FSC / Press Release


Magino Updated PEA: NPV of $939M, Projected Gold Production of 2.6M Ounces, Cash Costs $461(US)/Ounce


Vancouver, British Columbia CANADA, December 22, 2011 /FSC/ - Prodigy Gold Inc. (PDG - TSX Venture, KX3 - FWB), ("Prodigy", "the Company") is pleased to announce the results from an updated NI 43-101 compliant Preliminary Economic Assessment (PEA) of its 100% owned Magino gold project in northern Ontario. The updated PEA was completed by Wardrop, A Tetra Tech Company ("Tetra Tech"), with contributions from Snowden Mining Industry Consultants Inc. ("Snowden") and demonstrates robust economics for the proposed open pit gold mining project at Magino. (All figures are in Canadian dollars except where noted.)

Highlights of the PEA (base case using US$1,200/oz gold):

* Pre-tax Net Present Value (NPV) at 5% discount rate of $939 million, almost tripling the projected NPV of the project compared to the previous PEA (see press release dated April 1, 2011). The NPV at 8% discount rate is $709 million
* Life of Mine (LOM) gold production is projected to be more than 2,614,000 ounces gold (an increase of approximately 1.1M ounces), averaging 249,300 ounces a year over an 11 year mine life. Year one gold production is projected to be approximately 350,000 ounces at a mined grade of 1.57 gpt gold.
* Base case Internal Rate of Return (IRR) is 36%; payback period is estimated to be 1.9 years
* Total mineable resources are estimated to be 74,234,000 tonnes grading 1.15 gpt gold with a strip ratio of 2.1:1
* Average LOM cash operating costs are estimated to be US$461 (Cdn$496) per ounce
* Pre-tax cash flow from operations over the proposed LOM is estimated to be $2.08 billion, net cash is projected to be $1.52 billion LOM

Brian J. Maher, President and CEO of Prodigy Gold stated: "This update to the Magino mine PEA highlights a significant increase in the scope of our proposed mining operation. The proposed mill expansion to 20,000 tpd allows Prodigy to expand the Magino gold production profile to 249,300 ounces of gold per year, establishing the project as one of the larger proposed gold mining operations in North America. The PEA will serve as the template for a full feasibility study, expected to be completed in 2012. The results of the PEA validate our operational model for Magino and the Company looks forward to rapidly advancing the project in the coming year".

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Project Assumptions and Parameters:

Assumptions:
Base gold price (US$/oz) 1,200
Exchange Rate (US$/Cdn$) 0.93
Milling rate (tpd) 20,000
--No royalty
--No sunk costs
--100% equity financing
--Costs are estimated in 2011 first quarter dollars

Mine and Mill Parameters:
Total resource milled (million tonnes) 74.23
Waste moved (million tonnes) 152.51
LOM strip ratio 2.05:1
Average gold grade (gpt) 1.15
Total contained gold (million oz) 2.75
Estimated gold recovery (%) 95
Total recovered gold (million oz) 2.61
Project life (years) 11
Average annual production (oz) 249,319

Costs and Capital Requirements:
Mining costs ($/tonne) 1.22
Milling costs ($/tonne) 12.60
G and A ($/tonne) 1.14
Pre-production capital ($ million) 406
Sustaining capital ($ million) 145
Average cash cost (US$/oz) 461 (Cdn$496)

Financial Analysis:
Average annual pre-tax cash flow ($ million) 116.6
NPV 5% discount rate pre-tax ($ million) 939
IRR pre-tax (%) 36
Pre-tax payback period (years) 1.9

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Magino Mine Resources

The Magino mine resources used in this updated PEA were reported in a NI 43-101 compliant Technical Report filed on SEDAR on December 16, 2011. The resource estimate, completed by Snowden, contained Indicated gold resources of 2,176,000 ounces grading 1.00 gpt gold (67.6 million tonnes) and 1,721,000 ounces of Inferred gold resources grading 0.99 gpt gold (54.2 million tonnes) using a 0.35 gpt cut off grade. The complete resource estimate table is included below:

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Indicated
------------------------------------------------
Cut Off Tonnes Grade Grams Gold Ounces Gold
(gpt (gpt
Gold) Gold)
------------------------------------------------
2.00 5,562,000 3.36 18,705,000 601,000
1.50 10,345,000 2.60 26,928,000 866,000
1.00 20,779,000 1.91 39,605,000 1,273,000
0.75 31,730,000 1.55 49,086,000 1,578,000
0.50 50,056,000 1.21 60,368,000 1,941,000
0.35 67,555,000 1.00 67,690,000 2,176,000
0.10 99,205,000 0.76 74,297,000 2,421,000
------------------------------------------------
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Inferred
---------------------------------------------
Tonnes Grade Grams Gold Ounces Gold
(gpt
Gold)
---------------------------------------------
4,273,000 3.47 14,836,000 477,000
7,345,000 2.73 20,096,000 646,000
15,897,000 1.91 30,411,000 978,000
25,072,000 1.53 38,335,000 1,233,000
40,464,000 1.18 47,748,000 1,535,000
54,242,000 0.99 53,537,000 1,721,000
73,087,000 0.80 58,250,000 1,873,000
---------------------------------------------
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The Magino mineral resource estimate was imported into CAE Mining's NPV scheduler and an economic model, ultimate pit, push backs and schedule were generated. The results of a Golder and Associates geotechnical study completed in September 2011 were incorporated through importation of six slope regions that had scientifically determined pit wall angles. Nested pits using the Lerchs-Grossman algorithm were generated resulting in a selection of pits from which to choose the ultimate pit.

Mining and Production

The pit design, optimization and production schedule prepared by Tetra Tech resulted in a potential production schedule containing 74.23 million tonnes grading 1.15 gpt gold. Total gold recovered over an 11 year project life is 2.61 million ounces, averaging 249,300 ounces per year. The LOM average strip ratio is estimated to be less than 2.1 to 1. A summary of the annual mine production is outlined below.

To view the summary, click onto the link below or cut and paste into your browser:
www.usetdas.com/maps/prodigy/MaginoOpenPitEconomics.pdf

Processing Facility

The PEA contemplates using a conventional carbon-in-pulp (CIP) processing facility operating at 20,000 tpd with 95% availability. A gyratory crusher will be used as the Primary crusher. The gyratory will be fed by direct dump from 200 tonne trucks. The crushed product will be conveyed to the Coarse Ore Stockpile. The stockpile will feed the SAG mill. The SAG mill product will be the feed to two hydro-cyclone clusters which will be in closed circuit with two ball mills. Two trains will be run to process the ore starting at the hydro-cyclones and ball mills through to CIP. The trains will then combine to a single stream for the carbon elution.

The cyclone overflow from each ball mill will be fed to a leach feed thickener. The thickener underflow will be fed to a train of leach tanks with sodium cyanide. The pulp will be leached for 48 hours to extract 92% of the contained gold. The pulp will then be subjected to Carbon in Pulp where the carbon will move counter current to the carbon feed. The carbon will become loaded with the leached gold in solution. The loaded carbon will be washed and stripped in a hot caustic solution at an elevated temperature and pressure. The pregnant solution exiting from the stripping circuit will be cooled and pumped to a set of electro-winning cells where the gold will be plated out on steel wool. The gold laden steel wool will be smelted on site to produce dore.

The stripped carbon will be reactivated and returned to the CIP circuit. The supernatant from the tailings will be reclaimed and re-used in the process plant. The residual cyanide in the tailings reclaim water will be destroyed using sulphur dioxide, copper sulphate and lime.

Operating Costs

Operating cash costs, excluding sustaining capital, over LOM are projected to average US$461/oz (Cdn$496). Costs are summarized below:

-***-
----------------------------------------------------------------
$/tonne milled $/tonne mined $/oz gold
----------------------------------------------------------------
Average mining costs 3.72 1.22 106 (US$98)
Processing cost 12.60 - 358 (US$333)
G and A 1.14 - 32 (US$30)
----------------------------------------------------------------
TOTAL: 17.46 - 496 (US$461)
----------------------------------------------------------------
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Capital Cost Estimates

The PEA is based upon capital pricing as of the last quarter of 2011. The level of accuracy of the capital cost estimate is +/- 30% for this PEA. Pre-production capital costs are estimated at $405.6 million. Mining is assumed to be undertaken by owner with a leased equipment. The cost breakdown for pre-production capital expenditures, assuming contract mining, is shown below.

Sustaining capital, principally staged additions to the capacity of the tailings pond and mining equipment, is estimated to be $144.8 million.


-***-
Description Pre-production Capital Sustaining Capital
($ million) ($ million)
-------------------------------------------------------
Overall Site 22.7
-------------------------------------------------------
Open Pit Mining 8.4 119.4
Ore handling 14.3
Process 160.8
Tailings 10.2 24.0
Infrastructure 37.7 1.4
-------------------------------------------------------
TOTAL DIRECT COSTS 254.1
-------------------------------------------------------
Project Indirects 70.2
Owners 11.4
Contingency (30%) 69.8
-------------------------------------------------------
TOTAL INDIRECT COSTS 151.4
-------------------------------------------------------
TOTAL 405.6 144.8
-------------------------------------------------------

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Financial Analysis

The financial analysis for the Base Case evaluation utilizing a gold price of US$ 1,200 per ounce indicates a pre-tax NPV at a 5% discount rate of $939 million with an IRR of 36% and a payback period of 1.9 years. The project generates an undiscounted pre-tax cash flow from operations of $2.08 billion over the LOM. The table below outlines NPV and IRR at a variety of gold prices and discount rates (DR) on a pre-tax basis.

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---------------------------------------------------------------
Gold Price (USD$) 1,200 1,000 1,300 1,400
---------------------------------------------------------------
Cash flow from operations ($ million) 2,076 1,514 2,357 2,638
NPV 0% DR ($ million) 1,516 954 1,797 2,078
NPV 5% DR ($ million) 939 549 1,134 1,329
NPV 7.5% DR ($ million) 743 413 908 1,073
IRR Base Case (%) 36.4 24.7 41.8 47.1
---------------------------------------------------------------
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Note on Mineral Resources

Mineral resources that are not mineral reserves do not have demonstrated economic viability. This assessment is preliminary in nature as it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable to them to be categorized as mineral reserves. At this time there is no certainty that the preliminary assessment and economics will be realized.

Qualified Persons for the PEA

The PEA was prepared by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101. The QPs have reviewed and approved the content of this news release. The following consultants and QPs participated in the PEA:

* Tetra Tech, under the direction of Les Corradine, P.Eng,, Sr Project Manager, and with input from the following Qualified Persons: Cris Wright, P.Eng,, Sr. Mining Engineer, Todd Kanhai, P.Eng,, Metallurgical Engineer and Sabry Abdel Hafez, P.Eng, Sr. Minerals Economist.

* Snowden Mining Industry Consultants Inc., under the direction of Anthony Finch, MAusIMM. Mr. Anthony Finch is the Divisional Manager Mining Engineering and Principal Consultant at Snowden Mining Industry Consultants Inc.

A NI 43-101 compliant technical report will be filed on SEDAR within 45 days of the date of this press release.

About Prodigy Gold: Prodigy Gold Inc. (PDG: TSX.V) is currently evaluating the development of the Magino mine gold project in Ontario as an open-pit mining opportunity with the potential for deeper, higher grade gold production. The Magino project contains Indicated gold resources of 2,176,000 ounces grading 1.00 gpt gold (67.6 million tonnes), and 1,721,000 ounces of Inferred gold resources grading 0.99 gpt gold (54.2 million tonnes) at a cut off grade of 0.35 gpt gold. A Preliminary Economic Assessment (PEA) shows a pre-tax NPV of $939 million and an IRR of 36% using a 5% discount rate for the project (see Press Release dated December 22, 2011) available on SEDAR or Prodigy's web site). The proposed operation would have total gold production of 2,614,000 ounces and an average annual gold output of 249,300 ounces a year during an eleven year project life. Please note: mineral resources that are not mineral reserves do not have demonstrated economic viability. The PEA is preliminary in nature and includes Inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary assessment will be realized.

A full feasibility study for the proposed open pit mining project at Magino is scheduled for completion in 2012. Bringing the Magino mine project through the feasibility process and towards production, is a catalyst to growing Prodigy Gold and building substantial value for Prodigy shareholders: Today's Discovery, Tomorrow's Future.


All scientific and technical information for the Magino project, except the sections describing the PEA as noted above, has been reviewed and approved by Tom Pollock, P.Geo., Prodigy Gold's Vice President - Exploration, who is a qualified person under the definitions established by National Instrument 43-101. Drill core at Magino is boxed, covered, and sealed at the drill rig and moved to the Prodigy logging and sample preparation facilities by Prodigy Gold personnel. The core is then split down the centre using a typical table fed circular rock saw normally at one metre intervals. One half of the core is sent for assay to ALS Chemex, 2090 Riverside Dr., Timmins, ON, P4R 0A2, while the other half is returned to the core box and stored at Prodigy's sampling facility in a secure, fenced off, area. Prodigy QA/QC procedures include the regular use of blanks, standards and duplicate samples in addition to sending 10% of the samples off to a second lab for check assays. Samples assaying > 3.0 gpt gold are automatically re-assayed by the metallic screen method. Gold assays greater than 40 gpt are capped at 40 gpt when calculating composite intervals in drill holes. Drill holes are directed as much as possible perpendicular to the strike and dip of the mineralization at Magino. As a rough estimate the true thickness of the above intercepts is approximately 76%.


On behalf of the Board of Directors

Brian J. Maher
President and Chief Executive Officer


FOR FURTHER INFORMATION, PLEASE CONTACT:

Prodigy Gold Incorporated
Email: ir@prodigygold.com
Website: www.prodigygold.com
tel.: 1-604-688-9006 Fax: 1-604-688-9029



This news release includes certain forward-looking statements or information. All statements other than statements of historical fact included in this release, including, without limitation, statements relating to the potential mineralization and geological merits of the Magino mine property and other future plans, objectives or expectations of Prodigy Gold Incorporated (the "Company") are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's plans or expectations include risks relating to the actual results of current exploration activities, fluctuating gold prices, possibility of equipment breakdowns and delays, exploration cost overruns, availability of capital and financing, general economic, market or business conditions, regulatory changes, timeliness of government or regulatory approvals and other risks detailed herein and from time to time in the filings made by the Company with securities regulators. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise except as otherwise required by applicable securities legislation. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


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Source: Prodigy Gold Inc. (TSX-V: PDG) http://www.www.prodigygold.com
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