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Lower production forecast hits shares of Scottish gold miner

Cononish gold mine in Argyll.
Cononish gold mine in Argyll.

Shares in West Highlands gold miner Scotgold Resources fell more than 3% yesterday despite it announcing the successful completion of projects to boost output.

Investors were likely shaken by Scotland’s only active gold producer lowering expectations of third quarter performance.

The Alternative Investment Market shares slid by 3.01% to 64.50p

Scotgold, which is mining at Cononish, near Tyndrum, Argyll, now anticipates production of about 2,000 ounces of gold between July 1 and September 30.

The firm previously expected output of 2,900 to 3,500oz.

Scotgold has lowered its estimate for third quarter gold production.

It said the lower forecast was due to the “successful but delayed” commissioning of a power and ventilation project.

But it also said Q4 production was likely to be in line with its mine plan and “significantly ahead” of the second and third quarters of 2022.

New “optimisation initiatives” at the site are expected to increase efficiencies, mining rates, gold recovery and production in line with a target of a 23,500oz annual run rate.

‘Hugely encouraged’

Chief executive Phil Day said, “We achieved commercial production in July 2022 and continue to operate as a cash generative business.

“I am hugely encouraged by progress to date, which sees the majority of optimisation initiatives completed, strongly placing us for Q4 2022 and Q1 2023, driving the production ramp up towards phase two, and indeed margins, cash generation and profitability, in line with our stated strategy.

scottish gold

“Notwithstanding the reduction in gold production in late August/early September and consequent knock-on reduction of Q3 2022 guidance to circa 2,000 ounces of gold, due to the successful, but delayed implementation of the power and ventilation upgrades, I am excited looking ahead.

“Q4 2022-Q1 2023 are set to be very robust quarters in line with our mine plan and forecast to see a significant increase to Q2 and Q3 2022 production.”

Scotgold CEO Phil Day.

The recent work to boost production includes underground power and ventilation upgrades.

Scotgold has also undertaken a “debottlenecking” of parts of the site.

Following commissioning, the mine is expected to produce a total of about 5,000 tonnes of ore per month, with further improvements planned for Q4 forecast to raise this to about 6,000t.

July and August gold concentrate shipments totalled 214 tonnes, with a sales value of £2.6 million.

The first pour of commercial gold at Cononish in November 2020.

The company poured first gold in November 2020 and aims to produce 23,500oz per year by the end of Q1 2023.

Once in full production, the mine has anticipated forecast operating costs of about £544per oz, which Scotgold says will place it in the lowest quartile of gold mining operations globally.

It is Scotgold’s ambition to “build a mid-tier gold mining company in Scotland with multiple operations in the country that enhance the local environment and economy in ways that have an enduring positive impact.”

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