By: Dylan Sikes - AllPennyStocks.com News

Wednesday, January 29, 2014

Gold prices are back on the rise Wednesday after trading lower the first two days of the week, despite hitting their highest level in three months on Monday. The precious metal that analysts have been down on has had a nice start to 2014. Spot gold is up about 4 percent in January, even against the backdrop of the U.S. Federal Reserve starting to taper its massive monetary stimulus package known as quantitative easing. Many analysts figured that the slowing of stimulus would strengthen the U.S. dollar and gold would continue to languish as it did throughout 2013. This has been good news for the Toronto stock markets, especially the resource heavy Venture Exchange, which posted gains in four straight weeks before sliding back some last week. The last two months have also been great for Scorpio Gold Corp. (TSX-Venture:SGN), with shares rising from 14 cents at the beginning of December to highs of 29 cents this month.

The Vancouver based miner has a 70-percent interest in the producing Mineral Ridge open-pit and heap leaching gold mining operation in Esmeralda County, Nevada. Scorpio is currently entitled to 80-percent of the cash generated at the project. The company also has 100-percent rights to the Goldwedge property, an advanced-stage exploration project with a processing facility in Manhattan, Nevada.

Further, Scorpio holds claims and controls land and interests in Elko County, Nevada, known as the “Pinon Properties,” through its subsidiary and affiliates. The properties, which include 192 unpatented mining claims and are located at the southern end of the famous Carlin Gold Trend, have been explored by larger gold players, including Newmont (TSX:NMC) and Royal Standard Minerals in a joint venture with Cameco Corp. (TSX:CCO). More than 350 reverse circulation and diamond drill holes have delineated a near surface oxide gold deposit and a deeper breccia target.

Scorpio said on Wednesday that it is going to put some cash in its account and sell the Pinon Properties to an affiliate of Gold Standard Ventures Corp. (TSX-Venture:GSV) in order to focus on its other Nevada properties. A binding letter of intent has been inked between the companies and Scorpio has received an initial non-refundable deposit of $250,000 for the mining interests. Per the deal, Gold Standard has agreed to pay Scorpio a total of $8.5 million in cash and 5.5 million shares of GSV for the properties. Including the deposit, $6 million of the cash is due at closing with the balance due within one year of the closing of the transaction.

In addition to other customary conditions, the deal is contingent on Gold Standard securing an equity financing of at least $8 million. The contract also allows for Gold Standard to buy two mineral leases next to the property for $1 million if it can’t secure enough cash for the full purchase.

The LOI also spells out additional monies owed to Scorpio if certain levels of mineral resources are established at the Pinon Properties or if the property or Gold Standard are sold for certain amounts.

"The value of the full transaction to Scorpio Gold exclusive of the bonus consideration is approximately $0.11 cents per share, which is felt to be very accretive to the shareholders of the Company given that the market was giving Scorpio Gold little to no value for the Pinon asset," said Peter J. Hawley, chief executive at Scorpio, in a prepared statement today.

Shares of Scorpio have edged ahead in Wednesday action, climbing 1.3 percent on the news. Shares of Gold Standard, which has also had a nice month with a valuation appreciation of about 16.5 percent, are moving lower with the acquisition announcement, moving lower by 2.4 percent to 83 cents.

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