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NEWS OUT(SILVER):SPM:TSX-SCORPIO MINING-ACQUISITION
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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, Cosal-based
mining company to emerge.
The acquisition of Platte Rivers deposits in the
Cosal area, which are amenable to both underground and open pit mining
methods and located less than 10 kilometres from Scorpios existing, and
scaleable, mill facility, supports the Companys mandate to be a growing,
low-cost producer.
This will also substantially increase the size of the
Companys property holdings in Cosal 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.
The Transaction
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
- Diversified production base from a minimum of two
silver-zinc mines less than 10 kilometres from Scorpios central milling
facility in a mining-friendly jurisdiction.
- Scorpios existing milling facility was designed with
additional capacity and could be expected to process all of Platte Rivers
material with a low capital outlay.
- Increases overall mineral resource base.
- Combines experienced management teams.
- Reduces overhead from combined operations less than
10 kilometres apart.
- Enhances market presence.
- Increases leverage to current metal price
environment.
- Combines high-quality institutional shareholder
bases.
- Potential increased cash flow to support organic
growth and Scorpios strategy of low-cost external growth through
consolidation.
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
companys headquarters is in Reno, Nevada, and it also has offices in
Hermosillo and Cosal, Mexico.
The companys employees and contractors have
had direct roles in the discovery of the El Peon 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 companys 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 Cosal, 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
Scorpios Cosal 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
Cutoff
% Zn eq
Category
Tonnes
Ag g/t
Zn %
Pb %
Cu %
Au g/t
1.5%
Measured
3,250,000
59.4
2.51
1.12
0.05
0.081
1.5%
Indicated
9,403,000
58.9
1.95
0.90
0.04
0.112
1.5%
M & I
12,653,000
59.1
2.09
.96
0.04
0.104
1.5%
Inferred
198,000
28.1
0.95
0.63
0.01
0.069
4.5%
Measured
1,491,000
92.1
4.07
1.79
0.07
0.094
4.5%
Indicated
3,322,000
100.9
3.70
1.54
0.07
0.131
4.5%
M & I
4,813,000
98.2
3.82
1.62
0.07
0.119
4.5%
Inferred
4,000
93.1
1.90
1.48
0.04
0.113
Table 2.
Mineral Resource Estimate - Upper Zone (Only) - August 12, 2009
Cutoff
% Zn eq
Category
Tonnes
Ag g/t
Zn %
Pb %
Cu %
Au g/t
1.5%
Indicated
993,000
121.9
0.25
0.20
0.06
0.426
1.5%
Inferred
18,000
99.6
.01
0.04
0.02
0.211
4.5%
Indicated
228,000
287.5
0.38
0.34
0.12
0.766
4.5%
Inferred
1,000
234.3
0.00
0.00
0.02
0.075
T
Table 3.
Mineral Resource Estimate - 120 Zone - August 12, 2009
Cutoff
% Zn eq
Category
Tonnes
Ag g/t
Zn %
Pb %
Cu %
Au g/t
1.5%
Indicated
3,089,000
94.5
0.48
0.14
0.25
0.132
1.5%
Inferred
347,000
98.2
0.06
0.01
0.22
0.127
4.5%
Indicated
645,000
244.8
0.36
0.08
0.57
0.248
4.5%
Inferred
43,000
302.6
0.13
0.01
0.43
0.207
Note: Metal prices used in above estimates are US$12/oz silver, US$0.80/lb
zinc, US$0.70/lb lead, US$2.00/lb copper and US$750 /oz gold.
Mineral
resources are not reserves and do not have demonstrated economic viability.
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
Cutoff
g/t Ag eq
Category
Tonnes
Ag g/t
Cu %
Au g/t
50
Indicated
2,442,000
129.4
0.44
0.19
50
Inferred
996,000
97.2
0.34
0.13
100
Indicated
1,751,000
161.7
0.54
0.25
100
Inferred
545,000
138.5
0.49
0.20
Note: Metal prices used in above estimate are US$12/oz silver, US$2.00/lb
copper and US$750 /oz gold.
Mineral resources are not reserves and do not
have demonstrated economic viability.
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 Companys web site at:
www.scorpiomining.com.
Scorpios President, Mr.
D.
Roger Scammell, P.Geo., is the Qualified Person
for the Companys 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:
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
Corporations 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.
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