Nuestra Senora Project

Introduction

The 100% owned Nuestra Senora Project is located approximately 10 km east of the town of Cosala in Sinaloa State, Mexico. A paved highway connects Cosala with Mazatlan, 161 km southeast, and Culiacan, 164 km to the north. The property is accessible from Cosala via two heavy equipment access roads constructed by Scorpio. A 12-km road that passes through the village of La Seca accesses the Nuestra Senora, Santo Domingo and Santa Teresa workings at river level. A 28-km road that passes through the village of Santa Ana accesses the upper Candelaria workings 120 m above river level.

The property comprises five mineral exploitation claims covering an area of 1,896 ha and six exploration claims encompassing 13,560 ha. Scorpio Mining's wholly owned Mexican mining subsidiary, Minera Cosala SA de CV, holds 100% ownership of the Nuestra Senora mineral rights with no underlying royalties or interest payments.



Satellite View Looking Northwest


The Nuestra Senora Deposits

Mineralization within the four known deposits occurs as carbonate replacement-style (CRD) mantos, veins, chimneys, chimney breccias, and mineralized exo- and endo-skarn within limestone host rocks and granodiorite intrusive. The extent and character of the mineralization on the Nuestra Senora property suggest a large mineralizing system, the potential of which has not been tested by historic or modern exploration.


Nuestra Senora Property Geology


Nuestra Senora Land Position


Exploration & Development

Nuestra Senora Deposit

In early 2005, the Company focused its efforts on underground development and definition drilling of the Nuestra Senora deposit. The program was highly successful, resulting in the discovery of two large mineralized zones (Hoag and Sept 9) adjacent to the main Nuestra Senora deposit and other high-grade lenses (North and South) peripheral to its extensions.

The current understanding of the mineralized zones and their relation to other deposits in the area is that a series of stacked thrust faults provided the main conduit for mineralizing fluids. Subsequent deformation along the thrust faults created dilational zones, which provided wider structural traps for the emplacement of mineralization.


Structures Controlling Mineralization


Stacked Thrust Faults

The drill intersections and assay results to date demonstrate significant upsize potential for the project. The Hoag and Sept 9 zones do not outcrop at surface but are situated between the Nuestra Senora deposit and the Santo Domingo and Santa Teresa deposits, all of which have surface expressions. Management believes there is excellent potential to find other such "blind" (unexposed) mineralized bodies within the immediate area.

Longitudinal sections showing the location of the Hoag and Sept 9 zones relative to the Nuestra Senora deposit and underground workings are presented below.



Plan View of Nuestra Senora and Satellite Deposits

Longitudinal of Hoag, Sept 9 relative to St. Teresa & Nuestra Main Zone


The following images illustrate mining plans for the Main Northwest, Hoag, Sept 9 and Santa Teresa zones.


Main NW Zone 9-11 Levels

Main NW Zone Mine Plan

Hoag Zone Mine Plan

Santa Teresa Mine Plan

Santa Teresa Deposit & Santa Teresa Extension Zone

The surface expression of the Santa Teresa deposit is located 150 m northeast of the Santo Domingo adit and 250 m east of the Nuestra Señora mine. Surface and underground drilling of the deposit to date has intersected significant grades and widths of mineralization. Mineralization intersected by underground drilling from the 9th level lies 180 m below surface and is only 17 m from the haulage ramp, making it readily accessible for extraction.

The Santa Teresa Extension zone is parallel to and southeast of the Hoag zone. As shown in the figures below, the Santa Teresa Extension and Hoag zones are linked by the Sept 9 zone, where recent underground development on the 9th and 10th levels has delineated impressive sulphide mineralization within the structure. It has been determined that the Sept 9 zone is actually a mineralized feeder conduit for the emplacement of mineralization into the Hoag and Santa Teresa zones.

The Santa Teresa Extension continues to show good widths in the majority of drill holes and the geometry of the lens (as currently defined) suggests it will be amenable to low-cost, long-hole mining methods. The zone remains open in both dip directions along the rake of the mineralization.



Hoag, Santa Teresa & Sept 9 Zones

Santa Teresa & Sept 9 Zones

Santo Domingo Deposit

Mineralization within the Santo Domingo deposit is exposed at river level approximately 150 m southwest of the Santa Teresa occurrence. No previous drilling of the deposit has been recorded. Scorpio's initial four surface holes into the deposit have returned positive results as reported in the Company's July 10, 2007 news release. Future underground drilling of the Santo Domingo will be conducted from the 6th level workings of the Nuestra Senora mine.


2007 Pre-Feasibility Study

On June 14, 2007 Scorpio Mining released positive results from an independent Pre-Feasibility Study ("PFS") on the Nuestra Senora deposit. The results of the PFS which was completed by Genivar, an independent qualified engineering company with the participation of other Qualified Persons and companies, demonstrated that an underground bulk mining operation at Nuestra Senora was economically viable. The study projected that the cash cost of producing silver at the Nuestra Senora project, after accounting for by-product credits, would be a negative US$ 0.98 per ounce produced using discounted metal prices of US$ 11.00 per oz. for silver, US$ 1.25 per lb. for zinc, US$ 0.50 per pound for lead and US$ 2.25 for copper. 

Using the same discounted metal prices, the projected after tax production cash flow from commencement of production until the end of life of mine operations, was US$59.5 million, excluding the pre-production capital expenditures of US$26.5 million. The estimated Net Present Value after tax was US$14.3 million and Internal Rate of Return was 26.2% using a 10% real discount rate. These projections are substantially increased when using undiscounted, current day metal prices.

The key project parameters and highlights of the PFS are outlined in the Company's June 14, 2007 news release. A technical report for the pre-feasibility study was filed on Sedar on July 17, 2007 and is also available within the "Technical Reports" section below.


Mine Production

Based on the positive results of the PFS, the Company announced on June 25, 2007 its decision to proceed to production. Construction of the mill facility commenced on August 1, 2007 and was completed on schedule by March 31, 2008. Scorpio's dedicated 34-km power line from the main hydro dam to the mill facility was activated on April 10, 2008, allowing the mill to enter its commissioning period. Shipment of concentrates commenced in August, 2008. and the Company began receiving smelter and off-take payments the following month. Official commercial production was achieved in January 2009.

On November 16, 2009, the Scorpio team was proud to announce a record third quarter for commercial production with positive mine operations earnings, positive net earnings and earnings per share, an increase in concentrate sales, underground production, mill throughput and a decrease in Mexico operating costs per tonne, smelter treatment charges and underground development costs.

Subsequent to the third quarter ended September 2009, strengthening metal prices have allowed a production ramp-up and  increase in mill throughput to 21,000 tonnes per month for the fourth quarter. The Company's positive track record for 2009 should continue in the fourth quarter, resulting in increased revenues per tonne of concentrate sold. Scorpio has set strict mandates for 2009 to show profitability, and to date has exceeded all goals set.

President, Mr. D. Roger Scammell, PGeo, is the Company's Qualified Person for the Nuestra Senora project. All technical information for the project is obtained and reported under a formal quality assurance and quality control (QA/QC) program, details of which are presented in the PDF link below.

 

Presentations

360° View of the Nuestra Senora Mine Workings and River Canyon Topography



Technical Reports

Resource Estimate - Nuestra Senora Project - Jun 2008 (10.9 Mb)

Pre-Feasibility Study - Nuestra Senora Project - Jun 2007 (4.8 Mb)

Resource Estimate - Nuestra Senora Project - Feb 2007 (2.4 Mb)

Quality Assurance & Quality Control Program

 


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