The company which operates the Cononish gold and silver mine near Tyndrum has warned there is a “material risk” it may fall into administration in the next few weeks.

Shares in Scotgold Resources were suspended this morning after it told the City that it could fail if one unsecured creditor does not agree to a new payment plan.

The warning came as the company said a third-party review of the mine plan for Cononish, announced in July, had shown that significant capital investment is required but noted that funding talks now under way may not be successful.

Scotgold said in a statement to the stock market this morning: “While the geological data and documentation suggested 'no fatal flaws' in the MRE (mine resource estimate) and GC (grade control) 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.

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“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.”

Scotgold said in the statement that it has been managing its creditors, including debt providers. It noted that debt providers have not been paid interest as it has fallen due but have agreed to payment plans and that so far there have been no defaults.

However, Scotgold said: "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 company said that trading in Scotgold shares on the Alternative Investment Market (AIM) had been suspended as the board continues to “explore its options and pending clarification of its financial position”.

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Scotgold said in July that the first half of the year had been “disappointing” for gold production and the development of the underground mine.

It reiterated this morning that its ability to continue as a going concern over the long term would depend on the quantity and grade of ore mined being processed “being within a reasonable tolerance of the forecast quantity and grade and adherence to the previously planned product shipment schedule”.