Scotgold cheers ‘significant’ boost to mine plans

Scotgold chief executive Richard Gray. Picture: John Devlin

Scotgold chief executive Richard Gray. Picture: John Devlin

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Scotgold Resources, the firm developing Scotland’s first commercial gold mine, has hailed a “significant” boost to its plans on the back of lower running costs and higher prices for the precious metal.

The Aim-quoted company said that changes to the design of a storage facility as its Cononish site near Tyndrum, along with higher assumed gold prices, meant that its peak funding requirement for the project has reduced to £7.4 million, down from previous forecasts of £18.5m.

• READ MORE: Gold miner seeks to extend Cononish processing trial

Scotgold, which last year raised almost £46,000 by auctioning off ten coins made from its first gold, also told investors that the mine, in the Loch Lomond and the Trossachs National Park, is now expected to deliver underlying earnings of £100m over its nine-year lifespan – well above an earlier estimate of £67m – following the success of its bulk processing trial (BPT).

Changes to the miner’s development plans means it now needs fresh approval from the park authorities, a process that is expected to complete before the end of the year.

Scotgold also said that it needed additional working capital to see it through this period, but chairman Nat le Roux has agreed to lend it £1m for one year at an interest rate of 10 per cent. The net loan will amount to about £700,000 after the repayment of an existing facility.

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“The revised development plan now completed significantly lowers the financing hurdle and improves the economic returns, with significant further enhancement from the current pound sterling price of gold,” said le Roux, the Scots-born former chief executive of spreadbetting group IG.

Subject to approval and financing, the firm expects to start underground work in the second quarter of next year and reach “sustainable first phase” processing of 3,000 tonnes per month by early 2019.

Scotgold chief executive Richard Gray added: “It is extremely gratifying that we have managed to use the experience of the BPT to re-engineer aspects of Cononish and add significant value.

“With our improved economic returns and short-term funding secured, which avoids undue dilution for the existing shareholders, we now look forward to securing an attractive full financing package and subject to permitting, putting our mine into production at the earliest opportunity.”

Analysts at SP Angel said that today’s update has “enhanced the project returns” for the Cononish mine.

Last month, major shareholder Graham Donaldson and his wife Christine presented one of the first rounds minted from the firm’s gold to the University of Glasgow’s Hunterian museum, which houses some 70,000 coins and medals in its collection.

“We believe that gold mining has the potential to be a significant industrial sector and generator of employment in Scotland and this unique piece marks a significant milestone on this journey,” Gray said.

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