SCOTGOLD, the mining company with ambitions to dig precious metals out of the hills of Argyll, has put a planned fundraising on ice due to the recent gold price meltdown.
The price of gold has fallen 13.7% to $1428 (£935) an ounce since Scotgold last set out its projections a year ago but the owners of the Cononish mine said they remained confident of "healthy returns" once it proceeded.
Executive chairman John Bentley said: "The recent sharp decline in the gold price has severely dented market confidence, albeit that there has been significant positive movement since the lows of circa $1350 an ounce recorded on April 15, 2013.
"The potential to raise the required equity financing for the project is considered to be severely challenging under current market conditions. The board has thus decided to defer an immediate raise pending an improvement in market sentiment."
Expected pre-production expenditure remains largely unchanged at £22 million.
In its final development study for the Cononish mine, Scotgold said at current prices it could expect £39.8m of pre-tax cashflow over the mine's seven-year life.
This would allow it to pay back development costs 26 months after the start of production.
When gold was trading at $1655 an ounce a year ago, it predicted cash generation of £65.9m and payback over 18 months from the site near Tyndrum.
Scotgold increased its base case price to $1300 an ounce, from $1100 last year. At this level it should generate £26.3m of cashflow, up from its £23.4m prediction in 2012.
Scotgold's South African-based banker RMB Resources remained "supportive", Mr Bentley said, and was looking at potential debt options at different gold prices.
"In addition, we are considering a number of strategic alternatives with a view to advancing the project and achieving the overriding objective of delivering Scotland's first commercial gold mine."
He said that the mine, situated in the Loch Lomond and the Trossachs National Park, was capable of producing its first gold within 15 months of receiving funding.
The completion of this final development study for Cononish was meant to be followed by RMB providing an offer of finance based on the gold price. Scotgold was then going to seek the remaining money needed through issuing shares and other debt deals.
The sharp decline in the gold price has "negatively impacted on the amount potentially available" from RMB and increased the amount needed to be sourced elsewhere, Scotgold told investors, forcing it to put its plans on hold.
As of the end of March, Scotgold had AUS$600,000 (£400,000) in cash which has since been boosted by the final £300,000 instalment of the pre-development financing from RMB.
"All discretionary spending on the project has been cut and steps are being made to reduce the company's overhead costs and burn rate while options to progress the Cononish project are evaluated," Scotgold said.
Scotgold believes it can obtain the equivalent of 20,200 ounces of gold a year from the mine.
Mr Bentley said: "At base case gold price assumptions, the project provides healthy returns."
Scotgold expects to recover a total of 121,800 ounces of gold and 469,700 ounces of silver from Cononish. Previously it anticipated taking out 131,600 ounces of gold and 465,000 ounces of silver.
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