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Scorpio Gold announces closing of acquisition of Nevada mineral properties

Thursday, Dec 20, 2012

Scorpio Gold Corporation ("Scorpio Gold" or the "Company") (TSX VENTURE:SGN) announces that it has completed the acquisition (the "Acquisition") of two exploration-stage Nevada mineral properties, known as the Goldwedge and Pinon properties (the "Properties") from Royal Standard Minerals Inc. ("Royal Standard"). The Company acquired the Properties pursuant to the terms of an asset purchase agreement, which was disclosed in the Company's news release dated October 11, 2012.

In consideration for the Acquisition, the Company paid Royal Standard $1,250,000 in cash, less certain holdback amounts, issued Royal Standard 3,000,000 common shares (the "Consideration Shares") and assumed approximately US$16,500,000 of debt (the "Royal Standard Debt") owing by Royal Standard to Waterton Global Value, L.P. ("Waterton").

Scorpio assumed the Royal Standard Debt pursuant to the terms of a credit facility agreement (the "Credit Agreement") with Waterton, which provides that Scorpio Gold will be indebted to Waterton (the "Scorpio Debt") in the principal amount of US$16,000,000, but that the principal amount of the Scorpio Debt will increase to $16,250,000 if not repaid within one year, and increase to $16,500,000 if not repaid within two years. Under the terms of the Credit Agreement, the Scorpio Debt with accrue interest at a rate of 8% per annum, be repaid in monthly instalments over a 36 month period, be secured against all of the Company's assets, and may be repaid by the Company at any time without penalty. The Credit Agreement also provides that the Company will be required to use 50% of any net revenues from the Goldwedge property and 100% of any net toll-milling revenues from the mill located on the Goldwedge property to pre-pay the Scorpio Debt.

In connection with the Acquisition, the Company and Waterton entered into a royalty agreement (the "New Royalty Agreement") to reduce certain existing royalties held by Waterton in respect of the Properties and a gold supply agreement in respect of the Goldwedge Property (the "New Gold Supply Agreement", collectively with the New Royalty Agreement, the "New Agreements"). Under the terms of the New Royalty Agreement, the Company granted Waterton a 2% net smelter return royalty (the "NSR") on the Goldwedge property and portions of the Pinon property. The NSR in respect of portions of the Pinon property may be reduced by half (to a 1% NSR) for a cash payment to Waterton of US$1,000,000. The NSR in respect of the Goldwedge property may be reduced by half (to a 1% NSR) for a cash payment to Waterton of US$1,000,000, and then eliminated for a further cash payment of US$2,000,000. Under the terms of the New Gold Supply Agreement, the Company will be required to sell to Waterton all gold produced at the Goldwedge property until the date that is the later of the date the Scorpio Debt is repaid and December 17, 2015, subject to extension for certain force majeure events. Gold sold to Waterton pursuant to the New Gold Supply Agreement will be priced at the lower of the average settlement price of gold for the 10 trading days prior to the date of sale, and the settlement price of gold on the trading day immediately prior to the date of sale.

Source: Marketwire

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