15th Mar 2016 10:47
LONDON (Alliance News) - Scotgold Resources Ltd Tuesday said it is pushing ahead with its trial programme at the Cononish gold project in Scotland by installing a pilot plant to treat an existing stockpile of ore, but said that will not bring the project into commercial production.
The exploratory miner is yet to generate any revenue and said net cash generated from financing activities rose to USD1.6 million in 2015 from GBP889,654 in the previous year after it reduced the amount of loan repayments made in the year.
Net cash used in investing activities rose to USD668,165 from USD512,695 the year before and the company generated less proceeds from issuing share and options in the year, totalling USD1.6 million in 2015 compared to USD3.4 million in 2014.
However, the company made USD3.0 million in loan repayments in 2014 and didn't make any repayments in the most recent year.
That left the company with USD861,646 in cash at the end of 2015 compared to the balance of USD639,406 at the end of 2014.
The company's main asset is the wholly-owned Cononish gold and silver project in Scotland, where it has completed a bankable feasibility study that has shown the project can be developed at a peak funding requirement of GBP18.5 million, with expenditure over the life of the mine set to total around GBP24.0 million.
Scotgold is aiming to produce around 23,370 ounces of gold equivalent each year, with production expected to peak in the second year at around 28,540 ounces. The average grade over the life of the project will be around 11.8 grammes, peaking at 15.4 grammes in the second year.
The company said it plans to rapidly implement the schedule for the project, which is expected to take 16 months to develop once all the contracts and financing are in place, with the miner hoping to pay itself back within 19 months.
The project has strong economics, with an average operating cost of only GBP327 per equivalent gold ounce, roughly USD523 per ounce, with a breakeven gold price of USD689 per ounce.
That provides Scotgold with a very healthy margin even at low gold prices, and the company is using a base case price of USD1,100 an ounce - considerably lower than current prices, with gold trading over USD1,234 an ounce on Tuesday morning.
The miner is currently conducting a bulk processing trial using an existing 7,000 tonne stockpile of ore graded at around 7.9 grammes of gold per tonne. A small scale pilot plant will be installed to treat around 2,400 tonnes of ore of that stockpile over a six-month period - but that will not lead to commercial development of the project, the company said.
That plant will cost around GBP140,000 and be delivered in the middle of April, with the trial operations expected to start at the beginning of May.
"The objectives of the bulk processing trial are to demonstrate the marketability and profitability of Scottish gold production from Cononish. It will also give further confidence to metallurgical test-work already completed and to provide a basis for a review of the current development plan under the current Bankable Feasibility Study," said Scotgold.
"In undertaking this bulk processing trial, it is not intended that the Cononish project is brought into commercial production but rather that the experience gained and proof of gold production will facilitate the financing of the project, which can then proceed as planned or with a revised phased approach," the company added.
Scotgold shares were up 3.6% to 0.699 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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