Oct 15, 2009
Scorpio Announces Acquisition of Platte River Gold Inc.
Vancouver, October 15, 2009 - Scorpio Mining Corporation (TSX: SPM) ("Scorpio" or the "Company") today announces the proposed acquisition of Platte River Gold Inc. (Platte River) and all its assets.
Peter J. Hawley, Chairman, CEO reports, "We are very pleased to come to an agreement with the Platte River management group and major shareholders, all of whom not only support the planned arrangement but envision a larger, low-cost producer with near-term increased production, organic reserve and resource growth and high-quality assets allowing a long-term, Cosalá-based mining company to emerge. The acquisition of Platte River's deposits in the Cosalá area, which are amenable to both underground and open pit mining methods and located less than 10 kilometres from Scorpio's existing, and scaleable, mill facility, supports the Company's mandate to be a growing, low-cost producer. This will also substantially increase the size of the Company's property holdings in Cosalá and its overall exploration potential. Other favourable factors include the ownership of the surface rights for these properties, excellent roads and electrical supply infrastructure and year-round availability to water. All of these factors will help to streamline and fast track the exploitation of the Platte River deposits in a timely and cost-effective manner."
It is anticipated that the transaction will be in the form of a corporate amalgamation or plan of arrangement involving the issuance of approximately 74.8 million Scorpio common shares with a nominal value of approximately $50 million, which will result in Platte River shareholders holding approximately 40% of the issued and outstanding Scorpio Mining shares post transaction. The transaction remains subject to definitive documentation, regulatory approval, Scorpio Mining shareholder approval and other customary conditions. Platte River shareholders holding approximately 83% of the outstanding shares have agreed to support the transaction along with the Scorpio Board of Directors, which unanimously supported the transaction.
Highlights of the Transaction
About Platte River Gold Inc.
Platte River is a private Canadian company formed in April 2004 to carry out precious and base metals exploration, focusing in Mexico and Nevada. The company's headquarters is in Reno, Nevada, and it also has offices in Hermosillo and Cosalá, Mexico. The company's employees and contractors have had direct roles in the discovery of the El Peñon Au-Ag Mine in Chile, the Dolores Au-Ag Mine in Mexico, and the Jerritt Canyon (Au) and Paradise Peak (Au-Ag-Hg) mines in Nevada.
Platte River has a significant institutional shareholder base for a private company, with Tocqueville, CGT, Libra, Sprott and US Global owning 83% of the shares.
The company's Mexican subsidiary, Minera Platte River S.L. de C.V. (MPRG), controls four significant projects in Mexico, the most important of which is the polymetallic, La Verde Project, near Cosalá, Sinaloa, about 2.5 hours drive from Mazatlan. MPRG controls 10,207 hectares of exploration and exploitation concessions and owns the operating La Verde underground Ag-Cu-Au mine, all of which are contiguous to the northern boundary of Scorpio's Cosalá area land holdings.
The La Verde mine is producing approximately 12,000 tonnes per month and is currently leased out to a Mexican mine contractor for a monthly payment and royalty to MPRG.
In the La Verde Project area, MPRG has drilled 371 holes and more than 65,700 meters of core and reverse circulation drilling and has identified several significant deposits. These include the San Rafael deposit, with the related Zn-Ag-Pb-Au massive sulphide "Main Zone", the Ag-Cu-Au ± Zn-Pb "120 Zone" and the Ag-Au "Upper Zone" deposits. All of these zones have been drilled out at 25-50 meter drill spacing and remain open to expansion. In addition, preliminary metallurgical work has been completed on the Main and 120 Zones and indicates normal recoveries. An internal study has reviewed the economics of exploitation of the deposits by open pit mining followed by underground extraction.
Recently prepared mineral resource estimates for the San Raphael deposits using 1.5% and 4.5% zinc equivalent cutoff grades are as follows:
San Rafael Related Deposits
Table 1. Mineral Resource Estimate - Main Zone and Upper Zone - August 12, 2009
Table 2. Mineral Resource Estimate - Upper Zone (Only) - August 12, 2009
Table 3. Mineral Resource Estimate - 120 Zone - August 12, 2009
El Cajon Deposit
The El Cajon Ag-Cu-Au deposit has also been explored with 25-50 meter drill spacing and is also open to expansion. Preliminary metallurgical work completed to date reports acceptable industry normal recoveries. An internal study has reviewed the economics of exploitation of the deposit by underground extraction.
A recently prepared mineral resource estimate for the El Cajon deposit using 50 g/t and 100 g/t silver equivalent cutoff grades is as follows:
Table 4. Mineral Resource Estimate -- El Cajon Deposit - October 8, 2009
For the above mineral resource estimates, Platte River and Mine Development Associates (MDA) of Reno, Nevada worked together to define geologic models using interpretive cross sections spaced evenly at 25-meter intervals. The geologic interpretations were then used to guide the creation of individual metal domain models (based on naturally occurring populations for each metal) on the same 25-meter cross sections. The initial cross sections were subsequently "sliced" and rectified on perpendicular long sections spaced evenly every 3 meters. Metal grade compositing was done to 3-meter down-hole lengths, honoring all material type and mineral domain boundaries, and the block model metal grades were estimated individually using ordinary kriging methods. The stated resource for each deposit is fully diluted to 3 meter by 3 meter by 3 meter blocks and tabulated using zinc equivalent grades for the San Rafael deposit and silver equivalent grades for the El Cajon deposit. Paul Tietz, C.P.G. (AIPG) and Steve Ristorcelli, R.P.G. are the Qualified Persons for MDA responsible for the resource estimates. A NI 43-101 technical report being prepared by MDA to support the above resource estimates will be filed on Sedar within the next 45 days.
In addition to the exploration and exploitation concessions, MPRG has title to the surface rights to more than 430 hectares of land at the La Verde Mine and the San Rafael and El Cajon deposits. Elsewhere on the property there are an extensive number of additional polymetallic and precious metal targets, some with drilling and others identified and ready for initial drilling.
In and around the Parral District, Chihuahua, Mexico, MPRG controls an additional three projects and more than 4,000 hectares of exploration concessions, one of which has had two rounds of drilling (38 holes) and has identified a potential vein-hosted silver deposit. This mineralization is open in two directions and will require an additional drill program to enable a resource estimate.
In Nevada, Platte River Gold (US) Inc. (PRG) controls three projects and 368 mining claims. The most important project is the Gabel Project (51% PRG) in the northern Roberts Mountains and within the Battle Mountain - Eureka Gold Trend. This project is a joint venture with Blue Cove Capital (49%) and consists of 303 unpatented mining claims on BLM land, covering primarily lower-plate lithologies prospective for sediment-hosted gold mineralization. Limited drilling by PRG in 2008 encountered a 180-foot (54.8-meter) intersection grading 0.45 g/t gold in one hole and 170 feet (51.8 meters) grading 0.35 g/t gold in another hole at depths less than 350 feet (106 meters) in the Denay Formation. This formation is an important host to gold mineralization elsewhere in northern Nevada and has not been well explored in the northern Roberts Mountains. The property also contains a gold resource at Chert Cliff, which is historical in nature and currently non-compliant with NI 43-101.
Further information is available on the Company's web site at: www.scorpiomining.com.
Scorpio's President, Mr. D. Roger Scammell, P.Geo., is the Qualified Person for the Company's Mexican projects and has reviewed the content of this release.
ON BEHALF OF SCORPIO MINING CORPORATION
Peter J. Hawley
Chairman & CEO
For further information contact:
Rich Kaiser, YES International: 1-800-631-8127; 001-757-306-6090 (outside North America)
Email: y[email protected]
This news release includes certain statements that may be deemed "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to completing and optimizing the Platte Rive acquisition. Generally, these forward-looking statements can be identified by the forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "projects", "intends", "anticipates", or "does not anticipate", or "believes", or "variations of such words and phrases or state that certain actions, events or results "may", "can", "could", "would", "might", or "will" be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Scorpio Mining Corporation to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the exploration and development and operation of the mineral projects, risks related to international operations, construction delays and cost overruns, the actual results of current exploration, development and construction activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of silver, zinc, copper, lead and gold, as well as those factors discussed in the sections relating to risk factors of our business filed in Scorpio Mining Corporation's required securities filings on SEDAR, including its Annual Information Form dated March 27, 2009. Although Scorpio Mining Corporation has attempted to identify important factors that could cause results to differ materially from those contained in forward-looking statements, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended.
There can be no assurance that any forward-looking statements will prove accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Scorpio Mining Corporation does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws.