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Mineral Ridge

Introduction
The Mineral Ridge project is located ~6 km northwest of the town of Silver Peak and 56 km southwest of Tonopah in Esmeralda County, Nevada. The property consists of 616 mining claims totalling 5,010 hectares (12,380 acres).

Scorpio Gold holds a 70% interest in Mineral Ridge project with joint venture partner Waterton Global Value L.P. (30%). The Company is currently entitled to receive 80% of cash flow generated in accordance with project agreements and is the operator of the project.

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.

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 Johnson Matthey's refinery in Salt Lake City for further refining of the precious metals into separate 99.9% pure gold and silver bars.

Crushing of gold-bearing material mined by previous owners was completed in February 2011 with some 280,000 tons placed on the leach pad. The heap leaching process was initiated in late February and the first shipment of loaded precious metals carbon left site in April 2011. The Company made its first precious metals sale in June 2011.

Pre-production mining commenced in the Drinkwater pit on May 31, 2011, and the Company achieved commercial production status effective January 1, 2012.

In September 2013, the Mineral Ridge Mine Operation received a safety award by the Nevada Mining Association for its performance in the 2012 calendar year. Seven Nevada-based mining operations were nominated for safety awards in the small surface mining category, with Mineral Ridge placing second in safety ratings behind Newmont Mining's Lone Tree operation. Scorpio Gold is honoured to be recognized amongst some of the major producers in Nevada for its commitment to worker safety at Mineral Ridge. The Company congratulates its employees at the Mineral Ridge Operation, its Elko operations office personnel, and everyone who participated in the Company's first year of commercial production and put safety first.

Current Operations
2014 Production Guidance

The Company's forecast for its third year of commercial production at Mineral Ridge represents a new high of 40,000-45,000 ounces gold. The operation has consistently exceeded tonnage and grades indicated by the 2012 Life of Mine Plan Study completed by AMEC. These factors contributed to a strong operating performance in H1 2013, enabling the Company to increase its 2013 production forecast and decrease its cash cost estimate midway through the year. As in early 2013, the Company has taken a conservative approach to estimating total cash cost for 2014 at US$800-$850 per ounce of gold sold, and may revise this estimate at a future date if warranted by quarterly operating results.

Production in 2014 is scheduled from the Drinkwater and Mary/LC pits. Scorpio Gold recently received approval from the Nevada Bureau of Land Management for its Amended Plan of Operations, allowing the Company to proceed with the planned expansion of the current Mary pit to incorporate the Mary LC zone. The new Mary/LC pit will have dimensions far exceeding the current operating Drinkwater pit. Completion of a new mineral reserve estimate and Life of Mine plan, which will incorporate the Drinkwater, Mary and Mary LC mineralization, is expected in Q1 2014.

2014 Mineral Ridge Operations Forecast:
  • Production: 40,000 to 45,000 ounces gold
  • Total Cash Cost: US$800 to US$850 per ounce of gold sold

Key estimated parameters forming the basis for the 2014 forecast are:
  • Average throughput: 2,840 short tons (2,580 metric tonnes) per day
  • Average grade: 0.061 ounces per short ton (2.09 grams per tonne) gold
  • Waste to ore ratio of Drinkwater and Mary/LC producing pits combined: 4.3 to 1

The Company expects these parameters to fluctuate throughout 2014 and as a result, these parameters should be treated as full-year averages and will not necessarily be reflective of quarterly operating results.

2014 Capital Expenditure, Development and Exploration Budget

Capital, development and exploration expenditures for the Mineral Ridge operation in 2014 are budgeted at US$11.0 million as follows:

Expenditures US$
Capital $1.2 M
Development $5.9 M
Exploration $3.9 M
Total $11.0 M


FOURTH QUARTER 2013

Scorpio Gold reported a record quarterly gold production of 11,348 ounces in the fourth quarter of 2013 ("Q4"), representing an increase of 5% from Q4 2012 and an 18% increase from Q3 2013. Total gold production for the year was 39,160 ounces, an increase of 22% over 2012 and approaching the upper range of the Company's 2013 production forecast. Total cash cost for 2013 is forecast at $700 to $800 per ounce of gold sold. A summary of Q4 and total 2013 production results is presented in the Company's January 14, 2014 news release.

THIRD QUARTER 2013

Production for the third quarter ended September 30, 2013 ("Q3") totalled 9,632 ounces of gold and 3,702 ounces of silver for year-over-year increases of 45% and 28%, respectively, from Q3 2012. Total gold production for the first three quarters of 2013 was 27,812 ounces.

A summary of the Q3 2013 production and financial results is presented in the Company's October 9, 2013 and November 26, 2013 news releases, with complete details provided in the Q3 2013 Financial Statements and Management Discussion & Analysis.

Q3 2013 PERFORMANCE HIGHLIGHTS:
Q3 2013 Q3 2012 Nine Months 2013 Nine Months 2012
  $ $ $ $
Revenue (000's) 14,406 11,725 40,907 37,117
Mine operating earnings (000's) 1,494 3,005 7,988 11,347
Net earnings (loss) (000's) 810 3,259 (4,866) 8,929
Basic and diluted earnings  (loss) per share 0.00 0.02 (0.03) 0.05
Adjusted net earnings(1) (000's) 807 2,416 5,571 9,244
Adjusted basic and diluted net earnings per share(1) 0.00 0.01 0.02 0.05
Adjusted EBIDTA(1) (000's) 4,867 6,327 19,384 17,016
Adjusted basic and diluted EBIDTA per share(1) 0.03 0.04 0.10 0.10
Cash flow from operating activities /td> 3,263 3,445 6,494 8,342
Net earnings (000's) (7,772) 2,596 (5,676) 5,670
Basic earnings  (loss) per share (0.05) 0.01 (0.04) 0.03
Diluted earnings (loss) per share (0.05) 0.01 (0.04) 0.03
Adjusted net earnings(1) (000's) 2,659 2,595 4,764 6,828
Adjusted basic and diluted net earnings per share(1) 0.01 0.01 0.02 0.04
Adjusted EBIDTA(1) (000's) 7,989 4,664 14,517 10,689
Adjusted basic and diluted EBIDTA per share(1) 0.04 0.03 0.08 0.06
Cash flow from operating activities (000's) 5,392 7,542 11,466 12,645
Adjusted cash flow from operating activities (000's) 5,392 7,542 11,466 14,312
Total cash cost per ounce of gold sold(1) (000's) 713 965 738 944

 

Mining Operations    
Gold ounces produced 10,769 7,394 18,180 14,591
    Drinkwater pit  
    Ore tonnes mined 209,114 160,664 372,656 283,659
    Waste tonnes mined 568,765 700,523 1,181,831 1,357,293
    Total mined 777,879 861,187 1,554,487 1,640,952
    Strip ratio 2.7 4.4 3.2 4.8
    Mary pit  
    Ore tonnes mined 33,644 3,156 68,585 3,156
    Waste tonnes mined 444,029 244,927 771,044 525,132
    Total mined  477,673 248,083 839,629 528,288
    Strip ratio 13.2 77.6 11.2 166.4
   
Processing   
    Tonnes processed 208,262 160,759 414,108 287,427
     Gold head grade (g/t) 2.56 2.09 2.29 2.20
    Availability* 59.4% 53.5% 62.2% 52.9%

*Processing Availability is based on hours of crusher operations versus permitted run time.

Highlights for the Third Quarter Ended September 30, 2013:
  • 9,632 ounces of gold produced compared to 6,663 ounces during Q3 of 2012.
  • Increased revenue of $14.4 million compared to $11.7 million during Q3 of 2012, mainly due to increased production which resulted in a higher number of ounces sold, albeit at a lower average gold price.
  • Improved total cash cost per ounce of gold sold(1) of $729 compared to $904 during Q3 of 2012 mainly attributable to higher production levels.
  • Improved cash cost per ounce and higher production levels did not completely offset decrease in average gold price which consequently negatively impacted the following:
    • Mine operating earnings(1) of $1.5 million compared to $3.0 million during Q3 of 2012.
    • Net earnings of $0.8 million ($0.00 basic and diluted per share), compared to $3.3 million ($0.02 basic and diluted per share) during Q3 of 2012. Q3 of 2012 included a gain on disposal of mining assets of $905 compared to $19 in Q3 of 2013.
    • Adjusted net earnings(1) of $0.8 million ($0.00 basic and diluted per share) compared to $2.4 million ($0.01 basic and diluted per share) during Q3 of 2012.
    • Adjusted EBITDA(1) of $4.9 million ($0.03 basic and diluted per share) compared to $6.3 million ($0.04 basic and diluted per share) during Q3 of 2012.
  • Adjusted cash flow from operating activities(1) of $6.6 million compared to $4.3 million during Q3 of 2012 mainly due to favorable movements in working capital during Q3 of 2013.

Highlights for the Nine Month Period Ended September 30, 2013:
  • 27,812 ounces of gold produced compared to 21,254 during the nine months ended September 30, 2012.
  • Increased revenue of $40.9 million compared to $37.1 million during the nine months ended September 30, 2012, mainly due to increased production and higher head grades which resulted in a higher number of gold ounces sold albeit at a lower average gold price.
  • Improved total cash cost per ounce of gold sold(1) of $735 compared to $933 during the nine months ended September 30, 2012, mainly attributable to higher production levels as well as higher head grades.
  • Mine operating earnings(1) of $8.0 million compared to $11.3 million during the nine months ended September 30, 2012 mainly due to increased depletion and amortization during the nine-month period ended September 30, 2013.
  • Net loss of $4.9 million ($0.03 basic and diluted per share) after non-cash impairment charges of $9.9 million ($0.06 basic and diluted per share), compared to net earnings $8.9 million ($0.05 basic and diluted per share) during the nine months ended September 30, 2012.
  • Adjusted net earnings(1) of $5.6 million ($0.02 basic and diluted per share) compared to $9.2 million ($0.05 basic and diluted per share) during the nine months ended September 30, 2012 mainly due to increased depletion and amortization during the nine-month period ended September 30, 2013.
  • Increased adjusted EBITDA(1) of $19.4 million ($0.10 basic and diluted per share) compared to $17.0 million ($0.10 basic and diluted per share) during the nine months ended September 30, 2012 as a result of increased revenue and lower cash costs.
  • Adjusted cash flow from operating activities(1) of $18.1 million compared to $18.6 million during the nine months ended September 30, 2012.
(1) This is a non-IFRS measure; refer to Non-IFRS Performance Measures section of this press release and the Company's Management Discussion & Analysis for a complete definition and reconciliation to the Company's financial statements. Deposits
The Drinkwater and Mary are the two main deposits currently in production. Six additional satellite deposits known as Brodie, Brodie Northwest, Bluelite, Solberry, Oromonte and Wedge lie in close proximity and have undergone block modelling and open pit design and optimization. Mineral reserve and resource estimates have been reported for the Drinkwater and Mary deposits and an Inferred mineral resource has been reported for the satellite deposits (see Mineral Resource & Reserve Estimates).

Drinkwater Deposit

The Drinkwater deposit is the largest known deposit on the property. It was partially mined by underground methods from the 1860s to the early 1940s and by open pit methods from 1989 to 1999. The mineralized zones have a general strike of N45W and dip 20-25 degrees to the northeast. The zones have been traced by drilling over a strike length exceeding 750 m (2,500 ft) and down dip extension of over 600 m (2,000 ft). Two or more gold bearing shear zones have individual thicknesses of 1.5 to 12 m (5 to 40 ft) and an overall thickness of more than 30 m (100 ft).

Scorpio Gold commenced pre-production mining in the Drinkwater pit on May 31, 2011 and achieved commercial production status effective January 1, 2012.

The Company's review of historical data indicated that mineralization was left behind in the high wall at the northwest end of the Drinkwater pit. Drilling in 2012 and 2013 on the Drinkwater Highwall zone and its northwest trend not only confirmed this, but show that the width of this gold mineralization is quite substantial in places. Results from the 2012 and 2013 drilling will be modelled and incorporated into the Drinkwater mine plan for potential extraction. Additional drilling on the Drinkwater Highwall is planned in 2014.

Mary & Mary LC Deposits

Scorpio Gold commenced pre-stripping operations in the Mary pit in December 2011 and initial ore production in Q2 2012.

The Mary deposit is located immediately southeast of the Drinkwater pit. Previous drilling defined the mineralization over a strike length of 600 m (2,000 ft) and down dip extension of over 450 m (1,500 ft). Scorpio Gold completed a 58 hole drill program in 2011 to define the extent of mineralization for final pit design. From this program it became evident that the gold mineralization extended further southeast from the Mary zone to the adjacent Mary LC Zone, encompassing a strike length of 780 metres. Subsequent exploration work determined that the Drinkwater, Mary and Mary LC zones are not isolated deposits but represent one continuous zone of mineralization.

The 2012 drill program was designed to support modification of the Mary pit design, extending the pit wall from its current planned location, as based on drilling up to the end of 2011, to the southwest to include the continuation of mineralization into the Mary LC zone. Results from drilling in an area lying between the two zones as well as infill and step out holes to historical drilling on the Mary LC zone supported modification of the Mary pit design.

Prior to the 2013 drilling campaign, drill results for the Mary LC area were incorporated into an in-house wire frame resource block model, which formed the basis of the proposed Mary LC pit expansion design using floating cone methodology and economic parameters based on current operating costs. Within this pit design, areas that were not drilled due to topographic challenges, or which contained drill spacing deemed too wide for resource determination, or which extended outside of the floating cone boundary, were treated as waste with zero grade. The purpose of the 2013 drill program was to target these areas to determine if mineralization exists; to tighten up drill hole spacing for resource estimation; and to follow up on mineralized trends either below the proposed pit shell floor or outside of the existing cone boundary.

The 2013 drill program had an excellent success rate, with over 85% of the holes intersecting mineralization where expected based on wire frame modelling. Every successful drill hole intercept in the 2013 program has converted previously deemed waste material into mineralization, potentially adding to the resource base and increasing confidence levels.

Completion of a new reserve estimate and Life of Mine assessment, which will incorporate the Drinkwater, Mary and Mary LC, is expected in Q2 2014.

The Company has received approval from the Nevada Bureau of Land Management for an Amended Plan of Operations, allowing the Company to proceed with the proposed expansion of the Mary pit to incorporate the Mary LC zone.

Satellite Deposits

The satellite Brodie, Bluelite, Wedge, Oromonte and Solberry deposits are situated west and southwest of the Drinkwater pit and lie in close proximity to the leach pad. These deposits are part of a semi-continuous trend of mineralization within a shallow-dipping stratigraphic horizon. They lie on the western flank of an anticlinal fold structure and are considered to be related to mineralization within the Drinkwater-Mary trend, which lies on the eastern flank.

Telesto Nevada Inc. (Telesto) completed block modelling and open pit design and optimization for each of the deposits in 2012 (see November 26, 2012 news release). An Inferred mineral resource estimate was prepared for the Brodie, Bluelite, Wedge and Solberry deposits using drilling data available up to June 1, 2013. The generation of a floating cone resource for the Oromonte deposit was not possible due to insufficient drill hole density. Total Inferred resources for the four deposits amount to 513,000 tons at an average grade of 0.078 opt gold totalling 40,200 contained ounces gold (see August 16, 2013 news release and Mineral Resource Estimate).

Within Telesto's block model, there is an exploration target of 400,000 to 1,500,000 tons of mineralized material with an estimated grade of 0.02 to 0.07 opt that lies outside of the economic cone shell. The potential tonnages and grades of this exploration target are conceptual in nature and are based on drill results within the block model. There has been insufficient exploration to define this target as a mineral resource and it is uncertain if further exploration will result in the delineation of a mineral resource. The areal extent of this mineralization is presented in a plan section of the resource model wireframes available at: View Map. Cross-section views of the mineralized wireframe envelopes that extend or lie outside of the pit shells is available at: View Cross-Sections.

The 2013 satellite drilling program was designed to upgrade and potentially increase the mineral resource estimate completed by Telesto. Results received to date have met with much success, returning significant intercepts both within and extending outside of the floating cone pit shells modelled for each of the deposits.

Brodie, Brodie Northwest & Bluelite Deposits

The Brodie and Bluelite deposits are located 975 metres (3,200 feet) and 1,100 metres (3,600 feet) southwest, respectively, of the Drinkwater pit. Drilling in 2011-12 targeted the both deposits as well as the mineralized structural corridor that trends northwest from the historical Brodie pit toward the Bluelite. Previous operators thought the Brodie and Bluelite deposits were separate mineralized bodies; however, results of Scorpio Gold's drilling has demonstrated they are one semi-continuous zone of mineralization. The mineralized Brodie corridor encompasses a strike length of some 1,370 metres (4,500 feet) and is situated immediately adjacent to the leach pad.

As reported in the Company's August 16, 2013 news release, the Bluelite deposit was estimated to contain 193,000 tons grading 0.079 opt gold for 15,200 contained ounces gold, or approximately 37.8% of the total Inferred mineral resource for the four satellite deposits. The Brodie deposit was estimated to contain 158,000 tons grading 0.083 opt gold for 13,100 contained ounces gold, or approximately 32.5% of the total Inferred mineral resource for the four satellite deposits.

Results from the 2013 expansion drilling program on the Brodie and Bluelite deposits are very encouraging and are fully expected to increase and upgrade the current resource estimate for those deposits.

Oromonte Deposit

The Oromonte deposit lies northwest of the Wedge deposit and 425 metres (1400 feet) west-southwest of the Drinkwater pit. As of the Telesto report date, there was insufficient drill hole density to generate a floating cone resource for the deposit.

Drilling in 2013 followed up on a higher-grade zone of mineralization intersected at depth in 2011-2012.The indicated zone of mineralization trends northerly and lies along the edge of a geophysical magnetic high. It has been intersected at 85 to 115 metres vertical depth and, although not accessible by open pit mining, may be amenable to underground extraction should further results support underground development. Historical underground workings are known to lie approximately 180 meters to the east. The significance of these drill results in context with their structural and geophysical setting will be evaluated for follow up in 2014.

Solberry Deposit

The Solberry deposit lies west of the currently producing Drinkwater and Mary pits and 600 meters (1,970 feet) northwest of the leach pad. Pre-2013 drilling on the Solberry deposit outlined a small shallow resource and floating cone pit shell (as reported in the Company's August 16, 2013 news release). The Solberry deposit was estimated to contain 34,000 tons grading 0.061 opt gold for 2,100 contained ounces gold, or approximately 5.2% of the total Inferred mineral resource for the four satellite deposits.

Follow-up infill drilling was conducted in 2013 within the mineralized wireframe envelope modelled by Telesto, which extended east-southeast of the pit shell outline. Drilling in 2014 is targeting the extension of mineralization into untested ground outside of the current pit shell outline and southeast toward the Oromonte deposit.

The current resource and pit shell at Solberry appear to be constrained by the extent of historic drilling rather than any demonstrated termination of the mineralized trend. The 2014 drill program is designed to potentially expand and enhance the confidence level of the current resource. Initial results from the 2014 program are presented in the Company's April 14, 2014 news release.

2013 Solberry Drill Plan
2014 Solberry Drill Plan

Wedge Deposit

The Wedge deposit is located 225 metres (740 feet) southwest of the Drinkwater pit. Drilling has intersected near surface mineralization as presented in the Company's November 8, 2011 news release. As reported in the Company's August 16, 2013 news release, the Wedge deposit was estimated to contain 128,000 tons grading 0.076 opt gold for 9,700 contained ounces gold, or approximately 24.1% of the total Inferred mineral resource for the four satellite deposits.

Exploration
The 2013 exploration program on the Mineral Ridge project will focus on continued resource and reserve expansion of the Mary LC, Drinkwater Highwall and adjacent satellite deposits, as well as testing of high quality exploration targets.The budgeted US$3.2 million program includes:
  • Detailed digital and GIS (Geographic Information System) compilation of historical data.
  • Acquisition by staking of 1,000 hectares (2,400 acres) of new ground with gold showings.
  • Geochemical sampling and detailed geological and structural mapping program.
  • Over 800 line-kilometers (500 line-miles) of helicopter-borne VTEM (Vertical Time-Domain Electromagnetic) and magnetic geophysical survey.
  • 20,000 meters (66,000 feet) of reverse circulation (RC) drilling including infill, step out and target specific exploration.

Ore definition and condemnation drilling is currently in progress on the Mary & LC zones for refinement of the proposed super pit. Once completed, the drill will move to the Brodie and Bluelite satellite deposits to further define resources in those areas. Additional definition drilling on the Drinkwater Highwall zone is scheduled for later this year. The exploration drilling phase will test specific targets identified through compilation and interpretation of results from the ongoing ground and airborne surveys.

Coyote Target

The Coyote target is located approximately four km southwest of the Drinkwater and Mary pits. Numerous historical workings (circa 1900's) lie within the area, including seven shallow shafts, one adit and six trenches.

Surface exploration has outlined a 1.0 km long, north-northeast trending structural corridor that ranges from 200 m in width in the south to 300 m in the north and is open in all directions. Surface grab sampling, where conducted, has reported values up to 14 g/t (0.4 oz/ton) gold. Structural features of the corridor are traceable on surface a further three km northeast to the Mineral Ridge operation; however, detailed surface prospecting and sampling has yet to be conducted over this extent due to the rugged terrain.

First pass drilling of the Coyote target encountered widespread silver-enriched mineralization over significant widths. Eleven holes tested the target over a 250 x 600 metre area, while 2 holes tested an outlier zone located 914 metres to the northwest All of the holes terminated in mineralization (see September 13, 2011 news release). Follow-up exploration is planned.

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
DRINKWATER & MARY DEPOSITS SATELLITE DEPOSITS


DRINKWATER & MARY DEPOSITS


On October 1, 2012, Scorpio Gold reported results of the Life of Mine Plan Study (LOM) completed by AMEC E&C Services Inc. (AMEC) of Sparks, Nevada for the Drinkwater and Mary pits. The mine plan projects a current 3 year mine life at 66,000 tons per month (t/m) based on estimated Measured and Indicated Mineral Resources of 3.2 million tons (MT) grading 0.059 ounces per ton (oz/ton) gold (190,800 oz contained gold) including Probable Mineral Reserves of 2.1 MT grading 0.062 oz/ton gold (131,000 oz contained gold).

This mine plan study is exclusive of deposit modelling and a mineral resource estimate prepared by Telesto Nevada Inc. for the satellite Brodie, Bluelite, Solberry, Wedge and Oromonte deposits presented further below.

The Company believes the LOM provides a strong base further growth at Mineral Ridge. The study's quoted throughputs, grades and ounces produced have been exceeded in operations to date at Mineral Ridge. Dri -lling results from the Mary LC deposit and Drinkwater Highwall zone are not included in this estimate and are expected to add additional years to the LOM. The economic study solidly places over 68% of the total Measured and Indicated Resources into the Probable Reserve category.

Principal Outcomes - Life of Mine Plan Study
  • Estimated Probable Mineral Reserves: 2.1 Mt at 0.062 oz/ton gold (131,000 oz contained gold).
  • 3 year mine life at 66,000 t/m throughput.
  • Average annual gold production of 30,000 oz over the projected life of mine.
  • Total direct operating cash costs of $906/oz gold over the life of mine.
  • After tax net present value (NPV) of $25.8 million (8% discount rate) at an average gold price of $1,530/oz. Note that the average gold price used in the NPV calculation is based on a near-term spot gold price which regresses to a long-term price of $1,300 per ounce of gold, or the price at which the reserves and resources are reported.

  • Key risks to the Project include:
    • Current operations mining rate is lower than assumed in the LOM; extra equipment, operating shifts, or both will make up the difference.
    • Current operations heap leach solution application rates are lower than indicated in the LOM; this situation is likely to improve once the additional water well is operational, expected in the fourth quarter of 2012.
  • Key opportunities at the Project include:
    • Current mining results indicate that some of the material mined from voids left by historical underground mining contains gold mineralization, which has allowed a net increase in the ore recovered over what was predicted by the Mineral Reserve estimate.
    • There is potential to identify additional mineralization from drill-defined extensions to the Drinkwater and Mary deposits, which may support Mineral Resource estimation and potentially be converted into Mineral Reserves.
    • Exploration potential of identified prospects surrounding the Drinkwater and Mary deposits.

Mineral Reserves presented in Table 1 have demonstrated economic viability through the application of modifying factors in the LOM. All Mineral Reserves are classified as Probable Mineral Reserves with no Proven Mineral Reserves.

Mineral Reserve Estimate - Drinkwater & Mary Pits - April 30, 2012

Pit Ore Tons
(x1000)
Gold Grade
(oz/ton)
Contained
Gold (oz)
Waste Tons
(x1000)
Strip Ratio
(waste:ore)
Drinkwater 1,269 0.061 77,000 4,537 3.6
Mary 832 0.065 54,000 5,488 6.6
Total 2,101 0.062 131,000 10,025 4.8

Notes:
  1. The effective date of the Mineral Reserve is April 30, 2012.
  2. The Mineral Reserve estimate was prepared by Jim Ashton, P.E., of Scorpio Gold and audited by independent qualified person, Don Tschabrun, SME-RM, of AMEC.
  3. Mineral Reserves are reported at a 0.020 oz/ton gold cut-off grade.
  4. Mineral Reserves are contained within a designed pit with access ramps based on the Lerchs-Grossmann (LG) algorithm utilizing a $1,300 oz gold price. The optimization mining cost was $5.40/t of ore mined at Drinkwater, $5.31/t of ore mined at Mary, $2.77/t of waste mined, and $1.46/t of fill mined. An average crushing cost of $2.57 and an average processing cost of $6.90 were applied per ton processed. G&A costs were applied at $3.98 per ton processed. Shipping and refining costs of $21/oz gold produced were applied. A 65% metallurgical recovery was applied. Overall pit slope angles ranged from 45 degrees to 49 degrees.

Mineral Resource Estimate - Drinkwater & Mary Pits - April 30, 2012

Classification Tons
(x1000)
Gold Grade
(oz/ton)
Contained
Gold (oz)
Measured  - - -
Indicated 3,231 0.059 190,800
Measured + Indicated 3,231 0.059 190,800
Inferred 89 0.043 3,800

Notes:
  1. Mineral Resources are reported inclusive of Mineral Reserves.
  2. The effective date of the Mineral Resource is April 30, 2012.
  3. The Mineral Resource estimate was prepared by Jim Ashton, P.E., of Scorpio Gold and audited by independent qualified person, Michael Munroe, SME-RM, of AMEC.
  4. Mineral Resources are reported at or above a 0.017 oz/ton gold cut-off grade.
  5. Mineral Resources are reported using a long-term gold price of US$1,500/oz.
  6. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Mineral Resource estimate is based on a total of 1,510 drill holes and 52,682 assay results collected between 1939 and 2012 from the Drinkwater, Mary and Last Chance deposits. The cut-off date for information used in the geologic model and Mineral Resource model was February 29, 2012.

The key assumptions, parameters and methods used to estimate the Mineral Resource and Mineral Reserve are as presented in the Comapny's October 1, 2012 news release. An independent technical report supporting the disclosure of the Mineral Resource and Mineral Reserve estimate was prepared by AMEC and filed on SEDAR on October 15, 2012. View Technical Report (PDF 11.6 Mb).

The Mineral Resource and Mineral Reserve estimates were prepared by Jim Ashton, P.E., of Scorpio Gold and audited by AMEC. The AMEC Qualified Persons for the estimates are Mr Don Tschabrun, RM-SME for Mineral Reserves, and Mr Michael Munroe, RM-SME for Mineral Resources.


SATELLITE DEPOSITS


Mineral resource estimates were prepared on four of five satellite deposits by Telesto Nevada Inc. ("Telesto"), using drilling data available up to June 1, 2013. All of the deposits lie to the west and southwest of the currently producing Drinkwater and Mary pits, and are situated within 400 metres of the existing leach pad.

The following inferred mineral resource estimate was prepared using a breakeven cut-off grade of 0.024 ounces per ton (opt) gold. The resource is constrained by a conceptual floating cone pit shape that is defined by certain metal price, cost, recovery and pit slope assumptions as outlined further below. A plan map of the satellite areas and floating cone outlines is available at: View Map.

Inferred Mineral Resource Estimate - Satellite Deposits - June 1, 2013

Mineral Resource Summary Within Floating Cone Pit Shells
All Material Classified as Inferred

Deposit Tons x1000 Fill
Tons x1000
Waste
Tons x1000
Waste to
Ore Ratio
Average Au
Grade (opt)
Contained
Gold Ounces
x1000
Bluelite 193 2 841 4.4 0.079 15.2
Brodie 158 99 1,107 7.0 0.083 13.1
Solberry 34 0 93 2.7 0.061 2.1
Wedge 128 408 218 1.7 0.076 9.7
Total 513 509 2,259 4.4 0.078 40.2

Notes to the Mineral Resource Estimate:
  1. Mineral resources are reported using a long term gold price of $1400/oz.
  2. Rounding of tons and contained gold results in apparent differences in totals and is in accord with reporting guidelines.
  3. "Fill" refers to previously mined waste placed on top of the original topography that must be mined in the future to develop the resource. Fill is assumed to be sterile waste.
  4. A portion of the resource in the Wedge deposit is under or directly adjacent to current facilities.
  5. Mineral resources are as of June 1, 2013.
  6. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Exploration Target

Within Telesto's block model, there is an exploration target of 400,000 to 1,500,000 tons of mineralized material with an estimated grade of 0.02 to 0.07 opt that lies outside of the economic cone shell. The potential tonnages and grades of this exploration target are conceptual in nature and are based on drill results within the block model. There has been insufficient exploration to define this target as a mineral resource and it is uncertain if further exploration will result in the delineation of a mineral resource. The areal extent of this mineralization is presented in a plan section of the resource model wireframes available at: View Map. Cross-section views of the mineralized wireframe envelopes that extend or lie outside of the pit shells is available at: View Cross-Sections.

Details of the mineral resource database as well as key assumptions, parameters and methods used to estimate the mineral resource are presented in the Comapny's August 16, 2013 news release.

An independent technical report supporting the disclosure of the Mineral Resource estimate is available on SEDAR (see amended and restated report filed on April 10, 2014) and is also available here: View Technical Report (PDF 25.9 Mb).

The technical information contained within this website has been reviewed and approved by CEO, Peter J. Hawley, PGeo, a qualified person as defined by NI 43-101.

Technical Reports