Scorpio Weighs Gold Wedge Underground Restart After Higher Grade Drilling

0:14Welcome back to Mining Stock Daily here on Tuesday, October 20th. Ian Wagner here with a corporate update from our friends at Scorpio Gold. Scorpio Gold is a gold developer in Nevada, developing the Manhattan District, about 20 kilometers south of Kinross's Round Mountain mine. A maiden resource estimate of 740 ,000 ounces at 1.26 grams. They trade on the TSX Venture and the NASDAQ under the symbol SGLD. We've covered the Scorpio story for some time now, so I would encourage any new listeners to go back and listen to previous episodes to kind of dig deeper on what development has happened here in the Manhattan district.

0:57With us today is Zane Callion, CEO of Scorpio Gold. Zane, good to see you. Welcome back to the podcast. Thanks, Ian. No, very happy to be here and happy to be giving an update on all the progress we've made over the last couple of weeks. Yeah, we spoke to you, I think, late September. You put out some news here late last week around your gold wedge target at Manhattan. And I'll read the headline and then I'm hoping you can fill in some context here. You guys drilled 2.94 grams per ton gold over 36.4 meters from 169 meters there. you guys also returned you know a number of holes but you know from hole 125 121 122 some black mammoth some zanzibar but just staying at gold wedge what are you guys seeing there and how is it shaping your understanding of that target yeah so it's been um gold wedge has been a pretty big focus kind of as we've gotten to the the tail end of this 50 ,000 meter drill program um and one of the drivers of that is some of the initial holes that we drilled in that area were targeting the volcanic contact.

2:08So looking at that caldera contact, trying to chase that mineralization in the volcanics that we started to see at Black Mammoth as we stepped further north. And as we've continued to drill and test the caldera margin, where that reliance trend meets the caldera, we've started to kind of see those wider intercepts and mineralization in the volcanic units, which we've talked about previously. And one of the, through that process, we've been actually drilling through historically known blocks that were already in the resource and were drilled with RC. And one of the most interesting pieces of that is we've actually seen much higher grade, significantly higher grade, in a number of those blocks with the diamond drilling that we've been doing.

2:57And that's led us to believe that there could be the potential that that RC program or a good portion of the RC drill that's been done in that area may be underestimated. And the fact that we've experienced that in not one hole, but a number of holes consistently, just further leads us to believe that there is a lot of potential and maybe more potential in the Gold Wedge Underground than we previously understood from a grade perspective. and how significant sorry i don't mean to interrupt but how significant kind of is that is that difference in that gap of what what you guys previously saw from the rc to the to the diamond yeah like in some respects like it can be two or three times the grade like it is like it is significant like the the results that we put out last week we had the 36 meters 2.94 like that was significant those were blocks that were significantly upgraded in terms of grade previously so where that leads us is we're in a very different market than we were this time last year obviously it's a lot softer and I think companies are being rewarded for looking at ways to non-dilutively non-dilutively grow and non-dilutively expand and that's led us to look at call it a little bit more critically at near term development opportunities that was kind of the first result of that was the tailings study that we recently announced and we're going to be working on towards we're hoping that we'll have the initial results of it towards the end of this year.

4:23But alongside the tailings, Gold Wedge, just being able to kind of see this upgraded grade and really understand what's there is leading us to believe that there may be some near-term potential for development and leveraging of the existing infrastructure, the existing permitting that we have with the mill and the mill site and then alongside that, the permanent underground. So that collective infrastructure is very valuable. It would take a lot of time and money to be able to permit that today. And the fact that we have that infrastructure already leads us to believe that there's something that could be leveraged there in the near term to get into small-scale production relatively quickly and then ultimately leverage that cash flow to further expand Manhattan and further do exploration.

5:09Now, we don't want to dilute any further with kind of chasing development. And one of the benefits of this structure is that because we have so much data, because we have all the historic network for the underground that was done in 2012, not especially in say historic, we have modern network done that was done in 2012 on the underground. And we have this existing underground portal and infrastructure. We believe that the capex to get into production would be relatively modest comparatively, and also the timeframe would be relatively quick. So on that basis, we're looking at ways that we could non-dilutably finance the restart of the underground and get into cashflow in a relatively short amount of time.

5:58So that's what we're working on now. It's still early days. It's kind of we're working through that process. But because we have so much baseline data and so much historic data, we do believe that there is a really good potential to kind of put together something relatively quickly. I'm going to call it an economic study. I'm not going to kind of put a label on it as a PEA or PFS or any of the above. I think we're going to put together a study that involves economics and what that label will be will come out in the coming weeks and months and then look to leverage that to non-delugatively finance the restart.

6:35Okay, so a couple questions on that. So, yeah, I think the first one is just kind of when you think about that and financing something like that, like how do you make sure that doesn't necessarily compete with the drill program for money and in fact, you know, adds to, you know, future drilling. So that's kind of the first part. And then, yeah, just what shape is the mill in? What's the permit status and kind of how does that picture look? Yeah, so there is some rehab needed and those are all things that we're working on actively. So that's kind of things that are in the works. specifically with the mill and the mill site.

7:13With the underground, that again also, it does need to be dewatered. And these are things that are being actively worked on as we speak. So I think it's early days for us to be able to kind of provide any kind of clear pictures to all the steps necessary. And these are all things that are being actively worked on. And I think in the coming weeks and months, we'll be putting up further disclosure as to what exactly is going to occur and how we'll be able to execute that. Okay. Well, that's kind of the first time that I think you've come on with like a real sort of concrete vision for plan for that.

7:42So I think that's something like that we'll definitely want to kind of catch up on later into the year and kind of maybe into Q1. You know, one thing I'd add there is that a big, so obviously the infrastructure and the CapEx and all the stuff associated with actually the infrastructure layer of this is important. But the other side to it is because we're seeing this increased grade and upgrading these blocks with the current diamond drilling, we do need to understand kind of the resource model itself in the underground and what that mine plan would look like. But one of the benefits is if we do continue to see this increased grade, that could bring up not only the grade of the entire resource as a whole, like the average grade of the entire resource as a whole, but also it'd be very interesting to kind of see what that model looks like from a mine plan perspective.

8:32And that's something that's also being done as we speak as well, is looking at the underground model, looking at what a mining plan could look like and all of those things as well. Do you have any sense of kind of what that looks like from a numbers perspective, just the size and how much, how, you know, if you're going to be down there and you're going to do that real restart, what would you want as sort of a base to be able to go after in terms of ounces and grade and just kind of how are you kind of weighing the, you know, pros and cons or costs versus payoff? off yeah like i think at the end of the day it's like ensuring that the economics make sense and that this is actually worth worth doing um but what i would say is that it stays gold prices with the grade that we have um like we're not we don't expect that this is not going to be uneconomic i think it's more going to be the question of how economic it is yeah yeah yeah and just especially is it is it as it as a resource how do you guys manage your resources and your time and your brain power and sort of all that thing to make sure that it is additive and that it can um help build the overall resource and the program moving forward right um exactly so just back to kind of so well i guess so do you guys have a diamond drill there right now then we have uh yeah we have a diamond drill out there we're gonna have another one back out um in two weeks um we're fully expecting that keystone jumbo will be uh we'll have our permits for keystone jumbo here in the coming weeks um and so april fool is where we have one drill right now it's actively drilling and then keystone jumbo will be the next uh the next area that we'll be at okay yeah i mean because you know reliance trend obviously zanzibar black mammoth is sort of that northwest um near gold wedge there.

10:20April Fool's, the other side, right, is sort of further southeast. And then Keystone Jumbo is really a step out, right? So what are you guys doing there at April Fool's? And then what are you looking forward to at Keystone and how does that fit in? Yeah, so April Fool, Black Mouth was the first historic resource that we really stepped out on the main area. And we've been drilling kind of that core zone. And that's been our main focus and getting to 2 million ounces, one and a half to two million ounces in that core area has really been the core focus. Black Mammoth, kind of the first distal target that we stepped out on.

10:56One of the issues with Black Mammoth now is we can't drill it efficiently anymore because we don't have the plan of operations with the Forest Service to be able to drill that zone efficiently, but we are waiting on that. And early, we do hope towards the end of this year, early next year, we'll be able to get that plan in place and be able to be out there. So April Fool is kind of the next distal target that we've started to drill. We've been drilling there over the last three weeks. We're almost through the second hole at April Fool. And our initial indications and what we're seeing in the core were very promised by.

11:32And it's been very exciting. So April Fool was kind of the original, it was the first claim in the district. It was the original area where the mining was done and they call it late 1800s, early 1900s. so it's very exciting for us to um to kind of be able to drill that and it has been very underexplored so it's a big focus for us at the moment um and then second to april fool is then keystone jumbo which is where we've been very anxious to go um we do uh expect that we'll have the permit for keystone jumbo here in the very near term and um being able to get it to keystone jumbo will be very exciting because it's a it's a high grade target spin has a lot of history of high-grade mining.

12:13It's two past producing pits. And we'll be providing a lot more, like a bigger update on that here in the coming weeks. Yeah. I mean, I'm just looking at that. I mean, some big numbers, obviously historic, 33 grams per ton gold, 131 grams, 16.09, over 13 meters. So, I mean, that is an old one, high-grade, looks like an area totals about 150 ,000 ounces in the historic resource. um yeah i guess just just you know any any any thoughts on how you kind of you know multitask right you're in gold wedge you're going to be in april fools you're in keystone jumbo or will you move the drill from april fool to keystone jumbo like is that same drill going going there you're going to be doing all three at the same time no so we're going to be doing april fool and keystone jumbo collectively and then we'll have a the sonic drill which is active at um on the on the tailings so there's we'll have three drills one sonic drill and two um two diamond drills, one of April Fool, but it's Keystone Jumbo.

13:10Okay. Okay. Okay. Excellent. Well, yeah, I know, you know, I think you teased last time that you and Harrison were going to be putting together kind of a broader strategy right on the exploration and kind of development program. And so I think we'll definitely want to catch up with you on that. But I think this is a good place for today to give us kind of an update on where things are at and what you guys are seeing. Yep. No, exactly. All right. Well, appreciate the time, Zane. thanks so much for coming by and giving everyone kind of a overview of what you guys are doing there and especially on this kind of exciting prospects around the underground restart.

13:46Yep. Great. Well, appreciate the time, Ian. Happy to provide an update. I think there'll be a lot of exciting news here coming in the next couple of weeks. Excellent. That is Zane Callian, CEO of Scorpio Gold. They are listed on the TSX Venture and the NASDAQ under the symbol SGLD.

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