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Jul 21, 2014

Scorpio Gold Reports on Updated Life of Mine Plan for the Mineral Ridge Gold Operation, Nevada

Vancouver, July 21, 2014 - Scorpio Gold Corporation ("Scorpio Gold" or the "Company") (TSX-V: SGN) announces results of an updated Life of Mine Plan ("LOM") completed for the Drinkwater, Mary/LC, Brodie, Bluelite, Solberry, Wedge and Oromonte deposits at the 70% owned Mineral Ridge Gold Operation, located in Nevada.

The updated mine plan, which includes an updated mineral reserve estimate, projects mine life for Mineral Ridge extending into the 3rd quarter of 2016, or approximately 29 months as of the end of March 2014, the date of the LOM update. Average ore production over this time frame is estimated at 73,700 tons per month ("t/m") based on estimated Probable Mineral Reserves of 2.1 million tons ("Mt") grading 0.061 oz/ton gold (131,190 oz contained gold) within estimated Indicated Mineral Resources of 2.7 Mt grading 0.059 ounces per ton ("oz/ton") gold (160,300 oz contained gold). Expansion and infill drilling of the satellite deposits has continued since the March 31, 2014 cut-off date for the LOM and is expected to add to the resource base and potentially support further conversion of current mineral resources to mineral reserves.

This LOM is inclusive of the Drinkwater and Mary/LC deposits and the five satellite deposits, Brodie, Wedge, Bluelite, Solberry and Oromonte. An Inferred Mineral Resource estimate for the Brodie, Wedge, Bluelite, and Solberry deposits, dated June 1, 2013, was reported in the Company's August 16, 2013 news release. Development drilling over the past two years has allowed for an upgrade of the previous resource estimate to include Indicated Mineral Resources containing Probable Mineral Reserves. The updated Indicated Mineral Resource estimate for the five satellite deposits is 625,100 tons grading 0.061 oz/ton gold (38,360 oz contained gold), which includes a Probable Mineral Reserve for four of the deposits of 463,880 tons grading 0.065 oz/ton gold (30,050 oz contained gold).

Peter J. Hawley, CEO comments, "We are very pleased with the results of this updated LOM study, which places the Mineral Ridge operation in a very similar position to where it was as of April 30, 2012, the date of the previous LOM study. Over the two year span, approximately 1.7 Mt of ore have been mined at Mineral Ridge, which has been more than replaced by ongoing exploration, resulting in the 2.1 Mt of ore outlined as of March 31, 2014. Results from additional development drilling completed since the March 31, 2014 cut-off date of the study have been very positive and are fully expected to further increase mine life. This latest economic study reinforces that Mineral Ridge has the potential to continue as a producing mine for years to come."

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

Deposit Ore (Tons) Gold Grade (oz/ton) Contained Gold (oz) Waste (tons) Total (tons) Strip Ratio (waste:ore)
Drinkwater 170,680 0.056 9,630 322,430 493,110 1.9
Mary/LC 1,502,560 0.061 91,510 12,468,550 13,971,110 8.3
Brodie 105,260 0.069 7,270 1,356,250 1,461,510 12.9
Bluelite 227,480 0.066 15,010 1,267,620 1,495,100 5.6
Solberry 91,700 0.068 6,210 589,890 681,590 6.4
Wedge 39,440 0.040 1,560 198,440 237,880 5.0
Total 2,137,120 0.061 131,190 16,203,180 18,340,300 7.6

Notes to Table 1:
  1. The effective date of the Mineral Reserve estimate is March 31, 2014.
  2. 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.
  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 $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.
  5. No economic pit was developed for the Oromonte deposit.

Table 2. Indicated Mineral Resources Estimate - March 31, 2014

Deposit Tons Gold Grade (oz/ton) Contained Gold (oz)
Drinkwater 537,900 0.047 25,280
Mary/LC 1,534,500 0.063 96,670
Brodie 136,400 0.067 9,140
Bluelite 285,800 0.063 18,010
Solberry 110,000 0.067 7,370
Wedge 81,900 0.042 3,440
Oromonte 11,000 0.036 400
Total 2,697,500 0.059 160,300


Table 3. Inferred Mineral Resources Estimate - March 31, 2014

Deposit Tons Gold Grade (oz/ton) Contained Gold (oz)
Drinkwater 11,100 0.035 390
Mary/LC 50,900 0.061 3,100
Brodie 2,390 0.060 140
Bluelite 4,550 0.035 160
Solberry 100 0.043 4
Wedge 2,500 0.048 120
Oromonte 1,190 0.042 50
Total 72,730 0.055 3,970

Notes to Tables 2 & 3:
  1. Mineral Resources in Table 2 are reported inclusive of Mineral Reserves.
  2. The effective date of the Mineral Resource estimate is March 31, 2014.
  3. 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.
  4. Mineral Resources are reported at or above a 0.020 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 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 is being prepared by Welsh Hagen Associates and will be filed on SEDAR within 45 days of this news release.

About Scorpio Gold

Scorpio Gold holds a 70% interest in the producing Mineral Ridge gold mining operation located in Esmeralda County, Nevada with joint venture partner Waterton Global Value L.P. (30%), and Scorpio Gold is currently entitled to receive 80% of cash flow generated. Mineral Ridge is a conventional open pit mining and heap leach operation. The Mineral Ridge property is host to multiple gold-bearing structures, veins and lenses at exploration, development and production stages. Scorpio Gold also holds a 100% interest in the advanced exploration-stage Goldwedge property and processing facility in Manhattan, Nevada. The Company is assessing its exploration plans for the Goldwedge property as well as the potential for toll milling at the Goldwedge plant, which is currently permitted for 400 tons per day.

Scorpio Gold's CEO, Peter J. Hawley, PGeo, is a Qualified Person as defined by National Instrument 43-101 and has reviewed and approved the content of this release.

ON BEHALF OF THE BOARD
SCORPIO GOLD CORPORATION


Peter J. Hawley,
CEO

For further information contact:
Steve Roebuck, President
Tel: (819) 825-7618
Email:

Investor Relations:
Jim Macdonald, Torrey Hills Capital
Tel: (858) 456-7300
Email:

Website: www.scorpiogold.com

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. 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 potential expansion or upgrading of any mineral reserve or resource estimates and the Company's plans with respect to the filing of a technical report in support of the mineral reserve and resource estimates included herein and the exploration, development and exploitation of its Mineral Ridge project. 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 risks such as mining and operational risks affecting projected production and those risk factors outlined in the Company's Management Discussion and Analysis 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 thereof.