Shares in Scotgold Resources, which operates the Cononish gold and silver mine in Argyll, fell sharply after the company reported its cash position has been “adversely affected” by production problems in December.

Scotgold said it is now working on additional funding to support its 2023 mine plan after its "most challenging period". The company told the City in its fourth quarter 2022 update that there were "significant short-term strains" on the business, but that it still posted gold production totalling 1,805 ounces.

A further 324 ounces were mined in December but had to be stored underground as weather conditions were too treacherous for trucks to move the ore safely.

Its reduced guidance for the fourth quarter announced on December 21 was "primarily due to changing the short-term mining schedule" to boost long-hole mining and "harsher-than-expected" weather conditions. However, it added that the "stranded" ore was processed in the first week of January.

The company poured its first gold in 2020 and is developing the site into a 23,500-ounce-plus per annum mine. Cononish is a “high-grade mining operation” with a central processing plant producing gold concentrate for off-take and gold for the Scottish jewellery industry.

READ MORE: Scotgold sets out expansion ambitions for Argyll

It said that for the year to December 31, 2022 gold production totalled 8,564 ounces, set against 2,623 ounces in 2021.

For the last quarter, gold concentrate shipments totalled 236 tonnes with a sales value of £2.2 million.

Gold concentrate shipments totalled 1,078 tonnes with a sales value of £11.9m, in the year to December 31, while gold sales made to Scottish jewellery companies during the fourth quarter totalled £25,420.

Scotgold said: “As a result of impacted quarter four 2022 gold production and sales the company’s financial and working capital position has been adversely affected - the company is working on additional funding to support delivery of 2023 mine plan.

“The company’s current cash balance is £350,000 with a net debt position of £12.6m.”

READ MORE: Scotgold revises down gold production guidance

It said the mine plan focused on achieving sustainable and its continued ramp up to 2,000 ounces of gold per month.

This year’s mining has “commenced well” with 500 ounces of gold mined, and 1,600 tonnes of ore processed.

Phil Day, Scotgold chief executive, said last year was one "of significant development” at the Scottish facility.

“Advancing a mine and transitioning from development through to a long-term mining method, such as stoping, is always challenging, however I am pleased with the significant progress that has been made over the past year and would like to again thank our dedicated team that has helped build Cononish into the operational mine it is today, with over 100 employees,” Mr Day said.

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“December 2022 has been by far our most challenging period in terms of the underground mine development, as announced on December 21, which has put significant short-term strains on the business.

“However, mining in the new year has been progressing well and in line with the mining plan, achieving 78 metres of mining development as well as 500 ounces of gold mined, and 1,600 tonnes of ore mined and processed through the process plant.

“Our 2023 mine plan is focused on high grade and increasing ounce production, which in turn with lowering cost per ounce as the mine moves towards full production will generate significant cash generation per ounce. In line with this, management’s guidance for production has been set between 11,500 and 13,500 ounces of gold.

“I look forward to 2023 and reporting on our progress at Cononish as we move through the final development stage of the mine, into continuous long hole stoping.”

It said its strategy includes "growth through resource expansion and regional exploration"first through increasing knowledge of the gold vein in close proximity to the existing Cononish vein" and then to extend the same methodology to the other areas in the 2,900 square kilometres held by Scotgold.

Shares in Scotgold closed down 15.6 per cent, or 8.5p, at 46p.