Scotgold raises estimates of gold in Tyndrum mine

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The company aiming to create Scotland’s only commercial gold mine has raised its estimates for the amount of precious metal at its Cononish site near Tyndrum.

Scotgold Resources said “measured and indicated” resources of gold now stand at 82,600 ounces – 50 per cent higher than previously thought.

Including “inferred” resources, there could be as much as 169,200 ounces of gold and 631,300 ounces of silver. That is up from earlier estimates of 163,000 and 596,000 respectively, although reserves classed as inferred have less certainty than measured and indicated resources.

Chief executive Chris Sangster said: “The aim of the infill drilling programme has been achieved with a significant increase in indicated resources.”

Construction work at the Stirlingshire mine is due to begin in June, with first gold production expected early in 2014.

Aim-quoted Scotgold, which is also listed in Australia, is seeking about £25 million in funding for the mine. Based on a gold price of $1,655 an ounce, the project is expected to generate £65m in pre-tax cashflow over its ten-year lifetime.

The firm has already secured almost £1.2m of initial financing from RMB Resources, the mining finance arm of South African bank FirstRand. It is also in talks about securing up to £12m in funding in the form of a “gold loan”, where RMB would buy about 20,000 ounces in advance and Scotgold would repay the loan in the form of physical gold.

Along with the Cononish project, which is expected to create about 50 jobs, Scotgold has other prospects in Argyll and Bute, including the River Vein area and Sron Garbh, where it has encountered evidence of platinum, although Sangster has stressed this work is at a very early stage.

Shares in the company rose 2.9 per cent to 4.5p yesterday.