Scorpio Mining Reports New Mineral Reserve Estimate for Nuestra Señora and Preliminary Economic Assessment on the Nuestra Señora, El Cajón and San Rafael Deposits

TSX: SPM

TORONTO, May 22, 2013 /CNW/ - Scorpio Mining Corporation (TSX: SPM) ("Scorpio" or the "Company") reports on the new mineral reserve estimate for the Nuestra Señora deposit and Preliminary Economic Assessment ("PEA") for the Nuestra Señora, El Cajón and San Rafael deposits by Mine Development Associates ("MDA") of Reno, Nevada.

NUESTRA SEÑORA MINERAL RESERVE ESTIMATE

Highlights:

• 533,000 diluted tonnes mined through 2013;
• $43.0 million in net revenue (after smelting treatment and transportation charges);
• Operating costs of $26.6 million;
• Sustaining capital costs of $4.9 million;
• Net after-tax cash-flow of $21.4 million;
• NPV (5%) of $20.5 million; and
• MDA notes that, due to the complex geological nature of the Nuestra Señora deposit, there may be zones that have not been included in the current Proven and Probable reserves, and it is anticipated that Scorpio will continue to find and develop ore that is not included in this estimate.

The following previously reported mineral resource estimate for the Nuestra Señora deposit was prepared by MDA using a 60 g/t silver equivalent ("Aq eq") cutoff grade (see June 29, 2012 press release).

Nuestra Señora Mineral Resource Estimate - June 22, 2012

The following mineral reserve estimate for the Nuestra Señora deposit was prepared by MDA using a $60/tonne Net Smelter Return ("NSR") value cutoff.

Nuestra Señora Mineral Reserve Estimate - December 31, 2012

Notes to Mineral Reserve Estimate:

1. All Mineral Reserves have been classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the Standards Committee on Reserve Definitions and adopted by the CIM Council on December 11, 2005 and updated on November 27, 2010.
2. Proven and Probable reserves have been estimated using only Nuestra Señora Measured and Indicated resources and are based on underground development and stope designs created by MDA. Adjustments have been made for depletion of resources since the June 22, 2012 dated mineral resource estimate to the end of the year 2012. As such, the effective date of the new Nuestra Señora mineral reserve estimate is December 31, 2012.
3. Calculation of NSR values were based on smelter parameters, operating costs and metal prices of $25/oz Ag, $0.85/lb Zn, $0.90/lb Pb, and $3.40/lb Cu.
4. Stope designs were based on a NSR cutoff of $60/t. Reserves calculations are based on the total tonnage of material inside of the final stope designs and include internal dilution (the inclusion of sub-grade Measured and Indicated resources and non-resource).
5. Fully diluted Proven & Probable reserves reflect a 35% reduction of mine design volumes to reflect for ore loss due to unmined material and a 35% volume increase to reflect external dilution due to unintended breakage. The 35% adjustment factor for dilution and ore loss results in the grades from scheduled production of Proven and Probable reserves better reflecting the grades from recent mine-to-mill reconciliation. As such, MDA considers the 35% adjustment to be reasonable for the definition of reserves.

The relatively low conversion rate of estimated resources (as of June 22, 2012) to estimated reserves (as of December 31, 2012) is a result of the following:

• Reduction due to depletion from July through December mining;
• Reduction due to the application of a more stringent $60/t NSR value cutoff, which includes metallurgical and smelter recoveries (versus the 60g/t Ag eq cutoff exclusive of recoveries applied for the reported resource);
• Reduction due to sterilization of blocks against or near mined out areas;
• Reduction of portions of the resource that were too distant and not continuous to be economic;
• Addition of both internal and external dilution; and
• Reduction due to ore loss.

On the reserve estimate, Pierre Lacombe, President and CEO commented: "This update for the Nuestra Señora reserves puts behind us the issue raised back in November 2011 regarding the accuracy of the former geological model used to present the initial reserve estimate that was published in March 2011. Following the indicated reduction of Measured & Indicated resources published in June 2012, MDA completed the conversion of these resources into a proven and probable reserve estimate showing 533,000 diluted tonnes currently defined to this level of certainty. Although this is equating to only twelve months of operation at the current nominal processing rate of 1,500 tpd, MDA's comment, as reported in the highlight section above, outlines the potential for converting resources into plant feed beyond this 12 month period. Nevertheless, given the uncertainty that such an outlook is underlining, the Company is undertaking all the steps required to bring the El Cajon deposit to production status in a timely manner to ensure that this source of higher-grading silver plant feed can replace Nuestra Señora's output as its current reserves are gradually mined out."

Closure costs ($1.9 million) and plant salvage value ($10.0 million) were applied in the preceding cash-flow analysis to confirm that Proven and Probable reserves can be economically extracted; however, it is not intended to imply the forthcoming closure of the Nuestra Señora mine or plant in the near future. Mining of resources is anticipated to continue as additional ore is defined by short-term definition drilling.

PRELIMINARY ECONOMIC ASSESSMENT

The PEA undertaken by MDA assumed continued mining at Nuestra Señora along with the development of El Cajón and San Rafael underground operations and San Rafael open pit mining. The PEA is based on Measured, Indicated, and Inferred resources in all three deposits. The effective date of the PEA is December 31, 2012.

The PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have the economic considerations applied that would enable them to be classified as mineral reserves. There is no certainty that the PEA will be realized. Actual results may vary, perhaps materially. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

PEA Mining and Operational Highlights:

• Continued mining from Nuestra Señora of 1.5 million tonnes, adding approximately three and a half years of production at Nuestra Señora, at a reduced rate, from the schedule based solely on the reserve estimate tonnage;
• Expansion of the process plant from 1,500 tonnes per day to 2,750 tonnes per day (end of 2014) following ramp-up of El Cajon mine output and upon commencement of open pit mining at San Rafael (2015);
• Open pit mining of the San Rafael deposit starting in year three (2015); and
• Development of San Rafael underground to achieve production upon completion of mining at El Cajón (2018).

PEA Financial Highlights:

• A total of 10.2 million tonnes processed through an eleven year project life;
• 40.3 million ounces of equivalent silver produced through the project life;
• Total life of project net revenue (after smelting and transportation charges) of $863.1 million;
• Total operating costs of $480.6 million over the project life;
• Total capital cost of $85.3 million with $50.0 million for the first two years;
• Payback of the first two years of capital occurs half-way through year three;
• Total life-of-project cash flow of $229.8 million;
• NPV (5%) of the project is $166.7 million; and
• After-tax rate of return is 151%.

El Cajon and San Rafael Mineral Resource Estimates

The resource estimates for the El Cajon and San Rafael deposits, as used by MDA to build the PEA case, were as provided by MDA on September 7, 2012 and published in the Company's press releases dated September 24, 2012 and October 1, 2012, respectively. The tables below are indicative of the tonnages and grades at play, with a split between the San Rafael copper-silver dominant 120 Zone and the zinc + lead-silver dominant Main and silver + gold dominant Upper zones. The actual retained tonnages and associated grades of resources deemed as potential mine output, under the premises of the PEA, are also presented in the tables below.

The following mineral resource estimate for the San Rafael Main & Upper zones was calculated at a 1.5% zinc equivalent (Zn eq) cutoff.

San Rafael Mineral Resource Estimate for the Main & Upper Zones - September 7, 2012

The following mineral resource estimate for the San Rafael 120 zone was calculated at a 60 g/t Ag eq cutoff.

San Rafael Mineral Resource Estimate for the 120 Zone - September 7, 2012

The following mineral resource estimate for the El Cajón deposit was calculated at a 60 g/t Ag eq cutoff.

El Cajón Mineral Resource Estimate - September 7, 2012

PEA Mineral Resource Inventory

The following mineral resource inventory was prepared by MDA using a $60/tonne NSR value cutoff and includes the mineral resources for the Nuestra Señora, El Cajón and San Rafael deposits.

Mineral Resources Included in PEA by Resource Classification - December 31, 2012

Material Processed in the PEA by Deposit - December 31, 2012

Notes to Material Inventory Included in the PEA:

1. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
2. Stope designs for all three deposits are based on a NSR cutoff of $60/t.
3. Mineral resources do not include internal dilution, ore loss, or external dilution by waste tonnage at zero grades.
4. Material Processed in the PEA does include allowances for dilution and ore loss.

PEA Production Schedule

Production schedules for Nuestra Señora, El Cajón and San Rafael underground mining and the San Rafael open pit mining were developed to achieve an initial process capacity of 1,500 tonnes per day, expanding in the fourth quarter of year two (2014) to 2,750 tonnes per day. Production is based on continuation of mining the Nuestra Señora deposit through the first half of year five (2017). Mining of the El Cajón deposit would start late in year one (2013), with expansion of the processing plant coinciding with the ramp up in production at El Cajón and the start-up of the open pit mining of the San Rafael 120, Main and Upper zones early in year three (2015). Underground mining at San Rafael would start in year six (2018), at or near the completion of mining at El Cajón. Upon completion of underground mining from all deposits, in year seven (2019), the open pit production is expanded to meet the mill requirements through year eleven (2023).

On the PEA case, Pierre Lacombe comments, "The PEA case outlines positive economics for the set of assumptions used. With a capital outlay within the financial capability of the operations and a fast payback, the PEA provides a base from which further optimization studies will be performed, regarding alternate development scenarios seeking to maximize net present value."

The high rate of return on the project is due to strong resources providing strong revenues and existing infrastructure reducing capital requirements. A sensitivity analysis of revenue, operating cost and capital costs indicates the PEA deposits are most sensitive to metal prices while they are comparatively less sensitive to operating costs and relatively insensitive to capital costs.

Notes to the PEA Economic Analysis:

• Metal prices used in the analysis were  $25/oz Ag, $0.85/lb zinc, $0.90/lb lead, $3.40/lb Cu, and $1,400/oz Au;
• All material is to be processed through the Nuestra Señora process plant;
• Nuestra Señora metal recoveries are based on regression equations derived from historical plant performance; those for El Cajón and San Rafael rely on metallurgical testwork indications obtained to date;
• Underground development and mining costs are based on current Nuestra Señora unit costs;
• NPV discounting is done using 5%, 7%, and 10% annual rates for sensitivity;
• Available tax pools and a 30% tax rate;
• Silver production cash costs have been calculated using zinc, lead, and copper revenues as a credit against costs;
• Smelting costs and transportation have been based on current contracts;
• Closure costs and plant salvage value are included; and
• The PEA study assumes mining of Measured, Indicated, and Inferred resources for Nuestra Señora, El Cajón, and San Rafael.

MDA Recommendations

MDA's recommendations include expanding the resource and reserve at Nuestra Señora through additional drilling, monitoring and improving efficiencies of underground operations, and continued optimization of processing operations.

MDA recommended a feasibility level of study for the San Rafael and El Cajón projects, including infill drilling, geotechnical work for pit slopes and facilities, and additional metallurgical studies as required.

Technical Information

The Mineral Reserve estimate and PEA were prepared by Mr. Thomas L. Dyer, P.E., Senior Engineer for MDA; Steven Ristorcelli, C. P. G., Principal Geologist for MDA; Paul Tietz, C. P. G., Senior Geologist with MDA; Michael Lindholm, C. P. G., Project Geologist with MDA; Pierre Lacombe, Eng., President & CEO of Scorpio; and Jack McPartland, Q.P.M., Metallurgist/V.P. Operations of McClelland Laboratories, Inc. The Mineral Reserve was calculated under the supervision of Mr. Dyer, who also supervised preparation of the PEA.

Mr. Dyer, Mr. Ristorcelli, Mr. Tietz, Mr. Lindholm, Mr. Lacombe and Mr. McPartland are qualified persons under NI 43-101 and have reviewed and approved the contents of this news release with respect to the Nuestra Señora mineral reserve estimate and PEA.

A NI 43-101 compliant technical report dated April 12, 2013 supporting the disclosure of the Mineral Reserve estimate and PEA was prepared by MDA and filed on SEDAR on May 22, 2013.

About Us

Scorpio Mining Corporation is a silver producer operating in Mexico with significant base metal by-product credits. The 100% owned Nuestra Señora Mine in the Cosalá District of Sinaloa State, Mexico, has flexible mining methods and diversified metal production. It has a fully mechanized underground operation and a processing facility with permitted capacity for expansion to 4,000 tonnes per day. The plant produces zinc, copper and lead concentrates, with a significant payable silver component in the copper and lead concentrates.

In addition, the Company has numerous exploration targets in the vicinity of its current operations as well as the advanced El Cajón and San Rafael development projects. The Company's strategy for near-term growth is currently focused on mine development of the El Cajón deposit upon receipt of permitting.

Scorpio Mining's President and CEO, Mr. Pierre Lacombe, Eng., is a qualified person as defined under NI 43-101 and has reviewed the content of this release.

ON BEHALF OF SCORPIO MINING CORPORATION

Pierre Lacombe
President & CEO

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 the Company's operations, exploration and development plans, expansion plans, estimates, expectations, forecasts, objectives, predictions and projections of the future. 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: the results of the PEA, including, base case parameters, assumptions and analysis; forecasts of net present value, internal rate of return, initial and sustaining capital costs, operating costs and cash flows and sensitivity analysis, taxes, and royalties, risks related to the exploration and development and operation of the Company's projects in Mexico, 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, risks relating to completing acquisition transactions 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 14, 2013. 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.

SOURCE Scorpio Mining Corporation