Scotgold Resources Limited, which owns the Cononish Gold and Silver Mine near Tyndrum, said on Monday that trading in its shares will be suspended immediately “pending clarification of its financial position.”
In a stock exchange statement, Scotgold said a significant capital investment is required for the firm.
Scotgold said it is actively seeking additional financing with discussions at an advanced stage and, should the financing materialise, it is expected to provide sufficient funding for the company to continue as a going concern.
However the firm warned that the outcome of the funding discussions is “highly uncertain” and if the company cannot conclude a significant fundraise it will cast “material uncertainty” over Scotgold continuing as a going concern.
Scotgold said one unsecured creditor has demanded full payment of outstanding interest, and although the company has sufficient funds to make this payment, it does not believe that to do so would be in the best interest of all stakeholders.
It said default is possible if the creditor does not agree to a new payment plan.
It warned that in the event of default there is a material risk the business could be placed into administration in the next few weeks.
In its stock exchange statement, Scotgold said: “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 twelve 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.
“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.
“The company has been managing its creditors including debt providers. Debt providers have not been paid interest as it has fallen due, but they have agreed to payment plans and as such to date there have been no events of default.
“One unsecured creditor has (recently) demanded full payment of outstanding interest, and although the company has sufficient funds to make this payment, it does not believe that to do so would be in the best interest of all stakeholders.
“As such an event of default is possible if such creditor does not agree to a new payment plan.
“In the event of default there is a material risk the business could be placed into administration in the next few weeks.
“The board therefore continues to explore its options and pending clarification of its financial position, trading in the company’s shares on AIM will be suspended with effect from 7.30 a.m. on 11 September 2023.
“Notwithstanding the suspension of trading in the company’s shares, the company will continue to make announcements as and when there are any developments that require announcement in accordance with its obligations under the AIM Rules.”