Has Scotgold Resources lost its Midas touch?

The company has had a tumultuous time in 2023 as it has struggled to maximise production at the Cononish mine near Tyndrum, having twice already turned to investors for funding to support operations as the performance of the mine has disappointed.

Before today, Scotgold had already warned this year that its future was uncertain, amid concern over the quantity and grade of ore it has been able to extract from the underground mine. Now the company says it could fall into administration in a matter of weeks.

The latest blow stems from the initial findings of a third-party review into the Cononish mine plan for the next 12 months, which was commissioned by the firm in July and followed a disappointing performance in the first half.

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On the plus side, the initial findings suggest there are “no fatal flaws” in the mine resources estimate (MRE) or grade control (GC) modelling process for Cononish. But its review of the mine plan and associated cash flow forecasts, which are currently being assessed by the company, indicate that significant capital investment is needed to execute that plan.

Scotgold said it is actively seeking the additional financing it requires and that talks with investors are at an advanced stage, but it warned the outcome of those talks is far from certain. Indeed, should they end without agreement, the firm said it would cast material uncertainty over its ability to continue as a going concern.

However, its future does not rest solely on talks over additional funding. The company, which saw trading in its shares suspended today, is currently in a stand-off with an unsecured creditor which may decide its fate.

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The creditor recently demanded full payment of the outstanding interest it is owed which Scotgold has elected not to do, stating that while it has sufficient funds, it would not be in the best interest of all stakeholders to do so. But it also said that unless the creditor agrees to a new payment plan, the company may default, thereby creating a material risk it could be placed into administration in the next few weeks.

Things have seldom been dull for Scotgold since it began to realise the dream of extracting gold from the Scottish hills in 2016. We will know quite soon if that dream will ultimately turn into a nightmare.