The firm behind Scotland’s only precious metals mine may not be able to keep trading unless it secures a further £1 million extension to its current banking facility.
Scotgold Resources has spent months seeking new finance to push ahead with its stalled mine development at Cononish in the Loch Lomond and Trossachs National Park.
The firm drew back on plans for a major processing facility at the site last year and is instead exploring a smaller project focusing on higher-value seams.
In its half-yearly report, issued yesterday, the firm confirmed it had entered into a binding heads of agreement arrangement with three strategic investors to plough up to 1.825m Australian dollars into the business.
However, that investment is conditional on Scotgold being able to convince RMB Bank, a division of Firstrand, to further extend its corporate banking facility.
The current £1.6m facility with RMB was extended in November following a negotiation between the two parties.
It is due to run out on June 30 and Scotgold is now seeking a further extension of a minimum of £1 million of the facility until July 1 next year at the earliest.
“The directors believe the company will obtain sufficient funding to enable it and the consolidated entity to continue as going concerns and that it is appropriate to adopt that basis of accounting in the preparation of the financial report.
“However, the existence of the above conditions constitute a material uncertainty in relation to the company’s ability to continue as a going concern and whether it will therefore realise its assets and extinguish its liabilities in the normal course of business.”
The company describes former London Metal Exchange director and IG group chief executive Nat le Roux as the “major” investor, while Australia-based mining and precious metals investor Richard Harris has also taken up a position. The identity of the third investor has not been disclosed.
Under the terms of their financial agreement with Scotgold, a new company in which the local St Fillans community will have a 20% interest will be established to market gold and silver bars processed at Cononish.
Scotgold yesterday said it continued to explore options for the proposed smaller mining operation at the site.
“The company recently appointed Australian Mining Consultants UK Ltd to produce an initial mining schedule to examine the feasibility and practicality of this approach,” the firm said in its report. “Initial results are being evaluated and work is continuing to optimise a possible production profile.
“Similarly, the company’s tailings consultants are examining alternative configurations of the tailings management facility in order to optimise initial construction costs.
“The company is in the process of studying possible alternative configurations and throughput rates for the processing plant in order to reduce initial capital expenditure, whilst not precluding an expansion to the originally proposed project should prices and market conditions be favourable in due course.”
The firm said all relevant permissions for mining at the site had been obtained or could be achieved within a short time frame, and gold and silver production from the site could commence within 18 months of full finance being obtained.