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Sage Gold options 50% of Borealis from Gryphon

2010-02-24 14:38 NT - News Release

See News Release (C-SGX) Sage Gold Inc

Mr. Nigel Lees of Sage reports

SAGE AND GRYPHON TO JV BOREALIS GOLD PROJECT NEVADA

Sage Gold Inc. and Gryphon Gold Corp. have executed a binding letter of intent dated Feb. 23, 2010, pursuant to which Gryphon has agreed to grant Sage the right to earn a 50-per-cent undivided interest in the fully permitted Borealis gold project located in the Walker Lane mineral belt of southwest Nevada.

Highlights of the Borealis project:

• Minable reserves: proven and probable gold reserves -- 377,356 ounces, proven and probable silver reserves -- 3,226,700 ounces;
• Total inferred resource of 350,044 ounces of gold;
• Total measured and indicated sulphide (M&I) resource of 1,084,200 ounces of gold;
• Total inferred sulphide resource of 715,800 ounces of gold;
• Fully permitted for oxide gold production; Borealis had prior successful oxide gold mining;
• Production anticipated nine months after construction initiated;
• Financial model of minable reserves (prefeasibility study) at $800 (U.S.) gold price:
  • Initial capital cost $17.2-million (U.S.) (ex-owner's costs);
  • Cash operating cost $476 (U.S.) per ounce of gold equivalent;
  • Net present value at 5 per cent $12.5-million (U.S.) (after recovery of capital);
  • Internal rate of return (IRR) 27 per cent;
  • Initial mine life five years;
  • Payback period on capital 2.25 years;
• Exploration potential -- additional oxide and sulphide mineralization: 27.5-square-mile landholdings. Established correlation between geophysical anomalies and potential new gold zones.

The reserves and resources for the Borealis project have been derived from the Sept. 21, 2009, independent prefeasibility study prepared by Dr. Roger Steininger, qualified person, consultant to Gryphon Gold, and John Danio, consultant to Telesto Nevada Inc., in accordance with NI 43-101, which is available on SEDAR.

Gryphon's president and chief executive officer, John Key, commented: "I am very pleased Sage Gold and Gryphon Gold are partnering on the development of the Borealis project. Gryphon and Sage expect to jointly manage the Borealis project into production in the near term. Sage brings corporate and financial expertise required to advance the project, benefiting the shareholders of both companies. Gryphon and Sage agree that the Borealis property represents an excellent near-term production opportunity in Nevada and also has exploration potential for additional oxide and sulphide resources. Together, Gryphon and Sage will seek project financing for the Borealis project. We look forward to working with the Sage team to realize our shared vision for Borealis."

Sage president and chief executive officer, Nigel Lees, stated: "This agreement marks a milestone in our company. The Borealis project is a unique opportunity for Sage; it represents short-term oxide production with a large sulphide gold resource that could potentially sustain a major mining operation. This combined with our recent announcement on the Clavos property agreement represents a quantum leap in Sage's objectives to become a gold producer with a high-grade underground gold project in Timmins and the Borealis-permitted leachable gold oxide reserve in Nevada potentially followed by a long-term underground gold sulphide operation. Both projects exhibit significant potential for additions to the existing reserve and resource categories. We are very pleased to work with Gryphon to develop this first-class asset."

SUMMARY OF MINERAL RESERVE AND RESOURCE ESTIMATE FOR THE BOREALIS PROPERTY

                                Gold tonnes    Avg. Au grade   Contained oz
                                               (oz per ton)

Proven and probable gold        16,650,000        0.023            377,356
reserves
Remaining oxide/mixed
resource
Inferred in situ                11,064,000        0.019            211,344
Inferred heaps and dumps        14,064,000        0.010            138,700
Remaining sulphide resources
M&I                             21,016,000        0.052          1,084,200
Inferred                        22,457,000        0.032            715,800

Inferred oxide resources were not included in the economic model due to lack of sufficient verification by drilling and other uncertainties. Additional drilling, assaying and metallurgical testing may result in reclassification of a portion of the inferred oxide resources to either waste or to a measured and indicated resource category. The sulphide resources do not have demonstrated economic viability and should not be relied upon.

Under the terms of the LOI, Sage has the option to earn an undivided 50-per-cent interest in the Borealis project. The option exercise terms are:

• Sage made a $100,000 (U.S.) cash payment concurrent with LOI.
• Sage will agree to invest $400,000 (U.S.) in a private placement in Gryphon units. Each unit comprises one common share and one-half of a share purchase warrant.
• Sage and Gryphon will enter into a definitive option agreement on or before March 5, 2010, subject to regulatory and other approvals.
• The option agreement will provide for an option period through Dec. 31, 2010, which may be extended for a period of up to six months, and provide for a Borealis project team to advance the Borealis project during the option period.
• Sage and Gryphon will jointly finance the approved expenditures during the option period, subject to certain exceptions and adjustments.
• Sage will invest $9-million (U.S.) as and by way of a capital contribution to the joint venture if Sage elects to exercise its option to acquire its 50-per-cent participating interest.
• Sage (together with Gryphon) will arrange project financing. Sage and Gryphon have been in discussions with debt and equity financial partners to place the Borealis project into production.
• Sage will issue to Gryphon common shares of Sage with a value equal to $1-million (U.S.), subject to TSX Venture Exchange approval or, will make the payment in cash upon exercise of the option.
• Upon the classification of an additional 100,000 ounces of gold reserves as proven and probable, Sage will pay Gryphon a cash payment of $1-million (U.S.), and up to an additional $1-million (U.S.) for up to an additional 100,000 ounces of gold reserves classified as proven and probable (maximum $2-million (U.S.)).
• Advisory fees related to this transaction payable by Sage of two million Sage shares and two million two-year warrants exercisable to purchase Sage shares at six cents per share subject to regulatory approval.

The transaction is subject to due diligence, receipt of requisite approval including the approval of the Toronto Stock Exchange with respect to Gryphon, and the TSX-V with respect to Sage and the execution and delivery of a definitive option agreement.

Geology and mineralization of the Borealis property

Epithermal gold and silver mineralization at Borealis is hosted by Miocene pyroclastics/tuffs, andesite flows, dacite flows and laharic breccias. Structures are dominantly northeast-striking faults with steep dips and generally west-northwest-striking faults with steep southerly dips.

Both of these fault systems lie on regional trends of known mineralized systems; thus, Borealis appears to be at a major intersection of structural and mineralized trend systems.

Gold mineralization is often associated with hydrothermal breccias, pervasive silica and sulphides, principally pyrite. It is likely that the higher-grade deposits may have been localized along the intersections of small second-order faults with the major feeder structures. Many of the oxide deposits at the project site, such as the Borealis deposit, have a flat-lying tabular shape and appear to have formed within gently dipping volcanic units. The pyroclastic/tuff unit is the most favourable host for gold mineralization.

During its emplacement, finely disseminated gold found in the Borealis mineralizing system was enclosed in pyrite, and through natural weathering and oxidation, this gold was released and made available to extraction by cyanidation. Gold still bound in pyrite or pyrite-silica is not recovered easily by a simple cyanide heap leach operation. Widely spaced drilling indicates that pediment gravels cover the majority of the altered and mineralized volcanics over a seven-mile-long zone in the southern and southwestern parts of the district. Much of this area has received only minor testing with systematic multidisciplinary exploration.

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