Scotgold shares fall despite plans for more gold mines

Shares of Scotgold Resources Limited, the Australia-based gold exploration firm that owns the Cononish Gold and Silver Mine near Tyndrum, fell about 9% on Wednesday after it cut its gold production forecast for the fourth quarter of 2022.

“Due to changing the short-term mining schedule and harsher than expected weather conditions in December, production forecast for Q4 2022 is now set at 2,000 ounces of gold (previous forecast 3,000 to 3,500 ounces of gold),” said the company.

The news came as Scotgold published results for year ended June 30, 2022, showing its revenue soared to A$17.8 million in 2022 from just A$300,000 in 2021.

Loss before taxation was A$10.8 million compared to a loss of A$5 million in 2021.

Scotgold also said on Wednesday it plans to develop additional gold mines in Scotland.

Scotgold chairman Peter Hetherinton wrote: “In addition to expanding the Cononish resource and increasing the life of mine in the near-term we have an impressive land package for regional exploration in the future.

“We hold 13 licences, covering 2,900 square km of the Dalradian Belt across the Grampian Mountain range.

“The geology points to further exceptionally high-grade deposits, like Cononish and it is part of our longer-term strategy to explore these areas with the vision to develop additional gold mines in Scotland.”

Scotgold said it wants to be the “employer of choice in the region” and has been working with Forth Valley College in Falkirk on apprenticeship schemes “where we currently have placed students in mechanical engineering roles.”

In addition, Scotgold said it launched a partnership in July 2022 with the University of St Andrews for a five-year student bursary programme and that its team is “working closely with the University teaching staff and students on the MSc Strategic Resources course involving work at both the University and at our Cononish site.”

Scotgold Resources CEO Phil Day wrote: “It has been a year of transformative progress as we continue to ramp up production at our Cononish gold mine in Scotland towards Phase 2 mining, to achieve a yearly run rate of +23,500 ounces of gold in 2023.

“We were delighted to achieve Phase 1 mining in Q1 2022 and subsequently to announce the significant milestone of commercial production on 30 June 2022, after three consecutive months of positive operating cashflow, and continue to operate as a cash generative mining operation with buoyant gold concentrate sales.

“When developing an underground mine to achieve full production, there are sometimes short-term variations in ounces produced.

“This is normal and expected in underground mine development as development work continues in parallel with definition drilling to allow long hole retreat stope mining to commence.

“Once long-hole stoping is achieved, minimal dilution and increased ore recovery will be realised (and in parallel with all other optimisation initiatives implemented during 2021 and 2022 across the underground mine and processing plant), provide continuity of ore mined/ounces produced on a week by week/month by month basis.

“As I write this, 2023 is shaping up to be an exciting year for us in terms of mine development and gold production and I look forward to reporting on progress through out.

“As ever, none of this progress would be possible without our talented and committed team here in Tyndrum.

“We have grown ambitiously, increasing our workforce 156% since I joined in April 2021, to 96 people, of which 51 are from Scotland.

“In line with our vision to build a multi-asset gold production company, we will continue to increase our headcount during 2023 and beyond, through apprenticeships, internships, and student bursaries such as ours with the University of St Andrews, to become the employer of choice in the region.  

“Cononish is an exceptionally high-grade gold underground mining operation with a reserve grade of c.11.9g/t Au and has a current life of mine of 8.5 years with an estimated 555,000 tonnes of ore.

“Notably, even without any further resource exploration and expansion, Cononish’s in-situ value is estimated to be £288 million, at current gold prices of £1,456 per ounce and projected All in Sustaining cost (AISC) of £554 per ounce, will place Scotgold as one of the highest yielding – lowest cost gold producers globally once in full production in 2023. 

“Whilst we anticipate significant cash generation, especially once full production is achieved during 2023, we are committed to continuing to grow and realise Cononish and Scotgold’s value through exploration.

“Our resource/reserve and life of mine has the potential to be substantially increased within the immediate Cononish mining area, and to this end we have completed very low frequency magnetics to determine a 2023 exploration programme to do this.

“Looking ahead to 2023, I remain hugely excited and look forward to keeping stakeholders updated on our developments as we continue to build an intergenerational mining company for the future.”