OPTION AGREEMENT made between: SAGE GOLD INC. and GRYPHON GOLD CORPORATION and BOREALIS MINING COMPANY Dated as at March 5, 2010

A.

BMC is the recorded owner of a 100% interest in and to the claims comprising the Properties (as defined below);

B.

Sage and Gryphon entered into a letter agreement dated February 23, 2010 (the “LOI”) pursuant to which Gryphon agreed to grant to Sage the option to enter into a joint venture agreement to earn a 50% joint venture interest either through (i) a 50% undivided interest in the Properties or (ii) a 50% interest in BMC, all subject to certain terms and conditions;

C.

As consideration for entering into the LOI, Sage paid Gryphon a non-refundable cash deposit of US$100,000;

D.

Sage and Gryphon have entered into a Subscription Agreement under which Sage will invest US$400,000 in the Private Placement (as defined below); and

E.

This Option Agreement formalizes the terms of the LOI referred to above.

1.1

Defined Terms

(a)

“Accounting Procedure” means the procedure attached to this Agreement as Schedule “B”;

(b)

“Additional Reserve Payments” will have the meaning attributed to that term in Section 2.1(a)(ii) of this Agreement;

(c)

“Affiliate” has the meaning attributed to it in the Ontario Business Corporations Act;

(d)

“Agreement” means this option agreement, together with the schedules attached hereto, as amended or supplemented from time to time;

(e)

“Applicable Law” means any and all federal, state, territorial or municipal laws, statutes, regulations, by-laws, ordinances, rules, guidelines, policies, notices, orders and directions, or other requirements of any Government Authority having jurisdiction over the parties, the Participants, the Joint Venture or any of the Properties;

(f)

“Assets” mean all tangible and intangible goods, chattels, improvements or other items including, without limitation, land, buildings and equipment, acquired by or on behalf of a Party with respect to the Properties;

(g)

“Borealis Pre-Feasibility Study” means the Pre-Feasibility Study of the Borealis Property dated September 17, 2009, as referred to in Schedule “D” to this Agreement;

(h)

“Business Day” means a day, other than a Saturday or a Sunday, on which banks are generally open for business in the city of Toronto, Ontario and Vancouver, British Columbia;

(i)

“Capital Contribution” will have the meaning attributed to that term in Subsection 2.1(a)(i) of this Agreement;

(j)

“Capital Contribution Condition” will have the meaning attributed to that term in Subsection 2.1(a)(i) of this Agreement;

(k)

“Change of Control” is defined as the occurrence of any one or more of the following events:

(i)

a consolidation, merger, amalgamation, arrangement or other reorganization or acquisition involving either Party or any of its affiliates

(ii)

any person, entity or group of persons or entities acting jointly or in concert (an “Acquiror”), other than an Acquiror acceptable (as confirmed in writing) to the Party who is not subject to a Change of Control, acquires or acquires control (including, without limitation, the right to vote or direct the voting) of voting securities which, when added to the voting securities owned of record or beneficially by the Acquiror or which the Acquiror has the right to vote or in respect of which the Acquiror has the right to direct the voting, would entitle the Acquiror and/or associates and/or affiliates of the Acquiror to cast or to direct the casting of 30% or more of the votes attached to all of either Party’s outstanding voting securities which may be cast to elect directors of either Party or the successor corporation (regardless of whether a meeting has been called to elect directors) and as a result of such acquisition of control, directors of either Party holding such office immediately prior to such acquisition of control shall not constitute a majority of the board of directors of either Party;

(iii)

as a result of or in connection with: (A) a contested election of directors, or; (B) a consolidation, merger, amalgamation, arrangement or other reorganization or acquisition involving either Party or any of its affiliates and another corporation or other entity, as a result of such acquisition of control, directors of either Party holding such office immediately prior to such acquisition of control shall not constitute a majority of the board of directors of either Party; or

(iv)

the board of directors of either Party adopts a resolution to the effect that a change of control has occurred or is imminent;

(l)

“Construction” means construction work or activity carried out or performed by the Operator under this Agreement;

(m)

“Determination Event” will have the meaning attributed to that term in Section 14.1 of this Agreement;

(n)

“Due Diligence Out” means the option by either Gryphon or Sage to terminate this Option Agreement and Subscription Agreement during the Due Diligence Period due to the discovery of any condition that has a Material Adverse Effect on the other Party or, with respect to termination by Sage, on the Borealis Property that has not otherwise been disclosed to the terminating Party prior to February 23, 2010;

(o)

“Due Diligence Period” means the period commencing on February 23, 2010 and terminating on the earlier of (i) March 26, 2010 or (ii) the termination of this Option Agreement;

(p)

“Effective Date” means March 5, 2010;

(q)

“Environmental Laws” means all Applicable Laws currently in effect relating to pollution or protection of the environment, health, safety or natural resources, including, without limitation, the use, consumption, handling, transportation, storage or Release of Hazardous Substances;

(r)

“Environmental Order” means any prosecution, order, decision, notice, direction, report, recommendation or request issued, rendered or made by any Governmental Authority in connection with Environmental Laws or environmental orders;

(s)

“Exercise Date” means the date the Option is exercised by Sage under the terms of this Agreement;

(t)

“Expenditures” means all costs and expenses whatsoever, direct or indirect, with respect to the Properties, in accordance with this Agreement. Without limitation, the following categories of Expenses will have the following meanings:

(i)

“Expenses” means all costs incurred on the Properties, Operations and on exploration and development activities directed towards discovery and definition of an ore body on the Properties during the Option Period pursuant to Subsection 2.1(a) of this Agreement, including payments required to maintain the Properties in good standing, monies expended in paying the fees, wages, salaries, traveling expenses and fringe benefits of all persons engaged in work with respect to or for the benefit of the Properties and which are attributable to such persons work on the Properties; and

(ii)

“Royalty Buy Down Cash Payment” means any cash payments which Gryphon will be required to make under the terms of the Royalty Buy Down Option Agreement and, if applicable, the Royalty Holder Convertible Debenture, if Gryphon chooses to exercise its rights thereunder; provided that if Sage does not fund 50% of the Royalty Buy Down Cash Payment, its interest in the Joint Venture shall not be adjusted, but rather the full amount of the Royalty Buy Down Cash Payment shall

(u)

“Expenditure Budget” means the expenditure budget approved and authorized by the Project Team in accordance with Section 5.1(a) of this Agreement;

(v)

“GAAP” means generally accepted accounting principles in the United States;

(w)

“Governmental Authority” means any government or governmental, administrative, regulatory or judicial body, department, commission, authority, tribunal, agency or entity;

(x)

“Hazardous Substance” means any substance, combination of substances or by-product of any substance which is or may become hazardous, toxic, injurious or dangerous to any person, property, air, land, water, flora, fauna or wildlife; and includes but is not limited to contaminants, pollutants, wastes and dangerous, toxic, deleterious or designated substances as defined in or pursuant to any Environmental Laws or Environmental Orders;

(y)

“Interest” means a beneficial interest in BMC or the Joint Venture Entity, as applicable;

(z)

“Joint Venture” will have the meaning attributed to that term in Section 2.9 of this Agreement;

(aa)

“Joint Venture Agreement” means the Joint Venture Agreement to be negotiated by the Parties with terms and conditions contained in the indicative terms set forth on Schedule “G”;

(bb)

“Joint Venture Entity” will have the meaning attributed to that term in Section 2.1(a)(i) of this Agreement;

(cc)

“JV Agreement Condition” will have the meaning attributed to that term in Section 2.1(b) of this Agreement;

(dd)

“JV Effective Date” will have the meaning attributed to that term in Section 2.9 of this Agreement;

(ee)

“Licences” means any licences or permits (including, without limitation, water licences, surface leases, winter roads and rights of way) required in connection with the Properties;

(ff)

“Losses” means actual losses, liabilities, damages, injuries, costs or expenses, including legal costs as expenses, suffered or incurred by the respective party;

(gg)

“Project Team” means the committee established pursuant to Article 5 of this Agreement;

(hh)

“Material Adverse Effect” means any condition, event or change that would cause a material adverse effect on the value, economic viability, operations, property rights, property title, financial condition or prospects on a Party’s business or property or the ability to consummate the contemplated transactions;

(ii)

“Mine” means the workings established and Assets acquired, obtained or constructed in order to bring the Properties, or any portion thereof, into, and to maintain, commercial production, including, without limitation, mine development openings, plant and service facilities, concentrator and other metallurgical installations, tailings impoundments, infrastructure, housing and other related facilities;

(jj)

“Minerals” means any and all ores (and concentrates or metals derived therefrom) of precious, base or industrial minerals, in, on or under the Properties which may lawfully be explored for, mined and sold by the parties or Participants pursuant to the instruments of title under which the Properties are held;

(kk)

“Monthly Expenditure Report” will have the meaning attributed to that term in Section 7.8 of this Agreement;

(ll)

“NI-43-101” means National Instrument 43-101 as adopted by the Canadian Securities Administrators;

(mm)

“Notice of Exercise” will have the meaning attributed to that term in Section 2.9 of this Agreement;

(nn)

“Operations” means every kind of work done, or activity performed, by the Operator on or in respect of the Properties to plan, arrange, carry out or complete work contemplated by a work programs, exploration programs and operating plans, or as otherwise directed by the Project Team, including, without limitation, investigating, prospecting, exploring, and developing; property maintenance; reviewing technical information, preparing and completing reports, estimates and studies (including environmental studies); signing, equipping, improving and surveying, Construction; and, mining, milling. concentrating, rehabilitation, reclamation, and environmental protection; and further including the management and administration necessary to conduct and maintain records of the work or activity aforesaid:

(oo)

“Operator” means, at any time prior to the Exercise Date, BMC and, at any particular time on or after the Exercise Date, the Party or Parties acting as the Operator of the Joint Venture pursuant to the Joint Venture Agreement;

(pp)

“Option” will have the meaning attributed to that term in Subsection 2.1(a) of this Agreement;

(qq)

“Option Expiry Date” means December 31, 2010, unless extended by mutual agreement of the Parties for one or more additional option periods not to exceed six (6) months in the aggregate;

(rr)

“Option Period” means the period from the Effective Date to the earlier of (i) the exercise of the Option, (ii) the Option Expiry Date or (iii) the termination of the Option under the terms of this Agreement;

(ss)

“Party” or “Parties” means, as the context may require, Sage, BMC and Gryphon and their respective successors and permitted assigns which become parties pursuant to the Agreement;

(tt)

“Permitted Encumbrances” means, in respect of the Properties or the surface lands related thereto:

(i)

inchoate or statutory liens for taxes not at the time overdue and inchoate or statutory liens for overdue taxes the validity of which BMC is contesting in good faith but only for so long as such contestation effectively postpones enforcement of any such liens or taxes;

(ii)

statutory liens incurred in the ordinary course of the business of BMC in connection with workers’ compensation, unemployment insurance and similar legislation, but only to the extent that each such statutory lien relates to amounts not yet due;

(iii)

liens and privileges arising out of any judgment with respect to which BMC intends to prosecute an appeal or proceedings for review but only for so long as there is a stay of execution pending the determination of such appeal or proceedings for review;

(iv)

security given in respect of the Properties by BMC to a public utility or any Governmental Authority;

(v)

royalties and other obligations in existence as of the Effective Date imposed under the terms of any mining, mineral, exploration or resource claim, concession, lease, contract or other right pursuant to which BMC holds its interest in the Properties;

(vi)

any royalties, obligations, reservations or exceptions contained in the original grants from a Governmental Authority or arising under any Applicable Law in effect from time to time;

(vii)

easements, including rights of way for, or reservations or rights of others relating to, sewers, water lines, gas lines, pipelines, electric lines, telegraph and telephone lines and other similar products or services and any registered restrictions or covenants that run with the land, provided that there has been compliance with the provisions thereof;

(viii)

zoning by-laws or ordinances as to the use of real property;

(ix)

other restrictions as to the use of real property and agreements with other persons registered against title to the Properties provided such restrictions and agreements existed as of the Effective Date; and

(x)

the paramount title of the United States of America.

(xi)

undetermined or inchoate construction or repair or storage liens arising in the ordinary course of the business of BMC, a claim for which has not been tiled or registered pursuant to law or of which notice in writing has not been given to BMC;

(uu)

“Private Placement” means the subscription by Sage to purchase US$400,000 in units of Gryphon (the “Units”), effective on or before April 16, 2010, for cash on a private placement basis. Each unit consisting of one share of common stock and one-half of one warrant (exercisable for a period of two years at a 50% premium to the Unit price, expressed in US$), at an issue price per Unit equal to the greater of (i) the maximum discounted price permitted under Part VI of the TSX Company Manual, and (ii) a 5% premium to the 30 day volume weighted closing price of the common stock of Gryphon ending on the day immediately prior to the closing date under the Subscription Agreement, but not less than Cdn$0.18 per unit and not more than Cdn$0.25 per Unit, subject to TSX approval;

(vv)

“Private Placement Condition” means the condition, for the benefit of Gryphon, related to the closing Private Placement on or before April 16, 2010;

(ww)

“Project Financing Commitment” means such financing by one or more third parties as is required to bring a Mine into production;

(xx)

“Properties” means, subject to Section 2.7 of this Agreement, all mineral claims and permits comprising the Properties set forth in Schedule “A” attached hereto, the Minerals thereon, all information obtained from Operations and those rights and benefits appurtenant to the Properties, other than royalties but including, without limitation, surface rights, land use permits, leases and water rights that become subject to this Agreement;

(yy)

“Regulatory Approval” means the regulatory approval required for the Option, the transactions contemplated in this Agreement and, as applicable, the Joint Venture, including, but not limited to, TSX Venture Exchange approval for Sage and TSX approval for Gryphon;

(zz)

“Release” includes abandon, add, deposit, discharge, disperse, dispose, dump, emit, empty, escape, leach, leak, migrate, pour, pump, release or spill;

(aaa)

“Representative” will have the meaning attributed to that term in Subsection 5.2 of this Agreement;

(bbb)

“Royalties” will have the meaning attributed to that term in Schedule “C” to this Agreement;

(ccc)

“Royalty Buy Down” means the option under the terms of the Royalty Buy Down Option Agreement, exercisable to buy down the Royalties for consideration equal to: (i) a cash payment of US$1,750,000, (ii) the issuance of the 7,726,250 shares of Gryphon common stock and (iii) the issuance of a convertible debenture in the principal amount of US$1,909,500 to the holders of the Royalties, subject to adjustment in the case of amounts referred to in Sections 1.1(ccc)(ii) and (iii) in the event the Lessors (as referred to in the Royalty Buy Down Option Agreement) elect to adjust such amounts in accordance with Section 4(d) of the Royalty Buy Down Option Agreement, provided that principal amount of the convertible debenture will not exceed US$3,000,000;

(ddd)

“Royalty Buy Down Option Agreement” means the Option Agreement Amendment to Mining Lease, by and among Gryphon, BMC and each of Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 02/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, as amended, including by the terms of Amendment No. 2, effective as of February 12, 2010, and as may be amended from time-to-time;

(eee)

“Royalty Holder Convertible Debenture” means the convertible debenture in the principal amount of US$1,909,500 to the holders of the Royalties under the Royalty Buy Down Option Agreement;

(fff)

“Simple Majority” means a decision made by the Project Team by a majority of the votes present at a meeting and entitled to be cast,

(ggg)

“Special Expert” means an arm’s length third party expert designated by the Project Team to break any voting deadlock of the Project Team as contemplated in Section 5.13 of this Agreement or to settle any disputes related to the Additional Reserve Payments as contemplated in Section 2.1(a)(ii) of this Agreement;

(hhh)

“Subscription Agreement” means the subscription agreement between Sage and Gryphon executed in connection with the Private Placement;

(iii)

“TSX” means the Toronto Stock Exchange;

(jjj)

“TSX-V” means the TSX Venture Exchange;

(kkk)

“Underlying Agreements” means, collectively, the agreements set forth on Schedule “G” attached to this Agreement; and

(lll)

“Work Plan” will have the meaning attributed to that term in Subsection 5.1(b) of this Agreement.

1.2

General

1.3

Headings, etc.

1.4

Currency

1.5

Severability

1.6

Knowledge

1.7

Schedules

Schedules:

Description:

A

The Properties

B

Accounting Procedures

C

Royalties

D

Pre-Feasibility Study

E

Terms of Reimbursement of Expenditures

F

Indicative Terms of the Joint Venture Agreement

2.1

Grant and Exercise of Option

(a)

Sage shall have the right to enter into the Joint Venture Agreement (the “Option”) by satisfying the following conditions, each for the benefit of Gryphon and BMC (each, an “Option Exercise Condition”):

(i)

Sage will make an equity capital contribution in the aggregate sum of US$9,000,000 (the “Capital Contribution”) in cash to BMC or, upon mutual agreement of Sage and Gryphon, a corporate entity formed for the purposes of the Joint Venture (a “Joint Venture Entity”), in connection with the exercise of the Option; provided, however, that Sage will make the Capital Contribution on or before the earlier of (A) any time prior to the Option Expiry Date or, (B) within sixty (60) days after receipt by the Parties (or as soon thereafter as is practicable for Sage using its best efforts) of a binding commitment letter (a “Project Financing Commitment”) for the remainder of the Project Financing on terms acceptable to the Parties, acting reasonably (the “Capital Contribution Condition”).

(ii)

If the Payment Accrual Date (as defined below) has occurred prior to the exercise of the Option, Sage will to pay Gryphon cash payments (the “Additional Reserve Payments”) of US$1,000,000 for each 100,000 ounces of proven and probable reserves of gold (and gold equivalents) in the Borealis Property (over and above that set forth in the Borealis Pre-Feasibility Study), based on an independent third party report acceptable to Sage, acting reasonably, which may include a NI 43-101 technical report or a bankable feasibility study. Sage shall have a period of 30 days to engage an independent third party to review data and confirm proven and probable reserves prior to paying the Additional Reserve Payments. The Additional Reserve Payments for ounces greater than 100,000 ounces will be made on a proportionate basis if less than 200,000 ounces in total are confirmed. The Additional Reserve Payments will be made based on proven and probable reserves up to a total of US$2,000,000 and be payable in cash by the date (the “Payment Accrual Date”) which is the later of (A) the JV Effective Date and (B) 30 days upon delivery of an independent third party report. Any disputes of the proven and probable reserve determinations shall be settled by a Special Expert, who shall be an independent third party mining geologist. Sage’s obligations to make the Additional Reserve Payments will be reflected in the Joint Venture Agreement.

(iii)

Sage will deliver to Gryphon common shares of Sage with a value equal to US$1,000,000, based on the 30 day volume weighted closing price of its common stock traded on the TSX-V immediately prior the issue date, provided that if approval of the TSX-V is not obtained for the Sage

(iv)

Sage has executed and delivered to Gryphon the Subscription Agreement pursuant to which Sage will invest US$400,000 in the Private Placement, and pay the purchase price for the Units to Gryphon in cash on or before April 16, 2010 (the “Private Placement Condition”). If Sage does not pay purchase price for the Units to Gryphon on or before April 16, 2010 or if required regulatory approvals (including from the TSX and, if required by Sage, the TSX-V) for the Private Placement have not been obtained by April 16, 2010, the Option will terminate.

(v)

Sage will have paid 50% of the Expenditures. If Sage fails to fund its portion of any Expenditure which has been approved in accordance with the terms of this Agreement, Gryphon shall have the right to terminate the Option Agreement upon ten (10) days written notice of default and Sage’s failure to pay its portion of the Expenditures in accordance with Section 7.8 of this Agreement (the “Expenditure Funding Condition”); provided that Gryphon’s right to terminate the Option pursuant to this section 2(a)(v) shall not apply in the event Sage does not fund any portion of the Royalty Buy Down Cash Payment.

(vi)

Sage will deliver to Gryphon:

A.

evidence that Sage has obtained Regulatory Approval for the performance of the transactions and obligations under this Agreement and the terms of such Regulatory Approvals have been satisfied; and

B.

evidence of a Project Financing Commitment.

(vii)

If applicable, the Joint Venture Entity will assume and fulfill all of the obligations of BMC under each of the Underlying Agreements.

(b)

During the Option Period, the Parties will use best efforts to negotiate the terms and conditions of the Joint Venture Agreement in accordance with the Indicative Terms of the Joint Venture Agreement set out in Schedule F, and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010, and either Party may terminate this Agreement if the terms, conditions and form of the Joint Venture Agreement have not been agreed to by June 15, 2010 (the “JV Agreement Condition”).

(c)

If the Royalty Buy Down Option is exercised, the Joint Venture will agree to assume the obligations of Gryphon under the Royalty Holder Convertible Debenture; provided that if the Royalty Holder Convertible Debenture is converted in accordance with its terms, the Joint Venture shall reimburse Gryphon in cash for the principal amount of the Royalty Holder Convertible Debenture converted into shares of Gryphon.

(d)

If the Royalty Buy Down Option is exercised and Sage has not funded 50% of the Royalty Buy Down Cash Payment, the Joint Venture shall agree to reimburse Gryphon for the full US$1,750,000 amount of the Royalty Buy Down Cash Payment upon exercise of the Option by Sage.

(e)

If applicable, each of Gryphon, BMC and Sage agree to use their best efforts to enter into an assignment and assumption of the Underlying Agreements, as soon as possible following Regulatory Approval, pursuant to which the Joint Venture Entity shall assume BMC’s obligations and take an assignment of BMC’s rights, under the Underlying Agreements.

2.2

Obligations of BMC and Gryphon Regarding Properties

(a)

During the Option Period, BMC and Gryphon covenant and agree that:

(i)

BMC and Gryphon will allow Sage access to all reports, maps, sections, drill logs, assay results, studies, technical data and other information in its possession or control, whether in paper or electronic form, in respect of the Properties.

(ii)

At all times BMC and Gryphon shall provide to Sage copies of all correspondence with or from the Bureau of Land Management. or from a Governmental Authority from Mineral County, Nevada pertaining to mineral tenure or assessment work in respect of the claims comprising the Properties.

(iii)

Gryphon and BMC will seek all required consents to permit the exercise of the Option by Sage, including any approvals which may be required under the terms of the Leases.

(iv)

Gryphon and BMC will use best efforts to negotiate the terms and conditions of the Joint Venture Agreement and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010.

(v)

Gryphon and BMC will use best efforts to obtain Regulatory Approval and all other approvals, consents and waivers reasonable required for the execution, delivery and performance of the Joint Venture Agreement and performance of the transactions contemplated in this Agreement.

2.3

Obligations of BMC During Option Period

(a)

(a)          During the Option Period, BMC shall act in good faith and with reasonable care as follows:

(i)

BMC shall do such acts, and shall pay as Expenses such taxes, fees and rents as may be required to keep the Properties in good standing.

(ii)

All work conducted, carried out or performed by BMC on the Properties during the Option Period shall be done in a sound and workmanlike manner in accordance with sound mining practice and in compliance with all Applicable Laws of all Governmental Authorities, including without limitation, all Environmental Laws. BMC shall not be considered to be in default of this covenant if it is opposing in good faith any allegations of a breach of compliance with any Applicable Laws.

(iii)

BMC shall complete the necessary filings to maintain the Properties in good standing.

(iv)

Subject to receipt of Expenditures payments from Sage and Gryphon under Section 7.8 of this Agreement, BMC, as Operator, shall pay or cause to be paid all invoices for all materials and services purchased in connection with its work on the Properties that might give rise to a lien thereon.

(v)

BMC, as Operator, shall provide Gryphon and Sage with Monthly Expenditure Reports and such other reports as the Project Team may reasonably request.

(vi)

BMC shall permit Sage and Gryphon and their respective agents and representatives at their own risk and expense, reasonable access to the Properties at all times and to review and make copies (paper or electronic) of all reports, maps, sections, drill logs, assay results, studies and all other technical, accounting and financial records or data (paper or electronic) prepared by or on behalf of BMC in connection with any work done on or with respect to the Properties, to the extent the same are in BMC’s possession and the provision of such material does not create a hardship, within 20 days of any request thereof by Sage or Gryphon to BMC.

2.4

Obligations of Sage During Option Period

(a)

During the Option Period, Sage covenants and agrees that:

(i)

Sage will use its best efforts to obtain Regulatory Approval and all other approvals, consents and waivers reasonable required for the execution, delivery and performance of the Joint Venture Agreement and performance of the transactions contemplated in this Agreement.

(ii)

Sage will use its best efforts to negotiate the terms and conditions of the Joint Venture Agreement and agree to the form thereof as soon as reasonably practicable, but in no event later than June 15, 2010.

(iii)

Except as otherwise provided herein, Sage will pay 50% of the Expenditures.

(iv)

Sage will use its best efforts to arrange for Project Financing and obtain a Project Financing Commitment that is customary and usual in the marketplace with respect to the Properties to complete the development of the Mine on commercially reasonable terms.

2.5

Termination of the Option

(a)

Subject to Sage exercising the Option in accordance with Subsection 2.1(a) hereof, the Option Period shall end on the earlier of (i) the Option Expiry Date or (ii) termination of this Agreement in accordance with this Section 2.5.

(b)

Subject to the obligations of the parties that expressly survive the termination of this Agreement, the Option and this Agreement shall automatically terminate on the earlier of:

(i)

the mutual consent of the parties to terminate the Option and this Agreement;

(ii)

the Option Expiry Date; or

(iii)

the exercise of the Due Diligence Out by either Party.

(c)

Subject to the obligations of the parties that expressly survive the termination of this Agreement, Gryphon and BMC shall have the right to terminate the Option and this Agreement under the following circumstances:

(i)

the failure of the Capital Contribution Condition;

(ii)

the failure of the Private Placement Condition;

(iii)

the failure of the Expenditure Funding Condition;

(iv)

the failure of the Sage Issuance Condition;

(v)

in the event of a material breach by Sage of its covenants contained in this Agreement or the representations and warranties contained in Section 3.1 of this Agreement; provided that Sage has not cured such breach within 30 days following delivery of written notice of breach, or immediately if such default is not capable of being cured within 30 days; or

(vi)

forthwith if Sage shall generally not pay its debts as such debts become due or Sage shall admit in writing its inability to pay its debts generally as such debts become due or if Sage shall make a general assignment for the benefit of creditors or if any proceedings shall be instituted by or against Sage under any bankruptcy, insolvency or similar law.

(d)

Subject to the obligations of the parties that expressly survive the termination of this Agreement, any of Sage, Gryphon or BMC shall have the right to terminate the Option and this Agreement with written notice of:

(i)

exercise of a Due Diligence Out;

(ii)

the failure of the JV Agreement Condition;

(iii)

the failure to obtain a Project Financing Commitment on or before the Option Expiry Date; or

(iv)

a Determination Event.

(e)

Subject to the obligations of the parties that expressly survive the termination of this Agreement, either Sage or Gryphon shall have the right to terminate the Subscription Agreement with written notice of the exercise of its Due Diligence Out.

(f)

As applicable, Sections 2.6, 2.12, 5.10, 9, 11.2 and 11.3 and Articles 14 and 17 of this Agreement shall survive termination of the Option and this Agreement.

2.6

Reimbursement of Expenditures

2.7

Right to Drop Claims

(a)

BMC shall have no further responsibility to maintain in good standing such claims; and

(b)

the claims so dropped will be excluded from the terms of the Option and for the purposes of this Agreement thereafter the term “Properties” will exclude such dropped land, except for the purposes of determining the aggregate Expenditures incurred on the Properties which throughout will be based on the Expenditures on the retained and all dropped claims or land.

2.8

Right to Audit

2.9

Establishment of Joint Venture

2.10

Royalty Buy Down

(a)

The Parties acknowledge that the Royalty Buy Down Option will expire on August 22, 2010, unless otherwise extended. The Parties further agree that if the Royalty Buy Down Option is exercised:

(i)

the Joint Venture shall agree to reimburse Gryphon for the full US$1,750,000 amount of the Royalty Buy Down Cash Payment upon exercise of the Option by Sage, if Sage has not funded 50% of the Royalty Buy Down Cash Payment;

(ii)

Gryphon shall be solely responsible for the issuance of the 7,726,250 shares of its common stock; and

(iii)

Gryphon will issue the Royalty Holder Convertible Debenture upon exercise of the Royalty Buy Down Option and that the Joint Venture will agree to assume the obligations of Gryphon under Royalty Holder Convertible Debenture; provided that if the Royalty Holder Convertible Debenture is converted in accordance with its terms, the Joint Venture shall reimburse Gryphon in cash for the principal amount of the Royalty Holder Convertible Debenture converted into shares of Gryphon.

(b)

Nothing contained in this Agreement shall restrict Gryphon or BMC’s ability to negotiate an extension to or otherwise amend the Royalty Buy Down Option Agreement or require the consent of the Project Team or Sage to do so.

2.11

Several Rights and Obligations

2.12

No Partnership and Other Business Opportunities

2.13

Accounting Procedures

3.1

Representations and Warranties of Sage, BMC, and Gryphon

(a)

it is a corporation duly incorporated, organized, validly existing and in good standing under the laws of its incorporating jurisdiction and is qualified to do business in those jurisdictions where necessary in order to carry out the purposes of this Agreement;

(b)

it has full power, capacity and authority to enter into and perform its obligations under this Agreement and any agreement or instrument referred to or contemplated by this Agreement;

(c)

the execution and delivery of this Agreement will not violate or result in the breach of any Applicable Law to which it is subject or the terms of its constating documents;

(d)

neither the execution and delivery of this Agreement, nor the performance of the transactions contemplated hereunder, conflict with, result in the breach of or accelerate the performance required by any agreement to which it is a party;

(e)

BMC has obtained the principal operating permits in respect of the Properties set out in Section 1.21.1 of the Pre-Feasibility Study, and to the knowledge of BMC and Gryphon, such permits are in force on the date hereof;

(f)

this Agreement and all other agreements or instruments to be executed and delivered by such party hereunder have been duly executed and delivered by such party and constitute, legal, valid and binding obligations of such party enforceable against such party in accordance with their respective terms;

(g)

except as otherwise disclosed, no consent from a lender or any third party (other than the TSX-V in the case of Sage, the TSX in the case of Gryphon or such other consents as shall be referred to in the Joint Venture Agreement) is necessary to authorize such party to execute, deliver and perform its obligations under this Agreement;

(h)

there is no judgment, decree, injunction, ruling or order of any court, governmental department, commission, agency, instrumentality or arbitrator and no claim, suit, action, litigation, arbitration or governmental proceeding in progress, pending or threatened, which prevents or which seeks to prevent such party from entering into this Agreement: and

(i)

it has not committed an act of bankruptcy, is not insolvent, has not proposed a compromise or arrangement to its creditors generally, has not had any petition for a receiving order in bankruptcy filed against it, has not made a voluntary assignment in bankruptcy, has not taken any proceedings with respect to a compromise or arrangement, has not taken any proceeding to have itself declared bankrupt or wound-up, has not taken any proceeding to have a receiver appointed of any part of its assets, has not had any encumbrancer take possession of any of its property and has not had any execution or distress become enforceable or become levied upon any of its property.

3.2

Representations and Warranties of BMC and Gryphon

(a)

BMC is the registered and beneficial holder of a 100% legal and beneficial interest in the Properties, free and clear of any privilege, reservation, rights of others, lien, pledge, mortgage, lease, sublease, charge, encumbrance or other security interest therein other than Permitted Encumbrances;

(b)

Schedule “A” sets forth a true, accurate and complete description of the Properties;

(c)

the exploration and mining rights attaching to the Properties (as described in Schedule “A”) have been properly staked or otherwise properly constituted, as applicable, are properly recorded, and are valid and in good standing to the date hereof, in accordance with Applicable Law and all taxes and fees due thereon or in respect thereof to the date hereof have been paid in full;

(d)

BMC has caused work of sufficient value to be performed upon the Properties or paid fees in lieu thereof through to December 31, 2009 and has recorded and filed proof thereof, all of which work, recordings and filings have been completed in accordance with applicable statutes pertaining to such work:

(e)

to the best of BMC’s knowledge, it has not entered into any current material agreements other than the Underlying Agreements and has not made any material contractual commitments, in respect of the Properties, other than arising under the Underlying Agreements;

(f)

to the best of BMC’s knowledge, each of the Underlying Agreements is a legal, valid and binding obligation of each of the parties thereto, is enforceable in accordance with its terms, and no party thereto is in default of any of its obligations thereunder;

(g)

there is no judgment, decree, injunction, ruling or order of any court, Governmental Authority. instrumentality or arbitrator and no claim, suit, action, litigation, arbitration or governmental proceeding in progress, pending or threatened against or relating to, and affecting any of the Properties which prevents or which seeks to prevent BMC from entering into and performing its obligations hereunder and the transaction contemplated hereby;

(h)

the activities and operations that have been carried out on the Properties have been in compliance with all material respects with all Applicable Laws and directives of all Governmental Authorities and it has not received notice of non-compliance from any such Governmental Authorities;

(i)

BMC has not entered into any labour contracts, collective bargaining agreements, or any other labour-related obligations and liabilities which may affect the Properties or any Operations conducted thereon:

(j)

to the best of BMC’s knowledge and except as otherwise disclosed, all the lands covered by the Properties are free and clear of any Hazardous Substance and there is no judicial or administrative proceeding pending and no Environmental Order has been issued or, to the best of BMC’s knowledge and except as otherwise disclosed, threatened, concerning the possible violation of any Environmental Laws or Environmental Orders in respect of the Properties;

(k)

to the best of BMC’s knowledge except as otherwise disclosed, there are no material outstanding obligations or liabilities, contingent or otherwise, under any applicable environmental, mining or other law, including reclamation or

(l)

all environmental approvals required with respect to activities carried out by BMC on any part of the lands covered by the Properties, have been obtained, are valid and in full force and effect, have been complied with and there have been and are no proceedings commenced or threatened to revoke or amend any such environmental approvals.

4.1

Contribution and Respective Interests

5.1

Establishment of Project Team

(a)

develop the Expenditure Budget for each calendar quarter commencing on the Effective Date, which Expenditure Budget shall include (i) estimates for projected funding requirements during the Option Term and (ii) estimates of funding reasonably required to complete assessment work or make payments in lieu thereof and pay such rentals, maintenance fees, taxes or other payments and do all such other things as may be necessary to maintain the Properties in good standing, including, without limitation, staking, restaking, and surveying mining claims, and applying for licences, leases, grants, concessions, permits, patents and other rights to and interests in the Minerals;

(b)

consider and approve and, as applicable, develop all exploration programs, work programs, feasibility studies, mining plans and any amendments thereto (each, a “Work Plan”);

(c)

review and approve the Monthly Expenditure Report;

(d)

review and approve and, as applicable, participate in the preparation of all exploration, construction, operating and financial reports on the Operations;

(e)

consider and approve abandonment or surrender of any grant, patent, lease, mineral or mining claim, mining lease, permit, licence to prospect, mineral disposition or other right to or interest in Minerals which is comprised in the Properties;

(f)

consider and approve any major change in the mining plan established for any Mine or any plan for the installation of additional milling, concentrating or refining capacity or of additional plant, facilities or infrastructure at any Mine;

(g)

review and approve the annual ore reserve and resource estimates prepared by the Operator;

(h)

review and approve all material agreements with respect to the Properties and Operations;

(i)

review and approve all consultants and experts retained by or at the expense of the Operator with respect to the Properties and Operations;

(j)

consider and approve changes in the Accounting Procedure;

(k)

establish and modify its own rules of procedure in a manner not inconsistent with this Agreement;

(l)

negotiate with third parties the terms and conditions of the Project Financing and proposals in respect thereto and undertake all reasonable actions required to procure a Project Financing Commitment; and

(m)

retain such advisors and consultants as shall be approved by the Project Team.

5.2

Representation on Project Team

5.3

Meetings of Project Team

5.4

Notice of Meetings

5.5

Conduct of Project Team Meetings

(a)

be dissolved; or

(b)

be adjourned to the same place but on a date and at a time, to be fixed by the chairman of the meeting before the adjournment, which will be not less than three (3) days following the date for which the meeting was called.

5.6

Decisions of the Project Team

5.7

Unanimous Consent of the Project Team

(a)

the Expenditure Budget; and

(b)

Expenditures that in the aggregate exceed the greater of (A) the amount which is $50,000 above the Expenditure Budget, and (B) the amount which is 10% above the Expenditure Budget.

5.8

Chairman and Secretary

5.9

Consent Resolutions

5.10

Expenses

5.11

Decisions Binding on Participants

5.12

Power to Establish Other Rules

5.13

Deadlock Resolution

6.1

Operator

7.1

Rights and Powers of Operator

7.2

Status of Operator

7.3

Specific Duties and Obligations of Operator

(a)

to prepare and submit to the Project Team draft work programs, exploration programs and operating plans;

(b)

subject to any specific provision of this Agreement (including Subsection 5.1(g)), to implement, using such contractors, if any, as the Operator deems appropriate, all work programs, exploration programs and operating plans approved by the Project Team;

(c)

to pay all expenses properly incurred promptly as and when due in accordance with the Expenditure Budget;

(d)

to comply with the provisions of all agreements or instruments of title under which the Properties or Assets are held;

(e)

to perform such assessment work or make payments in lieu thereof and pay such rentals, maintenance fees, taxes or other payments and do all such other things as may be necessary to maintain the Properties in good standing, including, without limitation, staking, restaking, and surveying mining claims, and applying for licences, leases, grants, concessions, permits, patents and other rights to and interests in the Minerals;

(f)

to perform its duties and obligations hereunder in a sound and workmanlike manner, in accordance with sound mining and engineering practices and in compliance with all Applicable Laws; and

(g)

to prosecute claims or, where a defense is available, defend litigation arising out of the Operations.

7.4

Maintenance of Accounts

7.5

Restrictions

(a)

any decision to abandon, lease, sell or otherwise dispose of any Assets or series of related Assets having an aggregate value of greater than $25,000;

(b)

any decision to settle any suit, claim or demand in an aggregate amount in excess of $50,000;

(c)

any decision to enter into any material agreement with respect to the Operations; and

(d)

any agreements entered into with parties not acting at arm’s length with either Gryphon or Sage.

7.6

Access Obligations

7.7

Reporting Obligations

(a)

Monthly Expenditure Reports;

(b)

quarterly reports, with such reports to be delivered within 45 days following the end of each quarter;

(c)

an annual financial report, with such report to be delivered within 75 days following the end of each calendar year; and

(d)

an annual technical report, with such report to be delivered within 75 days following the completion of each Program, it being agreed that a Program will not be complete until after receipt of all data in respect of the Program.

7.8

Funding Budgets and Expenditure Obligations

7.9

No Operators Fee

8.1

Work Plans and Expenditure Budget

8.2

Approval of Work Plans and Expenditure Budget

10.1

Suspension of Timing of Obligation

10.2

Notification of Force Majeure

(a)

the commencement date and the cause and nature of the alleged event of force majeure;

(b)

a Summary of the action such Party or its representatives, agents, contractors or employees have taken to the date of such notice to correct the alleged event of force majeure;

(c)

confirmation as to all acts, actions and things done by such Party or its representatives, agents, contractors or employees to terminate the event of force majeure; and

(d)

the reasonably expected duration of the period of force majeure.

12.1

Termination for Change of Control

(a)

a Change in Control;

(b)

Either or both Parties shall be in material default of any obligation to creditors secured or otherwise, which would constitute a Material Adverse Effect.

12.2

Liquidated Damages Payable to Sage

12.3

Liquidated Damages Payable to Gryphon

13.1

Entire Agreement

13.2

Amendments

13.3

Waiver

14.1

Referral to Chief Executive Officers

14.2

Resolution of Other Matters

15.1

Arbitration of Disputes

15.2

Notice to Arbitrate

15.3

Arbitration

15.4

Arbitration Award

16.1

Further Assurances

17.1

Notices

(a)

To Sage at:

(b)

To BMC or to Gryphon at:

17.2

Public Statements

17.3

Confidentiality

(a)

becomes generally available to the public other than as a result of a disclosure by a Party or its representatives in violation of this Agreement;

(b)

was available to a Party on a non-confidential basis without violation of this Agreement prior to its disclosure by any Party;

(c)

becomes available to a Party on a non-confidential basis without violation of this Agreement from a source other than another Party or any representative of another Party provided that such source is not bound by a duty of confidentiality to the Joint Venture or any of the parties or Participants;

(d)

is made to any contractor, consultant. surety or any entity which provides financing for a Participant, where any such person reasonably needs to know such Information in the course of providing services to or otherwise dealing with the Participant making such disclosure and has executed a confidentiality undertaking containing provisions at least as onerous as in this Section 17.3; or

(e)

is required to be disclosed by Applicable Laws, provided that a Party first notifies the other parties or Participants that it believes it is required to disclose such information and it allows a reasonable period of time for the disclosure of such Information to be contested.

17.4

Expenses

17.5

Time of Essence

17.6

Successors and Assigns

17.7

Governing Law

17.8

Counterparts

SAGE GOLD INC.

By:

Name:

Title:

BOREALIS MINING COMPANY

By:

Name:

Title:

GRYPHON GOLD CORPORATION

By:

Name:

Title:

(i)

Richard J. Cavell, Hardrock Mining Co. and John Whitney and leased to BMC as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 and recorded in Mineral County, Nevada, as document #148668;

(ii)

Borealis Mining Company as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 as recorded in Mineral County, Nevada, as document #148666; and

(iii)

Borealis Mining Company as described in the Affidavit of Payment of Maintenance Fees and Intention to Hold Mining Claims dated August 7, 2009 as recorded in Mineral County, Nevada, as document #148667.

(1)

The principal amount of the Note shall be as determined in accordance with Section 2.6 of the Option Agreement;

(2)

The maturity date of the Note shall be 12 months from the date of issue;

(3)

The principal amount of the Note shall bear interest at the prime rate of interest (calculated annually) charged by Gryphon Gold Corporation's principal banker to its customers at the date of issue;

(4)

The interest shall be calculated and accrue annually;

(5)

The principal amount and accrued interest shall be payable on the maturity date;

(6)

Gryphon Gold Corporation shall covenant in the Note not to incur any new debt obligations for borrowed money which rank in priority to the promissory note.

1.

Mining Lease made effective as of the 24^th day of January, 1997, by and between Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/94, Hardrock Mining Company, a Nevada corporation, and John W. Whitney and J.D. Welsh & Associates, Inc., a Nevada Corporation.

2.

Amendment No. 1 to Mining Lease made and effective as of the 24^th day of February 1997, by and between Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/94, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, and J.D. Welsh & Associates, Inc., a Nevada corporation, and Cambior Exploration USA, Inc., a Nevada corporation.

3.

Assignment of Borealis Mining Lease dated January 24, 1997 made and entered into as of the 10^th day of January, 2005, by and between Golden Phoenix Mineral Company, a Minnesota corporation, and Borealis Mining Company, a Nevada corporation.

4.

Option Agreement Amendment to Mining Lease entered into effective as of August 22, 2008 by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, an individual.

5.

Amendment No. 1 to the Option Agreement Amendment to Mining Lease is entered into effective as of August 7, 2009, by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, an individual.

6.

Amendment No. 2 to the Option Agreement Amendment to Mining Lease, as amended, is entered into effective as of February 12, 2010, by and among Gryphon Gold Corporation, a Nevada corporation, Borealis Mining Company, a Nevada corporation, Richard J. Cavell TTTEE F/T Richard J. Cavell Trust dated 2/23/1994, Hardrock Mining Company, a Nevada corporation, and John W. Whitney, an individual.