Scotgold in advanced funding talks to avoid default

Embattled miner Scotgold Resources, which operates Scotland’s only gold mine, said on Monday it was close to securing enough funding from a new strategic investor, which will help it avoid going into administration.

The gold miner went into a trading halt early last month due to uncertainty around securing sufficient investment to continue operating. A few days later, Scotgold Resources said it had put staff on unpaid leave “until further notice”.

The company, which received initial approval for the Cononish mine in 2018, poured first gold in December 2020 and achieved commercial production in July last year.

A few months later, on March 27, Scotgold shocked shareholders by announcing that its gold grades, revenues and working capital had suddenly deteriorated to a point where its ability to keep operations going was in question.

It cited failed efforts to optimize production using what it considered a more cost-effective method of mining called long hole stoping. Any delays in switching to the new process, the miner warned at the time, would inevitably put a strain on its finances.

Scotgold launched in July a third-party review of its operations after “disappointing” production results in recent months. This would initially encompass an assessment of the mine design, schedule and production forecasts.

The company has said it remains confident that its transition to long hole stoping (LHS) as new mining technique, will improve prospects.

Scotgold also said that if cannot secure financing with the new strategic investor, the company would likely have to appoint administrators.