Scotgold raises £2m but warns future depends on quantity and quality of ore being mined

Scotgold Resources has raised £2 million but stressed yet again that its ability to continue as a going concern is “entirely dependent” on the quantity of ore that is produced from now on.

The firm, which is behind the Cononish gold and silver mine near Tyndrum on the West Highland Way, said it had concluded its open offer of shares, which was fully subscribed, raising £1.5m. An additional £500,000 came from a subscription agreement with existing shareholders Maurice and Nicole Mason. Maurice Mason is joining the Scotgold board as a non-executive director.

In March, Scotgold warned that it risked going bust after much weaker-than-expected production. The firm also revealed at the time that the email accounts of its executive directors had been accessed by “unauthorised persons” and emails sent in their names to numerous people. It believed that the issue had been resolved but the police were informed.

Confirming the latest £2m injection, the firm noted that From April 5 to April 30, 229 ounces of gold in flotation concentrate had been produced with 43 tonnes of gold concentrate shipped to the company’s off-take partner with a sales value of £300,000. Further Scottish gold doré sales were made to Scottish jewellery companies, totalling £183,478, from the start of January to May 4. As previously disclosed, first-quarter production was “disappointing”, Scotgold added.

Updating investors on its outlook, the group said: “Q1 was very challenging for Scotgold. Q2 2023 has started better but the ability for Scotgold to continue as a going concern is entirely dependent on the quantity and grade of ore that is produced from now on. The company has good visibility on what is expected for the next three months and work is underway on the mining schedule and plans for the balance of 2023 and beyond. The board of directors are pleased to announce that Maurice Mason has agreed to join the Scotgold board as a non-executive director, subject to the usual regulatory approvals and process.”

Sheldon Modeland, an analyst at house brokerage Shore Capital, noted: “Whilst Q1 gold production and the initial lower-than-expected stoping grades are disappointing, we note that the transition to long hole stoping is progressing well and in line with management’s 2023 mine plan. Looking forward, we emphasise that long hole stoping is the most appropriate mining method for steeply dipping narrow vein gold deposits like that observed at Cononish.

“Over the short term, we note that the company’s ability to continue as a going concern is entirely dependent on the quantity and grade of ore being mined and processed. As such, our financial and production forecasts remain under review while planned ore and subsequent gold production is achieved. We look forward to the results of the production and geological reconciliation work.”

In December, Scotgold said it was hoping to ramp up its headcount as it targets further mines in Scotland. Chairman Peter Hetherington noted that the group held 13 licences, covering 2,900 square kilometres of the Dalradian Belt across the Grampian Mountain range.