SCOTGOLD, Scotland’s first commercial gold producer, could generate significant free cash flow of around £13 million a year for the current mine life of more than eight years, house broker Shore Capital has said.

It comes after Scotgold (SGZ) earlier noted its “strongest quarter yet” amid record gold production which exceeded guidance, and sales of £5m.

Sheldon Modeland, of Shore Capital, said that Cononish mine in Loch Lomond and The Trossachs National Park is “an example of how gold mining can be done sustainably, production is from gravity separation and flotation without the use of cyanide and all tailings are dry stacked”.

He said: “What Cononish lacks in size, it makes up for in grade; current average feed grade is 19g/t Au. With its optimisation plans successfully executed, we believe SGZ could generate significant free cash flow (c.£13m/yr) for the current mine life of 8.5 years.

“On top of this, we see the potential for an extended life of mine with additional drilling and resource definition as well as 2,900km2 of prospecting options near the Cononish mine.”


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In its second quarter production, sales, and operations update to the City earlier this month it said that gold production totalled 3,531 ounces, a 188 per cent increase to the previous quarter, and above the guidance which was between 2,600 to 3,200 ounces.

Mr Modeland said: “Our post-tax FY23F valuation for Cononish is £84m or 139p per share assuming management successfully achieves its Phase 2 expansion of c.24koz of gold per annum in Q123.

“This increases to £104m or 172p per share should management successfully delineate additional resources at Cononish.

"After adjusting for FY22F net debt of £10.5m, our NAV is £93m or 155p per share, representing an 109% increase to the current share price.

“On top of this, we see further upside, albeit unquantified at this stage, through additional exploration of SGZ’s substantial option agreements that covers an area of 2,900km2 outside the current mine licence.”

The firm said earlier its new pre-constructed tailings thickener is now on site where it is planned for installation during the third quarter and once operational is expected a gold ounces run-rate of 16,500 to 17,500 ounces of gold on an annualised basis.

Shore said: “Funding for the optimisation plan and Phase 2 expansion is through the £3m Fern Wealth debt facility.”

Shares in Scotgold closed marginally down, 0.68 per cent, at 73.5p.