Scotgold’s Cononish gold mine ticks all the right boxes

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  • Low cost gold mine

  • Politically safe jurisdiction

  • Significant exploration upside

What Scotgold does

Scotgold Resources LTD (LON:SGZ) is the premier gold exploration and development company in Scotland.

The company is backed by entrepreneur Nat Le Roux and run by experienced mining engineer Richard Gray, late of Avocet Mining and Gencor.

What Scotgold owns

Scotgold owns the Cononish gold project in the Grampian region of Scotland.

The site of much early-stage development work in the past, Scotgold has been working for some years to bring the project all the way into production, with strong support from the local community in the nearby town of Tyndrum.

The company also has extensive exploration ground in and around Cononish as well as farther afield.

The main priority is production, but looking further out it’s possible that exploration work could yield another Cononish, or even, as Richard Gray occasionally speculates, a mine comparable to the one being developed by Dalradian across the Irish Sea.

The regional geology is similar, so the upside is very real.

The discovery of a project comparable in size to Cononish is a reasonable expectation, although the upside could be something much larger. The proof will come with drilling, and that will probably have to wait until production is well established.

What’s the latest?

in October, Scotgold raised GBP3mln by way of a placing of shares at 110p each.

The proceeds will be used to accelerate plans to double production at the Cononish gold and silver mine in Scotland.

Cononish remains on course to become Scotland’s first commercial gold mine by November 30, the group said.

Funds will also be used to increase exploration activities, rolling out Scotgold’s systematic programmes across its 2,900 square kilometre licence portfolio in the Grampian Terrane of Scotland.

Average annual gold equivalent production under the increased production plans will rise to 23,500 ounces from 9,910 ounces.

What the boss says: Richard Gray

“Our objective is to use the cash flow generative platform which Cononish is expected to provide to build a highly profitable, low-risk gold mining company operating in stable jurisdictions.”

What the broker says: SP Angel

“With GBP12m of Cononish capex spent, we estimate project NPV5% at GBP113m and arrive at NAV of GBP103m or 182p per share after adjusting for the estimated net debt position (as of Sep/20) and recent equity raise proceeds.”

“No value has been assigned to an exciting exploration package reflecting its current early stage status.” SP Angel added.

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