Apr 09, 2012
Scorpio Gold Provides Update on Golden Phoenix Litigation
Vancouver, April 9, 2012 - Scorpio Gold Corporation ("Scorpio Gold" or the "Company") (TSX-V: SGN) wishes to update investors on the legal proceedings (the "Proceedings") commenced by Golden Phoenix Minerals Inc. ("Golden Phoenix"), its joint venture partner on the Mineral Ridge project located in Nevada, against Scorpio Gold, its U.S. subsidiary, and Waterton Global Value LP ("Waterton"), Golden Phoenix's lender. Scorpio Gold initially announced the Proceedings in a news release dated April 4, 2012, at which time Scorpio Gold's management had not received any of the documents relating to the Proceedings.
Scorpio Gold's management has now reviewed the complaint filed by Golden Phoenix in the Second Judicial District Court of the State of Nevada. In addition to a number of allegations by Golden Phoenix relating solely to Waterton's conduct in relation to the debt arrangements between Waterton and Golden Phoenix, Golden Phoenix alleges that Scorpio Gold colluded with Waterton to delay the release of an updated mineral resource estimate regarding the Mineral Ridge project in order to allow Waterton to exercise its option to acquire Golden Phoenix's interest in the Mineral Ridge (the "G.P. Interest") project at a lower price, that Scorpio Gold breached its fiduciary duty to Golden Phoenix, and that Scorpio Gold breached its obligations under the operating agreement in respect of Mineral Ridge.
Scorpio Gold denies all of Golden Phoenix's allegations against it, and plans to vigorously defend itself from all claims advanced by Golden Phoenix in the Proceedings, which appear to be primarily focussed on preventing Waterton from enforcing its security and seizing the G.P. Interest following Golden Phoenix's apparent breach of its obligations under its debt arrangements with Waterton. Scorpio Gold confirms that it has at all times operated the Mineral Ridge project in accordance with good mining practices and the terms of the operating agreement between itself and Golden Phoenix. With respect to Golden Phoenix's claim that a technical report has been delayed, Scorpio Gold has engaged AMEC to prepare a report including an updated mineral resource estimate for Mineral Ridge. AMEC has advised that the report will likely be completed in mid-May of this year.
Scorpio Gold is disappointed that its joint venture partner has resorted to baseless allegations and litigation as a response to its own financial difficulties, but will continue to focus on exploration, development and mining activities at the Mineral Ridge project pending the outcome of the Proceedings and any debt enforcement actions taken by Waterton against Golden Phoenix.