                                                                                | $ | 12,693,731    |   | $ | 8,845,197   |  

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 |  
|----------------------------------------------- | - | ------------------ | -
|                                                |   | September 30,      |  
|                                                |   | 2008               |  
|SALES                                           | $ | 16,776             |  
|                                                |   |                    |  
|OPERATING COSTS AND EXPENSES:                   |   |                    |  
|Exploration and mining costs                    |   | 107,144            |  
|General and administrative                      |   | 294,370            |  
|General and administrative - stock compensation |   | 304,802            |  
|Depreciation and amortization                   |   | 17,965             |  
|Accretion of asset retirement obligation        |   | 1,250              |  
|                                                |   | 725,531            |  
|                                                |   |                    |  
|(LOSS) FROM OPERATIONS                          |   | (708,755           | )
|                                                |   |                    |  
|OTHER INCOME (EXPENSE):                         |   |                    |  
|Interest income                                 |   | 25,885             |  
|Miscellaneous income                            |   | 60,762             |  
|Foreign currency translation gain (loss)        |   | 3,099              |  
|Gain on derivative instrument
      liabilities |   | 1,369,223          |  
|Relief of debt                                  |   | 48,872             |  
|Accretion of discounts
      on notes payable   |   | (195,557           | )
|Interest expense                                |   | (35,934            | )
|                                                |   | 1,276,350          |  
|                                                |   |                    |  
|INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES |   | 567,595            |  
|                                                |   |                    |  
|PROVISION FOR INCOME TAXES                      |   | -                  |  
|                                                |   |                    |  
|NET INCOME (LOSS)                               | $ | 567,595            |  
|                                                |   |                    |  
|Income (Loss) per Share:                        |   |                    |  
|Basic                                           | $ | 0.01               |  
|                                                |   |                    |  
|Diluted                                         | $ | 0.01               |  
|                                                |   |                    |  
|Weighted Average Common Shares Outstanding:     |   |                    |  
|Basic                                           |   | 75,478,198         |  
|                                                |   |                    |  
|Diluted                                         |   | 75,478,198         |  

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)

|                                                             |   | Three Months Ended |  
|------------------------------------------------------------ | - | ------------------ | -
|                                                             |   | September 30,      |  
|                                                             |   | 2008               |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                        |   |                    |  
|Net income (loss)                                            | $ | 567,595            |  
|Adjustments to reconcile
      net income (loss) to net cash |   |                    |  
|(used in) operating activities:                              |   |                    |  
|Depreciation and amortization                                |   | 17,965             |  
|Stock
      compensation                                     |   | 304,802            |  
|Stock issued for interest                                    |   | -                  |  
|Accretion
      of discount on notes payable                 |   | 195,557            |  
|Accretion of asset retirement obligation                     |   | 1,250              |  
|Relief
      of debt                                         |   | (48,872            | )
|Foreign currency translation (gain) loss                     |   | (3,099             | )
|(Gain)
      on derivative instrument liabilities            |   | (1,369,223         | )
|Amortization of deferred finance costs                       |   | 15,288             |  
|Net change in current assets and
      liabilities:          |   |                    |  
|Accounts receivable                                          |   | (17,752            | )
|Interest
      receivable                                    |   | (169               | )
|Prepaid expenses                                             |   | 4,540              |  
|Deposits                                                     |   | (249,225           | )
|Accounts payable                                             |   | 355,525            |  
|Accrued
      liabilities                                    |   | (7,518             | )
|Accrued interest payable                                     |   | 194,267            |  
|Net
      Cash (Used in) Operating Activities                |   | (39,069            | )
|                                                             |   |                    |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                        |   |                    |  
|Increase to restricted
      cash                            |   | (20,355            | )
|Purchase of property, plant and
      equipment              |   | (572,835           | )
|Increase to construction
      in progress                   |   | (1,518,647         | )
|Net
      Cash (Used in) Investing Activities                |   | (2,111,837         | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                        |   |                    |  
|Proceeds from convertible debenture
      notes              |   | 3,500,000          |  
|Payments on notes
      payable                              |   | (51,866            | )
|Payments on capital leases                                   |   | (5,328             | )
|Payments on line
      of credit                             |   | (8,800             | )
|Payments on convertible debenture
      notes                |   | (56,250            | )
|Net Cash Provided by (Used in) Financing Activities          |   | 3,377,756          |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             |   | 1,226,850          |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD               |   | 3,255,754          |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                     | $ | 4,482,604          |  

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

5

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SANTA FE GOLD CORPORATIONNOTES TO THE UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS September 30, 2008

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 100% owned Summit silver-gold project in
New Mexico, the leased Ortiz gold property in New Mexico, the 100% owned Black
Canyon mica project in Arizona and the 100% owned Planet micaceous iron oxide
property in Arizona.

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-Q
under Article 8.03 of Regulation S-X. 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
three-month period ended September 30, 2008, are not necessarily indicative of
the results that may be expected for the year ending June 30, 2009. 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, 2008, included in the Companys Annual Report on Form
10-KSB, as filed with Securities and Exchange Commission.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 had net income of $567,595
for the three months ended September 30, 2008, has working capital of $994,248
and has a total accumulated (deficit) of $(46,670,268) at September 30, 2008. In
addition, the Company had only nominal revenue-generating operations  in the
quarter ending September 30, 2008. To continue as a going concern, the Company
is dependent on continued fund raising for project development and for
administrative operating expenses. In December 2007, the Company entered into a
definitive agreement with an investor for the private placement of a $13.5
million financing facility and received advances aggregating $8,850,000 through
September 30, 2008 (see NOTE 4).

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.

Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates under different assumptions or
conditions.

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

6

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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 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.

Derivative financial instruments
are initially measured at their fair value. For derivative financial instruments
that are accounted for as liabilities, the derivative instruments are initially
recorded at their fair values and are then re-valued at each reporting date,
with changes in the fair values 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 a convertible debt or equity instrument resulting from allocating some or all
of the proceeds to the derivative instrument, 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.

Cash and Cash Equivalents

The Company considers all liquid
investments purchased with an initial maturity of three months or less to be
cash equivalents. The Company maintains its cash in bank deposit accounts which,
at times, may exceed federally insured limits. The Company has not experienced
any losses in such accounts. The Company believes it is not exposed to any
significant credit risk on cash balances.

Restricted Cash

As part of the reclamation
deposits, the Company has restricted cash of $202,903, comprised of $50,000 held
on deposit for the Arizona State Treasurer in a one-year automatically renewable
short-term investment; $128,658 held as collateral against an irrevocable letter
of credit of the same amount to the U.S. Bureau of Land Management (BLM); and
$24,245 posted as a financial guarantee with the New Mexico Energy Minerals and
Natural Resources Department.

Net Earnings (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. When computing diluted earnings per share, the
consideration of the effect of the derivatives results in an adjusted net (loss)
for the three months ended September 30, 2008. Therefore the impact of
outstanding stock options and warrants has not been included as it would be
anti-dilutive.

NOTE 3 - DERIVATIVE INSTRUMENT LIABILITIES

On July 15, 2008, under the terms
of the 7% Senior Secured Convertible Debenture dated December 21, 2007, the Company
received the fourth advance under the agreement of $3,500,000 and issued
1,750,000 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

7

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was determined to be $1,184,521 with the following assumptions:
(1) risk free interest rate of 3.43%, (2) an expected life of 6.5 years, (3)
expected stock price volatility of 103.613%, and (4) expected dividend yield of
zero. The convertible debenture was determined to have a beneficial conversion
feature of $589,521 based upon the effective computed conversion price, which
was charged to the note discount and credited to Additional Paid In Capital. The
beneficial conversion feature in conjunction with the derivative instruments
liability for the warrants resulted in an aggregated note discount of
$1,774,042.

The fair market value of the
derivative instruments liability at September 30, 2008, was determined to be
$4,873,352 with the following assumptions: (1) risk free interest rate of 1.60%
to 2.98%, (2) remaining contractual life between 0 .75 to 6.2 years, (3)
expected stock price volatility of 91.534%, and (4) expected dividend yield of
zero. Based upon the change in fair value, the Company has recorded a non-cash
gain on derivative instruments for the three months ended September 30, 2008, of
$1,369,223 and a corresponding decrease in the derivative instruments liability.
The impact of EITF 00-19 on the financial statements as of and through September
30, 2008, was as follows:

|                                                                              |   | Derivative      |           |   | Derivative         |  |   | Derivative Gain    |  
|----------------------------------------------------------------------------- | - | --------------- | --------- | - | ------------------ |  | - | ------------------ | -
|                                                                              |   | Liability as of |           |   | Liability as of    |  |   | (Loss) Through     |  
|                                                                              |   | June 30, 2008   |           |   | September 30, 2008 |  |   | September 30, 2008 |  
|Convertible Debentures:                                                       |   |                 |           |   |                    |  |   |                    |  
|Compound Embedded Derivatives                                                 | $ | 236,662         |           | $ | 142,710            |  | $ | 93,952             |  
|Additional Investment Rights                                                  |   | 204,471         |           |   | -                  |  |   | 204,471            |  
|Purchase Agreement Warrants                                                   |   | 3,337,285       |           |   | 3,729,954          |  |   | (392,669           | )
|Amendment 2 Warrants                                                          |   | 1,279,636       |           |   | 1,000,688          |  |   | 278,948            |  
|Totals                                                                        | $ | 5,058,054       |           | $ | 4,873,352          |  |   | 184,702            |  
|                                                                              |   |                 |           |   |                    |  |   |                    |  
|Amount allocated to convertible note
      discounts at transaction inception |   |                 | 1,184,521 |  
|                                                                              |   |                 |           |   |                    |  | $ | 1,369,223          |  

NOTE 4  CONVERTIBLE DEBENTURE NOTES PAYABLE

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. The
agreement provides that proceeds from the debenture shall 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 the Companys
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. To date the Company has received the following advances under the
agreement and issued corresponding warrants related to the advances as follows:

|                  |   | Advances  |  |  | Warrants  |  | 
|----------------- | - | --------- |  |  | --------- |  | 
|December 21, 2007 | $ | 350,000   |  |  | 175,000   |  | 
|January 15, 2008  |   | 1,500,000 |  |  | 750,000   |  | 
|April 15, 2008    |   | 3,500,000 |  |  | 1,750,000 |  | 
|July 15, 2008     |   | 3,500,000 |  |  | 1,750,000 |  | 
|                  | $ | 8,850,000 |  |  | 4,425,000 |  | 

8

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NOTE 5  NOTES PAYABLE

On June 5, 2008, the Company
agreed to exercise the option to purchase the Planet MIO property, consisting of
thirty-one patented mining claims totaling 523 acres in La Paz County, Arizona.
The Company originally leased the property in 2000 from New Planet Copper Mining
Company under the terms of a Lease with Option to Purchase. The Company agreed
to exercise the purchase option in connection with settlement of an action the
Company commenced in March 2007 seeking to confirm that the lease remained in
good standing. The purchase price was $250,000. The Company signed a promissory
note for $200,000 with interest payable at 10% per annum from the date of
closing of the transaction. The provisions of the note call for a $50,000
payment at the signing of the note, which occurred in August 2008, and $50,000
annual principal and interest payments on the four subsequent anniversary dates
of the note. The agreement also provides for a 5% royalty to be paid on any
future production from the property.

On July 25, 2008, the Company
entered into an installment sales contract for $94,613 to purchase certain
equipment. The term of the agreement is for 36 months at an interest rate of
6.75%, with the equipment securing the loan.

The following summarizes notes payable
at September 30, 2008  and  June 30, 2008:

| |                                         |   | September 30, 2008 |   |   | June30, 2008 |  
| | --------------------------------------- | - | ------------------ | - | - | ------------ | -
| | Note payable for mineral property       | $ | 200,000            |   | $ | 250,000      |  
| | Installment sales contract on equipment |   | 92,747             |   |   | -            |  
| | Total outstanding notes payable         |   | 292,747            |   |   | 250,000      |  
| | Less: Current portion                   |   | (79,606            | ) |   | (50,000      | )
| | Long term portion                       | $ | 213,141            |   | $ | 200,000      |  

The aggregate maturities of notes
payable as of September 30, 2008, is as follows:

Year ending June 30,2009
    
    
    
    $
    22,0172010
    
    
    
    
    81,1392011
    
    
    
    
    83,3072012
    
    
    
    
    56,2842013
    
    
    
    
    50,000Total notes payable
    
    
    
    $
    292,747


NOTE 6  CAPITAL LEASES

In July of 2008 the Company
entered into a capital lease for the purchase of equipment at an interest rate
of 6.25% for a term of 36 months. The assets and liabilities under capital
leases are recorded at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are amortized or depreciated
over the lower of their related lease terms or their estimated productive
lives.

Minimum future lease payments
under capital leases, as of September 30, 2008, for each of the following years
and in aggregate are as follows:

9

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Year ending June 30,2009
    $
    32,2802010
    
    43,0412011
    
    43,0412012
    
    43,0412013
    
    43,0412014
    
    3,599Total minimum lease payments
    
    208,043Amount representing interest
    
    (27,490
    )Present value of future minimum lease payments
    
    180,553Current portion of capital lease
      obligations
    
    (33,261
    )Obligations of capital leases due after one year
    $
    147,292


NOTE 7 - STOCKHOLDERS (DEFICIT)

Issuances of Common Stock

On September 30, 2008, a director
exercised an option to purchase 500,000 shares of common stock at $0.11 per
share on a cashless basis. Under the cashless basis exercise, 431,250 shares
were issued.

Issuances of Options and Warrants

On July 22, 2008, the Company
granted a five (5) year option to purchase 100,000 shares of common stock to an
employee. The option exercise price is $0.83 per share, the closing price on the
date of grant and the options have a vesting period of six months from the date
of grant. The options were valued at $64,247 using the Black-Scholes option
pricing model. The options were valued using a volatility of 103.613%, a risk
free interest rate of 3.48%, an expected life of 5.0 years and zero quarterly
dividends. General and administrative stock compensation of $21,416 was
recognized during the three months ended September 30, 2008.

On June 25, 2008, the Board of
Directors granted awards of 500,000 shares of restricted stock to an officer and
200,000 shares of restricted stock to an employee. The shares will vest on
December 31, 2008, and are subject to forfeiture contingent on attainment of
certain performance objectives related to construction of the Summit project.
The stock grants were valued at $448,000 using the closing price on the date of
grant and were recorded as deferred stock compensation as equity reduction.
General and administrative stock compensation expense of $224,000 was recognized
for the three months ended September 30, 2008.

On May 1, 2008, the Company
granted a five (5) year option to purchase 100,000 shares of common stock to an
employee. The option exercise price is $0.79 per share, the closing price on the
date of grant. The options were valued at $61,724 using the Black-Scholes option
pricing model. General and administrative stock compensation expense of $30,862
was recognized for the three months ended September 30, 2008.

On March 24, 2008, the Company
granted a five (5) year option to purchase 100,000 shares of common stock to an
employee. The option exercise price is $0.73 per share, the closing price on the
date of grant, and the options have a vesting period of six months from the date
of grant. The options were valued at $57,048 using the Black-Scholes option
pricing model. General and administrative stock compensation expense of $28,524
was recognized for the three months ended September 30, 2008.

On July 15, 2008, in connection
with a scheduled advance of $3,500,000 under the 7% Senior Secured Convertible
Debenture, the Company issued 1,750,000 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

10

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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 three months ended September 30, 2008, are as follows:

|                                  |  | Stock Options |   |   | Stock Warrants | 
|--------------------------------- |  | ------------- | - | - | -------------- | 
|                                  |  |               |   |   | Weighted       | 
|                                  |  |               |   |   | Average        | 
|                                  |  | Shares        |   |   | Price          | 
|Outstanding at June 30, 2008      |  | 10,150,000    |   | $ | 0.14           | 
|Granted                           |  | 100,000       |   | $ | 0.83           | 
|Canceled                          |  | ---           |   |   | ---            | 
|Expired                           |  | ---           |   |   | ---            | 
|Exercised                         |  | (500,000      | ) | $ | 0.11           | 
|Outstanding at September 30, 2008 |  | 9,750,000     |   | $ | 0.15           | 

Stock options and warrants exercisable at September 30, 2008, are as follows:

|Exercisable Options | Exercisable
      Warrants
|------------------- | --------------------------
|                    |                           
|                    |                           
|                    |                           
|Exercise            |                           
|Price               |                           
|Range               | Number                    
|$0.10               | 5,000,000                 
|$0.11               | 4,000,000                 
|$0.46               | 100,000                   
|$0.55               | 250,000                   
|$0.73               | 100,000                   
|$0.74               | 50,000                    
|$1.24               | 50,000                    
|                    | 9,550,000                 

NOTE 8  OTHER INCOME

In August 2008, the Company
received miscellaneous income of $60,762 for restitution in full of an amount it
was defrauded in a financing transaction several years earlier. Additionally, in
September 2008, the Company negotiated a settlement with a governmental agency
on outstanding amounts owed for property taxes. In connection with the
settlement, the Company made a cash payment to settle the account in full and
recognized relief of debt of $48,872 for the remaining unpaid amount.

NOTE 9  SUBSEQUENT EVENTS

Subsequent to September 30, 2008,
the Company received cash proceeds aggregating $3,500,000 from the fifth
scheduled advance under the December 21, 2007, 7% Senior Secured Convertible
Debenture, and issued 1,750,000 warrants relating to the advance. The warrants
were valued at $811,917 using the Black-Scholes option pricing model using a
volatility of 91.534%, a risk free interest rate of 2.98%, an expected life of
6.22 years and zero quarterly dividends.

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

THIS FORM 10-Q MAY CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS
AS SUCH TERM IS DEFINED

11

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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-Q 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, 2008.

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 placing the property into production, (2) conducting further studies on our
Ortiz gold project located in New Mexico, (3) funding the re-opening and
enhancement of our Black Canyon mica project located in Arizona or alternatively
selling the project, (4) raising working capital for general operating and
administrative expenses, and (5) acquiring 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 had net income of $567,595 for the three months ended September
30, 2008, and have a total accumulated (deficit) of $(46,670,268) at September
30, 2008. To continue as a going concern, we are dependent on continued fund
raising for project development, execution of our business strategy and payment
of general and administrative operating expenses.

In December 2007, we entered into
a definitive agreement with a single investor for the private placement of a 7%
Senior Secured Convertible Debenture in the amount of $13.5 million. Advances
under this agreement are to be issued in accordance with a pre-determined
funding schedule related to the Summit projects anticipated construction
requirements during 2008. As of September 30, 2008, the Company has received
scheduled advances under the agreement totaling $8,850,000.

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. As of September 30, 2008, we
have cash on hand of $4,482,604. 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 September 30, 2008, we received $3,500,000, which constitutes the
fifth advance under the December 21, 2007, 7% Senior Secured Convertible
Debenture.

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

Derivative Financial Instruments

12

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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. Our derivative instrument
liabilities are revalued 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 September 30,
2008 and 2007

Sales

We had revenues of $16,776 for
the three months ended September 30, 2008, and $-0- for the three months ended
September 30, 2007. The increase of $16,776 is due to the limited sales of
aggregate products.

Operating Costs and
Expenses

General and administrative
decreased to $294,370 for the quarter ended September 30, 2008, from $301,250
for the comparative quarter ended September 30, 2007, a decrease of $6,880. The
decrease in the current quarter is attributable mainly to decreases in investor
relations expense of $52,380, financing costs of $35,298 and corporate meetings
of $32,876. These decreases were offset by increases in salaries and employee
related expenses of $79,191 and various new administrative costs of $26,646,
both increases occurring primarily as a result of the start up of the Summit
Project.

General and administrative stock
compensation increased to $304,802 for the quarter ended September 30, 2008,
from $18,308 for the comparative quarter ended September 30, 2007, an increase
of $286,494. The increase is attributable to amortized costs associated with
deferred stock compensation for an officer and another key employee, as well as
options issued to three employees that are being amortized over a vesting period
of six months.

Other Income and
Expenses

Other income and (expenses) for
the quarter ended September 30, 2008, were $1,276,350 as compared to
$(1,161,179) for the comparable quarter ended September 30, 2007. The increase
of $2,437,529 is attributable to several factors, including an increase in the
gain recognized on derivative instruments liability of $1,158,655, as well as
increases in miscellaneous income of $60,762, relief of debt of $48,872, and
interest income of $20,607. Other contributing factors include a decrease in the
accretion of discounts on notes of $482,974 and a decrease in interest expense
of $659,755. The decrease in accretion of discounts is due to the current
discounts on convertible notes being accreted over longer note periods, while
the decrease in interest expense resulted primarily from the recognition of
interest on the conversion of senior secured convertible debt in the prior
comparable quarter and the capitalization of interest of $150,166.

Gain on Derivative Financial
Instruments

We recognized a gain on
derivative financial instruments of $1,369,223 for the quarter ended September
30, 2008, as compared to a gain of $210,568 for the prior year comparable
period, an increase of $1,158,655. The non-cash income arises 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 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 increase in the

13

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derivative income in the quarter ended September 30, 2008, is
attributable mainly 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 our stock price, changes in the stock price will result in
volatility in the earnings in future periods as the we continue 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 September 30, 2008, we had
cash on hand of $4,482,604, a working capital of $994,248 and an accumulated
(deficit) of $(46,670,268). Subsequent to September 30, 2008,  we received
cash proceeds of $3,500,000 from the fifth scheduled advance under the December
21, 2007, 7% Senior Secured Convertible Debenture.

We are continuing to pursue a
joint venture or sale of the Black Canyon mica project. Management has
determined 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 calendar 2008 will
be funded from our current financing facilities, the 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 December 21, 2007, we 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. Advances from
the debenture will be issued in accordance with a pre-determined funding
schedule and the term of the debenture is 60 months. As of September 30, 2008,
we have received $8,850,000 under the funding schedule. On October 15, 2008, we received the fifth scheduled tranche of $3,500,000.

Factors Affecting Future Operating Results

We have deployed our plan to
place the Company on an improved financial footing. In addition to the
significant capital raisings already achieved, important elements of the plan
include maintaining currency in the filing of our annual and quarterly financial
reports and continuing to raise interim funding to provide for operations on our
various property sites. If we are able to continue to secure required financing
on acceptable terms, we believe we will be in a position to execute our business
plan on our property sites.

Off-Balance Sheet Arrangements

During the three months ended
September 30, 2008, we did not engage in any off-balance sheet arrangements
defined in Item 303(c) of the SECs Regulation S-B.

ITEM 4  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

14

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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
September 30, 2008. Based on this evaluation, our Chief Executive Officer has
concluded that our disclosure controls and procedures are effective.

During the quarter ended
September 30, 2008, 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 1 | LEGAL PROCEEDINGS
|------ | -----------------

None

|**ITEM 1A.** | RISK FACTORS
|------------ | ------------

Not Applicable

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

None.

|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

None.

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

None

|ITEM 5. | OTHER INFORMATION
|------- | -----------------

None

|ITEM 6. | EXHIBITS
|------- | --------

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

| | 31.1 | Certification
        of Chief Executive Officer and Chief Accounting Officer of Periodic Report
        pursuant to Rule 13a- 14a and Rule 15d-14(a).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                       
| | 32.1 | Certification
        of Chief Executive Officer and Chief Accounting Officer pursuant to 18
        U.S.C.  Section 1350.                           

15

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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: November 19, 2008 | SANTA FE GOLD
      CORPORATION
|------------------------ | -------------------------------
|                         |                                
|                         | By:                            
|                         |                                
|                         |                                
|                         |                                



---