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Exhibit 10.3

[***] Represents material which has been redacted and filed separately with the
Commission pursuant to a request for confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

OPTION AGREEMENT

THIS OPTION AGREEMENT is made and entered into as of August 3, 2011 (the
“Effective Date”) by and between GOLDEN PHOENIX MINERALS, INC., a Nevada
corporation, whose address is 1675 E. Prater Way, Suite 102, Sparks, Nevada
89434 (the “Grantor”) and WATERTON GLOBAL VALUE, L.P., by the general partner of
its general partner, Cortleigh Limited, whose address is Folio House, P.O. Box
800, Road Town, Tortola, VG1110 (“Waterton”), with Scorpio Gold (US)
Corporation, a Nevada corporation, whose address is 995 Rue Germain, Val-d’Or,
Quebec, Canada J9P 7H7 (“Scorpio Gold”), acknowledging the agreements contained
herein.  Grantor and Waterton will be collectively referred to hereinafter as
the “Parties” and individually as “Party.”

Recitals

A.           Grantor owns an undivided 30% interest in Mineral Ridge Gold, LLC,
a Nevada limited liability company (“Mineral Ridge”, with all of Grantor’s
ownership interest in Mineral Ridge at any point in time being referred to
herein as the “Mineral Ridge Interest”).
 
B.           Mineral Ridge is currently owned by Grantor and Scorpio Gold with
Grantor owning 30% of the ownership interest and Scorpio Gold owning 70% of the
ownership interest; pursuant to the Operating Agreement (defined below), Scorpio
Gold has certain rights to increase its ownership interest to 80% while reducing
Grantor’s ownership interest to 20%, all on the terms and conditions set forth
therein.
 
C.           Scorpio Gold and Grantor are parties to that certain Operating
Agreement for Mineral Ridge Gold, LLC dated as of March 10, 2010 (as amended,
modified, supplemented or restated from time to time, the “Operating
Agreement”), which governs the management, operation and administration of
Mineral Ridge.
 
D.           Scorpio Gold, Scorpio Gold Corporation (which directly or
indirectly wholly owns Scorpio Gold) and Grantor are parties to that certain
Exploration, Development and Mining Joint Venture Members’ Agreement and Limited
Liability Company Operating Agreement dated December 31, 2009, which pertains to
certain Company operational matters and restrictions (as amended, modified,
supplemented or restated from time to time, the “Exploration Agreement”, and
together with the Operating Agreement, the “Company Agreements”).
 
E.           Mineral Ridge owns or holds those certain properties consisting of
fee lands, patented mining claims, unpatented mining claims, unpatented millsite
claims, leases, water and water rights and other property interests located in
Esmeralda County, Nevada, as further described on Exhibit A attached hereto and
incorporated herein (together with all further and hereafter acquired properties
and interests, the “Mineral Ridge Properties”), along with the buildings,
structures, improvements and fixtures thereon and certain equipment, machinery
and other assets located thereon or used in connection therewith.
 

 
 

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F.           Grantor desires to grant to Waterton, and Waterton desires to
acquire from Grantor, an exclusive option to purchase all of Grantor’s right,
title and interest in and to Mineral Ridge, including Grantor’s rights in and to
the Company Agreements and the right of Grantor to receive or obtain its
undivided interest in the Mineral Ridge Properties.
 
G.           Grantor, Waterton and Scorpio Gold have entered into that certain
Consent, Waiver and Subordination dated August 3, 2011 (the “Consent”), whereby,
among other things, Scorpio Gold has consented to this Agreement and the option
granted to Waterton hereby and has agreed to accept Waterton as a full member of
Mineral Ridge, with all rights and obligations of a member of Mineral Ridge.
 
H.           Scorpio Gold desires hereby to acknowledge the Consent and its
consent to the transactions contemplated hereby.
 
I.           Grantor and Waterton desire to enter into this Agreement to
document the terms and conditions of the exclusive option granted by Grantor to
Waterton with respect to Mineral Ridge and the Mineral Ridge Interest.
 
Agreement

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and
conditions herein contained and recited, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged and
confirmed, the Parties hereto agree as follows:

ARTICLE 1
 
DEFINITIONS
 
As used in this Agreement, the following terms shall have the meanings assigned
to them in this Article 1.
 
1.1           “Affiliate” shall mean any person, partnership, joint venture,
corporation or other form of enterprise which directly or indirectly controls,
is controlled by, or is under common control with, a Party to this
Agreement.  For purposes of the preceding sentence, “control” means possession,
directly or indirectly, of the power to direct or cause direction of management
and policies through ownership of voting rights.
 
1.2           “Agreement” shall mean this Option Agreement, the recitals and all
exhibits attached hereto and by this reference incorporated herein, together
with all amendments, modifications, supplements and restatements from time to
time in accordance with the terms hereof.
 

 
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1.3           “Closing” shall have the meaning given thereto in Section 2.4.
 
1.4           “Commencement Date” means the date that is nine (9) months after
the Effective Date (being May 3, 2012), unless a Corporate Event is, in
Waterton’s sole discretion and opinion, likely to occur, in which case, the
Commencement Date shall be the date that Waterton makes a determination that a
Corporate Event is likely to occur, and Waterton shall notify Grantor of such
Commencement Date.
 
1.5           “Company Agreements” shall have the meaning given thereto in the
Recitals.
 
1.6           “Consent” shall have the meaning given thereto in the Recitals.
 
1.7           “Corporate Event” shall mean any one of the following events in
respect of Mineral Ridge or any person that, directly or indirectly, owns or
holds any interest in Mineral Ridge, including Scorpio Gold Corporation, Scorpio
Gold and Grantor (along with Mineral Ridge, each an “MR Group Entity”:
 
(a)           any “person” or “person acting jointly or in concert” as defined
under applicable securities laws or regulations, will acquire record or
beneficial ownership (within the meaning of the Securities Act (Ontario) or
other applicable law) of, or the power to exercise control or direction over, or
securities convertible into, any voting shares of any MR Group Entity, that
together with securities held by that person would constitute voting shares of
any such MR Group Entity representing more than 20% of the then outstanding
voting shares, measured by voting power rather than the number of shares, of
such MR Group Entity; or
 
(b)           there will be consummated any amalgamation, consolidation,
statutory arrangement (involving a business combination) or merger of any MR
Group Entity; or
 
(c)           any person or group of persons will succeed in having a sufficient
number of its nominees elected as a director of an MR Group Entity such that
such nominees, when added to any existing directors after such election who was
a nominee of or is an Affiliate or related person of such person or group of
persons, will constitute a majority of the directors of such MR Group Entity; or
 
(d)           any MR Group Entity agrees to accept or solicit any of the
foregoing.
 
1.8           “Effective Date” shall have the meaning given thereto in the
Preamble.
 
1.9           “Environmental Laws” shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation and
Recovery Act of 1976, the Clean Air Act, the Clean Water Act, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the Federal
Water Pollution Control Act, the Superfund Amendments and Reauthorization Act of
1986, the Safe Drinking Water Act, the Endangered Species Act, the National
Environmental Policy Act, the Mine Safety and Health Act of 1977, the Federal
Land Policy and Management Act of 1976, and the National Historic Preservation
Act, each as amended, and any state law counterparts, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state and local
governments (and all agencies thereof) concerning pollution or protection of the
environment, reclamation, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the existence, manufacture, processing,
distribution, use, treatment, storage, disposal, recycling, transport, or
handling or reporting or notification to any governmental authority in the
collection, storage, use, treatment or disposal of pollutants, contaminants, or
chemical, industrial, hazardous, or toxic materials or wastes.
 

 
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1.10           “Exercise Date” shall have the meaning given thereto in Section
2.2.
 
1.11           “Expiration Date” shall have the meaning given thereto in Section
2.2.
 
1.12           “Exploration Agreement” shall have the meaning given thereto in
the Recitals.
 
1.13           “Grantor” shall have the meaning given thereto in the Preamble,
together with its successors and permitted assigns.
 
1.14           “Hazardous Materials” means any substance:  (a) the presence of
which requires reporting, investigation, removal or remediation under any
Environmental Law; (b) that is defined as a “hazardous waste,” “hazardous
substance,” “extremely hazardous substance” or “pollutant” or “contaminant”
under any Environmental Law; (c) that is toxic, explosive, corrosive, flammable,
ignitable, infectious, radioactive, reactive, carcinogenic, mutagenic or
otherwise hazardous and is regulated under any Environmental Law; (d) the
presence of which on a property causes or threatens to cause a nuisance upon the
property or to adjacent properties or poses or threatens to pose a hazard to the
health or safety of persons on or about the property; (e) that contains
gasoline, diesel fuel or other petroleum hydrocarbons; or (f) that contains
PCBs, asbestos or urea formaldehyde foam insulation; in each case subject to
exceptions provided in applicable Environmental Laws.
 
1.15           “Lien” means any mortgage, deed of trust, lien, pledge, charge,
security interest, hypothecation, indenture, preferential right, assignment,
option, production payment or other lien, encumbrance or collateral security
instrument in, on or to, or any right, title or interest, or the rights, titles
or interests of any person under any conditional sale or other title retention
agreement or capital lease with respect to, any property or asset owned or held
by such person, the signing of any mortgage, deed of trust, pledge, charge,
security agreement, hypothecation, indenture, assignment or similar instrument,
or the signing or filing of a financing statement, personal property security
act filing or other similar instrument, which names such person as debtor, or
the signing of any security agreement or other similar instrument authorizing
any other party as the secured party thereunder to file any financing statement,
personal property security act filing or other similar instrument.
 
1.16           “MI&I Ounces” shall have the meaning given thereto in Section
2.1.
 
1.17           “Mineral Ridge” shall have the meaning given thereto in the
Recitals.
 

 
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1.18           “Mineral Ridge Interest” shall have the meaning given thereto in
the Recitals.
 
1.19           “Mineral Ridge Properties” shall have the meaning given thereto
in the Recitals.
 
1.20           “New Report” shall have the meaning given thereto in Section 2.1.
 
1.21           “Offer” shall have the meaning given thereto in Section 2.7.
 
1.22           “Operating Agreement” shall have the meaning given thereto in the
Recitals.
 
1.23           “Option” shall have the meaning given thereto in Section 2.1.
 
1.24           “Option Period” shall mean the period of time commencing on the
Commencement Date and ending on the date that is ten (10) years after the
Effective Date (being August 3, 2021).
 
1.25           “Purchase Price” shall have the meaning given thereto in Section
2.1.
 
1.26           “Scorpio Gold” shall have the meaning given thereto in the
Preamble, together with its successors and assigns.
 
1.27           “Waterton” shall have the meaning given thereto in the Preamble,
together with its successors and permitted assigns.
 
1.28           “$” shall mean United States currency.
 
ARTICLE 2
GRANT OF RIGHTS AND OPTION
 
    2.1     Option Granted.  Grantor hereby irrevocably grants to Waterton the
sole, exclusive and irrevocable option and right to purchase all of Grantor’s
right, title and interest in and to, and ownership of, Mineral Ridge, including,
without limitation, the Mineral Ridge Interest, Grantor’s right to receive an
assignment of and become a party to the Company Agreements and the right of
Grantor to receive or obtain an undivided interest in and to the Mineral Ridge
Properties and all production and proceeds thereof or appertaining thereto,
whether by partition, division or otherwise, which shall be exercisable by
Waterton in its sole discretion at any time (the “Option”).  If Waterton
exercises the Option, as consideration for the transfer, assignment and purchase
of the foregoing, Waterton shall pay to Grantor an amount calculated based on
the measured, indicated and inferred ounces of gold at and in the Mineral Ridge
Properties at the time of the Closing, as such measured, indicated and inferred
ounces of gold are determined by reference to the then most recent 43-101 report
(with the ounces reflected in such report being the “Report Ounces”) prepared in
respect of the Mineral Ridge Properties as filed by Scorpio Gold Corporation
(“Scorpio”) on SEDAR (such report being the “Current Report”), or, at Waterton’s
option, by reference to a new 43-101 report (the “New Report”) prepared by Micon
International Limited, AMEC plc or SRK Consulting, where the cost of such New
Report will be paid by Waterton (collectively, such measured, indicated and
inferred ounces being the “MI&I Ounces”) [***](collectively, the amount
calculated in accordance with the foregoing shall be referred to as the
“Purchase Price”).  The parties hereby acknowledge and agree that in the event
that the Current Report is used to determine the MI&I Ounces, the Purchase Price
shall be adjusted to account 1.1 for all ounces of gold that have been extracted
from the Mineral Ridge Properties since the date of the Current Report (such
extracted ounces of gold being the “Extracted Ounces”) based on either of the
two following formulae (as selected by Waterton at the time it exercises the
Option): (i) the Purchase Price shall be reduced by an amount equal to the
following:  [Purchase Price  X  (Extracted Ounces/Report Ounces)], or (ii) the
Purchase Price shall be reduced (on a dollar for dollar basis) by the total
aggregate value of any dividends or other distributions that the Grantor has
received from Mineral Ridge since the date of the Current Report.
 
 
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For the avoidance of doubt, the Extracted Ounces shall include all ounces of
gold extracted from the Mineral Ridge Properties that Scorpio or Mineral Ridge
have sold, transferred or delivered to any person, all ounces of gold extracted
from the Mineral Ridge Properties that are stored on site or as inventory
(whether on site or off site) and not yet sold or allocated for sale, and any
and all other ounces of gold that have been extracted from the Mineral Ridge
Properties since the date of the Current Report (including ounces of gold stored
on heap leach pads, ounces of gold being processed (whether in the process of
being milled, ground or aggregated, in ponds, in solution, in carbon columns or
otherwise), ounces of gold in transit and ounces of gold that have been
otherwise severed).  In order to confirm the Extracted Ounces, Waterton may
retain an independent auditor, consultant or advisor to analyze and assess the
Extracted Ounces, and Waterton and such auditor, consultant or advisor shall,
upon three (3) days notice to the Grantor, and at a reasonable time during
normal business hours, have the right to inspect, review and audit the accounts,
books, records and other information relating to Mineral Ridge and mineral
production at the Mineral Ridge Properties, including with respect to the
extraction of mineral products, the processing of mineral products, deliveries
to mills and refineries, deliveries to purchasers, the declaration and payment
of dividends and distributions by Mineral Ridge and other relevant
facts.          

2.2           Option Period; Termination.
 
(a)           Option Period.  Unless sooner terminated by Waterton pursuant
to Section 2.2(b), the Option shall expire at 5:00 p.m. Eastern time on the last
day of the Option Period (the “Expiration Date”).  The Option may be exercised
by Waterton at any time during the Option Period by delivery to Grantor of a
written notice of election to exercise the Option prior to the end of the Option
Period (the date such notice is effective being referred to hereinafter as the
“Exercise Date”).
 
(a) Option Period.  Unless sooner terminated by Waterton pursuant to
Section 2.2(b), the Option shall expire at 5:00 p.m. Eastern time on the last
day of the Option Period (the “Expiration Date”).  The Option may be exercised
by Waterton at any time during the Option Period by delivery to Grantor of a
written notice of election to exercise the Option prior to the end of the Option
Period (the date such notice is effective being referred to hereinafter as the
“Exercise Date”).
 
 
(b)           Termination.  In the event Waterton in its sole discretion desires
to terminate this Agreement, which Waterton may elect to do in its sole
discretion at any time during the Option Period, Waterton may terminate this
Agreement by giving Grantor written notice of termination, and this Agreement
shall be deemed terminated immediately upon receipt by Grantor of the notice of
termination.  Following expiration of the Option Period without Waterton
exercising the Option, Grantor shall have no further obligations or liabilities
hereunder.  Grantor has no right to terminate, rescind or limit this Agreement
or the Option prior to the Expiration Date.
 
2.3           Maintenance of Grantor’s Interest.  During the Option Period,
Grantor shall maintain in full force and effect its full right, title and
interest in and to Mineral Ridge, and in furtherance of the foregoing, in order
to maintain its full interest in and to Mineral Ridge, Grantor shall timely pay
and perform all amounts, debts, liabilities, capital calls and obligations set
forth in the Company Agreements.  Furthermore, Grantor shall not sell, assign,
transfer, convey, dispose of or grant any option or right of purchase with
respect to or Lien on or to, Grantor’s right, title or interest in or to its
ownership of Mineral Ridge, or agree to do any of the foregoing.  Prior to
exercise of the Option, Waterton shall not be liable for damages, liabilities,
indemnifications, obligations or losses of any kind associated with, arising or
resulting from or otherwise attributable to Mineral Ridge or its business,
operations or activities.
 
2.4           The Closing; Closing Deliveries.  If Waterton timely exercises the
Option, the closing of the exercise of the Option (the “Closing”) shall take
place within fifteen (15) days after the written notice of election to exercise
the Option is delivered by Waterton to Grantor, at a time and place mutually
agreeable to Waterton and Grantor.  At the Closing, Grantor shall: (a) deliver
to Waterton all share certificates, membership certificates or other documents
or instruments evidencing Grantor’s ownership of Mineral Ridge and otherwise
evidencing Grantor’s Mineral Ridge Interest, together with a duly executed
instrument of transfer or assignment or such other instruments or notations
necessary to transfer such membership interest; (b) make or cause to be made all
necessary and appropriate entries, notations, and written descriptions in the
books and records of Grantor and in the books, records and share registry of
Mineral Ridge necessary or desirable to record and evidence the transfer of the
interest in Mineral Ridge to Waterton; (c) execute and deliver to Waterton an
assignment agreement on terms and conditions, and containing representations and
warranties, acceptable to Waterton; and (d) execute, acknowledge and deliver to
Waterton such other and further deeds, assignments, stock transfers, documents
and instruments as may be necessary or advisable to consummate the exercise of
the Option.  At the Closing, Waterton shall: (x) pay to Grantor the full amount
of the Purchase Price by wire transfer in accordance with written instructions,
which instructions shall be delivered by Grantor to Waterton at least five (5)
days prior to the date of the Closing; and (y) sign and deliver a document or
instrument whereby Waterton agrees to assume and be bound by the Company
Agreements.  In addition, each of the Parties will deliver such other closing
certificates, documents and instruments as are reasonably requested by the other
Party.
 

 
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2.5           Transfer of Title at Closing.  Grantor has, and at the Closing
Grantor shall assign, transfer and convey to Waterton, good and indefeasible
title to Grantor’s right, title and interest in and to, and ownership of,
Mineral Ridge and the Mineral Ridge Interest, free and clear of all Liens or
other encumbrances, restrictions or agreements whatsoever (other than those
imposed by the Company Agreements).  Grantor represents, warrants and covenants
that at the Closing Waterton shall become a full member of Mineral Ridge for all
purposes, with all rights and privileges of a member thereof.
 
2.6           Pre-Closing Due Diligence.  Prior to Closing, Waterton has the
right to undertake and complete a full and complete due diligence review and
analysis of Mineral Ridge and the Mineral Ridge Properties.  Grantor shall
provide Waterton with full access, during normal business hours, to all books,
records, files and documents related to Mineral Ridge and the Mineral Ridge
Properties and all other information of Grantor related thereto or related to
the Mineral Ridge Properties, and to furnish such data, information and
documents as Waterton may reasonably request in connection with Waterton’s due
diligence review.
 
2.7           Right of First Refusal; Preemptive Right.   If, notwithstanding
the provisions of Section 2.3 of this Agreement and other relevant provisions of
this Agreement, Grantor receives an offer to purchase or acquire the Mineral
Ridge Interest or any right, title or interest related thereto that is the
subject of this Option (an “Offer”), including any such Offer from Scorpio Gold
or an Affiliate of Scorpio Gold (whether arising under the Company Agreements or
otherwise), Grantor shall promptly notify Waterton of its receipt of an
Offer.  The notice provided by Grantor shall be accompanied by a copy of the
Offer and such other details, notices and information with respect thereto.  If
the consideration for the Offer is, in whole or in part, other than monetary,
the notice from Grantor shall describe such consideration and its monetary
equivalent (based upon the fair market value of the nonmonetary consideration
and stated in terms of cash or currency).  Upon receipt of a notice of an Offer,
Waterton shall have forty-five (45) days from the date of receipt of such notice
to notify Grantor whether Waterton elects to acquire the interest subject to the
Offer at the same price (or its monetary equivalent in cash or currency) and on
substantially similar terms and conditions as set forth in such notice, or, in
the alternative, whether Waterton elects to exercise its Option on the terms and
conditions set forth herein.  The acquisition by Waterton shall be consummated
promptly after notice of such election is delivered.  If Waterton rejects the
Offer in writing and provides Grantor with Waterton’s written consent to
Grantor’s transfer pursuant to the Offer (which Waterton may withhold in its
sole discretion), then Grantor shall have sixty (60) days following receipt of
the foregoing Waterton rejection and consent to consummate the transfer
described in the Offer at the price and on the terms and conditions set forth in
the Offer.  Notwithstanding the foregoing, in the event that an Offer is
received, Waterton shall have and retain all of its rights and remedies under
this Agreement, including, without limitation, the right to enforce Section 2.3,
Section 8.14 and other relevant provisions of this Agreement.
 

 
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GRANTOR
 
3.1           Representations and Warranties.  Grantor represents and warrants
to Waterton as of the date hereof as follows, and covenant that these
representations and warranties will be true and correct throughout the Option
Period and through the Closing:
 
(a)           Organization and Standing; Corporate Power.
 
(i)           Grantor is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada.
 
(ii)           Grantor has the requisite corporate power and authority (i) to
enter into this Agreement and all other agreements and transactions contemplated
hereby, and (ii) to carry out and perform its obligations under the terms and
provisions of this Agreement and all agreements and transactions contemplated
hereby.
 
(b)           Authorization.  All requisite corporate action on the part of
Grantor, and its officers, directors, and shareholders, necessary for the
execution, delivery, and performance of this Agreement, the Closing of the
Option and all other transactions and agreements of Grantor contemplated hereby,
have been taken.  This Agreement and all agreements and instruments contemplated
hereby are, and when executed and delivered by Grantor, will be, legal, valid,
and binding obligations of Grantor enforceable against Grantor in accordance
with their respective terms.  This representation is limited by applicable
bankruptcy, insolvency, moratorium, and other similar laws affecting generally
the rights and remedies of creditors and secured parties.
 
(c)           No Violations.  The execution, delivery and performance of this
Agreement will not violate, breach or conflict with: (i) any provision of the
articles of incorporation or by-laws of Grantor, (ii) any law or statute
applicable to Grantor, (iii) any order or judgment of any court or other agency
of government; or (iv) any provision of any indenture, deed, agreement or other
document or instrument to which Grantor is a party or by which its properties or
assets are bound.  There is no law, rule or regulation, nor is there any
judgment, decree or order of any court or governmental authority binding on
Grantor which would be violated or contravened by the execution, delivery,
performance, or enforcement of this Agreement or any instrument or agreement
required hereunder.
 
(d)           Title.
 
(i)           Grantor has good and indefeasible title to the Mineral Ridge
Interest, free and clear of all Liens or other encumbrances, restrictions or
agreements whatsoever.  Grantor has not pledged, conveyed, optioned or otherwise
transferred or assigned (or agreed to pledge, convey, option or otherwise
transfer assign) any interest in or right to Mineral Ridge to any third party,
other than in favor of Waterton.
 

 
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(ii)           Grantor’s interest in Mineral Ridge is not subject to any voting
agreement, shareholder agreement, voting trust, proxy or other agreement or
arrangement with respect to voting or decision-making or any option or agreement
for the sale or transfer of such interest or any restriction with respect to the
sale, transfer or conveyance of such interest, except as set forth in the
Company Agreements.
 
(iii)           Grantor’s interest in Mineral Ridge constitutes 30% of the
ownership interest in and to Mineral Ridge, which constitutes 100% of the
ownership interest in and to Mineral Ridge owned by Pledgor.
 
(e)           Representations Regarding Mineral Ridge:
 
(i)           Mineral Ridge is a limited liability company duly organized,
validly existing, and in good standing under the laws of the State of Nevada;
 
(ii)           The entire agreement between Grantor and Scorpio Gold for the
governance, management, operation and administration of Mineral Ridge is
evidenced by the Company Agreements;
 
(iii)           The Company Agreements have been executed by the duly authorized
officers of Grantor and constitute the valid and binding agreement of the
parties thereto, enforceable in accordance with its terms, and Grantor has full
authority under all federal, state and local laws and regulations to perform all
of its obligations under the Company Agreements;
 
(iv)           The Company Agreements are in full force and effect, Grantor is
not in breach or default of any term or provision thereof, and to the best
knowledge of Grantor, Scorpio Gold is not in breach or default of any term or
provision thereof.  None of Grantor or to the best knowledge of Grantor Mineral
Ridge or Scorpio Gold is in default in the performance of any of its respective
obligations under the Company Agreements.  All payments and fees required to be
paid by the Company to Grantor hereunder have been paid to the date hereof and
Grantor does not have any claim against the Company for indemnification as of
the date hereof;
 
(v)           To the best knowledge of Grantor, Mineral Ridge has the full and
unfettered right to own, manage, use and operate its properties and assets,
including the Mineral Ridge Properties;
 
(vi)           To the best knowledge of Grantor, Mineral Ridge has obtained all
permits, licenses, approvals, authorizations and qualifications of all federal,
state and local authorities required for it to carry on its operations at or on
the Mineral Ridge Properties.  To the best knowledge of Grantor, Mineral Ridge
is not in violation of and has no liability (other than liability for compliance
with existing permits and laws, including but not limited to performance of
reclamation) under any statute, rule or regulation of any governmental authority
applicable to the Mineral Ridge Properties;
 

 
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(vii)           To the best knowledge of Grantor, Mineral Ridge is not in
violation of any law, rule, ordinance, or other governmental regulation,
including, without limitation, those relating to zoning, condemnation, mining,
reclamation, environmental matters, equal employment, and federal, state, or
local health and safety laws, rules, and regulations, the lack of compliance
with which could materially adversely affect the Mineral Ridge Properties;
 
(viii)           To the best knowledge of Grantor, there are no actions, suits
or proceedings pending or threatened against or affecting the Mineral Ridge
Properties, including any actions, suits, or proceedings being prosecuted by any
federal, state or local department, commission, board, bureau, agency, or
instrumentality.  To the best knowledge of Grantor, Mineral Ridge is not subject
to any order, writ, injunction, judgment or decree of any court or any federal,
state or local department, commission, board, bureau, agency, or instrumentality
which relates to the Mineral Ridge Properties;
 
(ix)           To the best knowledge of Grantor, Mineral Ridge has good and
marketable title to the Mineral Ridge Properties and has valid and effective
rights to its leased property, in each case free and clear of Liens other than
those notified to Waterton; and
 
(x)           To the best knowledge of Grantor, there is no condition or
activity at the Mineral Ridge Properties which constitutes a nuisance or which
could result in a violation of or liability under any applicable Environmental
Law.  To the best knowledge of Grantor, Mineral Ridge has not received any
notice of violation or any consent order issued under applicable Environmental
Laws to which the Mineral Ridge Properties or Mineral Ridge’s operations thereon
are now subject or may become subject.  To the best knowledge of Grantor, there
are no pending or threatened proceedings by or before any court or other
governmental authority with respect to operations on or the ownership of the
Mineral Ridge Properties alleged to be, or to have been, in violation of, or to
be the basis of liability under, any Environmental Law, and Grantor is not aware
of any “release” (as defined in the U.S. Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended) of any Hazardous Materials
at, from or affecting the Mineral Ridge Properties.
 
(f)           Contracts and Commitments.  Grantor is not in default, and will
not be in default as a result of the consummation of the transactions
contemplated by this Agreement, under any contract, agreement, commitment,
mortgage, indenture, loan agreement, lease, license, or other instrument to
which it is a party, the lack of compliance with which could materially
adversely affect the execution, delivery, performance, or enforcement of this
Agreement or any instrument or agreement required hereunder or the transactions
contemplated hereby.
 
(g)           Legality.  Grantor is not in material violation of any law, rule,
ordinance, or other governmental regulation, including, without limitation,
those relating to zoning, condemnation, mining, reclamation, environmental
matters, equal employment, and federal, state, or local health and safety laws,
rules, and regulations, the lack of compliance with which could materially
adversely affect the execution, delivery, performance, or enforcement of this
Agreement or any instrument or agreement required hereunder or the transactions
contemplated hereby.
 

 
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(h)           Litigation and Claims.  There are no actions, suits or proceedings
pending or, to the best knowledge of Grantor threatened against Grantor,
including any actions, suits, or proceedings being prosecuted by any federal,
state or local department, commission, board, bureau, agency, or
instrumentality, that could materially adversely affect the execution, delivery,
performance, or enforcement of this Agreement or any instrument or agreement
required hereunder or the transactions contemplated hereby.  Grantor is not
subject to any order, writ, injunction, judgment or decree of any court or any
federal, state or local department, commission, board, bureau, agency, or
instrumentality that could materially adversely affect the execution, delivery,
performance, or enforcement of this Agreement or any instrument or agreement
required hereunder or the transactions contemplated hereby.
 
(i)           Consents.  Grantor has obtained or made all consents, approvals,
authorizations, declarations, or filings required by or under any federal,
state, local, or other authority, stock exchange or any other third party or
from Mineral Ridge or Scorpio Gold, in connection with the valid execution,
delivery, and performance by Grantor of this Agreement and the consummation of
the transactions contemplated hereby.
 
(j)           Recitals.  The Recitals to this Agreement are true and correct.
 
(k)           Brokerage or Finder’s Fee.  All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by
Grantor in such manner as not to give rise to any valid claim for a brokerage
commission, finder’s fee, or other fee or commission arising by reason of the
transactions contemplated by this Agreement that would be added to or otherwise
affect the Purchase Price or that would give rise to a valid claim against
Waterton.
 
(l)           Representations.  No statements, warranties, or representations
made by Grantor herein contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements made, in
light of the circumstances under which such statements were or will be made, not
misleading.
 
(m)           Survival of Representations.  All representations and warranties
made by Grantor hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement.
 
 
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WATERTON
 
4.1           Representations and Warranties of Waterton.  Waterton represents
and warrants to Grantor as of the date hereof as follows, and covenants that
these representations and warranties will be true and correct throughout the
Option Period and through the Closing:
 

 
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(a)           Organization and Standing.  Waterton is a limited partnership duly
organized, validly existing, and in good standing under the laws of the British
Virgin Islands.
 
(b)           Power.  Waterton has the requisite partnership power and authority
(i) to enter into this Agreement and all other agreements contemplated hereby,
and (ii) to carry out and perform its obligations under the terms and provisions
of this Agreement and all agreements contemplated hereby.
 
(c)           Authorization.  All requisite partnership action on the part of
Grantor necessary for the execution, delivery, and performance of this Agreement
and all other agreements of Waterton contemplated hereby, have been taken.  This
Agreement and all agreements and instruments contemplated hereby are, and when
executed and delivered by Waterton, will be, legal, valid, and binding
obligations of Waterton enforceable against Waterton in accordance with their
respective terms.  This representation is limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws affecting generally the rights
and remedies of creditors and secured parties.
 
(d)           No Violations.  The execution, delivery and performance of this
Agreement will not violate, breach or conflict with: (i) any provision of the
partnership or other constating documents of Waterton, (ii) any law or statute
applicable to Waterton, (iii) any order or judgment of any court or other agency
of government; or (iv) any provision of any indenture, deed, agreement or other
document or instrument to which Waterton is a party or by which its properties
or assets are bound.  There is no law, rule or regulation, nor is there any
judgment, decree or order of any court or governmental authority binding on
Waterton which would be violated or contravened by the execution, delivery,
performance, or enforcement of this Agreement or any instrument or agreement
required hereunder.
 
(e)           Representations.  No statements, warranties or representations
made by Waterton herein contain any untrue statement of material fact or omit to
state a material fact necessary in order to make the statement made in light of
the circumstances under which such statements were made or will be made, not
misleading.
 
(f)           Survival of Representations.  All representations and warranties
made by Grantor hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement.
 
 
ARTICLE 5
NOTICES
 
5.1           Notices.  All notices given in connection herewith shall be in
writing, and all such notices and deliveries to be made pursuant hereto shall be
given or made in person, by certified or registered mail, by reputable overnight
courier, or by facsimile with receipt confirmed.  Such notices and deliveries
shall be deemed to have been duly given and received when actually delivered in
person or sent by facsimile (during normal business hours and with receipt
confirmed), on the next business day following the date they are sent by
courier, or three business days after registered or certified mailing, postage
prepaid, and addressed as follows:
 

 
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(a)           If to Grantor:
 
Golden Phoenix Minerals, Inc.
1675 E. Prater Way, Suite 102
Sparks, Nevada 89434
Attention: Tom Klein
Facsimile No.:  775-853-5010

(b)           If to Waterton:
 
Waterton Global Value, L.P.
c/o Waterton Global Resource Management, Inc.
199 Bay Street, Suite 5050
Toronto, Ontario
Canada M5L 1E2
Attention:
Facsimile No.: 416-504-3200

ARTICLE 6
TITLE TO AFTER-ACQUIRED INTERESTS
 
6.1           After-Acquired Property.  This Agreement applies and extends to
any further or additional right, title, interest or estate heretofore or
hereafter acquired by Grantor in or to Mineral Ridge or the Mineral Ridge
Properties or any part thereof.
 

 
ARTICLE 7
ENTIRE AGREEMENT/AMENDMENT
 
7.1           Entire Agreement.  This Agreement is the complete expression of
all agreements, contracts, covenants, and promises among the Parties, and all
negotiations, understandings, and agreements among the Parties are set forth in
this Agreement, which solely and completely expresses their understanding, and
shall be construed without reference to any such negotiations, understandings
and agreements.
 
7.2           Amendments.  This Agreement may not be amended or modified, nor
may any obligation hereunder be waived, except by writing duly executed on
behalf of all Parties, and unless otherwise specifically provided in such
writing, any amendment, modification, or waiver shall be effective only in the
specific instance and for the purpose it is given.
 

 
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ARTICLE 8
GENERAL PROVISIONS
 
8.1           Governing Law.  This Agreement, and the rights and liabilities of
the Parties hereunder, shall be governed by and construed in accordance with the
laws of the State of Nevada, other than its rules as to conflicts of law, and
the Parties hereby submit to the non-exclusive jurisdiction of the Nevada state
and federal courts with respect to any matters arising out of or pertaining to
this Agreement, and hereby waive any defenses of lack of jurisdiction,
inconvenient forum or improper venue.
 
8.2           Parties in Interest; Assignment.  All of the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective Parties hereto and their successors and permitted
assigns.  The rights, powers, privileges, and interests hereunder shall not be
assignable by either Party, except to Affiliates or subsidiaries, or as
otherwise specifically provided for herein, without the prior written consent of
the non-assigning Party; provided that any Affiliate, subsidiary or third party
to whom any rights, powers, privileges or interests hereunder or any interest in
the Property are assigned or conveyed shall agree in writing to be bound by all
the terms and conditions of this Agreement.
 
8.3           Other Business Opportunities.  This Agreement is, and the rights
and obligations of the Parties are, strictly limited to the matters set forth
herein.  Subject to the terms and conditions hereof, each of the Parties shall
have the free and unrestricted right to independently engage in and receive the
full benefits of any and all business ventures of any sort whatever, whether or
not competitive with the matters contemplated hereby, without consulting the
other or inviting or allowing the other to participate therein.  The doctrines
of “corporate opportunity” or “business opportunity” shall not be applied to any
other activity, venture, or operation of either Party.
 
8.4           No Partnership.  Nothing contained in this Agreement shall be
deemed to constitute any Party the partner of the other, nor, except as
otherwise herein expressly provided, to constitute any Party the agent or legal
representative of the other, nor to create any fiduciary relationship between
them.  It is not the intention of the Parties to create, nor shall this
Agreement be construed to create, any mining, commercial, tax or other
partnership or any joint venture.  No Party shall have any authority to act for
or to assume any obligation or responsibility on behalf of the other Parties,
except as otherwise expressly provided herein.
 
8.5           Severability.  In the event that any one or more of the provisions
contained in this Agreement or in any other instrument or agreement contemplated
hereby shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement or any such other instrument or
agreement.
 
8.6           Counterparts.  This Agreement may be executed in multiple
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same document.
 

 
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8.7           Covenant Running With Land.  The Option and all of the covenants,
conditions, and terms of this Agreement, including the right of Waterton to
acquire Grantor’s right to receive or obtain its undivided interest in the
Mineral Ridge Properties, shall (a) be of benefit to the parties, (b) run as a
covenant with the Mineral Ridge Properties and the ground covered thereby
(including any interest derived from the federal government in the event of the
amendment or repeal of the General Mining Law of 1872), and (c) bind and inure
to the benefit of the parties and their respective successors and permitted
assigns (including any third party who acquires any interest in the
Property).  The Option, this Agreement and the performance of the provisions
hereof attaches to the Mineral Ridge Properties.
 
8.8           Time of Essence.  Time is of the essence in this Agreement.
 
8.9           Rule Against Perpetuities.  In the event a court of competent
jurisdiction determines that the term or any other provision of this Agreement
violates the Rule Against Perpetuities, then the term of this Agreement shall
automatically be revised and reformed to coincide with the maximum term
permitted by the Rule Against Perpetuities, or such other provision shall
automatically be revised and reformed as necessary to comply with the Rule
Against Perpetuities, and this Agreement shall not be terminated solely as a
result of a violation of the Rule Against Perpetuities.
 
8.10           Additional Documents; Further Assurances.  At the request of
either Party, the Parties shall from time to time execute and deliver all such
further instruments, certificates and documents and do all such further actions
and things as may be necessary or appropriate to fully perform, effectuate and
carry out the purposes of this Agreement and the transactions contemplated
hereby.
 
8.11           Joint Preparation.  Each provision of this Agreement shall be
construed as though the parties participated equally in the drafting of the
same.  Consequently, the parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting party shall
not be applicable to this Agreement.
 
8.12           Severance of Invalid Provisions.  If and for so long as any
provision of this Agreement shall be determined to be invalid for any reason
whatsoever, such invalidity shall not affect the validity or operation of any
other provision of this Agreement except only so far as shall be necessary to
give effect to the construction of such invalidity, and any such invalid
provision shall be deemed severed from this Agreement without affecting the
validity of the balance of this Agreement.
 
8.13           Recording.  The Parties agree that any Party may record this
Agreement (or a memorandum or short form of this Agreement) in the official
records of Esmeralda County, Nevada.
 
8.14           SPECIFIC PERFORMANCE; SPECIAL REMEDIES.  Each of the Parties
hereto acknowledges that the other Party would be irreparably damaged if any of
the provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by a Party hereto could not
be adequately compensated in all cases by monetary damages alone.  Accordingly,
in addition to any other right or remedy to which a Party may be entitled, at
law or in equity, each shall be entitled to enforce any provision of this
Agreement by a decree of specific performance and to temporary, preliminary and
permanent injunctive relief to prevent breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.
 

 
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8.15           Right of Set-Off.  Waterton shall have the right to set off and
apply any indebtedness, liability or other monetary obligation at any time owing
by Grantor to or for the credit or the account of Waterton against the Purchase
Price in the event that Waterton exercises the Option, and Grantor hereby
expressly authorizes Waterton to so set off and apply any and all such amounts
to the payment of the Purchase Price.
 
8.16           Construction.  Whenever the word “including” is used in this
Agreement, it shall be deemed to mean “including without limitation.”
 
[signatures on following page]
 
 
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IN WITNESS WHEREOF, the Parties hereto have caused this Option Agreement to be
duly executed, delivered, and effective from the date first above written.
 

 
GRANTOR:
         
GOLDEN PHOENIX MINERALS, INC.
   
a Nevada corporation
               
By:________________________________
   
(name):_____________________________
   
(title):______________________________
               
WATERTON:
         
WATERTON GLOBAL VALUE, L.P., by the General Partner of its General Partner,
CORTLEIGH LIMITED
               
By:_________________________________
   
Authorized Signing Officer
 

The undersigned, Scorpio Gold (US) Corporation, as a member and the manager of
Mineral Ridge Gold, LLC, a Nevada limited liability company, hereby confirms and
acknowledges that it has reviewed this Option Agreement.  The undersigned
further confirms and acknowledges that it has signed and delivered the Consent
and that the undersigned has consented to this Option Agreement and the
transactions contemplated hereby, and, upon exercise of the Option, the
undersigned will admit Waterton as a member of Mineral Ridge Gold, LLC with all
rights and privileges of a member thereof.

Agreed and Confirmed as of the date first above written:

SCORPIO GOLD (US) CORPORATION

By: ___________________________
(name): ________________________
(title): _________________________

[Option Agreement Signature Page]
 
 
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STATE OF                                 )
                                                     )ss.
COUNTY OF ___________   )
 
The foregoing instrument was acknowledged before me on this _______ day of
__________________, 2011, by ______________________, as _____________________ of
Golden Phoenix Minerals, Inc., a Nevada corporation.
 
Witness my hand and official seal.
 

 

 
____________________________________
 
Notary Public
 
 
My Commission expires:
 
 
____________________________________
 
[Seal]

STATE OF                                )
                                                    )ss.
COUNTY OF ___________  )
 
The foregoing instrument was acknowledged before me on this _______ day of
__________________, 2011, by ______________________, as _____________________ of
Cortleigh Limited, the general partner of the general partner of Waterton Global
Value, L.P..
 
Witness my hand and official seal.
 

 

 
________________________________
 
Notary Public
 
 
My Commission expires:
 
 
________________________________
 
 
[Seal]

 
 
 

 
 
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STATE OF                                )
                                                    )ss.
COUNTY OF ___________  )
 
The foregoing instrument was acknowledged before me on this _______ day of
__________________, 2011, by ______________________, as _____________________ of
Scorpio Gold (US) Corporation, a Nevada corporation.
 
Witness my hand and official seal.
 

 

 
______________________________
 
Notary Public
 
 
My Commission expires:
 
 
_______________________________
 
 
 
[Seal]

 

 

 
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EXHIBIT A
to
OPTION AGREEMENT
Dated as of August 3, 2011
By and between
Golden Phoenix Minerals, Inc. and
Waterton Global Value, L.P.,
with Scorpio Gold (US) Corporation acknowledging the agreements therein

Mineral Ridge Project Properties
ESMERALDA COUNTY, NEVADA

Those unpatented mining claims, patented mining claims, fee lands and other real
property rights and interests (whether surface, underground, mineral, or other)
set forth in the following attached pages, all of which are located in Esmeralda
County, Nevada:

[see attached]

 

 
 
 
 
A-1

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