Scorpio Mining Reports Second Quarter Results, Signs Land Agreement on Cosalá Norte Properties and Files NI- 43-101 Technical Report for its Nuestra Señora, San Rafael and El Cajón

TSX:SPM

(Please note that all dollar amounts in this news release are expressed in Canadian dollars unless otherwise indicated. Refer to the second quarter 2012 Management Discussion and Analysis (''MD&A'') and unaudited financial statements for more information which are available on the Company's website at www.scorpiomining.com and on SEDAR at www.sedar.com )

TORONTO, Aug. 13, 2012 /CNW/ - Scorpio Mining Corporation (TSX: SPM) ("Scorpio Mining" or the "Company") reported operating and financial results for its second quarter (Q2) ended June 30, 2012. The Company produced a total 606,786 silver equivalent ounces in Q2 2012 compared to production of 709,393 during Q2 2011. Net earnings for Q2 2012 were $0.6 million or $0.00 per share (basic) compared to net earnings of $3.3 million or $0.02 per share (basic) for Q2 2011.  The decline in earnings in Q2 2012 compared to Q2 2011 was due to lower production of contained metals as a result of lower head grades in silver and copper, decreases in the recorded metal prices for all metals and an increase in lead and zinc concentrate inventories at the end of Q2 2012.

Second Quarter 2012 Highlights:

• Produced 606,786 silver equivalent ounces;
• Cash cost per silver payable ounce, net of by-product credits, was $15.05;
• Cash flow from operating activities before movements in working capital decreased by  63% from $5.5 million in Q1 2012 to $2.0 million in Q2 2012;
• Announced an independent Updated Mineral Resource estimate for our 100% owned Nuestra Señora Mine in Sinaloa State, Mexico, completed by Mine Development Associates ("MDA") of Reno, Nevada;
• Achieved significant progress in advancing projects in the Cosalá Norte area (San Rafael and El Cajón) as potential feed sources for the existing plant on the areas of land tenure, permitting and technical studies;
• Identified a new structurally controlled zone called "La Emma" in 16 holes at El Cajón ; and
• Completed 4,068 meter Phase I drill program at our 100% owned La Revancha Project, Chihuahua State, Mexico.

Peter J Hawley, President and CEO stated: "Despite lower grades at Nuestra Señora, we were able to maintain our throughput consistent with previous quarters. We remain focused on growing production at the Nuestra Señora processing plant by aggressively optimizing the Nuestra Señora mine plan and reducing mine and administration costs . In addition we are turning our attention to advancement of the development  projects in the Cosalá Norte area (San Rafael and El Cajón) during the upcoming quarter. We are pleased with the recent advances on the development of these promising projects and intend to provide an update on our production plan at Nuestra Señora upon completion of our 2012 reserve estimation.

In addition, Scorpio has achieved significant milestones with the completion of land agreements for our planned development activities at the Cosalá Norte properties, and the receipt of the environmental permit required for increasing the capacity of our existing processing plant at Nuestra Señora. Updated Mineral Resource estimations at both San Rafael and El Cajón are on schedule for dissemination during Q3 2012.  We expect to provide a NI 43-101 compliant reserve estimate for the Nuestra Señora Mine during Q4 2012.".

Subsequent to Second Quarter

• On July 18, 2012, Scorpio Mining reported preliminary results from the recently completed drill program at its 100% owned San Rafael Project in Cosalá, Sinaloa, Mexico;
• Appointed the Company's Chairman, founder and former Chief Executive Officer, Peter J. Hawley as interim President and Chief Executive Officer and Ewan Mason as Chairman of the Company
• Began preliminary mine design and scheduling work at El Cajon

Throughput Remains On-Track - Discussion of Q2 2012 Results

Plant throughput in Q2 2012 remained relatively consistent compared to the previous quarters of at or near the existing plant capacity of approximately 1,500 tonnes per day ("tpd"). This was made possible due to incremental production improvements made throughout 2011 such as increasing daily throughput, improving underground mine development and grade control.

Underground ore production was lower in Q2 2012 compared to Q2 2011 and concentrate production was lower for all metals except lead during Q2 2012 compared to Q2 2011 due to lower head grades encountered and associated reduced recoveries. Grade predictability has also impacted production. An updated reserve report due during Q4 2012 should improve mine planning and allow the Company to more accurately predict actual production.

On a consecutive quarter basis, revenue from metal payable of $12.5 million in Q2 2012 decreased 20% from $15.6 million in Q1 2012 due to lower silver and copper grades and lower recorded metal prices for all metals. Revenue from metal payable decreased 38% compared to $20.0 million in Q2 2011. The decrease in revenue relative to Q2 2011 was due mainly to lower production of contained metals as a result of lower head grades in silver and copper, decreases in the recorded metal prices for all metals and an increase in lead and zinc concentrate inventories at the end of Q2 2012. Net earnings in Q2 2012 were $0.6 million or $0.00 per share (basic) compared to net earnings of $4.0 million or $0.02 per share (basic) in Q1 2012 and net earnings of $3.3 million or $0.02 per share (basic) in Q2 2011.

Recovered silver equivalent ounces ⁽¹⁾ in Q2 2012 decreased 2% from 620,356 ounces in Q1 2012 to 606,786 ounces mainly due to a reduction in copper and silver grades. Recovered silver equivalent ounces decreased by 15% compared to 709,393 silver equivalent ounces in Q2 2011.  Lead and zinc concentrate inventories increased significantly at the end of Q2 2012 compared to Q1 2012 and included approximately 26,000 ounces and 1,500 ounces of silver payable, respectively. This increase in inventories was attributable to a combination of the Company's highest monthly production of lead and zinc in June 2012 coupled with customers not being able to accept the full month's production.

In addition, in-house metallurgical studies were completed and installation of a flash flotation cell was commenced in order to improve overall recoveries of metal in concentrate Subsequent to June 30, 2012, this installation was completed and the unit is now being commissioned.

Cash cost (recovery) per silver payable ounce, net of by-product credits, was $15.05 in Q2 2012 compared to $7.78 in Q1 2012 and $(0.37) in Q2 2011. The change in Q2 2012 relative to Q1 2012 was due to increased costs and lower silver payable. The increase in Q2 2012 costs relative to Q2 2011 was a result of decreased prices for lead, copper and zinc in Q2 2012 compared to Q2 2011, a decrease in contained metals produced; and higher zinc and lead concentrates in inventory. The Company also incurred approximately $1.1 million of additional costs in Q2 2012 beyond those incurred in Q2 2011, specifically relating to increased mine development access, the temporary use of production drilling contractors and increased maintenance expense for aging mobile equipment. As a higher proportion of long hole stoping production comes on line, and as new equipment arrives over the coming quarters, underground mining unit costs at Nuestra Señora should decrease

Adjusted EBITDA⁽²⁾ of $2.0 million in Q2 2012 decreased 64% from $5.5 million in Q1 2012 as a result of lower revenues and higher costs described above. Adjusted EBITDA in Q2 2012 decreased 83% compared to $11.6 million in Q2 2011 as a result of the reduction in revenues, and additional costs described above.

Cash flow from operating activities before movements in working capital of $2.0 million in Q2 2012 decreased 63% from $5.5 million in Q1 2012and decreased 82% compared to $11.2 million in Q2 2011 as a result of the reduction in revenues and additional costs described above.

1. Silver equivalent ounces were established using the following: silver US$24/oz.; zinc US$0.90/lb.; copper US$3.50/lb.; and lead US$0.90/lb.
   
   
2. This is a non-IFRS performance measure; please see Non-IFRS Performance Measures section of the Company's Q2 2012 Management's Discussion and Analysis.

Recent Advances at Cosalá Norte

The following are some of the recent advances achieved at the Cosalá Norte area

• Progress of Technical Studies - Technical issues advanced to enhance future development have included the following:
• Initiated the preparation of the Environmental Impact for exploitation at San Rafael and El Cajón.  It is anticipated that the EIS will be submitted to SEMARNAT in Q4 2012. The timing of environmental approval is not guaranteed, however the existing land access agreements, proven environmental compliance of existing operations and continuing community support gives the Corporation confidence that a positive outcome is expeditious.  It is anticipated that environmental permitting of phased development will be received in Q1 2013.
• Metallurgical and geotechnical drilling commenced for both San Rafael and El Cajón projects.
• Land Agreements - Signed long-term, common land lease agreements with the Higuera Larga and Los Molinos Ejidos for properties located in Cosalá Norte.  These agreements are prerequisites for subsequent environmental permitting. They cover approximately 476 hectares and allow for construction, mining and processing activities, including open pit mining and the construction of a tailings storage facility.  On June 14, 2012, these land agreements were registered with the National Agrarian Registry.

An Ejido is a communal ownership of land recognized and governed by the Federal Laws in Mexico.  While the mining rights are administered by the Federal Government through issued Mining Concessions, each Ejido controls and manages the surface rights through a group of representatives, elected by the Ejido members.

• Permitting On June 19, 2012, Scorpio Mining received notification of environmental approval from SEMARNAT to operate the existing processing plant up to a maximum of 4,000 tpd, if required by the Company's in the future.

Exploration: Continued Positive Results

At the San Rafael Project, Scorpio Mining has drilled approximately 3,334 meters in 2012. The program completed in-fill drilling on the known zones and delineated mineralization in the newly discovered Northwest ("NW") Extension. MDA is currently calculating an Updated Mineral Resource estimate for the deposit that includes approximately 120 new holes completed in 2011 and 2012. The discovery of new mineralization in the NW Extension and the number of new holes will delay this estimate until Q3 2012.  An additional 1,774 meters of diamond drilling was completed at San Rafael for purposes of collecting geotechnical information to be used in the design of potential open pit slopes and underground openings for potential underground mines.

At the El Cajón Project, Scorpio Mining has drilled approximately 4,695 meters in 2012. About half of this total (2,335 meters) was drilled in nine in-fill holes with the intent of raising the confidence level and expanding the previously reported resource estimate. The infill drilling intersected up to 450 g/t silver and 1.102 % copper over 11.6 meters in Hole EC97, including 884 g/ t silver and 2.075% copper over 3.9 meters. The remainder of the drilling (2,360 meters) identified a new structurally controlled zone called "La Emma" in 16 holes. Work is still in progress along this trend.

Scorpio Mining Files NI- 43-101 Technical Report for its Nuestra Señora, San Rafael and El Cajón

In addition, Scorpio Mining announced today that subsequent to its news release dated June 29, 2012, it has filed a National Instrument 43-101 Technical Report on SEDAR (www.sedar.com) for its Nuestra Señora, San Rafael and El Cajón silver-copper-gold+lead+zinc deposits in the Cosalá mining district, Sinaloa, Mexico.  Mine Development Associates of Reno, Nevada ("MDA") has prepared this Technical Report at the request of Scorpio Mining Corporation.  This report and associated resource estimates have been prepared in compliance with the disclosure and reporting requirements set forth in the Canadian Securities Administrators' National Instrument 43-101 ("NI 43-101"), Companion Policy 43-101CP, and Form 43-101F1, as well as with the Canadian Institute of Mining, Metallurgy and Petroleum's ("CIM") Mineral Resource and Reserves definition standards.

The Technical Report, dated August 10, 2012, is available on Scorpio Mining's web site at www.scorpiomining.com under the Operations, Reserves and Resources section.

Outlook

Rationalization of operating costs continues to be a priority for the Company.  Operating costs for underground mining during H1 2012 have been relatively high due to the use of contracted production drilling, increased maintenance of the aging mobile equipment fleet and increased jumbo development.  As a higher proportion of long hole stoping production comes on line, and as new equipment arrives over the coming quarters, underground mining unit costs at Nuestra Señora should decrease.

The installation of a flash flotation cell was recently completed and the cell is currently being commissioned.  Metallurgical evaluation has indicated that this unit should improve the overall recovery of the concentrates produced.

The Company engaged MDA to prepare an updated reserve estimate for the Nuestra Señora Mine.  That reserve will utilize the resource estimate as disclosed on June 29, 2012, and be based upon a mine design, production schedule and other criteria in compliance with NI 43-101.

While the reserve estimate for the Nuestra Señora Mine is currently under review, Scorpio Mining is working on accelerating development of the San Rafael and El Cajón Projects. The completion of new resource estimates for the San Rafael and El Cajón deposits is expected late Q3 2012.

The Corporation recognizes the strategic importance of developing multiple potential ore sources in the Cosalá district.  Accordingly it is prioritizing the technical, legal and environmental requirements to develop its known projects.  Registered land access agreements with the Ejidos covering the San Rafael and El Cajón projects are in place and are a significant prerequisite for environmental permitting.  Preliminary mine planning and design is also underway at El Cajon.

Over the coming quarters, the company expects to complete the filing of Technical Reports on SEDAR as follows:

• Updated Mineral Resource estimates for San Rafael and El Cajón in Q3 2012; and
• Nuestra Señora Mineral Reserve estimate in Q4 2012.

Phase I of the process required to increase plant capacity was recently completed on time and within its $5 million budget. Phase I activities included process flow engineering, civil works, and the purchasing of long lead time items such as an additional used ball mill and the installation of a flash flotation cell. The decision to proceed with the final Phase II of the plant expansion to increase plant capacity by 80% from 1,500 tpd to 2,750 tpd, will depend on the reserve estimates and permitting of projects in the Cosalá district.

As June 30, 2012 the Company had $25.9 million in its treasury, and is well positioned to continue exploration and development of its projects within the Cosalá and Parral districts.

About Us

Scorpio Mining Corporation is a silver producer operating in Mexico with significant base metal by-product credits. The 100% owned Nuestra Señora Mine and processing plant located in the Cosalá District of Sinaloa State, Mexico, has proven to be a low-cost operation with the benefit of flexible mining methods and diversified metal production. It has a fully mechanized underground operation and a processing facility built for expansion to 4,000 tpd. The plant produces zinc, copper and lead concentrates; with a significant silver component in the copper and lead concentrates. In addition, the company has over 40 exploration targets mostly in the vicinity of its current operations and is currently updating its resource calculations for the San Rafael and El Cajón Projects. Scorpio Mining also holds a 100% interest in the advanced, high-grade La Revancha silver and Tepozán silver-gold projects, both located in the productive Parral District within the respective states of Chihuahua and Durango, Mexico.The Company's strategy focuses on developing the San Rafael and the El Cajón Cajon projects while maintaining an active regional exploration at its existing mineral properties.

Scorpio Mining's President and CEO, Mr. Peter J. Hawley P. Geo, is a Qualified Person for the Company's Mexico projects and has reviewed the content of this release.

ON BEHALF OF SCORPIO MINING CORPORATION

Peter Hawley
President & CEO

This news release includes certain statements that may be deemed "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the Company's operations, exploration and development plans, expansion plans, estimates, expectations, forecasts, objectives, predictions and projections of the future. Generally, these forward-looking statements can be identified by the forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "projects", "intends", "anticipates", or "does not anticipate", or "believes", or "variations of such words and phrases or state that certain actions, events or results "may", "can", "could", "would", "might", or "will" be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Scorpio Mining Corporation to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the exploration and development and operation of the Companys projects in Mexico, risks related to international operations, construction delays and cost overruns, the actual results of current exploration, development and construction activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, future prices of silver, zinc, copper, lead and gold, risks relating to completing acquisition transactions as well as those factors discussed in the sections relating to risk factors of our business filed in Scorpio Mining Corporation's required securities filings on SEDAR, including its Annual Information Form dated March 26, 2012. Although Scorpio Mining Corporation has attempted to identify important factors that could cause results to differ materially from those contained in forward-looking statements, there may be other factors that cause results to be materially different from those anticipated, described, estimated, assessed or intended.

There can be no assurance that any forward-looking statements will prove accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Scorpio Mining Corporation does not undertake to update any forward-looking statements that are incorporated by reference herein, except in accordance with applicable securities laws.

SOURCE: Scorpio Mining Corporation

Victoria Vargas, Vice President Investor Relations and Corporate Communications [phone] Email: [email protected]
Rich Kaiser, YES International: 1-800-631-8127; 001-757-306-6090 (outside North America)
Email: [email protected]

Website: www.scorpiomining.com