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 Johnson Matthey's refinery in Salt Lake City for further refining of the precious metals into separate 99.9% pure gold and silver bars.
FOURTH QUARTER & YEAR ENDED 2016
Total gold production in 2016 was 36,879 ounces, exceeding the Company's high end guidance of 35,000 by 1,879 ounces, or 5%. The annual production for 2016 of 36,879 ounces represented a decrease of 7% over the prior year. Gold production in Q4 2016 totalled 8,301 ounces representing a decrease of 13% from Q4 2015. Mine production decreased in 2016 due to mining 24% fewer ore tonnes at 5% lower grades in the Mary LC and satellite pits, as compared to the prior year. Ore tonnes crushed and placed on the pad were 5% lower in 2016 compared to 2015 as a result of fewer tonnes mined which was offset by a larger initial ore stockpile inventory at the beginning of 2016.
A summary of the Q4 and Year 2016 operating and financial results is presented in the Company's January 11, 2017
and April 24, 2017
news releases with complete details provided in the Q4 2016 Financial Statements
and Management Discussion & Analysis
FOURTH QUARTER 2016 ("Q4") HIGHLIGHTS
- 36,879 ounces of gold produced at the Mineral Ridge mine compared to 39,690 ounces during 2015.
- Revenue of $42.8 million compared to $44.6 million during 2015.
- Total cash cost per ounce of gold sold(1) of $881 compared to $781 during 2015.
- Mine operating earnings of $9.6 million compared to $7.7 million during 2015.
- Net earnings of $0.3 million ($0.01 basic and diluted net loss per share) after non-cash impairment charges of $3.6 million, $1.4 million net loss on write-off and disposal of mining assets and $1.0 million loss on litigation, compared to a net loss of $18.0 million ($0.13 basic and diluted per share) after non-cash impairment charges of $21.9 million during 2015.
- Adjusted net earnings(1) of $6.5 million ($0.03 basic and diluted per share) compared to $4.6 million ($0.02 basic and diluted per share) during 2015.
- Adjusted EBITDA(1) of $9.5 million ($0.05 basic and diluted per share) compared to $10.6 million ($0.06(2) basic and diluted per share) during 2015.
- Cash flow from operating activities of $11.0 million compared to $11.2 million during 2015.
(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 a complete definition and reconciliation to the Company's financial statements.
- 8,301 ounces of gold produced at the Mineral Ridge mine compared to 9,503 ounces in Q4 of 2015.
- Revenue of $7.6 million in Q4 of 2016 compared to $10.8 million during Q4 of 2015.
- Total cash cost per ounce of gold sold(1) of $873 in Q4 of 2016 compared to $786 during Q4 of 2015.
- Mine operating earnings of $1.5 million in both Q4 of 2016 and 2015.
- Net loss of $4.3 million ($0.03 basic and diluted per share), compared to $4.7 million ($0.03 basic and diluted per share) during Q4 of 2015. During Q4 of 2016, impairments of $3.6 million on the mining assets, $1.0 million loss on litigation and $0.4 million write-off of mining assets were recorded. During Q4 of 2015, impairments of $4.9 million were recorded on the mining assets.
- Adjusted net earnings(1) of $0.8 million ($0.00 basic and diluted per share) compared to $0.7 million ($0.00 basic and diluted per share) during Q4 of 2015.
- Adjusted EBITDA(1) of $1.6 million ($0.01 basic and diluted per share) compared to $2.7 million ($0.01 basic and diluted per share) during Q4 of 2015.
- Cash flow from operating activities of $0.6 million compared to close to nil in Q4 of 2015.
(2) This number was adjusted following a change in the calculation of the non-controlling interest's share of MRG's net income (loss). See the section of the MD&A entitled "Equity" for a description of the resulting changes.
Based on the Company's current mine plan, it currently anticipates mining of gold at Mineral Ridge through to August 2017. Due to permitting timelines, the Company anticipates production of gold at Mineral Ridge to be 20 -- 25,000 ounces from the Mary LC, Brodie and Bluelite south pits. The Custer pit and other areas for which permitting is outstanding, are not included in this production estimate and will be evaluated for economics of associated mining timelines when permits are received. Given the Company's short remaining life of mine, it is taking initiatives to extend the life of mine at Mineral Ridge through additional drilling to expand its resources, applying for permits to expand and extend current operations of new and existing pits, expanding the heap leach pad, and conducting a drilling program on its leach pad to determine if the leach pad material is amenable for further gold recovery using milling processes.
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 and Mineral Reserve & Resource Estimates
). The Company's more recently updated mine plan includes the Mary LC, Bluelite, Solberry, Missouri and the Brodie phase B pits. To date, the Drinkwater, Bluelite, Solberry and Wedge pit resources have been depleted. Scheduled mining continues in the Mary LC, Missouri, Brodie SE and Brodie Phase "B" pits.
Permitted mining at Mineral Ridge remains scheduled to end in mid-2017. The Company is seeking approval from the Nevada Bureau of Land Management for its Environmental Assessment application to open pit mine the Custer and Oromonte deposits, which could extend the mining schedule.
Diamond drilling in 2016 will further evaluate the economics of the NW Drinkwater Highwall and Bunkhouse Hill areas, which if successful could also extend the mining schedule. In addition, an increase in the price of gold is allowing the Company to re-evaluate outlined mineralization sources within its permitted mining boundary that were previously deemed uneconomic.
(PDF 2.9 Mb)
Operations Area Map
(PDF 4.2 Mb)
Operations Area Map with Drill Hole Locations
(PDF 2.6 Mb)
Mary - Mary LC Deposit
The historic Mary deposit is located immediately southeast of the Drinkwater pit. Scorpio Gold commenced production at Mary in 2012. Exploration drilling in 2011 indicated that the gold mineralization extended further southeast from Mary to the adjacent Mary LC zone, encompassing a strike length of 780 meters. Subsequent work determined that the Drinkwater, Mary and Mary LC zones were not isolated deposits but represented one continuous zone of mineralization.
Drilling in 2012-2013 led to the completion of a mineral reserve and resource estimate for the Mary - Mary LC and incorporation of the expanded pit design into the updated LOM Plan. Infill and step-out drilling on the Mary LC post the March 31, 2014 cut-off date of the LOM Plan focused on increasing the total mineral resources, upgrading resource categories, lowering the strip ratio. Commercial production the Mary LC pit was achieved in 2015.
Mary LC Drill Plan
(PDF 2.2 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. Additional drilling is slated for 2017.
Bunkhouse Hill Drill Cross Sections
The satellite Brodie, Bluelite, Solberry, Wedge and Oromonte 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-Mary LC trend, which lies on the eastern flank.
Drilling on the satellite deposits post the LOM Plan cut-off date included infill, development and exploration drilling to expand and upgrade the mineral reserve and resource base and potentially extend life of mine.
Brodie, Bluelite & Missouri Deposits
The Brodie and Bluelite deposits are located 975 meters (3,200 feet) and 1,100 meters (3,600 feet) southwest, respectively, of the Drinkwater pit. The 500 meter (1,640 feet) mineralized corridor that lies between the Bluelite and Brodie deposits is known as the NW Brodie trend. Commercial production in both the Brodie and Bluelite pits was achieved in 2015. The Bluelite pit resources have since been depleted.
The Missouri is a shallowly northeast dipping deposit located west and northwest of the Brodie deposit. It outcrops at surface and has some historical underground workings. The mineralization has been outlined by drilling over a ~200 meter strike length and ~100 meters down dip with true widths ranging from 1.5 to 7.62 meters. Scorpio Gold commenced open pit mining of the Missouri deposit in Q2 2016.
Brodie Drill Plan
(PDF 1.9 Mb)
Bluelite Drill Plan
(PDF 1.0 Mb)
NW Brodie Trend & Missouri Deposit Drill Plan
(PDF 2.0 Mb)
The Solberry deposit lies west of the Drinkwater pit and 600 meters (1,970 feet) northwest of the leach pad. Drilling in 2014-15 successfully upgraded the resource base at Solberry and commercial production was achieved in 2015. The Solberry pit resources have since been depleted.
Solberry Drill Plan
(PDF 1.5 Mb)
The Wedge deposit is located 225 meters (740 feet) southwest of the Drinkwater pit and immediately adjacent to the leach pad. Positive results from the 2014-15 expansion drilling program successfully upgraded the resource base at Wedge and commercial production was achieved in 2015. The Wedge pit resources have since been depleted.
Wedge Drill Plan
(PDF 1.5 Mb)
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)
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.
Operations Area Map with Drill Hole Locations
(PDF 2.6 Mb)
The Defiance target lies along trend of and ~200 meters southeast of the Custer deposit. Extensive road construction at the beginning of the year allowed for crossing the sizeable canyon that lies between the two areas and drilling on the Defiance target for the first time in 2016. Thirty-six holes were drilled on roughly 50 meter centers, defining the initial footprint of the Defiance mineralization over a ~200 x 300 meter area (see May 10, 2016
news release). Compared to Custer, the mineralization encountered thus far lies at greater depths and over narrower widths due to geological differences between the two deposits. Surface mapping is ongoing to enhance understanding of the geology in the Defiance target area.
The Paris target is a previously undrilled area located NNW of the Solberry deposit. It was targeted as one of several possible northwest strike extensions of the Drinkwater mineralization based on rock chip sampling and limited historic underground workings. Significant faulting to the northwest of Drinkwater has offset and obscured the Drinkwater trend. First-pass drilling in 2016 intersected mineralization in 19 of 24 RC holes collared over a 150 x 450 meter area (see May 24, 2016
news release). Based on a review of the geology and assay results, Paris is not considered a continuation of the Drinkwater trend. No further drilling is currently planned in the Paris target area.
State Bank Target
State Bank is a large target area located west-southwest of the Bluelite deposit. Targeting of the area was based on a combination of soil geochemistry, rock chip sampling, geophysical interpretation and aster imagery. Detailed geological and structural mapping determined that elevated gold grades correlate with fold axes, a feature common to several of the gold deposits at Mineral Ridge.
In total, 78 reverse circulation and two diamond core holes tested parts of the target area in 2014-2015. Approximately 42% of the holes intersected mineralization of interest; however, the majority of holes returned sub-gram gold assays. High-grade mineralization was intersected in two holes (MR151899-900) in the southwest corner of the target area (see December 21, 2015
Bluelite North Target
The Bluelite North target lies 300-500 meters northwest of the Bluelite deposit and 100-300 meters west of the Solberry deposit. Scorpio Gold's initial phase of widely-spaced exploration drilling in the area intersected significant mineralization in 50% of the holes drilled with several holes reporting mineralization at shallow depths (see July 7, 2015
The Chieftan target is located 500 meters west-northwest of the Drinkwater pit. First pass drilling returned significant results in 10 of 12 holes drilled (see August 24, 2015
Drinkwater Highwall Target
The Drinkwater Highwall target area is located at the northwest end of the Drinkwater pit. Scorpio Gold's previous drilling had reported significant mineralization left behind in the wall of the pit. A review and modelling of the data from all drilling campaigns and further definition of existing underground mining voids has determined that the mineralization remaining in the Drinkwater Highwall is not economic at current gold prices.
The Physik target is situated approximately 300 meters southwest of the producing Mary LC pit. The area was targeted based a combination of remote sensing, geophysics and structural interpretation. Initial drill testing over a 200 meter strike length intersected significant mineralization in 7 of 9 holes, with drill hole MR141107 returning 31.79 g/t gold over 4.57 meters within 15 meters of surface (see November 3, 2014
news release. Follow-up drilling in 2015 tested within the vicinity of MR141107 but did intersect similar high-grade mineralization.
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:
- The North-Northeast Eagles Nest Fault
- The North-Northeast Coyote Fault
- The Northwest BW Normal Fault
- The North-Northwest Gillian Fault
- The Northeast Mary/Drinkwater Cross Fault
- The North-Northwest Mary/Drinkwater Cross Fault
- 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
On July 21, 2014, the Company reported on an updated Life of Mine Plan ("LOM") dated March 31, 2014. The LOM is inclusive of the Drinkwater, Mary, Mary LC deposits and the five satellite deposits, Brodie, Wedge, Bluelite, Solberry and Oromonte.
Principal Outcomes - Life of Mine Study
- Estimated Probable Mineral Reserves: 2.1 Mt grading 0.061 oz/ton gold (131,190 oz contained gold).
- 2.5 year mine life at 73,700 t/m ore throughput as of March 31, 2014.
- Total gold production over projected life of mine is approximately 97,700 ounces gold which includes 85,300 recoverable ounces mined and 12,400 recoverable ounces gold in inventory as of March 31, 2014.
- Average total cash cost per ounce of gold sold of $1,074.
- After tax net present value until mine closure of $7.4 million (8% discount rate) using an average gold price of $1,300/oz.
- Key risks include:
- Current estimated reserves may not be realized causing a shortfall in gold production.
- Current water requirements for the heap leach solution would be in jeopardy if the main water well were to fail. The Company is currently rehabilitating a second water well to reduce this risk.
- Key opportunities include:
- Current estimated reserves may be exceeded, thus increasing gold production.
- There is potential to identify additional mineralization from drill-defined extensions to the known deposits, which may support Mineral Resource estimation updates and potentially be converted into Mineral Reserves.
- Exploration potential of other identified prospects on the Mineral Ridge property.
Mineral Reserves presented in Table 1 have demonstrated economic viability. All Mineral Reserves are classified as Probable Mineral Reserves with no Proven Mineral Reserves.
Table 1. Probable Mineral Reserves Estimate - March 31, 2014
Notes to Table 1:
Gold Grade (oz/ton)
Contained Gold (oz)
Strip Ratio (waste:ore)
Table 2. Indicated Mineral Resources Estimate - March 31, 2014
- The effective date of the Mineral Reserve estimate is March 31, 2014.
- The Mineral Reserve estimate was prepared by Jim Ashton, P.E., of Scorpio Gold and audited by independent qualified person, Randy Martin, SME-RM, of Welsh Hagen Associates.
- Mineral Reserves are reported at a 0.020 oz/ton gold cut-off grade.
- 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 $4.15/t of ore mined at Drinkwater, $3.79/t of ore mined at Mary/LC, $2.96/t of ore mined from the satellite deposits, $2.92/t for waste mined from the Drinkwater, $2.57/t for waste mined from the Mary/LC and satellite deposits, and $1.56/t of fill mined. An average processing cost of $11.29 was applied per ton processed. G&A costs were applied at $4.70 per ton processed. Shipping and refining costs of $28.82/oz gold produced were applied. A 65% metallurgical recovery was applied. Overall pit slope angles ranged from 45 degrees to 49 degrees.
- No economic pit was developed for the Oromonte deposit.
Table 3. Inferred Mineral Resources Estimate - March 31, 2014
Gold Grade (oz/ton)
Contained Gold (oz)
Notes to Tables 2 & 3:
Gold Grade (oz/ton)
Contained Gold (oz)
- Mineral Resources in Table 2 are reported inclusive of Mineral Reserves.
- The effective date of the Mineral Resource estimate is March 31, 2014.
- The Mineral Resource estimate was prepared by Jim Ashton, P.E., of Scorpio Gold and audited by independent qualified person, Randy Martin, SME-RM, of Welsh Hagen Associates.
- Mineral Resources are reported at or above a 0.020 oz/ton gold cut-off grade.
- Mineral Resources are reported using a long-term gold price of US$1,500/oz.
- Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
The Mineral Resource estimate is based on a total of 2,514 drill holes and 108,969 assay results collected between 1939 and 2014 from the Drinkwater, Mary, Brodie, Bluelite, Solberry, Wedge, and Oromonte deposits. The cut-off date for information used in the geologic model and Mineral Resource model was March 31, 2014.
Key Assumptions, Parameters & Methods Used:
- Mineral Resources reported are constrained within a conceptual Lerchs-Grossmann (LG) pit shell and are inclusive of Mineral Reserves.
- The economic parameters used to construct the Mineral Resource LG pit are the same as those used in the Mineral Reserve pit except that the price of gold was increased from $1,300 per ounce to a long-term gold price of $1,500 per ounce.
- The block model consists of 15 ft x 15 ft x 10 ft blocks estimated using inverse-distance to the second power methodology. Mineralized envelopes were constructed on 25 ft spaced sections using a 0.010 oz/ton gold assay grade as a guide. The envelopes were combined into wire-frames that defined the extent of mineralization for all the deposits.
- Extensive historical underground workings are present in the Drinkwater and Mary areas. Underground wire-frames were used to remove the percentage of the block contained within the mineralized envelope.
- A single bulk density factor of 13 cubic ft per short ton was assigned to all blocks that represent in-situ rock and used in the Mineral Resource estimates.
- In the Drinkwater area, assays were capped at a threshold of 1.6 oz/ton gold, in the Mary/LC and Oromonte areas assays were capped at a threshold of 1.0 oz/ton gold, in the Brodie, Bluelite, and Solberry area assays were capped at 0.650 oz/ton gold, and in the Wedge area assays were capped at 1.50 oz/ton.
- Mineralization pinches and swells, and is not easily mapped, and correlation between sections is often difficult, therefore outlier restriction was also applied to restrict gold interpolation at a threshold of 0.5 oz/ton gold and a distance of 60 ft for the Drinkwater and Mary/LC deposits and a distance of 40 ft for the satellite deposits.
The Mineral Resource and Mineral Reserve estimates were prepared by qualified person, Jim Ashton, P.E., of Scorpio Gold and audited by independent qualified person, Mr. Randy Martin, RM-SME of Welsh Hagen Associates. An independent technical report supporting the disclosure of the Mineral Resource and Mineral Reserve estimate and Life of Mine Plan was filed on SEDAR on September 3, 2014 and is also available here: View Technical Report (PDF 27.3 Mb)