The Creature with Bloodthirst does not have a -1/-1 counter on it.
Steps
Activate
Cauldron of Souls by tapping it, giving the Creature with Bloodthirst persist until end of turn.
Activate
Grinding Station by tapping it and sacrificing the Creature with Bloodthirst.
When the creature dies, its persist ability and
Dross Scorpion trigger.
Resolve the persist trigger, returning the creature from your graveyard to the battlefield, which enters the battlefield with at least one +1/+1 counter on it due to its bloodthirst ability.
When the creature enters the battlefield,
Grinding Station triggers, untapping
Grinding Station.
Resolve the
Dross Scorpion trigger, untapping
Cauldron of Souls.
Resolve the
Grinding Station ability from step 2, causing target player to mill three cards.