New development revealed as Scottish gold mine strives to avert collapse

Ian McConnell
Mon, 16 October 2023 

The mine at Cononish (Image: Jamie Simpson)

Scotgold Resources, which has been developing Scotland’s only gold mine at Cononish in Argyll, has revealed it is in discussions with a new “strategic investor” which could enable it to continue as a going concern.

The company had on October 2 warned that administrators could be appointed “over the coming days” after the party which had at that stage been the “most advanced prospective investor” withdrew from discussions.

Scotgold told the stock market yesterday: “Further to this, the company is now in advanced discussions with a new strategic investor which, should final agreement be reached, is expected to provide sufficient funding for the company to continue as a going concern.”

However, it added: “Whilst financing discussions are at an advanced stage, in the event the company cannot secure financing with the new strategic investor, this could result in the appointment of administrators.”

Scotgold describes itself as “Scotland's first commercial gold producer”.

It poured first gold in November 2020 at its Cononish gold and silver mine near Tyndrum.

The company noted it is developing Cononish into a “plus-23,500-ounce gold mine per annum”.

It added: “Cononish is a high-grade underground mining operation with a central processing plant producing gold concentrate for off-take and gold doré for the Scottish jewellery industry.”

Scotgold has in recent years highlighted its ambitions to develop other sites in Scotland.

It noted: “It is Scotgold's vision to build a mid-tier gold mining company in Scotland with multiple operations in the country that enhance the local environment and economy in ways that have an enduring positive impact.”

Trading in Scotgold shares was suspended on September 11 after the company told the stock market it needed “significant capital investment” and highlighted the “highly uncertain” outcome of funding discussions.

It said then: “On 10 July 2023, the company announced that, among other things, it was undertaking a third-party review of the Cononish mine plan for the next 12 months, encompassing a geological review of the Cononish mine mineral resource estimate (MRE) and grade control (GC) process, mine design, schedule and production forecasts. Initial findings have been fed back to the board.

“As announced on 10 July 2023, H1 2023 was disappointing in terms of gold production and development of the underground mine at Cononish. The ability of the group to continue as a going concern over the long term would 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 previously planned product shipment schedule.”

In this September 11 statement, Scotgold added: “While the geological data and documentation suggested 'no fatal flaws' in the MRE and GC modelling process, the draft mine plan and associated cash flow forecasts are currently being reviewed by the company, but they indicate that to deliver to the plan, a significant capital investment is required.

“The company is actively seeking additional financing and discussions are in an advanced stage and, should they materialise, are expected to provide sufficient funding for the company to continue as a going concern. The outcome of the funding discussions is highly uncertain and if the company cannot conclude a significant fundraise, it will cast material uncertainty for the company to continue as a going concern.”

Scotgold revealed late last month that it had placed the majority of its approximately 80-strong workforce at the Cononish mine on unpaid leave.

On September 29, Scotgold told the stock market: “As at 28 September 2023, the company has placed the majority of its employees on short term unpaid leave until further notice, allowing the company time to advance the financing discussions and preserve funds to help retain some key trained staff members across mining and plant and maintenance. This care and maintenance team will maintain the company's assets and ensure compliance with statutory, regulatory and environmental reporting obligations for the immediate future.”