Scorpio Mining Reports Financial Results for its Second Quarter 2013

TORONTO, Aug. 14, 2013 /CNW/ - Scorpio Mining Corporation (TSX: SPM) ("Scorpio Mining" or the "Company") reports its financial and operating results for the second quarter ("Q2") ended June 30, 2013. This press release should be read in conjunction with the Company's unaudited Financial Statements and Management's Discussion and Analysis for the second quarter ended June 30, 2013, available on the Company's website at www.scorpiomining.com and on SEDAR at www.sedar.com. All monetary figures are expressed in Canadian dollars unless otherwise specified.

HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2013

SECOND QUARTER 2013 HIGHLIGHTS & SUBSEQUENT EVENTS

Financial

• Revenue from metals payable of $7.6 million in Q2 2013, decreased from $11.0 million in Q1 2013 due to lower recorded metal prices for all metals, lower plant throughput and lower silver, lead and copper head grades, albeit compensated by higher zinc grades;
• Cash cost per silver payable ounce, net of by-product credits⁽¹⁾, increased to $20.29 in Q2 2013 compared to $10.42 in Q1 2013 due a decrease in silver payable ounces as a result of lower silver grades; a decrease in by-product credits as a result of lower metal prices for lead, copper and zinc; and reduced throughput brought by relining of the plant's two ball mills and change of motor and pinion on one of these units;
• Net loss in Q2 2013 was $(3.2) million or $(0.02) per share (basic) compared to net earnings of $1.3 million, or $0.01 per share (basic), in Q1 2013;
• At June 30, 2013, the Company recognized an impairment charge of $0.8 million, net of tax, in respect of the Company's deferred development and exploration costs at its Nuestra Señora Mine;
• Adjusted EBITDA⁽¹⁾ of $(1.6) million in Q2 2013 decreased from $3.2 million in Q1 2013 as a result of lower revenues described above; and
• Cash flow from (used in) operating activities before movements in working capital of $(1.5) million in Q2 2013 decreased from $3.3 million in Q1 2013.

Operations

• Production from the Nuestra Señora Mine in Q2 2013 encountered lower silver, copper and lead grades compared to Q1 2013; however, the on-going placement of backfill will allow for safe mining of higher ore grades during H2 2013;
• Reduced plant throughput in Q2 2013 primarily resulted from the scheduled relining of the two plant ball mills and additional accumulated downtime of one of these mills, which required replacement of its motor and of a worn pinion, with subsequent modifications and corrective maintenance to overcome an elevated vibration issue;
• Reduced metal recoveries in Q2 2013 were a consequence of the lower silver, copper and lead feed grades to the plant, coupled with the unstable flotation circuit operation brought by repeated stoppages for making mechanical adjustments on the repaired ball mill;
• Recovered silver equivalent ounces⁽²⁾, of 439,567 ounces in Q2 2013, decreased 13% from 502,934 ounces in Q1 2013 mainly due to the reduction in silver, lead and copper head grades, which was partially offset by higher zinc grades; and
• Focus on decreasing costs and increasing efficiencies, led to drafting of changes to work schedules for plant and mine personnel, resulting in the reduction of overlaps and overtime. A review of the required manpower base led to identification of additional staff and exploration personnel redundancies. All of the above are effective through July and August 2013.

Project development

• Released the latest reserve estimate for the Nuestra Señora Mine and the Preliminary Economic Assessment ("PEA") for the advanced Cosalá District mineral resources in late May;
• Received approval from the federal environmental authority (SEMARNAT) for its Environmental Impact Statement (Spanish acronym "MIA") pertaining to underground mining at the El Cajón and San Rafael deposits;
• In May 2013, SEMARNAT of the State of Sinaloa denied the Company's initial submission for the Change of Land Use Permit (Spanish acronym "CUS") related to the El Cajón project. Subsequent to the end of Q2 2013, the Company submitted a revised application for the CUS. Development work required to put the El Cajón deposit into production is expected to commence in Q4 2013, subject to the CUS approval;
• Sales negotiations for the concentrates produced at the Nuestra Señora plant were completed with three customers. The new contracts are effective July 1, 2013 and replace the two contracts which expired on June 30, 2013; and
• A contract mining arrangement was finalized that will allow for provision of silver-copper ore from the La Verde Mine to the Nuestra Señora plant, with first ore flow expected by late August.

Exploration

• The Company has completed 4,927 meters of underground drilling at the Nuestra Señora Mine during H1 2013 to investigate new areas and to further define and upgrade areas with currently defined "inferred resources". Some additional drilling will be completed from underground before year-end;
• Exploration drilling is continuing in the Nuestra Señora Mine and an initial program was completed around outlying properties within the Cosalá District, namely Venado and San Ramón, while still underway at Los Cristos; and
• The ASTER survey completed during Q1, to map alteration on previously identified structural zones, is undergoing interpretation in conjunction with consideration for the data obtained from the 1,100 line kilometer heliborne geophysical survey conducted during Q1 to collect radiometry, magnetometry and EM-VLF data. This process will be used for defining areas warranting follow-up exploration.

OUTLOOK

Although production from the Nuestra Señora Mine in Q2 2013 encountered lower silver, copper and lead grades compared to Q1 2013; a thorough review of previously mined sections of the ore body, including the Candelaria zone, in conjunction with the on-going placement of backfill, and other initiatives should allow for the improvement of head grades going forward. Mining of resources at Nuestra Señora will continue with additional ore as defined by short-term definition drilling while ensuring that safe, sustainable methods are used.

Over the past year, a series of steps were taken to reduce costs. However, the implemented cost reduction programs have been impacted by the lower mined feed grades, which translate into higher cash cost per ounce of payable silver.

In response to the recent drop in silver and base metals prices, we have intensified our focus on improving margins through cost reduction efforts. We have taken additional measures to reduce overall spending and increase cash flow generation, including a 10% reduction in personnel to be implemented during Q3 2013. We have identified new reduction in capital and exploration spending for 2013. The planned 2013 exploration program, originally budgeted at $5.2 million, has been reduced to $3.1million of which $1.8 million has been spent to date.

The Company's goal is to commence production at El Cajón and feed its ore to the processing plant, initially in conjunction with Nuestra Señora Mine output. A window of six months would be required, from receipt of the remaining permit, to complete sufficient development work underground at El Cajón to start supplying material at the plant. An additional quarter will be needed to ramp the mining activities to a regular production regime at an expected potential of up to 1,500 tpd using design assumptions based solely on surface drilling data. A level of sustainable output will be better determined once underground operations are underway and access to the ore body is achieved.

As at June 30, 2013 the Company had $23.8 million in its treasury. Despite reduced cash flows brought by the difficult metal pricing environment, planned reduction in the operating and exploration expenditures, coupled with the possibility of improving head grades and the commencement of mining at La Verde, give the Company confidence that its treasury and future cash flows will be adequate to finance its immediate capital, development and exploration plans.

About Us

Scorpio Mining Corp. 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 National Instrument 43-101 and has reviewed and approved 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: 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 Corp.'s required securities filings on SEDAR, including its Annual Information Form dated March 14, 2013. Although Scorpio Mining Corp. 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 Corp.