Scotland's only gold mine seeking stock flotation

Published on Saturday 6 February 2010 15:44

SCOTLAND'S only commercial gold mine will this week seek to persuade investors to back a flotation worth up to £2 million on the Alternative Investment Market.

• Chris Sangster CEO of Scotgold in the Cononish Goldmine near Tyndrum.

Scotgold Resources, which owns the mine at Tyndrum, joined the Australian stock exchange in 2007, and is now eyeing a dual listing by the end of the month to fund further exploration efforts.

It recently submitted planning permission for the mine at Cononish in the Loch Lomond and the Trossachs National Park but it is also searching for further gold and silver deposits in a vast area beyond the mine, covering 2,200 square kilometres of the central Highlands.

Chris Sangster, chief executive of Scotgold Resources, hopes the Initial Public Offering (IPO) will raise money from local, private investors, plus institutional investors interested in mining, to explore further opportunities on the land.

The IPO is the first of a string of fundraising exercises expected from Scotgold over the next couple of years. If planning permission is received for the mine as predicted in June, analysts say it will have to raise a further 12m to put it into production.

Sangster told Scotland on Sunday that Scotgold is likely to raise the extra 12m through bank debt and another share offering. He said: "The options are open about the way we finance it. We are beginning discussions with various parties to see what is possible."

Scotgold bought the Cononish mine from Switzerland-based Oak Consortium in 2007 for 800,000. Gold deposits were discovered in the area in 1984 but previous owners never exploited the mine as the low price of gold at the time made the project unviable.

However, gold prices have soared in recent years to more than $1,000 (642) an ounce and Scotgold expects to extract 20,000 oz a year for the life of the mine – estimated to be eight years.

Although exploration of the land beyond the mine is still at the "early stages", the firm says it has seen "very good indications" of further gold and silver deposits.

John Bentley, chairman of Scotgold, said that at current gold prices, the Cononish mine will cover all plant and capital costs within 18 months. He said: "That's a fantastically quick pay-back."

Bentley, who is also non-executive director of Faroe Petroleum, said the firm was floated in Australia initially because its founder shareholder, Shane Sadleir, who owns about a 12 per cent stake, lives there. Now that the company is more developed, management is keen to attract interest from Scottish and other UK investors, Bentley said.