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Mineral Ridge

Introduction
The 5,617 hectare (13,879 acre) Mineral Ridge property is located ~6 km northwest of the town of Silver Peak and 56 km southwest of Tonopah in Esmeralda County, Nevada. Scorpio Gold holds a 70% interest in the project with joint venture partner Elevon, LLC (30%).

Prior to Scorpio Gold's acquisition in March 2010, Mineral Ridge historically produced ~575,000 ounces of gold, including ~170,000 ounces from open pit and ~405,000 ounces from underground mining operations. Upon acquiring its interest, the Company commenced major site rehabilitation to bring the project to a fully operational status. Pre-production mining commenced in the Drinkwater pit on May 31, 2011 and the Company achieved commercial production status effective January 1, 2012.

Mineral Ridge is a conventional open pit heap leaching operation. Gold and silver bearing solution from the leach pad is collected in the pregnant pond and processed through carbon columns in the ADR plant for recovery of the precious metals from leachate on carbon. Loaded carbon is shipped to Metals Research in Kimberley, Idaho for processing into doré. The doré bars are then delivered to the Royal Canadian Mint's refinery in Ottawa for further refining of the precious metals into separate 99.9% pure gold and silver bars.


Current Operations
FOURTH QUARTER 2017

Production in Q4 2017 totalled 3,709 ounces of gold and 2,256 ounces of silver. Total production in 2017 amounted to 19,045 ounces of gold and 10,203 ounces of silver. Mining operations were suspended in early November 2017; however, residual but diminishing gold recoveries continue from the leach pads. Mine production decreased in 2017 due to mining 47% fewer ore tonnes, although average grades were 9% higher as compared to the prior year. A summary of the Q4 2017 operating results is presented in the Company's January 10, 2018 news release.

THIRD QUARTER 2017

Production at Mineral Ridge in Q3 2017 totalled 4,935 ounces of gold and 2,588 ounces of silver. Mining was suspended in early November 2017 due to limited remaining pad capacity and higher strip ratios. A summary of the Q3 2017 operating and financial results is presented in the Company's October 27, 2017 and November 29, 2017 news releases with complete details provided in the Q3 2017 Financial Statements and Management Discussion & Analysis.

On January 4, 2018, the Company announced an updated feasibility study outlining positive economics for processing the residual heap leach material and mining of higher-grade mineralization in the existing pits. The study provides ~7.5 years of additional mine life at Mineral Ridge and 250,500 oz. life of project gold sold at a total cash cost of US$805/oz. The Company is pursuing financing for the construction of a 4,000 TPD milling facility with CIL recovery and dry stack tailings circuit.

Highlights for the Third Quarter Ended September 30, 2017 and Subsequent Events:
  • 4,935 ounces of gold were produced at the Mineral Ridge mine during Q3 of 2017, compared to 9,981 ounces during Q3 of 2016.
  • Revenue of $6.0 million, compared to $13.3 million during Q3 of 2016.
  • Total cash cost per ounce of gold sold(1) of $1,209 compared to $956 during Q3 of 2016.
  • Mine operating loss of $1.1 million compared to mine operating earnings of $3.2 million during Q3 of 2016.
  • Net loss of $2.8 million ($0.02 basic and diluted per share), compared to net earnings of $2.3 million ($0.01 basic and diluted per share) during Q3 of 2016.
  • Adjusted net loss(1) of $0.9 million ($0.01 basic and diluted per share) compared to $2.4 million ($0.01 basic and diluted per share) for Q3 of 2016.
  • Adjusted EBITDA(1) close to nil ($0.00 basic and diluted per share) compared to $3.5 million ($0.02 basic and diluted per share) during Q3 of 2016.
  • In October 2017, the Company announced a positive feasibility study for processing the heap leach mineral resource at Mineral Ridge, with a proven & probable mineral reserve of 6.9 million tons grading 0.0171 oz/t (0.59 g/t) or 117,200 oz. of gold.
  • On October 24, the Company engaged Mine Technical Services to complete a NI 43-101 mineral resource report on existing drilled targets at the Mineral Ridge mine for possible run of mine feed to the proposed milling facility.
  • On November 15, the Company announced the engagement of Bordeaux Capital Inc. to act as a financial advisor to Scorpio Gold in connection with a proposed financing for the construction of a new processing facility at Mineral Ridge, to re-finance the Company's current debt and for general working capital purposes.

Highlights for the Nine Months Ended September 30, 2017:
  • 15,336 ounces of gold were produced at the Mineral Ridge mine, compared to 28,578 ounces produced during the nine months ended September 30, 2016.
  • Revenue of $22.2 million, compared to $35.2 million during the nine months ended September 30, 2016.
  • Total cash cost per ounce of gold sold(1) of $991, compared to $883 during the nine months ended September 30, 2016.
  • Mine operating earnings of $2.4 million, compared to $8.1million during the nine months ended September 30, 2016.
  • Net loss of $3.0 million ($0.02 basic and diluted per share), compared to net earnings of $4.6 million ($0.02 basic and diluted per share) during the nine months ended September 30, 2016.
  • Adjusted net earnings(1) of $1.0 million ($0.00 basic and diluted per share), compared to $5.7 million ($0.03 basic and diluted per share) during the nine months ended September 30, 2016.
  • Adjusted EBITDA(1) of $3.1 million ($0.02 basic and diluted per share), compared to $7.9 million ($0.04 basic and diluted per share) million during the nine months ended September 30, 2016.
(1)This is a non-IFRS measure; refer to Non-IFRS Measures section of this press release and the Company's Management Discussion & Analysis for Q3 of 2017 for a complete definition and reconciliation to the IFRS results reported in the Company's financial statements for Q3 of 2017.



Deposits
In 2014, the Company reported an updated Life of Mine Plan ("LOM Plan") for the Mineral Ridge Operation that included the Drinkwater, Mary, Mary LC, and the five satellite deposits, Brodie, Bluelite, Solberry, Wedge and Oromonte (see July 21, 2014 news release). More recently, the Company developed an updated mine plan that included the Mary LC, Bluelite, Solberry, Missouri and the Brodie phase A, phase B and SE pits. To date, the Drinkwater, Bluelite, Solberry, Missouri, Brodie phase A and Wedge pit resources have been depleted. Scheduled mining continues in the Mary LC and Brodie phase B and SE pits which extend mining through the first week of November 2017.

Permitting for mining in the Custer, Oromonte, Drinkwater High Wall and Bunkhouse Extension areas is expected in Q1 of 2018, at which time the Company will evaluate the economics of mining these areas.

Property Map (PDF 2.9 Mb)
Operations Area Map (PDF 4.2 Mb)
Operations Area Map with Drill Hole Locations (PDF 2.6 Mb)

Bunkhouse Hill Target Area

The Bunkhouse Hill area extends northeast of the Mary LC pit. Drilling in 2015 intersected significant mineralization extending 250 meters northeast of the Mary LC pit at vertical depths of 50 to 150 meters. Fifteen RC holes were drilled in 2016 to further test and delineate the economics for extending the Mary LC pit into this area.

Geologically, the Bunkhouse Hill target is the immediate down-dip extension of the mineralization present in the Mary LC pit. The mineralization at Bunkhouse dips at 39° NE vs. the more typical 25-30° NE dip of the Mary LC mineralization. This dip change is spatially related to a change in geology, whereby the mineralized zone transitions from being hosted in felsic intrusive rocks to sedimentary rocks of the Wyman formation. Mapping work has shown how important this rheological contrast is in the formation of ore zones. The Bunkhouse target is currently defined over a ~150 x 450 meter area and mineralization remains open down dip to the northeast.

Bunkhouse Hill Drill Cross Sections




Bunkhouse Hill Section - Center

Bunkhouse Hill Section +150

Bunkhouse Hill Section -150



Oromonte Deposit

The Oromonte target occurs over a 300 x 500 meter area situated between the Solberry and Wedge deposits. A small mineral resource estimate for the deposit based on 53 RC drill holes was reported in the 2014 LOM Plan. Follow-up drilling in 2014-2016 intersected significant mineralization at vertical depths ranging from near surface to 150 meters depth across the target area.

The mineralization at Oromonte is interpreted to be a continuation of the mineralized horizon(s) between the Solberry and Wedge deposits that have been offset by normal faulting. The occurrence of a higher-grade zone of mineralization at depth is thought to be related to a rheological contrast between the basement granite and a later intrusion of alaskite (leucogranite). The difference in deformational behaviour of the two rock types under stress may have caused greater structural damage and fluid flow within the mineralizing structures in this area, resulting in a higher-grade zone of mineralization. The Oromonte deposit was subsequently down-dropped by late-stage normal faulting. A generalized geological model of the mineralization is presented in the Oromonte Cross Section.

Although not accessible by open pit mining, the deeper mineralization at Oromonte may be amenable to underground extraction should further results support underground development. Historical underground workings occur in the Wedge deposit area approximately 180 meters to the east.

Oromonte Drill Plan (PDF 2.2 Mb)

Oromonte Cross Section (PDF 350 Kb)

Custer Deposit

Discovered in 2015, the Custer deposit lies along trend of and ~500 meters southeast of the Mary LC deposit. Structurally, Custer is very similar to the Drinkwater deposit, having far less of the post-mineral faulting and folding that was predominant in the Mary and Mary LC deposits. As a result, the mineralization at Custer is quite continuous and predictable. Definition drilling in 2016 followed up on a highly successful first-pass drilling program in 2015. A total of 81 holes have now outlined the Custer mineralized zone over a 150 x 200 meter area at depth (see May 3, 2016 news release). The Custer deposit is in the permitting process for future consideration of open-pit mining.

Geology & Mineralization
The Mineral Ridge gold deposits are located on the northeast flank of the Silver Peak Mountain Range. This range lies in the southern reaches of the Great Basin, within the Walker Lane structural corridor. Walker Lane is a 100-km-wide region of right lateral, wrench-faulting which separates the Sierra Nevada batholith to the west and southwest and the Great Basin to the east and northeast.

Mineral Ridge is an anticlinal dome found on the eastern flank of the Silver Peak Range. It has been interpreted as an uplifted metamorphic core complex where unmetamorphosed and unfolded Cambrian strata are in detachment-fault contact with underlying deformed granitoids and Precambrian metamorphic rocks of the core complex. Auriferous quartz lenses of the central gold-quartz district are concordant with foliation in the metasedimentary host rocks of the Precambrian Wyman Formation. Transitional contacts were observed between quartz and alaskite (commonly pegmatitic), and between alaskite and peraluminous two-mica granite, strongly suggesting that the alaskite, quartz, and ore metals were derived hydrothermally from residual granite melt and aqueous fluids.

The property is located on a typical "Nevada Structural System" which is known to control gold mineralization.

To date, seven well-defined gold bearing structures have been documented on the property as follows:
  1. The North-Northeast Eagles Nest Fault
  2. The North-Northeast Coyote Fault
  3. The Northwest BW Normal Fault
  4. The North-Northwest Gillian Fault
  5. The Northeast Mary/Drinkwater Cross Fault
  6. The North-Northwest Mary/Drinkwater Cross Fault
  7. The North-Northwest Black Warrior Intersection Fault
The known mineralized zones occur over an area of approximately 4,300 m (14,000 ft) north-south and 4,600 m (15,000 ft) east-west. Individual zones can be as much as 43 m (140 ft) thick, usually consisting of a higher-grade 1.5 to 9.0 m wide halo surrounded by a lower-grade mineralized envelope. Two or more high-grade zones are commonly observed stacked on one another. Gold deposition is structurally controlled, and some of the highest grade material is found in mineralization shoots that are at an oblique angle to the direction of movement of the upper plate slab.

Gold is present as native gold and electrum, and generally occurs as rounded, angular, irregularly shaped and elongated inclusions and intergrowths in quartz, frequently associated with micaceous minerals or carbonates occupying interspatial spaces or fracture filling. Gold is also frequently associated with goethite, sometimes with relict pyrite, and on occasions intergrown with sphalerite, galena, anglesite/cerrusite and pyrite.

Mineral Resource & Reserve Estimates
The Mineral Resource estimate for the material on the heap leach pad that is directly amenable to processing is provided in Table 1. No cut-off criteria have been applied since there will be no selectivity of areas to be processed and the leach pad will be processed in its entirety. The Mineral Resources are reported inclusive of Mineral Reserves and have an effective date of 29 June 2017. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Mineral Resource estimate for the open-pit (other) areas is provided in Table 2 (Measured and Indicated) and Table 3 (Inferred). The Mineral Resources are reported inclusive of Mineral Reserves and have an effective date of 30 November 2017. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Table 1: Mineral Resource Estimate for Mineralization Contained within the Heap Leach Pad
Mineral Resource Classification Tons
('000)
Gold
(opt)
Silver
(opt)
Contained Gold
('000 oz)
Contained Silver
('000 oz)
Measured 2,895 0.017 0.016 48.5 46.4
Indicated 4,220 0.017 0.018 73.2 74.1
Measured & Indicated 7,117 0.017 0.017 121.7 120.4
Inferred 76 0.016 0.027 1.2 2.0
Notes:
  1. The effective date of the Mineral Resource estimate is June 29, 2017.
  2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
  3. Mineral Resources are quoted inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
  4. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions: a long-term gold price of $1,216/oz; assumed process costs of $11/t; and metallurgical recovery for gold of 91%. Silver was not used in the consideration of reasonable prospects for eventual economic extraction. Silver recoveries from heap leach pad material are projected to be 24%.
  5. Rounding may result in apparent differences when summing tons, grade and contained metal content.
  6. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Table 2: Measured and Indicated Mineral Resource Tabulation for Other Areas
Area Classification Tons
(kt)
Gold Grade
(opt)
Contained Gold
(koz)
Brodie Measured 455.7 0.063 28.6
Indicated 237.9 0.056 13.4
Subtotal Measured and Indicated 693.6 0.060 41.9
Custer Measured 147.8 0.083 12.3
Indicated 75.4 0.088 6.6
Subtotal Measured and Indicated 223.2 0.085 18.9
Drinkwater HW Measured 527.3 0.046 24.3
Indicated 209.2 0.049 10.3
Subtotal Measured and Indicated 736.6 0.047 34.6
Mary LC & Bunkhouse Measured 721.4 0.072 51.7
Indicated 403.3 0.074 29.8
Subtotal Measured and Indicated 1,124.7 0.072 81.5
Oromonte Measured 235.8 0.162 38.3
Indicated 169.0 0.074 12.6
Subtotal Measured and Indicated 404.8 0.126 50.9
Combined Measured 2,088.0 0.074 155.2
Indicated 1,094.8 0.066 72.6
Total Measured and Indicated 3,182.8 0.072 227.8
Notes:
  1. The effective date of the Mineral Resource estimate is November 30, 2017.
  2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
  3. Mineral Resources are reported inclusive of Mineral Reserves at a gold cut-off grade of 0.01 opt Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
  4. Mineral Resources are constrained to the area within the grade-shell wireframes. The areas outside of these grade shells are assumed to be at zero grade.
  5. These Mineral Resource are considered to be amenable to open-pit mining. Conceptual Whittle pit shells used the following assumptions: a long-term gold price of $1,350/oz; assumed combined operating costs of $12.36/t (mining, process, general and administrative); metallurgical recovery for gold of 95%, and variable pit slope angles that ranged from 38--42.
  6. Rounding may result in apparent differences between when summing tons, grade and contained metal content. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Table 3: Inferred Mineral Resource Tabulation for Other Areas
Area Classification Tons
(kt)
Gold Grade
(opt)
Contained Gold
(koz)
Brodie Inferred 2.4 0.034 0.08
Custer Inferred -- -- --
Drinkwater HW Inferred 180.1 0.059 10.61
Mary LC & Bunkhouse Inferred 0.1 0.061 0.01
Oromonte Inferred 0.4 0.092 0.03
Combined Total Inferred 182.9 0.059 10.73
Notes:
  1. The effective date of the Mineral Resource estimate is November 30, 2017.
  2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
  3. Mineral Resources are reported inclusive of Mineral Reserves at a gold cut-off grade of 0.01 opt. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability
  4. Mineral Resources are constrained to the area within the grade-shell wireframes. The areas outside of these grade shells are assumed to be at zero grade.
  5. These Mineral Resource are considered to be amenable to open-pit mining. Conceptual Whittle pit shells used the following assumptions: a long-term gold price of $1,350/oz; assumed combined operating costs of $12.36/t (mining, process, general and administrative); metallurgical recovery for gold of 95%, and variable pit slope angles that ranged from 38--42.
  6. Rounding may result in apparent differences between when summing tons, grade and contained metal content. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Mineral Reserve Statement

The Mineral Reserve estimates were prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards and the 2003 CIM Best Practice Guidelines.

The Mineral Reserve estimate for the material on the heap leach pad is provided in Table 4. The estimate has an effective date of June 29, 2017.

Proven and Probable Mineral Reserves for the open-pit (other) area material are reported within the final pit design used for the mine production schedule and are shown in Table 5. The estimate has an effective date of November 30, 2017.

Table 4: Mineral Reserve Estimate for the Heap Leach Pad
Mineral Reserve Classification Tons
('000)
Gold
(opt)
Silver
(opt)
Contained Gold
('000 oz)
Contained Silver
('000 oz)
Proven 2,895 0.017 0.016 48.5 46.4
Probable 4,220 0.017 0.018 73.2 74.1
Less Material Remaining in Place due to facility designs (260) 0.017 0.017 (4.5) (4.6)
Total Proven & Probable 6,855 0.017 0.017 117.2 115.9
Notes:
  1. The Mineral Reserves have an effective date of June 29, 2017.
  2. The QP for the estimate is Mr. Jeffery Choquette P.E., an employee of Hard Rock Consulting.
  3. Mineral Reserves are contained within the Project leach pad facility with the following assumptions: long-term gold price of $1,300/oz; assumed total ore process costs of $10.59/t; metallurgical recovery for gold of 91%, and 24% for silver, refining and smelting cost of $28.39/oz of gold. Allowance has been made for the facility location which excludes 260,000 t; this material must remain in-place, based on the to the heap material mining and tailings placement design.
  4. Rounding as required by reporting guidelines may result in summation differences.

Table 5: Mineral Reserve Estimate for the Other Areas
Pit Area Mineral Reserve Classification Tons
('000)
Gold
(opt)
Contained Gold
('000 oz)
Brodie Proven 51 0.042 2.1
Probable 12 0.027 0.3
Subtotal Proven and Probable 63 0.039 2.5
Custer Proven 314 0.047 14.8
Probable 144 0.032 4.6
Subtotal Proven and Probable 459 0.042 19.4
Drinkwater Proven 836 0.038 32.1
Probable 352 0.033 11.7
Subtotal Proven and Probable 1,189 0.037 43.7
Mary LC Proven 470 0.035 16.3
Probable 276 0.035 9.7
Subtotal Proven and Probable 746 0.035 26.0
Bunkhouse Proven 239 0.047 11.1
Probable 4 0.021 0.1
Subtotal Proven and Probable 243 0.046 11.2
Oromonte Proven 563 0.071 39.8
Probable 449 0.030 13.7
Subtotal Proven and Probable 1,012 0.053 53.5
Total Combined Proven 2,474 0.047 116.2
Probable 1,239 0.032 40.1
Total Proven and Probable 3,713 0.042 156.3
Notes:
  1. The Mineral Reserves have an effective date of November 30, 2017.
  2. The Qualified Person for the estimate is Mr. Jeffery Choquette P.E., an employee of Hard Rock Consulting LLC.
  3. Mineral Reserves are reported within the pit designs at a 0.01 opt gold cut-off grade. Pit designs incorporate the following considerations: base case gold price of $1,300/oz; pit slope angles that range from 38--47; average life-of-mine metallurgical recovery assumption of 93%; crushing costs of $1.81/t, process cost of $5.79/t, general and administrative and tax costs of $2.90/t; and average mining costs of $1.42/t mined
  4. Rounding as required by reporting guidelines may result in summation differences.

An NI 43-101 compliant technical report in support of the resource and reserve estimates and associated updated feasibility study was filed on SEDAR on January 9, 2018.

Updated Feasibility Study
On January 4, 2018 the Company announced the results of an updated positive feasibility study ("the Project") to process the heap leach material and additional open-pit mineral reserves at its Mineral Ridge property ("the Property"). This updated feasibility study includes the economic results of processing the reserves, in addition to the previously issued feasibility study (refer to press releases of October 10, 2017 and November 6, 2017) which considered only the processing of the heap leach pad reserves.

Economic Parameters

The economic viability of the Project has been evaluated using constant dollar after-tax discounted cash flow methodology. This valuation method requires projecting material balances estimated from operations and calculating resulting economics. Economic value is calculated from sales of metal, plus net equipment salvage value and bond collateral less cash outflows such as operating costs, management fees, capital costs, working capital changes, any applicable taxes and reclamation costs. Of the $67.5 million in total capital required for the Project, $28.9 million is financed through a capital lease. Resulting annual cash flows are used to calculate the net present value and internal rate of return of the Project.

The economic evaluation is based on the estimated Mineral Reserves on the heap leach pad as of June 29, 2017, plus the Mineral Reserves estimated in other areas that can be mined using open pit methods. Since the Project entails use of infrastructure active up to, and including, the time of capital investment, continuity of administrative and certain operational activities is expected, which allows certain costs to be determined based on actual history. Otherwise, operating and capital costs for proposed new activities have been derived by third-party engineers.

During the Project life (one year of initial capital investment and seven-and-one-half years of operation), the site will undergo further evaluation to extend its operating life, and as such, no end-of-project reclamation is included in this Project analysis.

The open-pit mining equipment is assumed to be acquired through a capital lease. The lease is modeled at a four-year term at 6% interest. Interest payments are reported as cash operating costs, principal payments reduce cash as a financing activity and costs are booked as assets on the balance sheet.

Economic Results

Based on the economic parameters summarized above, the Project returns a NPV5% (after-tax) of $35.1 million and an IRR of 30.0%, and achieves payback in 2.9 years (Table 6).

Table 6: Economic Results
Area Unit Total/Average
Construction Period years 1
Operating Period years 7.5
Heap leach Pad Material Milled kt 6,855
Average Leach Pad Gold Grade opt 0.017
ROM Material Milled kt 3,712
ROM Material Gold Grade opt 0.042
Recovery After Process and Refining % 91.6
Life of Project Gold Sold koz 250.5
Average Annual Gold Sold koz/a 33.4
Gold Price $/oz 1,250
Realized Gold Price $/oz 1,249.50
Average Silver Grade opt 0.017
Average Annual Silver Sold koz/a 3.7
Realized Silver Price (Average) $/oz 19.81
Total Cash Cost $/oz 805
Initial capital expenditures $ million 34.9
Remnant Ore Capital Expenditures (Ops Year 6) $ million 32.6
Total After-tax Net Cash Flow $ million 53.5
Net Salvage Value $ million 13.1
NPV of Net Cash Flow Discounted at 5% $ million 35.1
IRR % 30.0
Payback from End of Construction years 2.9

Management anticipates that the Project returns could potentially be further enhanced through the judicious sourcing and refurbishment of certain used equipment, available for purchase in the south-western United States. However, no economic studies have been undertaken with respect to sourcing and refurbishing used equipment, including the Feasibility Study which is based on new equipment only.

Sensitivity Analysis

Project sensitivity to variations in operating costs, capital costs, gold grade and metals price was evaluated with respect to the NPV. The NPV5% (after-tax) of the Project is more sensitive to changes in metal price and metal grade, as compared to changes in CAPEX and OPEX. For example, at a gold price of $1,100/oz, a 12% decrease, the NPV5% (after-tax) decreases to $10 million and the IRR declines to 13%. At a gold price of $1,400/oz, a 12% increase, the NPV5% (after-tax) increases to $58 million and the IRR increases to 43%.

The NPV sensitivity to CAPEX, OPEX, gold price and head grade is shown graphically in Figure 1 below

Figure 1: NPV Sensitivity
Note: Figure prepared by MTS, 2017

Similarly, the sensitivity of the IRR to CAPEX, OPEX, gold price and head grade is shown graphically in Figure 2 below.

Figure 2: IRR Sensitivity
Note: Figure prepared by MTS, 2017

Conclusions

Based on the updated Feasibility Study, the Project, as defined in the technical report, is technically and economically viable. It is therefore recommended that Scorpio Gold construct the new processing facilities as described, to process the heap leach material as well as the reported open-pit reserves at the Property.

Units of Measure

Unless otherwise defined herein, the following defined terms have the following meanings:

Unit Symbol
foot m
gram g
ounce oz
pound lb
ton (short = 2,000 lb) t
ounces per ton opt
kilo (x 1,000) k
million (x 1,000,000) N
hour h
minute min
year y
day d
annum a
tons per hour tph
tons per day tpd
tons per annum tpa
US gallon gal
cubic feet ft3
US gallons per minute gpm
US dollars $

Qualified Persons

The following are Qualified Persons ("QP"s) as defined by NI 43-101 and participated in the preparation of the feasibility study:

Qualified Person Company QP Responsibility/Role
Mr. Todd Wakefield, RM-SME Mine Technical Services Geology
Ms. Stella Searston, RM-SME Mine Technical Services Geology
Mr. Ian Crundwell, P. Geo. Mine Technical Services Mineral Resources
Mr. Jeff Choquette, P.E. Hard Rock Consulting, LLC Mineral Reserves and Mining Methods
Mr. Paul Kaplan, P.E. NewFields Environment Studies and Permitting
Mr. Gordon John Cooper, P. Eng. Novus Engineering Inc. Mineral Processing
Mr. Amritpal Singh Gosal, P. Eng. Novus Engineering Inc. Infrastructure and Plant Design
Mr. Bruce Genereaux, RM-SME Mine Technical Services Economic Analysis

An NI 43-101 compliant technical report in support of the resource and reserve estimates and associated updated feasibility study was filed on SEDAR on January 9, 2018.

Technical Reports