Low cost gold mine
Politically safe jurisdiction
Significant exploration upside
What Scotgold does
The company is backed by entrepreneur Nat Le Roux and run by experienced mining engineer Richard Gray, late of Avocet Mining and Gencor.
What Scotgold owns
Scotgold owns the Cononish gold project in the Grampian region of Scotland.
The site of much early-stage development work in the past, Scotgold has been working for some years to bring the project all the way into production, with strong support from the local community in the nearby town of Tyndrum.
The company also has extensive exploration ground in and around Cononish as well as farther afield.
The main priority is production, but looking further out it’s possible that exploration work could yield another Cononish, or even, as Richard Gray occasionally speculates, a mine comparable to the one being developed by Dalradian across the Irish Sea.
The regional geology is similar, so the upside is very real.
The discovery of a project comparable in size to Cononish is a reasonable expectation, although the upside could be something much larger. The proof will come with drilling, and that will probably have to wait until production is well established.
What’s the latest?
The company recently announced the appointment of Phillip Day as chief executive, following the retirement of Richard Gray, who will stay on as a non-executive.
In March, Scotgold raised £1.5mln through a placing to help it though through the current production ramp-up at Cononish. It placed 2.1mln new shares at 70p each.
“Although progress has been made resolving the various production issues encountered, the lag between the timing of the re-estimated production build-up and sales receipts means that further working capital is required before the project becomes cashflow positive,” the company said.
Scotgold said the placing should fulfil this funding requirement, however, a company owned and operated by its chairman Nathaniel le Roux will provide additional debt funding of £500,000 if needed.
Coronavirus (COVID-19) continues to have an impact on the Cononish mine’s overall development schedule, as previously reported.
Filter press issues, also previously announced, continued through most of March, hampering a ramp-up of production, although progress resolving these issues has been made in recent days, it said.
Despite the continued delay to ramp up, the company still expects production for calendar year 2021 to be within the guidance range previously provided of between 28,500 and 25,700 tonnes of ore processed, and between 7,900 and 7,000 ounces of gold produced.
The company has deferred the target date for the completion of the planned Phase 2 expansion until September 2022, from the previous target of May 2022.
What the broker says
SP Angel said: “The fundraise along with access to expanded loan facility covers working capital requirements as the team ramps up production at the recently commissioned high-grade Cononish operation.
Local jewellers have shown willingness to pay a premium for locally sourced gold of up to £400/oz on anecdotal evidence, which the broker has used to arrive at an updated 147p NAV per share estimate.