---

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 endedMarch 31, 2010

[   ]  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:
92,287,419 shares outstanding as of May 14, 2010.

---

SANTA FE GOLD CORPORATIONINDEX TO FORM
10-Q

|               | **PART I** **FINANCIAL INFORMATION**                                                                                       |         
|-------------- | -------------------------------------------------------------------------------------------------------------------------- | --------
|               |                                                                                                                            | **Page**
|Item 1.        | Financial Statements                                                                                                       | F-3     
|               | Consolidated Balance Sheets, March 31, 2010 (Unaudited) and
      June 30, 2009                                            | F-3     
|               | Consolidated Statements of Operations for the Three Months
      and Nine Months Ended March 31, 2010 and 2009 (Unaudited) | F-4     
|               | Consolidated Statements of Cash Flows for the Nine Months
      Ended March 31, 2010 and 2009 (Unaudited)                  | F-5     
|               | Notes to the Unaudited Consolidated Financial Statements                                                                   | 6       
|Item 2.        | Managements Discussion and Analysis and Plan of Operations                                                                | 18      
|Item 4.        | Controls and Procedures                                                                                                    | 23      
|               |                                                                                                                            |         
|               | **PART II** **OTHER INFORMATION**                                                                                          |         
|Item 1.        | Legal Proceedings                                                                                                          | 23      
|Item 1A.       | Risk factors                                                                                                               | 23      
|Item 2.        | Unregistered Sales of Equity Securities and Use of Proceeds                                                                | 23      
|Item 3.        | Defaults Upon Senior Securities                                                                                            | 24      
|Item 4.        | Submission of Matters to a Vote of Security Holders                                                                        | 24      
|Item 5.        | Other Information                                                                                                          | 24      
|Item 6.        | Exhibits                                                                                                                   | 24      
|SIGNATURES     | 24                                                                                                                        
|CERTIFICATIONS | 25                                                                                                                        

2

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PARTIFINANCIALINFORMATION

ITEM1. FINANCIALSTATEMENTS

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SANTA FE GOLD CORPORATIONCONSOLIDATED BALANCE SHEETS

|ASSETS                                                                                                                                                                |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                                                                                      |  
|                                                                                                                                                                      |  
|                                                                                                                                                                      |  
|CURRENT ASSETS:                                                                                                                                                       |  
|Cash and cash equivalents                                                                                                                                             | $
|Accounts
      receivable                                                                                                                                             |  
|Prepaid expenses and other
      current assets                                                                                                                       |  
|Total Current Assets                                                                                                                                                  |  
|MINERAL PROPERTIES                                                                                                                                                    |  
|PROPERTY, PLANT AND EQUIPMENT, net                                                                                                                                    |  
|OTHER ASSETS:                                                                                                                                                         |  
|Construction
      in progress                                                                                                                                        |  
|Idle equipment, net                                                                                                                                                   |  
|Restricted
      cash                                                                                                                                                 |  
|Deferred financing costs                                                                                                                                              |  
|Total Other Assets                                                                                                                                                    |  
|                                                                                                                                                                      | $
|                                                                                                                                                                      |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                        |  
|CURRENT LIABILITIES:                                                                                                                                                  |  
|Accounts payable                                                                                                                                                      | $
|Accrued liabilities                                                                                                                                                   |  
|Derivative instrument liabilities                                                                                                                                     |  
|Current portion
      of notes payable                                                                                                                                |  
|Current portion of capital
      leases                                                                                                                               |  
|Current portion
      of senior secured convertible notes payable, net of discount 
                       of
      $-0- and $8,027, respectively                     |  
|Deferred
      revenue                                                                                                                                                |  
|Accrued interest payable                                                                                                                                              |  
|Total Current Liabilities                                                                                                                                             |  
|LONG TERM LIABILITIES:                                                                                                                                                |  
|Senior secured
      convertible notes payable, net of discount of 
                       $4,071,283
      and $4,514,554, respectively, net of current portion      |  
|Derivative
      instrument liabilities                                                                                                                               |  
|Notes payable, net of current
      portion                                                                                                                           |  
|Capital leases,
      net of current portion                                                                                                                          |  
|Deferred revenue                                                                                                                                                      |  
|Asset retirement
      obligation                                                                                                                                     |  
|Total Liabilities                                                                                                                                                     |  
|STOCKHOLDERS' EQUITY (DEFICIT):                                                                                                                                       |  
|Common stock, $.002 par value,
      200,000,000 shares authorized; 
                   
       92,287,419 and 82,316,112 shares issued and outstanding, respectively |  
|Additional paid in capital                                                                                                                                            |  
|Accumulated
      (deficit)                                                                                                                                           |  
|Total Stockholders' Equity (Deficit)                                                                                                                                  |  
|                                                                                                                                                                      | $

The accompanying notes are an integral part of the consolidated
financial statements. F-3

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SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS
OF OPERATIONS(Unaudited)

|                                                       |   | Three Months Ended |   |   | Nine Months Ended |  
|------------------------------------------------------ | - | ------------------ | - | - | ----------------- | -
|                                                       |   | March 31,          |   |   | March 31,         |  
|                                                       |   | 2010               |   |   | 2009              |  
|                                                       |   |                    |   |   |                   |  
|SALES                                                  | $ | 261,532            |   | $ | 45,049            |  
|                                                       |   |                    |   |   |                   |  
|OPERATING COSTS AND EXPENSES:                          |   |                    |   |   |                   |  
|Costs applicable to sales                              |   | -                  |   |   | 11,061            |  
|Exploration and
      mining costs                     |   | 275,425            |   |   | 166,600           |  
|General and administrative                             |   | 655,407            |   |   | 464,603           |  
|Depreciation and
      amortization                    |   | 127,641            |   |   | 85,027            |  
|Accretion of asset retirement obligation               |   | -                  |   |   | 1,250             |  
|                                                       |   | 1,058,473          |   |   | 728,541           |  
|                                                       |   |                    |   |   |                   |  
|(LOSS) FROM OPERATIONS                                 |   | (796,941           | ) |   | (683,492          | )
|                                                       |   |                    |   |   |                   |  
|OTHER INCOME (EXPENSE):                                |   |                    |   |   |                   |  
|(Loss) on disposal of assets                           |   | -                  |   |   | -                 |  
|Interest income                                        |   | 6,948              |   |   | 28,159            |  
|Miscellaneous income                                   |   | 1,000              |   |   | -                 |  
|Foreign currency
      translation (loss) gain         |   | (726               | ) |   | 2,021             |  
|Gain (loss) on derivative instrument
      liabilities |   | 3,634,854          |   |   | (6,259,972        | )
|Relief of debt                                         |   | -                  |   |   | -                 |  
|Accretion of discounts on notes
      payable          |   | (260,774           | ) |   | (607,926          | )
|Interest expense                                       |   | (25,017            | ) |   | (63,523           | )
|                                                       |   | 3,356,285          |   |   | (6,901,241        | )
|                                                       |   |                    |   |   |                   |  
|INCOME (LOSS) BEFORE PROVISION                         |   |                    |   |   |                   |  
|FOR INCOME TAXES                                       |   | 2,559,344          |   |   | (7,584,733        | )
|                                                       |   |                    |   |   |                   |  
|PROVISION FOR INCOME TAXES                             |   | -                  |   |   | -                 |  
|                                                       |   |                    |   |   |                   |  
|NET INCOME (LOSS)                                      | $ | 2,559,344          |   | $ | (7,584,733        | )
|                                                       |   |                    |   |   |                   |  
|Income (Loss) per Share:                               |   |                    |   |   |                   |  
|Basic                                                  | $ | 0.03               |   | $ | (0.10             | )
|                                                       |   |                    |   |   |                   |  
|Diluted                                                | $ | 0.03               |   | $ | (0.10             | )
|                                                       |   |                    |   |   |                   |  
|Weighted Average Common Shares Outstanding:            |   |                    |   |   |                   |  
|Basic                                                  |   | 90,646,438         |   |   | 76,009,126        |  
|                                                       |   |                    |   |   |                   |  
|Diluted                                                |   | 90,646,438         |   |   | 76,009,126        |  

F-4

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SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS
OF CASH FLOWS(Unaudited)

|                                                                                                  |   | Nine Months Ended |  
|------------------------------------------------------------------------------------------------- | - | ----------------- | -
|                                                                                                  |   | March 31,         |  
|                                                                                                  |   | 2010              |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                             |   |                   |  
|Net (loss)                                                                                        | $ | (2,418,382        | )
|Adjustments to reconcile net
      (loss) to net cash       (used in) operating
      activities: |   |                   |  
|Depreciation                                                                                      |   | 342,121           |  
|Stock
      compensation                                                                          |   | 509,677           |  
|Accretion of discount on notes payable                                                            |   | 774,436           |  
|Accretion
      of asset retirement obligation                                                    |   | -                 |  
|Relief of debt                                                                                    |   | -                 |  
|Foreign
      currency translation (gain) loss                                                    |   | 621               |  
|(Gain) loss on derivative instrument liabilities                                                  |   | (671,157          | )
|Loss
      on disposal of assets                                                                  |   | 3,572             |  
|Amortization of deferred financing costs                                                          |   | 64,448            |  
|Net change in operating assets and liabilities:                                                   |   |                   |  
|Accounts receivable                                                                               |   | (261,585          | )
|Prepaid
      expenses and other current assets                                                   |   | (165,113          | )
|Deposits                                                                                          |   | -                 |  
|Accounts
      payable                                                                            |   | (716,437          | )
|Accrued liabilities                                                                               |   | 83,920            |  
|Accrued
      interest payable                                                                    |   | 228,919           |  
|Net
      Cash (Used in) Operating Activities                                                     |   | (2,224,960        | )
|                                                                                                  |   |                   |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                             |   |                   |  
|Increase to restricted cash                                                                       |   | -                 |  
|Proceeds from disposal
      of assets                                                            |   | 31,400            |  
|Purchase of property, plant and equipment                                                         |   | (277,257          | )
|Construction in progress                                                                          |   | (3,827,731        | )
|Net Cash (Used
      in) Investing Activities                                                     |   | (4,073,588        | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                             |   |                   |  
|Proceeds from convertible notes payable                                                           |   | -                 |  
|Proceeds from issuance
      of stock and warrants                                                |   | 10,301,003        |  
|Proceeds from notes payable                                                                       |   | 212,762           |  
|Payments on notes payable                                                                         |   | (170,606          | )
|Payments on capital leases                                                                        |   | (97,436           | )
|Payments on line of credit                                                                        |   | -                 |  
|Payments on convertible debenture notes                                                           |   | -                 |  
|Payment of private placement
      fees                                                           |   | (625,000          | )
|Payment of financing costs                                                                        |   | (288,000          | )
|Deferred revenue                                                                                  |   | 4,000,000         |  
|Net Cash Provided
      by Financing Activities                                                   |   | 13,332,723        |  
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                  |   | 7,034,175         |  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                                    |   | 509,846           |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                                          | $ | 7,544,021         |  

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

---

SANTA FE GOLD CORPORATIONCONSOLIDATED STATEMENTS
OF CASH FLOWS(Continued)

|                                                                                     |   | Nine Months Ended | 
|------------------------------------------------------------------------------------ | - | ----------------- | 
|                                                                                     |   | March 31,         | 
|                                                                                     |   | 2010              | 
|                                                                                     |   |                   | 
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                  |   |                   | 
|                                                                                     |   |                   | 
|Cash paid for interest                                                               | $ | 78,711            | 
|                                                                                     |   |                   | 
|Cash paid for income taxes                                                           | $ | -                 | 
|                                                                                     |   |                   | 
|SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
      AND 
      FINANCING ACTIVITIES: |   |                   | 
|                                                                                     |   |                   | 
|Stock issued for conversion
      of accrued interest                                | $ | 483,000           | 
|                                                                                     |   |                   | 
|Equipment purchased with
      notes payable                                         | $ | 16,825            | 
|                                                                                     |   |                   | 
|Equipment purchased with
      capital leases                                        | $ | -                 | 
|                                                                                     |   |                   | 
|Stock issued for conversion
      of accrued liability                               | $ | 200,000           | 
|                                                                                     |   |                   | 
|Stock issued for conversion
      of senior secured convertible notes                | $ | -                 | 
|                                                                                     |   |                   | 
|Stock issued for conversion
      of note payable                                    | $ | 18,219            | 

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

F-5

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SANTA FE GOLD CORPORATIONNOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2010(Unaudited)

NOTE 1 NATURE OF OPERATIONSANDBASISOFPRESENTATION

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, the 100%
owned Planet micaceous iron oxide property in Arizona, and formerly the purchase
option lease contract on the Pilar gold property in Sonora, Mexico. Based upon
the initial results of its sampling program, the Company has decided not to
continue any additional work on the Pilar gold property, and in accordance with
the provisions of the contract has relinquished its rights in the project.

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 and nine month periods ended
March 31, 2010, are not necessarily indicative of the results that may be
expected for the year ending June 30, 2010. 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, 2009, included
in the Companys Annual Report on Form 10-K, as filed with Securities and
Exchange Commission.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 a net loss of $2,418,382 for the nine months ended March 31, 2010,
has a working capital deficit of $6,020,324 which includes a non-cash financial
derivative liability of $12,518,832 and has a total accumulated deficit of
$56,338,478 at March 31, 2010. In addition, the Company had only nominal revenue
generating operations in the nine months ended March 31, 2010. To continue as a
going concern, the Company is dependent on continued fund raising for project
development and for administrative operating expenses.

The
Companys consolidated 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.

Principles of Consolidation

The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries Azco Mica, Inc., a Delaware corporation, The Lordsburg
Mining Company, a New Mexico corporation, Minera Sandia, S.A. de C.V., a Mexican
corporation, and Santa Fe Gold Barbados Corporation, a Barbados corporation. All
significant inter-company accounts and transactions have been eliminated in
consolidation.

6

---

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.

Fair Value Measurements

U.S.
accounting standards require disclosure of a fair-value hierarchy of inputs the
Company uses to value an asset or a liability. In September 2006, the FASB
issued new accounting guidance, which establishes a framework for measuring fair
value under generally accepted accounting principles (GAAP) and expands
disclosures about fair value measurements. The Company previously partially
adopted this guidance for all instruments recorded at fair value on a recurring
basis. In the second quarter of fiscal 2010, the Company adopted the remaining
provisions of the guidance for all non-financial assets and liabilities that are
not re-measured at fair value on a recurring basis. The adoption of these
provisions did not have an impact on the Companys consolidated financial
statements.

Fair
value standards define fair value as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Additionally, the standards establish a
three-level fair value hierarchy that prioritizes the inputs used to measure
fair value. This hierarchy requires that the Company maximize the use of
observable inputs and minimize the use of unobservable inputs. The three levels
of the fair-value hierarchy are described as follows:

Level 1: Quoted prices (unadjusted) in
active markets for identical assets and liabilities. For the Company, Level 1
inputs include quoted prices on the Companys securities that are actively
traded.

Level 2: Inputs other than Level 1 that
is observable, either directly or indirectly. For the Company, Level 2 inputs
include assumptions such as estimated life, risk free rate and volatility
estimates used in determining the fair values of the Companys option and
warrant securities issued derivative financial instruments.

Level 3: Unobservable inputs that are
supported by little of no market activity and that are significant to the fair
value of the assets or liabilities. This includes certain pricing models,
discounted cash flows methodologies and similar techniques that use significant
unobservable inputs.

The
Company measures financial instruments that it considers to be derivatives at
fair value on a recurring basis which consist of certain embedded features
contained within its debt instruments and certain warrant contracts. The
derivatives are measured on their respective origination dates, at the end of
each reporting period and at other points in time when necessary, such as
modifications, using Level 3 inputs in accordance with GAAP. The Company does
not report any financial assets or liabilities that it measures using Level 1 or
Level 2 inputs. The derivatives and their respective derivative values measured
using Level 3 inputs as of March 31, 2010 are as follows:

|                                                |  |         |  |  |         |  |   |            |  |   | March 31,  | 
|----------------------------------------------- |  | ------- |  |  | ------- |  | - | ---------- |  | - | ---------- | 
|                                                |  | Level 1 |  |  | Level 2 |  |   | Level 3    |  |   | 2010       | 
|Other Assets:                                   |  |         |  |  |         |  |   |            |  |   |            | 
|Idle equipment, net                             |  | ---     |  |  | ---     |  | $ | 1,223,528  |  | $ | 1,223,528  | 
|                                                |  |         |  |  |         |  |   |            |  |   |            | 
|Value of derivative
      instruments liability |  | ---     |  |  | ---     |  | $ | 12,518,832 |  | $ | 12,518,832 | 

Idle
equipment includes equipment associated with the mica project which the Company
ceased operations and are classified as Level 3. The fair value of the idle
equipment was determined based upon an independent third party appraisal. The
appraised value was established based upon comparable sales of similar assets
and certain assumptions regarding market demand for these assets. As this
valuation was based upon unobservable inputs, we classified the idle equipment
as Level 3. There was no change in the carrying valuation of the idle equipment
during the nine-month period ended March 31, 2010 and the reduction of $34,972
during this period resulted from the sale of equipment.

7

---

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 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
twelve months of the balance sheet date.

Deferred Revenue

Deferred
revenue represents a cash advance made under a definitive gold sale agreement to
sell a portion of the life-of-mine gold production only from our Summit
silver-gold mine. Under the terms of the agreement, the Company will receive two
upfront cash advances and on going production payments equal to the lesser of
$400 per ounce and the prevailing market price, for each ounce of gold delivered
pursuant to the agreement. The upfront cash advances will be amortized over the
life of the agreement based upon the estimated ounces of gold to be delivered
under the life of the agreement. Deferred revenue on the Companys balance sheet
is categorized as current if the Company expects to recognize such revenue
within the following twelve months.

Net Earnings (Loss) per Common Share

The
Company calculates net income (loss) per share as required by Accounting
Standards Codification subtopic 260-10, Earnings per Share (ASC 260-10). 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 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. Therefore the impact
of outstanding stock equivalents has not been included as they would be
anti-dilutive.

Recent Accounting Pronouncements

Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 105-10, Generally Accepted
Accounting Principles  Overall (ASC 105-10). ASC 105-10 establishes the
FASB Accounting Standards Codification(the Codification) as the source
of authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of
the SEC under authority of federal securities laws are also sources of
authoritative U.S. GAAP for SEC registrants. All guidance contained in the
Codification carries an equal level of authority. The Codification superseded
all existing non-SEC accounting and reporting standards. All other
non-grandfathered, non-SEC accounting literature not included in the
Codification is non-authoritative. The FASB will not issue new standards in the
form of Statements, FASB Staff Positions or Emerging Issues Task Force
Abstracts. Instead, it will issue Accounting Standards Updates (ASUs). The
FASB will not consider ASUs as authoritative in their own right. ASUs will
serve only to update the Codification, provide background information about the
guidance and provide the bases for conclusions on the change(s) in the
Codification. References made to FASB guidance throughout this document have
been updated for the Codification.

8

---

Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Companys present or future
consolidated financial statements.

NOTE 3  ADOPTION OF NEW ACCOUNTING POLICY

In
June 2008, the Financial Accounting Standards Board (FASB) issued Emerging
Issues Task Force (EITF) Issue 07-5 (EITF 07-5), Determining Whether an
Instrument (or Embedded Feature) is Indexed to an Entitys Own Stock. EITF
07-5, which is now included in the FASB Accounting Standards Codification at ASC
815-40-15-5, requires entities to evaluate whether an equity-linked financial
instrument (or embedded feature) is indexed to its own stock by assessing the
instruments contingent exercise provisions and settlement provisions.
Instruments not indexed to their own stock fail to meet the scope exception of
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities, paragraph 11(a), now included
in the FASB Codification at ASC 815-10-15-74(a), and should be classified as a
liability and marked-to-market. ASC 815-40-15-5 is effective for fiscal years
beginning after December 15, 2008 (effective as of July 1, 2009 for the Company)
and is to be applied to outstanding instruments upon adoption with the
cumulative effect of the change in accounting principle recognized as an
adjustment to the opening balance of retained earnings or other appropriate
components of equity.

The
Company has various warrants outstanding which it has previously accounted for
as derivative instrument liabilities and the accounting for those warrants is
not changed by the adoption of ASC 815-40-15-5. However, prior to July 1, 2009,
the conversion option embedded in the Companys $13,500,000 7% Senior Secured
Convertible Debentures was not separately accounted for as a derivative
instrument liability. Effective July 1, 2009, the conversion option met the
criteria of a derivative instrument liability because the terms of the Senior
Secured Convertible Debentures require that the conversion price be adjusted in
certain circumstances that do not meet the fixed-for-fixed criteria in ASC
815-40-15-5. As a result, the Company is now required to separately account for
the embedded conversion option as a derivative instrument liability, carried at
fair value and marked-to-market each period, with changes in the fair value each
period charged or credited to income.

The
cumulative effect of this change in accounting principle of $2,381,894 has been
recognized as a reduction of the opening balances of retained earnings and of
additional paid-in capital as of July 1, 2009 of $942,636 and $1,439,258,
respectively, with corresponding adjustments at July 1, 2009 to decrease the
carrying value of the Convertible Debentures by $323,137 and the recognition of
a derivative liability of $2,705,031. The cumulative effect adjustment is the
difference between the amounts previously recognized in the Companys
consolidated balance sheet as of June 30, 2009 and the amounts that would have
been recognized if the conversion option in the Convertible Debentures had been
accounted for as a derivative instrument liability from the issuance date.

For
the nine months ended March 31, 2010 and 2009, the Company recognized a loss for
the change in fair value of the embedded conversion derivative liability in the
amounts of $379,098 and $-0-, respectively.

For
the nine months ended March 31, 2010, the Company recognized a gain for the
change in fair value of the derivative liability in the amount of $671,158. For
the nine months ended March 31, 2009, the Company recognized a loss of
$3,474,893.

In
August 2009, the FASB issued Accounting Standards Update (ASU) ASU 2009-05,
Measuring Liabilities at Fair Value(ASU 2009-05). ASU 2009-05 provides
guidance on measuring the fair values of liabilities under Accounting Standards Codification (ASC) Topic 820, Fair Value
Measurements and Disclosures (ASC 820). ASU 2009-05 describes various
valuation methods that can be applied to estimating the fair value of
liabilities, requires the use of observable inputs, and minimizes the use of
unobservable valuation inputs. ASU 2009-05 was effective for the Companys
interim reporting period beginning October 1, 2009.

9

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NOTE 4 - DERIVATIVE INSTRUMENT LIABILITIES

The
fair market value of the derivative instruments liability at March 31, 2010, was
determined to be $12,518,830 with the following assumptions: (1) risk free
interest rate of 0.68% to 2.43%, (2) remaining contractual life of 1.45 to 4.76
years, (3) expected stock price volatility of 86%, 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 nine months ended March 31,
2010, of $671,158 and a corresponding decrease in the derivative instruments
liability.

|                                                                                                 |   | Derivative          |  |   | Derivative      |  |   | Derivative Gain |  
|------------------------------------------------------------------------------------------------ | - | ------------------- |  | - | --------------- |  | - | --------------- | -
|                                                                                                 |   | Liability as of     |  |   | Liability as of |  |   | (Loss) Through  |  
|                                                                                                 |   | June
      30, 2009 |  |   | March 31, 2010  |  |   | March 31, 2010  |  
|Convertible Debentures:                                                                          |   |                     |  |   |                 |  |   |                 |  
|Compound Embedded Derivatives                                                                    | $ | 4,907               |  | $ | -               |  | $ | 4,907           |  
|Purchase
      Agreement Warrants                                                                |   | 6,543,873           |  |   | 8,535,366       |  |   | (1,991,493      | )
|Amendment 2 Warrants                                                                             |   | 1,256,896           |  |   | 899,335         |  |   | 357,561         |  
|Embedded
      Conversion Option                                                                 |   | --                  |  |   | 3,084,129       |  |   | (3,084,129      | )
|Totals                                                                                           | $ | 7,805,676           |  | $ | 12,518,830      |  |   | (4,713,154      | )
|                                                                                                 |   |                     |  |   |                 |  |   |                 |  
|Derivative liability at the time of
      warrant exercise applied to additional paid in capital |   |                     |  |   |                 |  |   | (788,293        | )
|Amount at adoption of
      accounting change on July 1, 2009                                    |   |                     |  |   |                 |  |   | 2,705,031       |  
|Amount allocated to warrants at
      transaction inception                                      |   |                     |  |   |                 |  |   | 3,467,574       |  
|                                                                                                 |   |                     |  |   |                 |  | $ | 671,158         |  

The derivative liability is comprised of the following as
of:

|                                                            |   | March 31,  |  |   | June 30,  | 
|----------------------------------------------------------- | - | ---------- |  | - | --------- | 
|                                                            |   | 2010       |  |   | 2009      | 
|Current portion of derivative
      instruments liability   | $ | 12,518,830 |  | $ | 2,643,500 | 
|Long-term portion of derivative instruments
      liability |   | -          |  |   | 5,162,176 | 
|                                                            | $ | 12,518,830 |  | $ | 7,805,676 | 

The
entire amount of derivative instrument liabilities are classified as current due
to the fact that settlement of the derivative instruments could be required
within twelve months of the balance sheet date.

NOTE 5 CONVERTIBLE NOTES PAYABLE AND
DEBENTURES

Convertible Senior Subordinated Notes

On
October 30, 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.

10

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Senior Secured Convertible Debenture

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 were issued in accordance
with a pre-determined funding schedule related to the Summit projects
anticipated construction requirements. 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 on the
outstanding principal balance is 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. The Company has received the total advances
under the agreement of $13,500,000, and the Company has issued an aggregate of
6,750,000 warrants under the debenture advances.

On
June 30, 2009, the Company entered into Amendment 2 on the Senior Secured
Convertible Debenture dated December 21, 2007. Pursuant to the amendment, all
the accrued interest on the debentures due June 30, 2009, in the collective
aggregate amount of $974,360, was automatically converted into 974,360 shares of
the Companys common stock effective as of June 30, 2009. Additionally, the
aggregate accrued interest on the outstanding principal amounts of the
debentures for the quarters ended September 30, 2009 and December 31, 2009 were
paid in shares of the Companys common stock, to be valued at $1.00 per share at
the time of payment and issuance. The amendment also provides that on March 31,
2010, the note holder shall have the option to make a six-month election, by
providing written notice of its election thirty days prior to March 31, 2010, to
have the March 31, 2010 and June 30, 2010 quarterly interest payments paid in
shares of the Companys common stock. The note holder has chosen not to make the
election, and consequently the accrued interest relating to the debentures,
totaling $236,250 for the quarter ended March 31, 2010, was paid in cash during
April 2010. Commencing September 30, 2010, the note holder shall have the option
to make an annual election, by providing 30 days prior written notice of its
election, to have the subsequent four quarterly interest payments paid in shares
of the Companys common stock. Valuation of the common stock shall be based upon
the Market Price of the stock for the 30 trading days immediately preceding the
payment due date.

The
components of the convertible notes payable and debentures are as follows as
of:

|March 31, 2010:                   |   | Principal  |  |   | Unamortized |   |   |           | 
|--------------------------------- | - | ---------- |  | - | ----------- | - | - | --------- | 
|                                  |   | Amount     |  |   | Discount    |   |   | Net       | 
|Current portion                   | $ | -          |  | $ | -           |   | $ | -         | 
|Long-term portion, net of current |   | 13,950,000 |  |   | (4,071,283  | ) |   | 9,878,717 | 
|                                  |   |            |  |   |             |   |   |           | 
|                                  | $ | 13,950,000 |  | $ | (4,071,283  | ) | $ | 9,878,717 | 

|June 30, 2009:                    |   | Principal  |  |   | Unamortized |   |   |           | 
|--------------------------------- | - | ---------- |  | - | ----------- | - | - | --------- | 
|                                  |   | Amount     |  |   | Discount    |   |   | Net       | 
|Current portion                   | $ | 18,219     |  | $ | (8,027      | ) | $ | 10,192    | 
|Long-term portion, net of current |   | 13,950,000 |  |   | (4,514,554  | ) |   | 9,435,446 | 
|                                  |   |            |  |   |             |   |   |           | 
|                                  | $ | 13,968,219 |  | $ | (4,522,581  | ) | $ | 9,445,638 | 

11

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Aggregate
yearly maturities of long term debt based upon payment terms at March 31, 2010,
are as follows:

|2010                                | $ | -          |  
|----------------------------------- | - | ---------- | -
|2011                                |   | -          |  
|2012                                |   | 13,950,000 |  
|Subtotal                            |   | 13,950,000 |  
|Less: unamortized original discount |   | (4,071,283 | )
|                                    | $ | 9,878,717  |  

As
of March 31, 2010, accrued interest payable on the convertible notes payable and
debentures was $242,633.

NOTE 6  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 original provisions of
the note called for a $50,000 payment at the signing of the note, which occurred
in August 2008, and four subsequent principal payments of $50,000 plus interest
due each anniversary date of the agreement. In August 2009, the amortization
schedule of the note was amended to reflect four equal annual payments of
principal and interest of $63,094. The due date for the first annual payment was
extended with the interest rate increased to 20% per annum during the extension
period. The Company has also agreed to pay an additional $2,000 in legal and
miscellaneous fees to document the amendment. All other provisions of the
original agreement remain unchanged including the provision 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.

On
September 30, 2009, the Company entered into an installment sales contract for
$16,825 to purchase certain equipment. The term of the agreement is for 36
months at an interest rate of 9.25%, with the equipment securing the loan.

On
October 1, 2009, the Company entered into an agreement to finance insurance
premiums in the amount of $72,906 at an interest rate of 6.99% with equal
payments due monthly beginning November 1, 2009 and continuing until September
1, 2010.

On
November 1, 2009, the Company entered into an agreement to finance insurance
premiums in the amount of $139,856 at an interest rate of 5.99% with equal
payments due monthly beginning December 10, 2009 and continuing until October
10, 2010.

The
following summarizes notes payable at March 31, 2010 and June 30, 2009:

12

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|                                                                                                                                                                                                      |   | March 31,   |   |   |               |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ------------- | -
|                                                                                                                                                                                                      |   | 2010        |   |   | June 30, 2009 |  
|                                                                                                                                                                                                      |   | (Unaudited) |   |   |               |  
|Note payable for mineral
      property,           interest
      at 10%, payable in 4 annual
      installments           of
      $63,094, including interest through August 2012                   | $ | 156,906     |   | $ | 200,000       |  
|                                                                                                                                                                                                      |   |             |   |   |               |  
|Installment sales contract on
      equipment,           interest
      at 6.75%, payable in 36 monthly
      installments           of
      $2,911, including interest through September 2011       |   | 47,202      |   |   | 70,518        |  
|                                                                                                                                                                                                      |   |             |   |   |               |  
|Installment sales contract on
      equipment,           interest
      at 9.25%, payable in 36 monthly
      installments           of
      $537, including interest through October 2012           |   | 14,441      |   |   | -             |  
|                                                                                                                                                                                                      |   |             |   |   |               |  
|Financing contract on
      insurance
      premiums           interest
      at 6.99%, payable in 11 monthly
      installments           of
      $6,862, including interest through September 2010 |   | 33,717      |   |   | -             |  
|                                                                                                                                                                                                      |   |             |   |   |               |  
|Financing contract on
      insurance
      premiums           interest
      at 5.99%, payable in 11 monthly
      installments           of $13,098,
      including interest through October 2010  |   | 77,234      |   |   | -             |  
|Total Outstanding Notes Payable                                                                                                                                                                       |   | 329,500     |   |   | 270,518       |  
|Less: Current maturities                                                                                                                                                                              |   | (196,434    | ) |   | (74,430       | )
|Obligations of notes payable due after one
      year                                                                                                                                                 | $ | 133,066     |   | $ | 196,088       |  

The
aggregate maturities of notes payable as of March 31, 2010, is as follows:

|Year
      ending June 30,      |   |         | 
|------------------------------- | - | ------- | 
|2010                            | $ | 67,762  | 
|2011                            |   | 138,821 | 
|2012                            |   | 63,960  | 
|2013                            |   | 58,957  | 
|Total Outstanding Notes Payable | $ | 329,500 | 

NOTE 7  CAPITAL LEASES

The
Company utilizes capital leases for the purchase of equipment. Lease terms and
interest rates for the equipment are 60 months at 6.25%, 36 months at 5.34%, and
36 months at 5.78% . 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 March 31, 2010, for each of
the following years and in aggregate, are as follows:

13

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|Year ended June 30,                                    |   |          |  
|------------------------------------------------------ | - | -------- | -
|2010                                                   | $ | 33,451   |  
|2011                                                   |   | 149,563  |  
|2012                                                   |   | 92,447   |  
|2013                                                   |   | 43,041   |  
|2014                                                   |   | 3,599    |  
|Total minimum lease payments                           |   | 322,101  |  
|Amount representing interest                           |   | (21,700  | )
|Present value of future minimum lease
      payments   |   | 300,401  |  
|Current portion of capital lease obligations           |   | (132,428 | )
|Obligations of capital leases due after one
      year | $ | 167,973  |  

NOTE 8 - STOCKHOLDERS EQUITY (DEFICIT)

Issuances of Common Stock

On
July 17, 2009, a director exercised options to purchase 1,150,000 shares of
common stock as follows: 1,000,000 shares at $0.10 per share, 75,000 shares at
$0.55 per share, and 75,000 shares at $0.60 per share. The total purchase price
for the exercise of the options was $186,250. The director utilized proceeds
from the Agreement to Sell Royalty dated May 19, 2009. At that time the director
also utilized the remaining $13,750 from the Agreement to Sell Royalty to
purchase an additional 12,500 shares at $1.10 per share, the market closing
price on July 17, 2009. Under the Agreement to Sell Royalty, the entire $200,000
has been utilized and no further amounts are due to the director under the
agreement.

On
July 20, 2009, an individual exercised an option to purchase 20,000 shares of
common stock at $0.60 per share on a cashless basis. Under the cashless basis
exercise, 8,991 shares were issued.

On
July 27, 2009, the Company issued 94,339 shares of common stock at $1.06 per
share in connection with a private placement. As part of the private placement
the Company also issued 47,169 warrants with an exercise price of $1.06 per
share and an expiration of 5 years. The warrants were valued as a derivative
instrument liability and recorded separately at fair value at the time of
issuance, reducing the value of the equity recorded by the same amount. The
private placement was subject to a sales commission and an additional 9,433
shares of common stock were issued as a commission on the transaction.

On
August 6, 2009, the Company issued 100,000 shares of common stock at $1.06 per
share in connection with a private placement. As part of the private placement
the Company also issued 50,000 warrants with an exercise price of $1.06 and an
expiration of 5 years. The warrants were valued as a derivative instrument
liability and recorded separately at fair value at the time of issuance,
reducing the value of the equity recorded by the same amount.

On
August 13, 2009, an individual exercised an option to purchase 20,000 shares of
common stock at $0.60 per share on a cashless basis. Under the cashless basis
exercise, 8,679 shares were issued.

On
August 17, 2009, the Company issued 18,868 shares of common stock at $1.06 per
share in connection with a private placement. As part of the private placement
the Company also issued 9,434 warrants with an exercise price of $1.06 per share
and an expiration of 5 years. The warrants were valued as a derivative
instrument liability and recorded separately at fair value at the time of
issuance, reducing the value of the equity recorded by the same amount. The
private placement was subject to a sales commission and an additional 1,910
shares of common stock were issued as a commission on the transaction. On August
25, 2009, an individual exercised an option to purchase 10,000 shares of common
stock at $0.60 per share on a cashless basis. Under the cashless basis exercise,
4,286 shares were issued.

14

---

On
September 30, 2009, a convertible debenture holder converted $241,500 of accrued
interest into 241,500 shares of the Companys stock. The aggregate amount of
accrued interest converted was recorded as capitalized interest expense during
the three months ended September 30, 2009.

On
November 10, 2009, a warrant holder exercised 239,989 warrants with an exercise
price of $1.00 per share to purchase shares of the Companys stock on a cashless
basis. Under the cashless basis, 67,335 shares were issued.

On
November 18, 2009, 18,219 shares of common stock were issued to a convertible
debenture holder for conversion of $18,219 of note principal at $1.00 per share
in accordance with the debenture terms.

On
December 7, 2009, the Company issued 20,000 shares of common stock at a market
value of $29,400 for investor relations services. These services will be
provided through June 2010.

On
December 11, 2009, a warrant holder exercised 651,945 warrants with an exercise
price of $1.00 per share to purchase shares of the Companys stock on a cashless
basis. Under the cashless basis, 207,235 shares were issued.

On
December 29, 2009, an option holder exercised 10,000 options with an exercise
price of $0.60 per share to purchase shares of the Companys stock on a cashless
basis. Under the cashless basis, 5,522 shares were issued.

On
December 31, 2009, a convertible debenture holder converted $241,500 of accrued
interest into 241,500 shares of the Companys stock. The aggregate amount of
accrued interest converted was recorded as capitalized interest expense during
the three months ended December 31, 2009.

On
January 15, 2010, a warrant holder exercised 60,000 warrants with an exercise
price of $1.25 per share to purchase shares of the Companys common stock and
the Company received cash proceeds of $75,000.

On
January 20, 2010, the Company closed a registered direct offering with 23
institutional investors and issued 7,692,310 shares of common stock and warrants
to purchase an additional 3,846,155 shares of common stock. The Company received
net proceeds of approximately $9,375,000, after deducting placement agent fees
and other offering expenses. The securities were issued pursuant to the
Company's effective S-3 Registration Statement under which the securities are
registered. The units, including the Shares and Warrants (including the
Placement Agent warrants) and shares issuable upon exercise of the Warrants were
issued pursuant to a prospectus supplement dated as of January 20, 2010, which
was filed with the Securities and Exchange Commission ("SEC") in connection with
a takedown from Santa Fe's shelf registration statement on Form S-3, which
became effective on December 29, 2009, and the base prospectus contained in such
registration statement. From the date of the transaction, the Company has agreed
that it will not issue additional common stock or securities convertible into
common stock for a period of 90 days. The Company also agreed that in any
subsequent financings completed within six months of the closing, except for an
underwritten public offering, that the Purchasers shall have the right to
participate up to 25% in the subsequent financings. In any registered public
offering, the Purchasers shall have the right to participate, but no Purchaser
shall have the right to purchase any particular amount of such underwritten
public offering.

On
March 22, 2010, an option holder exercised 20,000 options with an exercise price
of $0.60 per share to purchase shares of the Companys stock on a cashless
basis. Under the cashless basis, 8,680 shares were issued.

Issuances of Options

On
July 13, 2009, the Company granted a five (5) year option to purchase 200,000
shares of common stock to an employee under the 2007 Equity Incentive Plan. The
option exercise price is $1.00 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 fair market value of the options at the time of issuance was
determined to be $103,123 with the following assumptions: (1) risk-free rate of
interest of 0.92%, (2) an expected life of 2.75 years, (3) expected stock price
volatility of 83.13%, and (4) expected dividend yield of zero. Stock-based
compensation expense of $103,123 was recognized during the nine months ended
March 31, 2010.

On
January 1, 2010, the Company issued 75,000 five year options with an exercise of
$1.38, the market price on the date of the grant, to each of the two outside directors.
The options have a vesting period of six months from the date of grant. The fair
market value of the options at the time of issuance was determined to be
$114,600 with the following assumptions: (1) risk-free rate of interest of
1.70%, (2) an expected life of 3.0 years, (3) expected stock price volatility of
85.14%, and (4) expected dividend yield of zero. Stock-based compensation
expense of $57,300 was recognized during the three months ended March 31, 2010.

15

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Issuances of Warrants

On
July 27, 2009, in connection with a private placement for 94,339 shares of the
Companys common stock, the Company issued 47,169 five year warrants giving the
holder the right to purchase common stock at $1.06 per share. The fair market
value of the warrants under the placement at the time of issuance was determined
to be $35,017 with the following assumptions: (1) risk-free rate of interest of
2.63%, (2) an expected life of 5.0 years, (3) expected stock price volatility of
87.31%, and (4) expected dividend yield of zero. The private placement was
subject to a sales commission and an additional 4,716 five year warrants were
issued as a commission on the transaction. The fair market value of the
commission warrants under the placement at the time of issuance was determined
to be $3,501 with the following assumptions: (1) risk-free rate of interest of
2.63%, (2) an expected life of 5.0 years, (3) expected stock price volatility of
87.31%, and (4) expected dividend yield of zero.

On
August 6, 2009, in connection with a private placement for 100,000 shares of the
Companys common stock, the Company issued 50,000 five year warrants giving the
holder the right to purchase common stock at $1.06 per share. The fair market
value of the warrants under the placement at the time of issuance was determined
to be $35,579 with the following assumptions: (1) risk-free rate of interest of
2.73%, (2) an expected life of 5.0 years, (3) expected stock price volatility of
86.19%, and (4) expected dividend yield of zero.

On
August 17, 2009, in connection with a private placement for 18,868 shares of the
Companys common stock, the Company issued 9,434 five year warrants giving the
holder the right to purchase common stock at $1.06 per share. The fair market
value of the warrants under the placement at the time of issuance was determined
to be $6,769 with the following assumptions: (1) risk-free rate of interest of
2.43%, (2) an expected life of 5.0 years, (3) expected stock price volatility of
86.19%, and (4) expected dividend yield of zero. The private placement was
subject to a sales commission and an additional 944 warrants were issued as a
commission on the transaction. The fair market value of the commission warrants
under the placement at the time of issuance was determined to be $677 with the
following assumptions: (1) risk-free rate of interest of 2.43%, (2) an expected
life of 5.0 years, (3) expected stock price volatility of 86.19%, and (4)
expected dividend yield of zero.

On
January 20, 2010, in connection with the registered direct offering for
7,692,310 shares of the Companys common stock, the Company issued 3,846,155
five year warrants giving the holder the right to purchase common stock at $1.70
per share. The warrants are exercisable immediately after issuance and will
expire five years from the date of issuance. The fair market value of the
warrants under the placement at the time of issuance was determined to be
$2,921,877 with the following assumptions: (1) risk-free rate of interest of
2.45%, (2) an expected life of 5.0 years, (3) expected stock price volatility of
85.19%, and (4) expected dividend yield of zero. The private placement was
subject to the issuance of 461,539 warrants to placement agents, exercisable at
$1.625 per share and has an exercise period of approximately 4.9 years. The
warrants vest six months from the date of issuance. The fair market value of the
placement agent warrants under the placement at the time of issuance was
determined to be $353,190 with the following assumptions: (1) risk-free rate of
interest of 2.45%, (2) an expected life of 4.94 years, (3) expected stock price
volatility of 85.19%, and (4) expected dividend yield of zero.

In
connection with the private placement of the senior secured convertible notes on
March 20, 2006, the Company issued warrants for 75,001 shares of common stock as
part of the financial advisory fee associated with the transaction. The warrants
had an exercise price of $1.58 and an initial term of term of three years. On
September 6, 2006, the warrant expiration date was amended to September 6, 2009.
The warrants were not exercised and expired on September 6, 2009.

Stock
option and warrant activity, both within the 1989 Stock Option Plan and 2007
Equity Incentive Plan and outside of these plans, for the nine months ended
March 31, 2010, are as follows:

16

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|                              | Stock
        Options |          | Stock
        Warrants
|----------------------------- | --------------------- | -------- | ----------------------
|                              |                       | Weighted |                       
|                              |                       | Average  |                       
|                              | Shares                | Price    |                       
|Outstanding at June 30, 2009  | 6,390,000             | $0.22    |                       
|Granted                       | 350,000               | $1.16    |                       
|Canceled                      | (100,000)             | $0.94    |                       
|Expired                       | ---                   | ---      |                       
|Exercised                     | (1,230,000)           | $0.19    |                       
|Outstanding at March 31, 2010 | 5,410,000             | $0.29    |                       

Stock
  options and warrants exercisable at March 31, 2010, are as follows:

|Outstanding and Exercisable Options | Outstanding and Exercisable
        Warrants
|----------------------------------- | --------------------------------------------
|                                    |                                             
|                                    |                                             
|                                    |                                             
|Exercise                            |                                             
|Price                               | Outstanding                                 
|Range                               | Number                                      
|$0.11                               | 4,000,000                                   
|$0.46                               | 100,000                                     
|$0.55                               | 175,000                                     
|$0.60                               | 725,000                                     
|$1.00                               | 200,000                                     
|$1.165                              | 60,000                                      
|$1.38                               | 150,000                                     
|                                    | 5,410,000                                   

|Outstanding Options | 3.61 | $0.29 |  | Outstanding Warrants | 4.05 | $1.20
|------------------- | ---- | ----- |  | -------------------- | ---- | -----
|Exercisable Options | 3.53 | $0.24 |  | Exercisable Warrants | 3.40 | $1.35

As
of March 31, 2010, the aggregate intrinsic value of all stock options and
warrants vested and expected to vest was approximately $4,754,410 and the
aggregate intrinsic value of currently exercisable stock options and warrants
was approximately $4,416,910. The intrinsic value of each option share is the
difference between the fair market value of the common stock and the exercise
price of such option or warrant share to the extent it is "in-the-money".
Aggregate intrinsic value represents the value that would have been received by
the holders of in-the-money options had they exercised their options on the last
trading day of the quarter and sold the underlying shares at the closing stock
price on such day. The intrinsic value calculation is based on the $1.05 closing
stock price of the Common Stock on March 31, 2010. The total number of
in-the-money options and warrants vested and exercisable as of March 31, 2010,
was 8,683,203.

The
  total intrinsic value of options and warrants exercised during the period ended
  March 31, 2010, was approximately $9,200. Intrinsic value of exercised shares
  is the total value of such shares on the date of exercise less the cash received
  from the option or warrant holder to exercise the options. The total cash proceeds
  received from the exercise of stock options and warrants was $75,000.

The
total fair value of options and warrants granted during the period ended March
31, 2010, was approximately $3,389,707. The total grant-date fair value of
option shares vested during the period ended March 31, 2010, was approximately $103,123.

17

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As
of March 31, 2010, there was approximately $57,320 of total unrecognized
stock-based compensation cost, net of expected forfeitures, related to unvested
stock options granted. This cost is expected to be recognized over a
weighted-average period of 0.25 years.

NOTE 9  SUBSEQUENT EVENTS

The
Company has evaluated events and transactions that occurred subsequent to March
31, 2010 for possible disclosure or recognition in the consolidated financial
statements. The Company has determined that there were no such events or
transactions that warrant disclosure or recognition in the consolidated
financial statements except as noted below.

On
April 6, 2010, the Company issued a purchase order for the purchase of a mining
truck for the Summit project for an aggregate purchase price of $220,000. The
Company has made a down payment on the truck of $53,750 and anticipated delivery
should occur in 4-5 months.

On
April 16, 2010, an individual exercised an option to purchase 10,000 shares of
common stock at $0.60 per share on a cashless basis. Under the cashless basis
exercise, 3,815 shares were issued.

On
May 1, 2010, the Company entered into an agreement for investor relations
services. The agreement covers a period of twelve months with monthly payments
of $15,000, for a total payment of $180,000, and a monthly payment of 15,000
restricted shares of the Companys stock, for a total payment of 180,000 shares.
Additionally, the Company has issued a three (3) year option to purchase 500,000
shares of the Companys stock with an exercise price of $1.30 for 250,000
shares, and an exercise price of $1.70 for the remaining 250,000 shares. The
options shall vest in 25% increments after periods of three, six, nine, and
twelve months. The fair market value of the options at the time of issuance was
determined to be $170,418 and will be expensed over the vesting periods with the
following assumptions: (1) risk-free rate of interest of 1.56%, (2) an expected
life of 3.0 years, (3) expected stock price volatility of 71.55%, and (4)
expected dividend yield of zero.

18

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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 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-K FOR THE YEAR ENDED JUNE 30, 2009.

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
consolidated 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 a net loss of $2,418,382
for the nine months ended March 31, 2010, and have a total accumulated deficit
of $56,338,478 at March 31, 2010. 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.

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 March 31, 2010, we have cash on hand aggregating $7,544,021.
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.

On
September 11, 2009, we entered into a definitive gold sale agreement to sell a
portion of the life-of-mine gold production only from our Summit silver-gold
mine. Under the terms of the agreement, we received $4.0 million and on going
production payments equal to the lesser of $400 per ounce and the prevailing
market, for each ounce of gold delivered pursuant to the agreement. The
agreement funded $500,000 in September 2009, and the balance of $3.5 million was
received under the terms of the agreement in October 2009 upon satisfaction of
the funding conditions of the agreement.

19

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On
January 20, 2010, the Company closed a registered direct offering and issued
7,692,310 shares of common stock and warrants to purchase an additional
3,846,155 shares of common stock. The Company received net proceeds of
approximately $9,375,000, after deducting placement agent fees and other
offering expenses. The securities were issued pursuant to the Company's
effective S-3 Registration Statement under which the securities are registered.
See Liquidity and Capital Resourcessection belowfor additional
description of thePlacement transaction.

The
Companys consolidated 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

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 consolidated financial statements.

RESULTS OF OPERATIONS

Operating Results for the Three Months Ended March 31, 2010
and 2009

***Sales***

We
had revenues of $261,532 for the three months ended March 31, 2010, as compared
to $45,049 for the three months ended March 31, 2009. The increase of $216,483
is due to revenues of $260,763 from precious metals recovery from our initial
trial flux material shipments for smelter feedstock. Walk-in sales for aggregate
products decreased to $769 for the current three months ended March 31, 2010,
from $45,049 for the comparable period ended March 31, 2009.

***Operating
Costs and Expenses***

Costs
applicable to sales were incurred aggregating $-0- for the three months ended
March 31, 2010, as compared to $11,061 for the three months ended March 31,
2009. The decrease of $11,061 is attributable to not incurring any operating
costs allocable to the nominal aggregate segment in the current reporting
period. Costs attributable to the flux material feedstock was not inventoried as
the potential value of precious metals recovery was not determinable and all
related costs have been capitalized to the project.

Exploration
and mining costs were $275,425 for the three months ended March 31, 2010, as
compared to $166,600 for the three months ended March 31, 2009, an increase of
$108,825. The increase is mainly attributable to increases in shop supplies of
$12,532; repairs and maintenance of $15,923; general operating expenses
aggregating $47,971; property and casualty insurance of $9,782, and property
taxes of $36,214. These increases were offset mainly by a decrease in fuel
expense of $7,551.

General
and administrative expenses increased to $655,407 for the three months ended
March 31, 2010, from $464,603 for the comparative three months ended March 31,
2009, an increase of $190,804. The increase is attributable primarily to
increased expenses in the following areas: labor burden of $80,728; legal
services of $30,897 related to financing activities; auditing and accounting expenses of $42,336; corporate filing
fees of $13,608, deferred finance costs of $9,290 and investor relations and
consulting fees aggregating $147,536. These increases where offset by a decrease
in stock compensation related to options of $92,757 and stock exchange fees of
$16,682.

20

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Depreciation
and amortization expense increased to $127,641 for the quarter ended March 31,
2010, as compared to $85,027 for the quarter ended March 31, 2009, and increase
of $42,614. The increase is related to on-going equipment purchases for the
Summit Project and additional fixed assets put into service.

***Other
Income and Expenses***

Other
income and (expenses) for the three months ended March 31, 2010, were $3,356,285
as compared to $(6,901,241) for the comparable three months ended March 31,
2009. The net change of $10,257,526 is primarily attributable to an increase in
the gain recognized on derivative instruments liability of $9,894,826 and by
decreases in accretion of discounts on notes payable of $347,152 and interest
expense of $38,506 and were offset by a decrease in interest income of $21,211.

***Loss
on Derivative Financial Instruments***

We
recognized a gain on derivative financial instruments of $3,634,854 for the
three months ended March 31, 2010, as compared to a loss of $6,259,972 for the
prior years comparable period, resulting in a difference of $9,894,826. The
non-cash gain 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 and the issuance of warrants attached to stock subscriptions
and warrants issued under our registered direct offering. 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 derivative income
in the three months ended March 31, 2010, is attributable mainly to adjustments
to record the embedded conversion feature of derivative financial instruments at
fair value in accordance with current accounting standards, warrants issued
under our registered direct offering, and 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 we continue
to reflect the derivative financial instruments at fair values.

Operating Results for the Nine Months Ended March 31, 2010
and 2009

***Sales***

We
had revenues of $274,978 for the nine months ended March 31, 2010, as compared
to $68,192 for the nine months ended March 31, 2009. The increase of $206,786 is
due to revenues of $260,763 from precious metals recovery from our initial trial
flux material shipments for smelter feedstock. Walk-in sales for aggregate
products and miscellaneous decreased to $14,215 for the current nine months
ended March 31, 2010, from $68,192 for the comparable period ended March 31,
2009, a decrease of $53,977. The Company does not actively market the aggregate
products.

***Operating
Costs and Expenses***

Costs
applicable to sales were incurred aggregating $264 for the nine months ended
March 31, 2010, as compared to $34,667 for the nine months ended March 31, 2009.
The decrease of $34,403 is attributable to not incurring any operating costs
allocable to the nominal aggregate segment in the current reporting period.
Costs attributable to the flux material feedstock was not inventoried as the
potential value of precious metals recovery was not determinable and all related
costs have been capitalized to the project.

Exploration
and mining costs were $449,259 for the nine months ended March 31, 2010, as
compared to $407,415 for the nine months ended March 31, 2009, an increase of
$41,844. The change is mainly attributable to increased costs incurred on a
foreign subsidiary aggregating $34,424; repairs and maintenance of $20,934;
general operating costs of $38,856; property and casualty liability insurance of
$38,069, land lease payments of $7,312, and property taxes of $33,645. These
increases were offset by decreases in equipment leases aggregating $43,819; shop
supplies of $11,915; fuel costs of $8,031, and relocation costs attributable to
the mica division of $78,160.

21

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General
and administrative expenses increased to $1,726,510 for the nine months ended
March 31, 2010, from $1,615,251 for the comparative nine months ended March 31,
2009, an increase of $111,259. The change is attributable primarily to the
following increases: legal services of $119,447 relating to financing
activities; auditing and accounting expenses of $63,125; general and
administrative expenses related to the recent establishment of two foreign
subsidiaries of $28,634; consulting and investor relations costs of $324,441;
corporate filing fees of $20,483; commissions and finance fees of $30,678 and
labor burden of $102,434. These increases were offset by decreases in the
following: stock compensation of $448,000; stock compensation attributable to
stock options of $127,231 and stock exchange fees of $16,682.

Depreciation
and amortization expense increased to $342,121 for the nine months ended March
31, 2010, as compared to $148,765 for the comparable period ended March 31,
2009, and increase of $193,356. The increase is related to on-going equipment
purchases for the Summit Project and additional fixed assets put into service.

***Other
Income and Expenses***

Other
income and (expenses) for the nine months ended March 31, 2010, were $(175,206)
as compared to $(4,596,335) for the comparable nine months ended March 31, 2009.
The decrease of $4,424,129 is primarily attributable to decreases of the
following: the loss recognized on derivative instruments liability of
$4,146,051; accretion of discounts on notes payable of $359,015 and interest
expense of $107,886. These expense decreases were offset by income decreases of:
interest income of $71,307; miscellaneous income of $56,984 and relief of debt
of $48,872.

***Loss
on Derivative Financial Instruments***

We
recognized a gain on derivative financial instruments of $671,158 for the nine
months ended March 31, 2010, as compared to a loss of $3,474,893 for the prior
year comparable period, resulting in a difference of $4,146,051. The non-cash
gain 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
and the issuance of warrants attached to stock subscriptions and warrants issued
under our registered direct offering. 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 derivative gain in the nine months
ended March 31, 2010, is attributable mainly to adjustments to record the
embedded conversion feature of derivative financial instruments at fair value in
accordance with current accounting standards, warrants issued under our
registered direct offering, and 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 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 March 31, 2010, we had cash on hand of $7,544,021, a working capital deficit
of $6,020,324, which included a non-cash financial derivative liability of
$12,518,832 in this amount, and an accumulated deficit of $56,338,478.

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 will
require additional funding to meet our corporate general and administrative
commitments, to continue feasibility studies on our mineral properties and to
initiate exploration programs. We anticipate going into production in the second
calendar quarter of 2010 and that our operations for the remaining fiscal year
2010 will be funded mainly from anticipated sales of precious metals, the sale
of our securities and possibly through the exercise of certain
options and warrants. We believe we will be able to finance our continuing
future activities, although 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,
future operations and liquidity may be adversely impacted. In the event that we
are unable to obtain required capital, we may be forced to reduce our
exploration and operating expenditures or to cease development operations
altogether.

22

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On
September 11, 2009, we entered into a definitive gold sale agreement to sell a
portion of the life-of-mine gold production only from our Summit silver-gold
mine. Under the terms of the agreement, we received $4.0 million and on going
production payments equal to the lesser of $400 per ounce and the prevailing
market, for each ounce of gold delivered pursuant to the agreement. The
agreement funded $500,000 in September 2009, and the balance of $3.5 million was
received under the terms of the agreement in October 2009 upon satisfaction of
the funding conditions of the agreement.

On
January 14, 2010, the Company entered into definitive security purchase
agreements with 23 institutional investors (collectively, 'Purchasers") to sell
an aggregate of $10.0 million of units, each unit consisting of one Share and
one-half of a Warrant to purchase a Share by way of the Placement. Pursuant to
the transaction, we agreed to sell to the Purchasers an aggregate of 7,692,310
Shares and Warrants to purchase up to 3,846,155 additional Shares. The Warrants
are exercisable at an exercise price of $1.70 per share beginning immediately
after issuance and will expire 5 years from the date they are first exercisable.
The private placement was subject to the issuance of 461,539 warrants to
Placement Agents, exercisable at $1.625 per share and have an exercise period of
approximately 4.9 years. These warrants vest six months from the date of
issuance.

On
January 20, 2010, we closed the registered direct offering and issued 7,692,310
shares of common stock, warrants to purchase an additional 3,846,155 shares of
common stock and 461,539 warrants to the Placement Agents. We received net
proceeds from the offering of approximately $9,375,000, after deducting
placement agent fees and other offering expenses.

The
securities were issued pursuant to the Company's effective S-3 Registration
Statement under which the securities are registered. The units, including the
Shares and Warrants (including the Placement Agent warrants) and shares issuable
upon exercise of the Warrants were issued pursuant to a prospectus supplement
dated as of January 20, 2010, which was filed with the Securities and Exchange
Commission ("SEC") in connection with a takedown from Santa Fe's shelf
registration statement on Form S-3, which became effective on December 29, 2009,
and the base prospectus contained in such registration statement. From the date
of the transaction, the Company has agreed that it will not issue additional
common stock or securities convertible into common stock for a period of 90
days. The Company also agreed that in any subsequent financings completed within
six months of the closing, except for an underwritten public offering, that the
Purchasers shall have the right to participate up to 25% in the subsequent
financings. In any registered public offering, the Purchasers shall have the
right to participate, but no Purchaser shall have the right to purchase any
particular amount of such underwritten public offering.

We
are utilizing the net proceeds for general corporate purposes, including but not
limited to, working capital for the Summit silver-gold project; acquisition of
additional feed sources for expansion of the Lordsburg mill; advancement of the
Ortiz gold project; and pursuit of acquisition opportunities.

Factors Affecting Future Operating Results

We
continue to deploy our plan to place the Company on an improved financial
footing. In addition to the significant capital raisings already achieved and
the securities placement in January 2010, important elements of the plan include
remaining current in the filing of our annual and quarterly financial reports
and continuing to raise funding as may be required to provide for operations on
our various property sites. If we 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 March 31, 2010, we did not engage in any off-balance
sheet arrangements defined in Item 303(a) (4) of the SECs Regulation S-K.

23

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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 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 and Chief Financial
Officer, we have conducted an evaluation of our disclosure controls and
procedures as of December 31, 2009. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer has concluded that our disclosure
controls and procedures are effective.

During
the quarter ended March 31, 2010, 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

On
January 15, 2010, a warrant holder exercised 60,000 warrants with an exercise
price of $1.25 per share to purchase shares of the Companys common stock and
the Company received cash proceeds of $75,000.

On
January 20, 2010, the Company closed a registered direct offering and issued
7,692,310 shares of common stock and warrants to purchase an additional
3,846,155 shares of common stock. The Company received net proceeds of
approximately $9,375,000, after deducting placement agent fees and other
offering expenses. The securities were issued pursuant to the Company's
effective S-3 Registration Statement under which the securities are registered.
The units, including the Shares and Warrants (including the Placement Agent
warrants) and shares issuable upon exercise of the Warrants were issued pursuant
to a prospectus supplement dated as of January 20, 2010, which was filed with
the Securities and Exchange Commission ("SEC") in connection with a takedown
from Santa Fe's shelf registration statement on Form S-3, which became effective
on December 29, 2009, and the base prospectus contained in such registration
statement. From the date of the transaction, the Company has agreed that it will
not issue additional common stock or securities convertible into common stock
for a period of 90 days. The Company also agreed that in any subsequent
financings completed within six months of the closing, except for an
underwritten public offering, that the Purchasers shall have the right to
participate up to 25% in the subsequent financings. In any registered public
offering, the Purchasers shall have the right to participate, but no Purchaser
shall have the right to purchase any particular amount of such underwritten
public offering.

On
March 22, 2010, an option holder exercised 20,000 options with an exercise price
of $0.60 per share to purchase shares of the Companys stock on a cashless
basis. Under the cashless basis, 8,680 shares were issued.

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

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: May 14, 2010 | 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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