PLANS to develop Scotland's first modern commercial gold mine have been placed in doubt after concerns were raised by its auditor about the future of Scotgold Resources, the company at the centre of the development.
The Australian mining firm has sparked hopes of a Gaelic gold rush with its development of the first Scottish gold mine in 561 years at Cononish near Tyndrum in Argyll.
But auditor Marcus Ohm of Australian accountants HLB Mann Judd warned Scotgold it faces a "material uncertainty that may cast significant doubt upon the company's ability to continue as a going concern".
Scotgold, which formed in 2007, plans to begin construction work at the Cononish gold and silver mine, which lies within the Loch Lomond and the Trossachs National Park, this summer.
It had predicted the first production of gold in early 2014, after originally planning to begin extraction earlier this year.
However the firm's chairman John Bentley insisted there was a future for the business.
"We anticipate funding the development of the Cononish mine from a combination of debt and equity," he said.
The gold and silver in the mine has been estimated to be worth nearly £200 million, and it was expected to employ 52 people.
Analysts estimated the operation could pump £80m into the Scottish economy over its eight to 10 years of operation.
Scotgold insists further borrowing and a share offering will raise enough money for further development.
But it has emerged it holds a bank debt of £1.26m that has to be paid off by December 31, while pre-tax losses for the six months to the end of December hit £1.68m, compared to £723,203 for the same period last year.
The debt comes from a loan provided by RMB Resources, a division of South Africa's FirstRand Bank, to fund pre-development of the Cononish gold project.
Scotgold has estimated it will need £22m in funding for mining to go ahead at Cononish, and previously said it intended to approach RMB to arrange a facility to part-fund development.
The company remained of the belief it would obtain sufficient funding to enable it to continue as a going concern.
It raised £475,000 from a share issue in December 2012, and said it could issue new stock to obtain more funds, or sell assets.
In October the company told investors it was on track to raise £10m to £12m of debt but needed a similar injection of equity. The auditor highlighted concerns that further finance is needed to ensure the firm can repay the "maturing bank debt" and further develop mineral exploration.
It warned the "financial conditions ... indicate a material uncertainty that may cast significant doubt upon the company's ability to continue as a going concern, and therefore whether it will realise its assets, and extinguish its liabilities, in the normal course of business."
Since the beginning of last year, Scotgold has been conducting infill drilling at the Cononish mine.
This is intended to give a more accurate assessment to potential backers about the amount it can deliver in the earlier years of the project.
The company, founded by chief executive Chris Sangster, told investors last month that the total resource at Cononish is now reported at 169,200 ounces of gold and 631,300 ounces of silver.
That is a slight increase from 163,000 ounces of gold and 596,000 ounces of silver estimated in 2009.
With the price of gold at about £1060 an ounce, and with silver at about £20 an ounce, that would make the development potentially worth £190m if it can be developed.
The firm has previously said it estimates it can recoup the costs of development in just 18 months of production.
In October, 2011, Mr Sangster, whose grandparents hail from Aberdeenshire, said he believed Scotland would be "put firmly on the gold map as this mine is highly prospective".
Scotgold also had rights to explore 2200sq km of land in the central Highlands, and the company had sights on the location of another mine.
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