To date, seven well-defined gold bearing structures have been documented on the property as follows:

1. The North-Northeast Eagles Nest Fault
2. The North-Northeast Coyote Fault
3. The Northwest BW Normal Fault
4. The North-Northwest Gillian Fault
5. The Northeast Mary/Drinkwater Cross Fault
6. The North-Northwest Mary/Drinkwater Cross Fault
7. The North-Northwest Black Warrior Intersection Fault

The known mineralized zones occur over an area of approximately 4,300 m (14,000 ft) north-south and 4,600 m (15,000 ft) east-west. Individual zones can be as much as 43 m (140 ft) thick, usually consisting of a higher-grade 1.5 to 9.0 m wide halo surrounded by a lower-grade mineralized envelope. Two or more high-grade zones are commonly observed stacked on one another. Gold deposition is structurally controlled, and some of the highest grade material is found in mineralization shoots that are at an oblique angle to the direction of movement of the upper plate slab.

Gold is present as native gold and electrum, and generally occurs as rounded, angular, irregularly shaped and elongated inclusions and intergrowths in quartz, frequently associated with micaceous minerals or carbonates occupying interspatial spaces or fracture filling. Gold is also frequently associated with goethite, sometimes with relict pyrite, and on occasions intergrown with sphalerite, galena, anglesite/cerrusite and pyrite.

The Mineral Resource estimate for the material on the heap leach pad that is directly amenable to processing is provided in Table 1. No cut-off criteria have been applied since there will be no selectivity of areas to be processed and the leach pad will be processed in its entirety. The Mineral Resources are reported inclusive of Mineral Reserves and have an effective date of 29 June 2017. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

The Mineral Resource estimate for the open-pit (other) areas is provided in Table 2 (Measured and Indicated) and Table 3 (Inferred). The Mineral Resources are reported inclusive of Mineral Reserves and have an effective date of 30 November 2017. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

Table 1: Mineral Resource Estimate for Mineralization Contained within the Heap Leach Pad

Notes:

1. The effective date of the Mineral Resource estimate is June 29, 2017.
2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
3. Mineral Resources are quoted inclusive of Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
4. Mineral Resources are contained within the Mineral Ridge leach pad facility with the following assumptions: a long-term gold price of $1,216/oz; assumed process costs of $11/t; and metallurgical recovery for gold of 91%. Silver was not used in the consideration of reasonable prospects for eventual economic extraction. Silver recoveries from heap leach pad material are projected to be 24%.
5. Rounding may result in apparent differences when summing tons, grade and contained metal content.
6. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Table 2: Measured and Indicated Mineral Resource Tabulation for Other Areas

Notes:

1. The effective date of the Mineral Resource estimate is November 30, 2017.
2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
3. Mineral Resources are reported inclusive of Mineral Reserves at a gold cut-off grade of 0.01 opt Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
4. Mineral Resources are constrained to the area within the grade-shell wireframes. The areas outside of these grade shells are assumed to be at zero grade.
5. These Mineral Resource are considered to be amenable to open-pit mining. Conceptual Whittle pit shells used the following assumptions: a long-term gold price of $1,350/oz; assumed combined operating costs of $12.36/t (mining, process, general and administrative); metallurgical recovery for gold of 95%, and variable pit slope angles that ranged from 38--42º.
6. Rounding may result in apparent differences between when summing tons, grade and contained metal content. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Table 3: Inferred Mineral Resource Tabulation for Other Areas

Notes:

1. The effective date of the Mineral Resource estimate is November 30, 2017.
2. The QP for the estimate is Mr. Ian Crundwell, P.Geo., of Mine Technical Services.
3. Mineral Resources are reported inclusive of Mineral Reserves at a gold cut-off grade of 0.01 opt. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability
4. Mineral Resources are constrained to the area within the grade-shell wireframes. The areas outside of these grade shells are assumed to be at zero grade.
5. These Mineral Resource are considered to be amenable to open-pit mining. Conceptual Whittle pit shells used the following assumptions: a long-term gold price of $1,350/oz; assumed combined operating costs of $12.36/t (mining, process, general and administrative); metallurgical recovery for gold of 95%, and variable pit slope angles that ranged from 38--42º.
6. Rounding may result in apparent differences between when summing tons, grade and contained metal content. Tonnage and grade measurements are in Imperial units. Grades are reported in ounces per ton.

Mineral Reserve Statement

The Mineral Reserve estimates were prepared with reference to the 2014 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards and the 2003 CIM Best Practice Guidelines.

The Mineral Reserve estimate for the material on the heap leach pad is provided in Table 4. The estimate has an effective date of June 29, 2017.

Proven and Probable Mineral Reserves for the open-pit (other) area material are reported within the final pit design used for the mine production schedule and are shown in Table 5. The estimate has an effective date of November 30, 2017.

Table 4: Mineral Reserve Estimate for the Heap Leach Pad

Notes:

1. The Mineral Reserves have an effective date of June 29, 2017.
2. The QP for the estimate is Mr. Jeffery Choquette P.E., an employee of Hard Rock Consulting.
3. Mineral Reserves are contained within the Project leach pad facility with the following assumptions: long-term gold price of $1,216/oz; assumed total ore process costs of $10.59/t; metallurgical recovery for gold of 91%, and 24% for silver, refining and smelting cost of $28.39/oz of gold. Allowance has been made for the facility location which excludes 260,000 t; this material must remain in-place, based on the to the heap material mining and tailings placement design.
4. Rounding as required by reporting guidelines may result in summation differences.

Table 5: Mineral Reserve Estimate for the Other Areas

Notes:

1. The Mineral Reserves have an effective date of November 30, 2017.
2. The Qualified Person for the estimate is Mr. Jeffery Choquette P.E., an employee of Hard Rock Consulting LLC.
3. Mineral Reserves are reported within the pit designs at a 0.01 opt gold cut-off grade. Pit designs incorporate the following considerations: base case gold price of $1,300/oz; pit slope angles that range from 38--47º; average life-of-mine metallurgical recovery assumption of 93%; crushing costs of $1.81/t, process cost of $5.79/t, general and administrative and tax costs of $2.90/t; and average mining costs of $1.42/t mined
4. Rounding as required by reporting guidelines may result in summation differences.

An NI 43-101 compliant technical report in support of the resource and reserve estimates and associated updated feasibility study was filed on SEDAR on January 9, 2018.

On January 4, 2018 the Company announced the results of an updated positive feasibility study ("the Project") to process the heap leach material and additional open-pit mineral reserves at its Mineral Ridge property ("the Property"). This updated feasibility study includes the economic results of processing the reserves, in addition to the previously issued feasibility study (refer to press releases of October 10, 2017 and November 6, 2017) which considered only the processing of the heap leach pad reserves.

Economic Parameters

The economic viability of the Project has been evaluated using constant dollar after-tax discounted cash flow methodology. This valuation method requires projecting material balances estimated from operations and calculating resulting economics. Economic value is calculated from sales of metal, plus net equipment salvage value and bond collateral less cash outflows such as operating costs, management fees, capital costs, working capital changes, any applicable taxes and reclamation costs. Of the $67.5 million in total capital required for the Project, $28.9 million is financed through a capital lease. Resulting annual cash flows are used to calculate the net present value and internal rate of return of the Project.

The economic evaluation is based on the estimated Mineral Reserves on the heap leach pad as of June 29, 2017, plus the Mineral Reserves estimated in other areas that can be mined using open pit methods. Since the Project entails use of infrastructure active up to, and including, the time of capital investment, continuity of administrative and certain operational activities is expected, which allows certain costs to be determined based on actual history. Otherwise, operating and capital costs for proposed new activities have been derived by third-party engineers.

During the Project life (one year of initial capital investment and seven-and-one-half years of operation), the site will undergo further evaluation to extend its operating life, and as such, no end-of-project reclamation is included in this Project analysis.

The open-pit mining equipment is assumed to be acquired through a capital lease. The lease is modeled at a four-year term at 6% interest. Interest payments are reported as cash operating costs, principal payments reduce cash as a financing activity and costs are booked as assets on the balance sheet.

Economic Results

Based on the economic parameters summarized above, the Project returns a NPV5% (after-tax) of $35.1 million and an IRR of 30.0%, and achieves payback in 2.9 years (Table 6). 

Table 6: Economic Results

Management anticipates that the Project returns could potentially be further enhanced through the judicious sourcing and refurbishment of certain used equipment, available for purchase in the south-western United States. However, no economic studies have been undertaken with respect to sourcing and refurbishing used equipment, including the Feasibility Study which is based on new equipment only.

Sensitivity Analysis

Project sensitivity to variations in operating costs, capital costs, gold grade and metals price was evaluated with respect to the NPV. The NPV5% (after-tax) of the Project is more sensitive to changes in metal price and metal grade, as compared to changes in CAPEX and OPEX. For example, at a gold price of $1,100/oz, a 12% decrease, the NPV5% (after-tax) decreases to $10 million and the IRR declines to 13%. At a gold price of $1,400/oz, a 12% increase, the NPV5% (after-tax) increases to $58 million and the IRR increases to 43%.

The NPV sensitivity to CAPEX, OPEX, gold price and head grade is shown graphically in Figure 1 below

Note: Figure prepared by MTS, 2017 

Similarly, the sensitivity of the IRR to CAPEX, OPEX, gold price and head grade is shown graphically in Figure 2 below.

Note: Figure prepared by MTS, 2017 

Conclusions

Based on the updated Feasibility Study, the Project, as defined in the technical report, is technically and economically viable. It is therefore recommended that Scorpio Gold construct the new processing facilities as described, to process the heap leach material as well as the reported open-pit reserves at the Property.

Units of Measure

Unless otherwise defined herein, the following defined terms have the following meanings:

Qualified Persons

The following are Qualified Persons ("QP"s) as defined by NI 43-101 and participated in the preparation of the feasibility study:

An NI 43-101 compliant technical report in support of the resource and reserve estimates and associated updated feasibility study was filed on SEDAR on January 9, 2018.

• Updated Feasibility Study and NI 43- 101 Technical Report: Mineral Ridge Project, Jan 2018 (20 Mb)
• Quality Assurance & Quality Control Program
• Corporate Safety Statement