Scotgold Resources warns of immediate threat to mining firm after production blow: emails hacked

Scotgold Resources, the company behind the Cononish gold and silver mine near Tyndrum on the West Highland Way, has warned that it risks going bust after much weaker-than-expected production.

In an operational update, the firm told investors that gold grades resulting from its latest activity had begun to “decline significantly”, with total ore production in February negatively impacted. As a result of its 430 West ore drive turning to waste and the need to focus on ore production, the company shifted development priorities at the start of March to the 415 East ore drive. In parallel, plans commenced to bring forward “long hole stoping” - a widely used method in underground mining - to early April to secure the short to medium term production profile and enhance gold production thereafter.

The firm warned: “The company’s management team continuously assess the cash position of the company. As a result of recent mining performance being below plan, largely due to lower than expected grades in the 430 West ore drive resulting in the subsequent decision to bring forward long hole stope mining, the directors now believe that, in the event that the planned commencement of long hole stoping in April is delayed, or the anticipated tonnes of ore mined in April and the following months is significantly below the current mine plan, then a material uncertainty would exist that casts significant doubt over the ability of the consolidated entity to continue as a going concern in the very immediate term.”

It said it was in advanced discussions with its gold offtake partner to secure a $500,000 (£408,000) advance to assist with short-term working capital. The directors have also discussed, if the need arises, about providing a short-term convertible loan. Shares were down about 70 per cent in afternoon trade.

Scotgold added: “The ability of the consolidated entity to continue as a going concern over the long term will remain dependent on the quantity and grade of ore mined and processed being within a reasonable tolerance of the forecast quantity and grade and adherence to the planned product shipment schedule.”

The firm, which is due to release its half-year results this Thursday, also revealed that the email accounts of its executive directors had been accessed by “unauthorised persons” and emails sent in their names to numerous people. It believes that the issue has been resolved but the police have also been informed.

Just last month the firm raised some £2.5 million to back its growth ambitions. In December, Scotgold said it was looking to ramp up its headcount as it targets further mines in the area. Unveiling full-year results, chairman Peter Hetherington noted that the group held 13 licences, covering 2,900 square kilometres of the Dalradian Belt across the Grampian mountain range. He said the group had 96 employees with “ambitious growth plans” to continue to increase the headcount during the coming year.

Sheldon Modeland, an analyst at house-broker Shore Capital, noted: “We place our financial and production forecasts for the Cononish mine under review while the company transitions to the long hole stoping mine plan.”