Mar 4 2011
As a result of a review by the British Columbia Securities Commission, Gryphon Gold Corporation (TSX:GGN)(OTCBB:GYPH) is issuing this news release to clarify certain aspects of the mineral disclosure in respect of its Borealis Property.
We have engaged Telesto Nevada to prepare an updated technical report on the Borealis Property in accordance with the requirements of National Instrument 43-101 ("NI 43-101"), including a pre-feasibility study, to update the mine plan to reflect current costing data, update reserves and resources for the Borealis Property and update an economic model based upon a staged start up using updated gold and silver pricing. The scientific and technical data described below is based on our current technical reports (dated September 17, 2009 and April 28, 2008).
The NI 43-101 Technical Report on the Mineral Resources of the Borealis Gold Project located in Mineral County, Nevada, USA dated April 28, 2008 (the "2008 Technical Report") disclosed the following measured, indicated and inferred resources attributable to the oxide and sulphide portion of the Borealis Property:
The reserves disclosed in our 2009 Pre-Feasibility Study include those resources reported in our 2008 Technical Report as measured or indicated resources and which were classified as reserves as a result of the economic analysis contained in the 2009 Pre-Feasibility Study.
Certain third party news organizations (AXcess News, as reproduced on Stockwatch.com and Canada Stockwatch) incorrectly reported our resources and reserves in press releases issued on October 28, 2010 by referring in error to all resources as reserves. Such releases were not issued by or on behalf of Gryphon Gold and have since been corrected.
In our press release dated October 21, 2010, we announced that our board of directors had developed a strategy to potentially expedite production of the Borealis Property. The focus of this strategy was to finalize critical data pertaining to the Freedom Flats re-leach at the Borealis Property and then to finance a scaled down version of the mine start-up. The first phase of this plan is to begin gold recovery from the previously mined and partially leached Freedom Flats oxide heap. The initial capital costs for the mine start up are estimated at $8 million, with the balance of the capital costs (estimated at $9.2 million) to be incurred once the initial phase of the mine is in production, such additional costs to be funded from the revenue earned from the production from the first phase. Although the scaled down version of the mine start up will result in lower initial production than contemplated in the 2009 Pre-Feasibility Study, the aggregate costs and the overall production over the life of the mine are expected to be consistent with those set out in the 2009 Pre-Feasibility Study.
The 2009 Pre-Feasibility Study includes as reserves (under the heading "Legacy Heaps") the reserves described in our December 30, 2010 press release as reserves contained in the "Freedom Flats Heap". Any increase in gold grades at Freedom Flats announced in our December 30, 2010 press release is not expected to result in a material increase in our reserves or material increase in the revenue compared to the projections referred to in our 2009 Pre-Feasibility Study (based on gold prices of US$800 per ounce).
We expect to complete our updated technical report prior to finalizing the terms of the proposed offering disclosed in our press release dated February 7, 2011.
On July 29, 2010, we announced that inferred resources may be converted into measured and indicated resources as a result of fill-in drilling. Any increase in measured and indicated resources resulting from the 2010 fill-in drilling program is not expected to be material and will be reflected in the updated technical report.
On November 15, 2010, the independent firm of Fundamental Research Corp. published a report on Gryphon Gold and the Borealis Property. This report was reproduced on our website, but has since been removed. The valuation of the mineralization attributable to the Borealis Property contained in that report is not based on the discounted cash flow analysis contained in the 2009 Pre-Feasibility Study and is not otherwise supported by data provided by Gryphon Gold. We do not believe that the resource estimates and economic analysis contained in that report are compliant with NI 43-101, and it should not be relied on.
On April 28, 2010, we announced that SRK Consulting had completed a due diligence review of the 2009 Pre-Feasibility Study on behalf of Sage Gold and that we and Sage Gold had retained SRK Consulting to commence the preparation of a feasibility study for the Borealis Property. SRK Consulting did not commence work on any feasibility study as the preparation of a study was deferred until the completion of the drill program we announced on April 28, 2010 and until confirmation by Sage Gold of the exercise of its option to enter into a joint venture announced on March 8, 2010. On August 16, 2010, we announced that the option agreement with Sage Gold had been terminated by Sage Gold and Gryphon Gold. As a result of the termination of the option agreement with Sage Gold, neither we nor Sage Gold requested the start of work on a feasibility study by SRK Consulting.
We will issue a further press release once an updated technical report has been filed with Canadian securities regulatory authorities.
Steven D. Craig, CPG, Gryphon Gold's Vice-President of Exploration, a "qualified person" as defined in National Instrument 43-101 of the Canadian Securities Administrators ("NI 43-101"), has supervised the preparation of the technical information relating to the Borealis Property referred to in this press release.