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Jan 05, 2010

Scorpio Gold Signs Binding Joint Venture Agreement with Golden Phoenix on the Mineral Ridge Gold Property, Nevada

Vancouver, January 5, 2010 - Scorpio Gold Corporation (TSX-V: SGN) is pleased to announce that it has entered into a binding, definitive joint venture agreement (the "agreement") with Golden Phoenix Minerals Inc. ("Golden Phoenix"; OTC Bulletin Board: GPXM) allowing for the acquisition of up to a 100% interest in the Mineral Ridge Gold Property, subject to terms and conditions as outlined below. The Company has been assigned the right and initial responsibility to fund, manage and operate the Mineral Ridge gold property.

Peter J. Hawley, CEO, reports, "With the conclusion of the acquisition agreement and submission of a draft NI 43-101 technical report to the TSX-V in late November, the only matters currently outstanding are the approval of the transaction by the Exchange and completion of required financing. The preparation of a NI 43-101 compliant resource estimate to support a full feasibility study has been advancing rapidly, with surface reverse circulation and diamond drilling of the mineralized open pit areas completed, metallurgical work 90% completed, and the resource base open pit grade shells and pit maximization models nearing finalization. Completion of all related studies for the resource estimate is expected over the next two months."

"Since the beginning of our due diligence we have always recognized the bigger picture of the Mineral Ridge project with respect to expanding the gold mineralization base and strengthening project economics. We are aggressively moving the project forward with intent to resume production as a low-cost gold producer. The Scorpio team, as demonstrated with its parent company, Scorpio Mining, has the experience needed for timely and cost-effective advancement from development stage to production. Subject to results of a feasibility study, the plan is to bring this project on line in the near term and take advantage of an unprecedented strength in the current gold market."

Terms
  • The Company will pay to Golden Phoenix US$3.75 million in cash, net of advances made to date, and an aggregate deemed amount of US$3.75 million in the Company's shares, priced at C$0.50 per share, in order to acquire an initial 70 percent interest in the Mineral Ridge property and related assets.
  • The Company will contribute the Net Smelter Royalty ("NSR") recently agreed to be acquired from the Mary Mining Trust (news release dated October 9, 2009) for US$3.0 million, and Golden Phoenix will contribute its approximately US$3.0 million in bonding on the property.
  • All existing claims, including the 54 patented claims and 134 unpatented claims (total 188 claims) forming the original Mineral Ridge property and the 145 unpatented claims recently staked by the Company adjacent to Mineral Ridge, will be consolidated, nearly doubling the size of the property to over 5,921 acres.
  • Scorpio Gold has created a 100% owned US subsidiary, Scorpio Gold (US) Corporation, and as a result of the agreement with Golden Phoenix, the parties will create a joint venture entity to own, explore, develop and exploit the Mineral Ridge property under the name Mineral Ridge Gold LLC whose ownership will be prorated according to the interests held in the property (initially 70% Scorpio Gold US and 30% Golden Phoenix).
  • The Company has agreed to solely fund all costs of bringing the Mineral Ridge property into commercial production, which has been defined as two consecutive quarters of throughput of products from mining operations averaging greater than 70 percent of the average life of mine ("LOM") projected capacity.
  • The Company has the right to increase its joint venture interest by 10% to 80%, by providing 120% of the estimated costs of placing the property into commercial production, as set out in a feasibility study, and commencing commercial production within 30 months of closing the agreement.
  • The Company will also have an option to purchase Golden Phoenix's remaining 20% interest (assuming Scorpio's increase by 10% discussed above) for 24 months following the commencement of commercial production. If the option is exercised, the purchase price of the 20% interest will be based on the Net Asset Value of the project, less a 10 percent discount, to be determined at that time by an independent valuation firm.

Given the property's existing permits, bonding and infrastructure, Mineral Ridge is considered to be a potential turn-key mining operation and Scorpio Gold looks forward to the reactivation of mining operations in a relatively short period of time once the project financing is arranged.

Robert Martin, President of Golden Phoenix, commented, "Since the start of negotiations six months ago, our companies have worked hand-in-hand to expand and enhance the Mineral Ridge property. Scorpio Gold has not only confirmed the previously defined mineralization but has located new mineralized veins. They have aggressively staked surrounding claims so that Mineral Ridge is now nearly twice its original size and covers mineralization previously unidentified. Given the acquisition by Scorpio Gold of the underlying royalty plus the established infrastructure and the bonding and permits that are already in place, the project has all the makings of a successful gold mine.

About the Project

The Mineral Ridge project, a former producer, is located about 30 miles west of Tonopah, Nevada and has historically produced almost 575,000 ounces of gold, including ~170,000 ounces from open pit and ~405,000 ounces from underground mining operations. The property is currently bonded and has been permitted for heap leach gold processing and production, and was in production as recently as 2005. The mine project hosts multiple gold bearing structures, veins and bodies. It features a well-developed infrastructure consisting of roadways, power grid, heap leach pad, crushing circuit, ADR plant, water supply, maintenance shop, refuelling and storage facilities and administrative buildings.

Mineral Ridge has had a clean operating history and no environmental, permitting, legal, taxation, marketing or political factors are known that may impact the mineral resource estimates currently being prepared. The dry climate and non-acid generating character of the rock should offer favourable conditions for mining and reclamation operations.

For additional information please see the Company's website at www.scorpiogold.com.

Mr. Peter Hawley, PGeo, is the Company's Chief Executive Officer and Qualified Person for the various Company projects. He is responsible for the current exploration and development programs and has reviewed the content of this release.

ON BEHALF OF THE BOARD
SCORPIO GOLD CORPORATION


Peter J. Hawley,
Chief Executive Officer and Director

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

The Company relies on litigation protection for "forward-looking" statements. This news release contains forward-looking statements that are based on the Company's current expectations and estimates, including statements as to future sales. Forward-looking statements are frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate", "suggest", "indicate" and other similar words or statements that certain events or conditions "may" or "will" occur, and include, without limitation, statements regarding the Company's plans with respect to the exploration and development of its projects. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from estimated or anticipated events or results implied or expressed in such forward-looking statements, including those risk factors outlined in the Company's Management Discussion and Analysis for the year ended December 31, 2010 as filed on Sedar. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.