The upgraded reserve estimate sent shares in the Aim-quoted company soaring as it said the “robustness” of the data would help to secure finance to drive the project forward.
A report compiled by mining consultant Bara has revealed there are proven reserves of 24,000 ounces of gold at the Cononish site near Tyndrum, along with a further 174,000 ounces that are classed as “probable”.
The total estimate of 198,000 ounces compares with a previous figure of 71,000 ounces, contained in the firm’s mine development plan of April 2013.
Chief executive Richard Gray said: “We continue on track to deliver the Cononish project into production. I believe this ore reserve statement highlights the robustness of the project, even using a gold price of $1,100 an ounce, some $100 below the current market price.”
Gray, formerly of West Africa-focused gold miner Avocet, took the helm at Scotgold in October following a boardroom shake-up that saw previous chief Chris Sangster step back to a non-executive role.
October’s overhaul included a new chairman in the form of Sandy Littlejohn, managing director of Glasgow-based dental laboratory DTS. He replaced John Bentley, who resigned to focus on “other corporate responsibilities”. However, Littlejohn resigned two months later after he was unable to take part in a fundraising exercise, and Nat le Roux, the Scots-born former chief executive of spreadbetting group IG, took the helm in March.
Production at Cononish, which sits within the Loch Lomond and the Trossachs National Park, is expected to begin the first quarter of 2017. Once up and running, the mine would employ about 60 people. The £23.8 million project has an estimated lifespan of eight years, with average annual gold output forecast at 23,000 ounces.
Scotgold said: “Further work is still required to complete the bankable feasibility study, principally to update the capital cost estimates, review and adjust as appropriate the operating cost estimates and incorporate the conceptual opportunities identified for savings. This is expected to be completed by the end of July.”
The Bara report said the mine also has proven and probable silver reserves of 851,000 ounces, up from an earlier estimate of 289,000.
Earlier this year, Gray said that Scotgold was looking for acquisition opportunities across Europe as it continues to develop plans for Cononish, which would be Scotland’s first commercial gold mine.
He told The Scotsman in March that the company, which is also listed in Australia, would look to buy assets “at a more advanced stage” than its current project, and predicted that customers would be willing to pay a premium for Scottish gold.
Gray said yesterday that Scotgold’s increased confidence in the Cononish scheme “is a material factor in our early stage discussions with potential financiers and will assist us secure the best possible financial arrangements in the coming months”.
Following the update, shares in the company rose 0.08p, or 14.2 per cent, to finish the session at 0.68p.
A study last month from business adviser BDO showed Scotgold’s shares were the biggest Scottish risers on Aim in the first quarter, up 42.8 per cent.