Scotgold Resources secures crucial financial boost as new mining commences

Scotgold Resources, the company behind the Cononish gold and silver mine near Tyndrum on the West Highland Way, has secured a financial lifeline as it transitions to new mining methods.

The firm had recently warned of a material uncertainty over its ability to continue as a going concern in the “very immediate term”. It also revealed wider half-year losses of A$9.5 million (£5.2m) just days after warning over its future. However, the group has now secured a $500,000 (£408,000) advance to assist with short-term working capital from its gold offtake partner. In addition, Bridge Barn, a company owned and controlled by non-executive director Nathaniel le Roux, has agreed to postpone interest payments amounting to some £450,000.

In an update, Scotgold said it had commenced long hole stope mining with the first blast in the eastern section of the 430 West drive. Further gold doré was poured this week on site and is being prepared for sale to jewellers to generate additional revenue for the company.

Sheldon Modeland, an analyst at house-broker Shore Capital, noted: “The commitments from the company’s offtaker and debt provider are encouraging given the current working capital constraints and requirements. Looking forward, we highlight that long hole stoping is the most appropriate mining method for steeply dipping narrow vein gold deposits like that observed at Cononish. The main advantage is that ore can be generated quickly for processing thus benefiting cash flows. That said, the main disadvantage is that rapid changes in ore width or payability may not be seen as quickly as other methods.”

At the end of last month, the group posted half-year losses of A$9.5m, compared with a A$5.3m loss before tax a year earlier. That came despite total revenues rising to A$9.5m from A$6.4m during the first half of last year.

Chairman Peter Hetherington said: “The period under review, whilst challenging, has seen progress and important milestones being achieved at our Cononish gold mine, in Tyndrum, as we continue to develop Scotland’s first commercial gold mine towards full production, producing both gold concentrate for off-take and Scottish gold doré for the jewellery industry.”